Dresdner Kleinwort Wasserstein parent, the German insurer Allianz, suffered a worse-than-expected first-quarter loss as a result of huge writedowns on investments and continuing losses at Desdner Bank. . Allianz suffered a net loss of Euros 520 million euros ($596 million) in the first three months of 2003 — its fourth consecutive quarter in the red.
Overall, global premium income in the insurance business went up by 9.8 percent, with life and health recording an increase of 17.3 per cent, but further write-downs on investments in the banking business of Euros 2.3 billion euros gouged earnings, and the company closed the quarter at a loss of Euros 520 million.
In the banking business – which essentially means the Dresdner Bank group – total net interest, fee, commission and trading income amounted to Euros 2.0 billion. Net interest income fell, primarily as a result of the deconsolidation of Deutsche Hyp and the disposal of risk-weighted assets. Commission business continued to suffer, but trading income was up almost threefold by comparison with the first quarter of 2002.
However, costs are being cut. Administrative expenses in the banking business were running at Euros 1.6 billion euros during the first quarter of 2003, down 10.8 percent over the corresponding period for the previous year. Expenses for loan loss provisions were Euros 355 million during the first three months, and the banking segment closed the quarter with a slightly positive operating result of Euros 69 million.
The balance of other expenses and income amounting to minus Euros 303 million was essentially comprised of write-downs on securities and restructuring costs connected with the Advance Group. After write-downs on securities, amortization of goodwill, taxes and minority interests, the banking business returnee a negative result of 424 million euros.
Assets under management are also falling and, even though PIMCO is bombing, the staff are trousering most of the money. The total managed by the Allianz Group ended the quarter at Euros 979 billion. The Group’s own investments have gone down slightly since the end of 2002 by Euros 3 billion euros to Euros 400 billion, while investments held for third parties totaled Euros 553 billion . Despite net inflows of Euros 8 billion (adjusted for currency differences) the total assets under management are down Euros 8 billion by comparison with year-end 2002. This largely reflected falling stock markets, plus the strength of the euro against the US dollar. Unsurprisingly, the fixed-income business is booming. New inflows amounted to a total of Euros 11 billion, with the PIMCO Total Return Fund making the most significant contribution. With assets under management totaling US$73 billion, it is now the world’s biggest actively managed investment fund. Its European equivalent, the Euro Bond Total Return Fund (“powered by PIMCO”) has attracted Euros 3 billion during the eleven months since its introduction.
Overall, the Group’s German mutual fund business saw net inflows of Euros 1.7 billion.
Operating profit in the asset management segment was Euros 137 million. After deduction of the loyalty bonuses and retention payments – primarily for management and employees of the PIMCO Group – amortization of goodwill, taxes and minority interests, a loss of Euros 85 million resulted.
In an interview with Allianz.com, board member for controlling Helmut Perlet said it was too early to say if Allianz had turned the corner, especially since 2003 was a quirt year for the insurance industry, in terms of a decline in claims arising from natural hazards. “The situation remains serious,” he said. He was noticeably optimistic about the growth respects in asset management than in banning. “Banking continues to be dependent on developments in the capital markets and the economy as a whole,” he said. “Further improvement in administrative expenses by 10.8 percent indicates that the cost-cutting measures are taking effect. This action demonstrates that we’re on the right track.”