Allianz's banking subsidiary back in the black

Allianz, Europe's biggest insurance group by premiums, yesterday shook off fears over losses caused by Hurricane Charley as it announced better-than-expected second-quarter banking results buttressed by strong non-life underwriting.

Dresdner Bank made a half-year profit for the first time since Allianz bought it in a strategically controversial €24 billion deal in 2001. The bank's €129 million net profit in the second quarter, compared with a € 33 million loss a year ago, was buoyed by a €190 million gain from the sale of a 25 per cent stake in Telecinco, which floated on the Madrid stock exchange in June.

Dresdner Kleinwort Wasserstein, the investment banking unit that has long been identified as a potential spin-off candidate, remained in profit, but quarterly operating profits halved to €78 million as Allianz choked off risk capital by 20 per cent.

Mr Michael Diekmann, Allianz chief executive, said of the unit: "We are not on a par with some of our competitors but we avoid their volatility."

He described the slimmed-down DrKW as an "attractive business model" whose performance he was "really very happy with". This should allow Allianz to "further prepare" for some kind of divestment, he said.

Allianz's core non-life insurance business also excelled. Allianz has a substantial general insurance business in Ireland, employing 900 people, but no breakdown of Irish figures was published.

For the group, the second-quarter combined ratio, which measures the cost of claims and overheads as a proportion of premium income, was 92.8 per cent, comfortably ahead of a full-year target of 97 per cent, because of lower expenses and an absence of large claims.

Only life assurance was a disappointment, analysts said, as strong growth in Germany, France and Spain was cancelled out by slumps in Italy, Switzerland and South Korea.

Overall, Allianz's premium income for the quarter was a stable €13.8 billion. Pre-tax profits leapt to €1.3 billion from €38 million a year ago and net profits declined slightly from €662 million to €614 million, because of a return to normalised taxes after an extraordinary tax credit in 2003.

Mr Helmut Perlet, finance director, warned that the group must reckon with a weaker second half, as a result of higher likely claims and weaker investment profits. He said US subsidiary Fireman's Fund appeared to have an exposure of "a mid-double digit million amount" to Hurricane Charley, which hit Florida over the weekend. - (Financial Times Service)