Allianz CEO describes ‘horrible week’ as US justice department investigates

Strong results overshadowed by inquiry over insurer’s funds division

Oliver Baete, chief executive of Germany's Allianz, on Friday spoke of a "horrible week" for him and the insurer, his first response to a disclosure that the US Department of Justice was investigating losses at its fund division.

Mr Baete, making an unexpected appearance to reporters in a call after the company’s second-quarter earnings, said the insurer would set aside possible reserves for the case when the time is appropriate and conceded “not everything was perfect in the fund management”.

The issue, disclosed by Allianz on Sunday and which overshadowed better-than-expected earnings on Friday, is a blow to the reputation of one of Germany’s most valuable companies and its global operations that in recent years have stayed out of the headlines.

“It was a horrible week for us and for me personally,” he said.

READ MORE

Hedge funds

In March last year, Allianz shuttered two private hedge funds after severe losses during the market mayhem sparked by the outbreak of the coronavirus pandemic.

That prompted a wave of litigation by US investors claiming around $6 billion (€5.1 billion) in losses from the so-called Structured Alpha family of funds. The investors, which include pension funds for truckers, teachers and subway workers, say that the fund division, Allianz Global Investors, strayed from a strategy of using options to protect against a short-term financial market crash.

Last year, Allianz revealed that the US Securities and Exchange Commission was also investigating. It says it is actively cooperating with both bodies and defending itself in the lawsuits.

“This event will leave its mark, but it will not change Allianz’s path,” Mr Baete said.

He said he regretted that investors lost money.

The DOJ has declined to comment on the matter.

Better results

Allianz posted a better-than-expected 46 per cent jump in second-quarter net profit and provided a rosier outlook for the full year as it emerges from pressure on business caused by the coronavirus pandemic.

Net profit attributable to shareholders of €2.225 billion in the three months through June compares with €1.528 billion a year earlier. The figure beat a €2.055 billion consensus forecast.

More optimistic about the outlook for this year, the company said it now expects operating profit in 2021 to be in the upper half of a range of between €11 billion and €13 billion.

Last year, the insurer abandoned its profit target due to economic uncertainty resulting from the pandemic and posted its first decline in operating profit in nearly a decade.

Allianz, like other insurers, had faced clients making claims for business interruption and cancelled events from lockdowns, while demand for car and travel insurance fell.

In another sign of a return to normal times for the insurance group, Allianz announced on Thursday plans to buy back up to €750 million worth of shares by the end of the year, after last year cancelling a buyback halfway through due to the pandemic. – Reuters