In fact, Allianz CEO Oliver Bäte declined to be on Friday’s conference call. Because he generally leaves the presentation of the insurer’s quarterly figures to CFO Giulio Terzariol. But after this “terrible week”, Bäte wanted to explain what had really happened and which caused the Allianz share price to fall by more than eight percent between Monday and Thursday.
Last Sunday, Allianz had to announce that a dispute that had been brewing for more than a year with a number of pension funds and other investors in the United States had taken on a new dimension. Because the US Department of Justice has opened investigations against the subsidiary Allianz Global Investors (AGI).
The country’s top law enforcement agency wants to know if all went well at AGI in early 2020, when a number of its high-risk funds with the handsome name “Structured Alpha” suffered damage. heavy losses due to the stock market crash. as a result of the corona pandemic. Investors, including teachers’ pension funds and metro workers, accuse AGI of wrongdoing and demand compensation. It’s supposed to be around six billion dollars.
“We will defend the interests of our shareholders with discipline and vigor,” Bäte said of the claims for damages. But he also made it clear that Allianz must pay properly, and not just to investors. Because there is also a threat of a fine.
“We are fully cooperating with the authorities,” stressed Bäte. In addition to the Department of Justice, the Securities and Exchange Commission is also investigating the proceedings. You’ve already reviewed over a million documents and emails with her, he said. And at AGI, the offer has tightened and the management has rejuvenated. Bäte fights for confidence, especially investor confidence. The fact that such a process could bring Allianz shares so badly into the basement worries shareholders and banking analysts.
The figures for the second quarter are encouraging. Allianz gained 29% more than in the same quarter of the previous year, which had been hit hard by the Covid-19, and operating income rose to 3.3 billion euros. This is a good basis for reaching the annual target, which Bäte and Terzariol foresee between 11 and 13 billion euros. However, that would be the operating result. It remains to be seen whether the bottom line is an increase in after-tax profit and all the special factors. In the year 2020, the net profit was seven billion euros, in the second quarter of 2021 it was 2.2 billion euros. But if the American business costs billions, it is at the expense of profits, which can threaten a significant decline.
Bäte and Terzariol calm down: the dividend will be paid at least at the level of the previous year. And on Thursday, Allianz announced that it was resuming its share buyback program, which had been halted due to the pandemic, and that it would buy back its own paper for 750 million euros by the end of the year. This supports the course of action.
But Allianz’s management knows it: as long as the case is not resolved, the price will be under pressure again and again in the short term. Rumors about the amount of a possible fine are enough for this. This is why the Allianz affair does not fit into the concept at all. Because the group attaches great importance to the fact that it always makes solid profits despite all the problems like a rock in the waves. The insurance industry as a whole is rocked by the pandemic, low interest rates and high natural disasters: Allianz is feeling it all too, but still making high profits as if nothing had happened.
Bäte took the opportunity to talk about the damage caused by the flooding. “I’m from Cologne, 20 minutes from Euskirchen and the main flood zones,” he said. The deaths and damage are terrible for the local population and for society as a whole. “With me, only the cellar was flooded, with others the house and the yard disappeared,” he said.
Bäte congratulated the representatives and employees of Allianz for their work as assistants and for the payment of insurance benefits. At present, Allianz is assuming 900 million euros to be paid to victims in Germany and other countries, whose reinsurers will reimburse around 500 million euros. “We are acting quickly and without bureaucracy,” he promised. More than 230 adjusters are located in the affected areas. “We make down payments of up to 10,000 euros per customer.”