Pimco worries takes shine off Allianz earnings

Reuters
The logo of Europe's biggest insurer Allianz SE is pictured at the Allianz Arena soccer stadium in Munich
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The logo of Europe's biggest insurer Allianz SE is pictured at the Allianz Arena soccer stadium in …

MUNICH (Reuters) - Europe's largest insurer Allianz expects problems at bond fund manager Pimco to weigh on group performance in 2014 after investors withdrew money last year and Pimco chief executive Mohamed El-Erian said he would leave.

The firm predicted operating earnings this year of about 10 billion euros - flat relative to 2013 - as the contribution from asset management division, of which Pimco is the biggest part, is expected to fall.

Asset management performance has come into sharp focus as the division struggles to deal with investors withdrawing funds in expectation of higher interest rates and a management reshuffle after El-Erian stunned the investment community by announcing he would leave the firm.

Shares in the company fell 3.4 percent, making it the second-worst performer in the Stoxx index of European insurers <.SX7P>, which was down 0.74 percent.

"Allianz's outlook for the year 2014 signals stagnation in terms of the operating profit," LBBW analysts said in a research note.

Allianz, often cautious with its earnings forecasts, left itself some room to manoeuvre, saying group results could be 500 million euros higher or lower than the 10 billion euro target depending on markets and payouts for natural catastrophes such as floods or hurricanes.

Following El-Erian's departure announced for March, Pimco appointed six new deputy chief investment officers, saying this was a "significant improvement" on the unit's previous structure which concentrated nearly all investment strategy decision making onto the shoulders of its Chief Investment officer Bill Gross and El-Erian.

Allianz expects asset management operating profit to fall to between 2.5 billion and 2.9 billion euros this year, from 3.2 billion in 2013. While operating profit in the division rose 7 percent last year, most of this was due to a strong first half.

Pimco saw third party assets under management fall by 10 percent last year to 1.1 trillion euros, mostly due to U.S. dollar weakness but with some investor outflows also contributing to the decline.

The unit's flagship Total Return Fund posted nine straight months of net outflows and notched its first negative return in 14 years in 2013.

DIVIDEND INCREASE

Allianz proposed raising its dividend to 5.30 euros per share for 2013 from 4.50 euros paid for 2012, after fourth quarter and 2013 net profit came in according to expectations.

Operating profit in 2013 crossed the 10 billion euro mark for the first time since 2007 when the financial crisis began, helped by strong performance in property and casualty insurance.

"The environment will remain challenging in 2014 but our performance shows that we are well positioned with our three-segment strategy," Chief Executive Michael Diekmann said in a statement on Thursday.

Operating profit in life and health insurance is expected to be between 2.7 and 3.3 billion euros, after 2.7 billion in 2013, while the main money spinner of property and casualty insurance is seen at 5.1 to 5.7 billion euros, compared with 5.3 billion last year.

Analysts polled by Reuters on average expected group operating profit of 9.9 billion euros in 2014.

(Reporting by Jonathan Gould; Editing by Thomas Atkins and Janet Lawrence)

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