ALLIANZ, 1Q2015: Downscaling of the Russian business improved the Group's profitability in the CEE area

14 May 2015 — Daniela GHETU
The ALLIANZ Group witnessed an 11.2% increase of its total revenues, to EUR 37.8 billion, while operating profit grew by 4.8% to EUR 2.86 billion. Net income attributable to shareholders rose 11.0%, up to 1.82 (1.64) billion EUR.

"ALLIANZ achieved very good results in the first quarter compared to last year's already strong first quarter. While it is a promising start, the challenge of the current low-interest rate environment remains. However, we are well prepared for the rest of 2015," said Dieter WEMMER, Chief Financial Officer of Allianz SE.

In Property and Casualty insurance, revenues experienced excellent growth. In the Life and Health insurance segment, operating profit surpassed 1 billion EUR for the first time. Third- party assets under management increased due to market movements and foreign currency exchange effects.

The conglomerate solvency ratio rose by 10 pp to 190% as of March 31, 2015. Solvency II capitalization remained stable at 192% compared to 191% at the end of 2014 due to management actions. Shareholders' equity grew over the same period by 12.6% to 68.4 billion EUR compared to 60.7 billion EUR.

Property and Casualty with continued strong internal growth

GWP in Property and Casualty insurance reached EUR 17.34 billion in the first quarter of 2015, an increase of 13.9% y-o-y. Excluding foreign currency exchange and consolidation effects, growth was 3.5%. Strong internal premium growth came especially from Allianz Global Corporate & Specialty, Allianz Worldwide Partners, Germany and Latin America.

Operating profit declined by 13.7% to EUR 1.28 billion in 1Q 2015. The decline in operating profit stemmed mainly from a higher impact from natural catastrophes as well as restructuring expenses following the sale of the private lines of Fireman's Fund.

The quarterly combined ratio increased by 2.0 pp to 94.6%. Claims from natural catastrophes amounted to EUR 222 million. In particular the storms Elon and Felix in January as well as Niklas and Mike in March had an impact on results.

"Despite our repositioning in Russia and the United States, internal growth was strong," said Dieter WEMMER. "Claims from natural catastrophes were substantially higher than last year, affecting operating profit. Total natural catastrophe and weather-related losses were roughly in line with expectations."

In Central and Eastern Europe, GWP decreased by 14.5% on an internal basis and were at EUR 569 million. Czech Republic and Croatia, and to lower extend Romania and Bulgaria were the only CEE markets where P&C GWP increased in 1Q2015. However, the most important driver of the GWP decrease in the region was the downscaling of the motor and other retail business in Russia. Thus, GWP in Russia decreased from EUR 231 million in 1Q2014, to EUR 81 million in 1Q2015.

Yet, in efficiency terms, the change operated in the Russian business strategy had a positive effect, contributing with 0.2pp - together with the favorable loss development in the Czech Republic -, to the development of the Group's accident year loss ratio.

The combined ratio indicator improved in Russia from 139.6% in 1Q2014, to 110.8% in 1Q2015, while the operating profit indicator improved from a loss of EUR 51 million in 1Q2014 to a loss of EUR 3 million in 1Q2015. Ukraine and Romania also reported better combined ratios, while in the rest of the region the indicator worsened.

Life and Health insurance with record operating profit

In Life and Health insurance, statutory premiums rose to EUR 18.82 billion in the 1Q 2015. This represents an increase of 9.7%. Excluding foreign currency exchange and consolidation effects, internal growth was 5.3%.

Premium growth benefitted in particular from strong demand for unit-linked products in Italy, Asia-Pacific and Turkey. In Italy, premiums were EUR 1.34 billion higher than the previous year's first quarter, an increase of 56.4%.

The new business margin declined 1.0pp in the 1Q 2015 to 1.5% due to the low yield environment. The value of new business stood at EUR 269 million.

Operating profit rose by 25.5% to EUR 1,104 million in 1Q 2015. The increase in operating profit was mainly driven by the investment result that benefitted from realized gains after a strong market appreciation.

"The results of the first quarter reflect a continued diversification of our life products," said Dieter WEMMER. "Strong results in both core markets and growth markets show that our new products are met with high demand. The continued challenge of the low-interest rate environment, however, is affecting the value of our new business. We will continue to adjust our product strategies."

Premiums in Central and Eastern Europe remained relatively stable, increasing by 0.2% to EUR 232 million. Growth in unit-linked and group pension business in Bulgaria compensated for a premium decrease of the unit-linked business in Hungary.

Operating profit went up from EUR 27 million to EUR 38 million for the region, the best performance bellonging to the Slovak Republic where the indicator increased from EUR 8 million in 1Q2014, to EUR 11 million in 1Q2015.

Download the full ALLIANZ Interim Report for 1Q2015 here.

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