AGCS profits hit by Vale dam and Boeing losses as group results impress

Allianz Global Corporate & Specialty (AGCS), the corporate insurance arm of Germany’s Allianz Group, posted strong revenue growth in the first quarter of this year compared to the first quarter of last year, as the parent group published a decent set of overall results above analyst expectations. The combined ratio and profits at AGCS were hit, however, by some hefty losses including the Vale dam disaster in Brazil in January and the global grounding of the Boeing 737 Max fleet following fatal crashes in both Ethiopia in March this year and Indonesia in October last year. The Vale dam disaster is expected to cost a total in excess of $3.5bn. Boeing recently confirmed that its total expected loss for the 737 Max fleet will be more than $1bn. Allianz stated in its first-quarter results presentation: “Ethiopian Airlines/Boeing and Vale had a combined impact of close to -€0.1bn.” According to Brazilian analysts, Allianz led the Vale liability programme while Chubb, Swiss Re and Mapfre were lead players on its property and business interruption policies. The good news for AGCS was that its revenues jumped 16.4% in the first quarter of this year, against the same period last year. Evidence of a firming in the large corporate and commercial sector was backed up by the fact that AGCS reported a year-to-date change on renewals of 3%. Allianz said the AGCS book was “volume and price positive”, with property, financial lines, mid-sized corporate business and engineering lines being the main growth drivers. The revenue growth was aided by a positive 5.1% effect from foreign exchange movements. The bad news was that, while Allianz Group’s overall results were boosted by lower-than-average losses for the quarter, AGCS’s operating profit and combined ratio were hit by large losses. “[The] impact of lower nat cat [was] more than offset by high large losses (eg Boeing, Vale),” stated the company in its presentation to analysts. The first-quarter 2019 combined ratio at AGCS was 99.7%, compared with 94.6% in the same period of last year. The operating profit for the first quarter of this year was €106m, against €139m last year. Overall, Allianz delivered a decent set of results for the first quarter. Total revenues were up 9.1% to reach €40.3bn. P&C revenues were up 6.3% to hit €19.5bn. The P&C operating profit was up 14.2% to €1.46bn, helping lift the group operating profit up 7.5% to €2.96bn. The improved P&C operating profit came mainly on the back of a significantly higher underwriting result across the group, driven by strong top-line growth, lower natural catastrophe losses and an improved expense ratio. The natural catastrophe and weather results were 1.7% better than last year. Nat cat losses of €141m (1.1% of the total) compared with €311m (2.6%) for the same period, and were well below the ten-year full-year average of 2.1%. “Allianz achieved strong results in the first quarter, putting the group on track to meet its 2019 full-year targets,” said Oliver Bäte, chief executive officer of Allianz SE.

AGCS profits hit by Vale dam and Boeing losses as group results impress

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