EUROPE’S BIGGEST insurer Allianz abandoned its profit targets yesterday and said new guidance was impossible given financial market turmoil that kept its Dresdner Bank firmly in the red in the second quarter.
“We expect this difficult market environment to continue to 2009, therefore our 2006 long-term operating profit growth target of 10 per cent compound annual growth rate until 2009 cannot be maintained,” Allianz said in a statement released a day ahead of schedule.
“Due to expected market conditions, accurate earnings predictions, especially for banking, are not feasible. But underlying operating profitability in insurance and asset management is stable enough to generate a run rate before banking of €9 billion plus in 2008 and 2009,” it said.
Allianz posted a 29 per cent fall in second-quarter net profit to €1.524 billion.
It is looking to sell Dresdner, which it bought for €24 billion in 2001, and has been talking with the country’s number two lender, Commerzbank, about a possible merger.
Analysts value Dresdner at roughly €8 to €10 billion.
Dresdner posted an operating loss of €566 million in the second quarter, compared with a €427 million profit in the prior-year quarter, hurt by its investment banking business and €286 million in writedowns on investments hit by the credit market crisis.
Aside from banking, the capital markets crisis also hit life insurance revenues, particularly for unit-linked life insurance products, Allianz said.
Operating profit in life insurance and also in Allianz’s main business of property and casualty insurance fell by less than analysts had expected on average.
This helped offset some of the damage from Dresdner, with Allianz’s overall operating profit falling by 36 per cent to €2.104 billion in the quarter, only slightly below expected.
While Allianz’s share has been bolstered in recent months by periodic speculation it was nearing a sale of the bank, it has still fallen by nearly a fourth so far this year, lagging the DJ Stoxx European insurance index, which is down by about a fifth. – (Reuters)
