OREANDA-NEWS. November 21, 2007. Quarterly net profit of Allianz Group has increased by 20.7% to EUR 1.92 billion, while operating profit equalled EUR 2.6 billion.

Mr. Helmut Perlet, Financial Director of Allianz SE, commented on the Allianz Group Q3 results as follows: "The company’s good performance substantiates our forecast for the year 2007: net profit of EUR 8 billion and operating profit of EUR 11 billion. Our stable performance shows that we will be able to reach the gross income target set for the year 2007, despite the complicated stock market situation. We will continue following the stable risk management policy and working to improve quality and efficiency across all lines of business."

In Q3’ 2007, Allianz Group increased its quarterly net profit by 20.7%, from 1.59 billion EUR to 1.92 billion EUR. As compared to the first nine months of the previous year, net profit has grown by 29.2%, reaching 7.3 billion EUR.

The nine-month operating profit has increased by 7.8%, reaching 8.76 billion EUR, whereof 2.6 billion EUR were earned in Q3. Despite the fact that operating profit has fallen by 2.1% vs. the nine-month period of the previous year, it generally remains quite high, being close to the Q3’ 2006, which equalled 2.66 billion EUR.

In Q3, consolidated gross income reached 23 billion EUR, which is 400 million EUR higher than in Q3’ 2006. The double-digit growth in operating profit was secured thanks to such segments as asset management and life insurance. Dresdner Bank’s operating profit equalled 87 million EUR, despite the financial-market turmoil and its effect on the securities trading results. During the first 9 months of 2007, Dresdner Bank slightly increased its operating profit, as compared to the same period of the previous year.

As expected, equity has fallen by 2.8%: on 31 December 2006 it equalled 50.5 billion EUR, while this figure decreased to 49.1 billion EUR by 30 September 2007. This can be mainly attributed to redemption of the shares held by AGF minority shareholders and recognition of goodwill as part of equity.

Property and Liability Insurance

Allianz has achieved success in property and liability insurance by combining orientation towards profitability and growth in business volumes. As compared to Q3’ 2006, gross premium written (GPW) has increased by 2.5%: from 10.4 billion EUR to 10.7 billion EUR. Operating profit reached a considerable level of 1,5 billion EUR. However, this result is 13.9% below 1.7 billion EUR shown in the third quarter of 2006, which was more favourable for business. The main reason for profit decrease was the higher level of expenses (up 172 million EUR vs. the same quarter of the previous year) due to the increasing number of natural disasters, mainly floods in the United Kingdom and strong hurricanes in other parts of the world.

The combined ratio has increased by almost 4 percentage points vs. Q3’2006 (when the unusually low loss level was registered) and equalled 94.1%. Thus, the combined ratio remains at planned level.

Life and Health Insurance

Operating profit in the life and health insurance segment has increased by 41.5% vs. the same quarter of the previous year, from 617 million EUR to 873 million EUR, which was mainly due to one-time receipts. Beginning from 2005, assets, which constitute the main source for stable growth of operating profit, have been growing on average by 5.2% a year, equaling 354 billion EUR in Q3’ 2007.

Premium income grew by 4.3% from 9.8 billion EUR to 10.2 billion EUR. The increase in premium growth rates was recorded not only in the emerging markets of the Eastern Europe and Asia, but in the Western Europe as well — in particular, in France and Italy. "Our profitability in life insurance has continued to grow in the Q3. Furthermore, we have once again managed to achieve a significant growth rate of 6% in collected premium (including foreign exchange differentials)", explained Mr. Helmut Perlet, Financial Director of Allianz SE.

Banking

In Q3, the operating income of Dresdner Bank decreased by 24 %, from 1.6 billion EUR in Q3’ 2006 to about 1.2 billion EUR, due to the negative result of securities trading (loss of 196 million EUR). Stock market turmoil has also negatively affected prices of securities. On the other hand, fee and commission income has grown by 9.2%, from 631 million EUR to 689 million EUR, and net interest income has increased by 4.2 %, from 695 million EURto 724 million EUR. In this difficult market environment, operating profit equalled 87 million EUR as compared to 391 million EUR earned in the same quarter of the previous year.

Due to this income dynamics, cost-income ratio has increased from 78.6 % in the same quarter of the previous year to 91.1 %, despite further cost reduction measures. After 9 months of the running year, cost-income ratio equalled 74.7 %.

The aggregate effect of financial market fluctuations and the losses incurred by Dresdner Bank equalled 575 million EUR. This figure includes revaluation of asset-backed securities (ABS) portfolio for 350 million EUR and adjustment for 30 million EUR, including M&A financing obligations. The remaining 195 million EUR pertain to the business lines indirectly affected by the market situation.

Asset Management

Third-party assets have grown to 775 billion EUR vs. 764 billion EUR in the end of the previous year. This corresponds to the growth of 7.1%, based on the fixed foreign exchange rate. During the 9-month period, net capital inflow equalled 12 billion EUR. However, in Q3, the company has shown net capital outflow of 8 billion EUR, while this period was generally characterized by the huge capital outflow in the Russian market.

"Despite difficult market situation, we maintain strong position", commented on the situation Mr. Helmut Perlet. "For example, in the fixed-income financial instruments segment, PIMCO benefited from the company’s strong positions by investing in premium financial instruments, which was made quite timely. Despite the fact that such tactics has initially only slowed growth, the Q3 results were much more impressive than the market on average."

The Q3’ 2007 operating profit has increased by 12.2 %, from 294 million EUR in the same period of the previous year to 330 million EUR. The Q3 cost-income ratio equalled 58.9%, which is slightly lower than in the same period of the previous year, and presently remains to be exceptionally low.