Allianz increases operating profit by 7.1% to €3.8bn

Munich - Allianz SE has announced that its total business volume rose by 5.9% to €39.6bn for the second quarter of the year 2023. The global insurer said this was driven by the Property-Casualty business segment which benefited from higher prices and volumes while the growth of the Life/Health business segment was primarily linked to strong single-premium volumes in the US. This growth was partially offset by a decrease in AuM-driven revenues in our Asset Management business segment.

Internal growth, which adjusts for foreign currency translation and consolidation effects, was strong at 8.7%, driven by the Property-Casualty business segment and supported by the Life/Health business segment.

For the first six months of 2023, total business volume rose by 4.8% to €85.6bn, driven by the Property-Casualty business segment, supported by the Life/Health business segment, and partially offset by a decrease in our Asset Management business segment.

Internal growth was strong at 6.4%, driven by the Property-Casualty business segment.

Earnings (2Q 2023)

Allianz said operating profit increased 7.1% to €3.8 (2Q 2022: €3.5) bn. This is due to a higher result of our US operations in the Life/Health business segment, and a stronger insurance service result in the Property-Casualty business segment. This was partly offset by the Asset Management business segment due to lower AuM-driven revenues.

Shareholders' core net income was strong at €2.5 (2Q 2022: €2.0) bn due to a higher operating profit, while net income attributable to shareholders was €2.3 (2Q 2022: €2.0) bn. Core earnings per share (core EPS) was €11.40 (6M 2022: €5.77), while the annualized core return on equity (RoE) was 16.7% (full year 2022: 12.7%).

It further said for half of the year 2023, its operating profit increased 14.9% to 7.5 (6M 2022: 6.5) bn euros due to a higher operating investment result in the Life/Health business segment and a higher operating insurance service result in the Property-Casualty business segment. This was partly offset by the Asset Management business segment due to lower AuM-driven revenues.

Shareholders' core net income was €4.7 (6M 2022: €2.5) bn due to a higher operating profit and an improved non-operating result. Non-operating result in the prior year was impacted by a provision related to the AllianzGI US Structured Alpha matter.

Net income attributable to shareholders was €4.4 (6M 2022: €2.5) bn.

Solvency II Capitalization Ratio

The Solvency II capitalization ratio was 208% at the end of 2Q 2023 compared with 206% at the end of 1Q 2023. Including the application of transitional measures for technical provisions, the Solvency II capitalization ratio was 235% at the end of the second quarter of 2023 compared with 232% at the end of the first quarter of 2023.

Segmental highlights

"Our strong results and consistency of delivery are showing once again the quality of our franchise.

• Growth in total business volume in our Property-Casualty segment was excellent. We achieved strong rate increases and continue to take actions to successfully offset inflation. The performance in commercial lines was outstanding as a result of solid pricing momentum and strong underwriting discipline.
• Operating profitability in our Life/Health business is very strong. Sustained value creation, well supported by growth in PVNBP and a strong new business margin, is evidence of our ability to deliver value to our customers while achieving healthy profitability. 
• Our Asset Management business continued to achieve positive net inflows in the second quarter as we supported our clients to navigate through a challenging business environment. Third-party assets under management were stable at 1.7 trillion euros compared to the first quarter. This bodes well for future profitability.

We confirm our full-year outlook of operating profit of 14.2 billion euros, plus or minus 1 billion euros," says Giulio Terzariol, Chief Financial Officer of Allianz SE

Property-Casualty insurance: Double-digit growth 

In the second quarter of 2023, total business volume rose by 8.0% to €17.6 (€16.3) bn. Adjusted for foreign currency translation and consolidation effects, internal growth was strong at 11.4% due to a price effect of 7.1% and a volume effect of 4.7%, slightly offset by a service effect of -0.5%. The main contributors to the increase were Allianz Partners, Australia, Latin America and Germany.

Operating profit increased by 10.8% to €2.0 (€1.8) bn, benefiting from a higher operating insurance service result as well as an improved operating investment result.

The combined ratio improved by 0.4% points to 92.2% (92.6%). The loss ratio improved by 0.4% points to 67.4%, benefiting from lower claims from natural catastrophes and a positive discounting impact. This was partly offset by higher claims inflation and a lower run-off result. The expense ratio increased slightly by 0.1% points to 24.8% (24.7%).

Total business volume for six months surged 9.8% to €41.7 (€38.0) bn. Adjusted for foreign currency translation and consolidation effects, internal growth was very strong at 11.8%, supported by a price effect of 6.4% as well as a volume effect of 5.4% and a service effect of 0.1%. While many entities added to that growth, the primary contributors were Allianz Partners, Turkiye, AGCS and Germany. In the first half of 2023, AGCS Total Gross Premium Written of €6.583bn is +10% above prior year, adjusted for foreign exchange effects (6M 2022: €5.923bn).

Core Gross Net Premium Written (GNPW/premium net of fronting and facultative reinsurance) increased year- over-year by +16% to €4.586bn (6M 2022: €3.949bn), mainly driven by MidCorp and Property reflecting inflation- driven increase of insured values and rates, as well as strong new business and high retention. Liability, too, benefited from the significant rate momentum carried over from second half 2022 and showed a strong renewal performance.

Operating profit rose 16.3 percent to €3.9 (€3.3) bn, driven by a significantly higher operating insurance service result and an improved operating investment result. The AGCS Operating Profit for 6M 2023 of €479m (6M 2022: €351m) is €129m better than prior year mainly due to a better insurance service result.

The combined ratio improved by 1.1% percentage points to 92.0% (93.2%). The loss ratio improved by 0.9 percentage points to 67.2% due to lower claims from natural catastrophes and a favourable impact from discounting. This was partially offset by higher claims inflation and a less favourable run off result. The expense ratio improved by 0.2 percentage points to 24.8% (25.0%). The AGCS Core Combined Ratio for 6M 2023 stands at 90.8% and is better than prior year (6M 2022: 93.3%).

The improvement in both the loss ratio and the expense ratio is only partially offset by a higher reinsurance ratio. Main drivers are a benign current accident year claims development in short-tail lines as well as a higher favourable discounting effect due to higher yields in the second half of 2022. The profitable underwriting performance allowed for an additional build-up of reserves, mainly to address inflation risks.

Life/Health insurance: Strong operating profit

In the second quarter of 2023,  the present value of new business premiums (PVNBP), amounted to €17.7 (€16.5)bn, driven primarily by increased volumes in the United States from fixed index annuities sales promotion. Economic impacts in Germany and Italy, primarily due to discounting, had an offsetting effect.

Operating profit increased to €1.2 (€1.0) bn mainly driven by a higher result in the United States due to a prior year negative hedge result on variable annuities turning positive. The release of the Contractual Service Margin (CSM) remained stable at €1.2 (€1.2) bn.

Contractual service margin (CSM) is stable at €52.9 (€52.4) bn. New business and expected in-force return were offset by the CSM release and economic variances. Normalized growth was 1.5% in the second quarter.

The new business margin (NBM) reached 6.2% (6.3%). The value of new business (VNB) increased slightly to €1.1 (€1.0) bn.

6M 2023: PVNBP declined to €36.2 (€37.6) bn, as increases in the United States and Allianz Reinsurance were offset by a lower contribution from Germany and Italy.

Operating profit jumped to €2.5 (€1.8) bn due to an increase in operating investment result in the United States caused by prior year negative hedge result on variable annuities turning positive. The release of the Contractual Service Margin (CSM) increased slightly to €2.5 (€2.4) bn and is in line with expectations.

Contractual service margin (CSM) at €52.9 (€52.2) bn, is driven by strong new business in the United States and Germany, and expected growth due to unwinding. The normalized growth was 2.7%.

The new business margin increased to 5.8% (5.5%), driven by favourable economics across entities. The value of new business remained stable at €2.1 (€2.1) bn, due to offsetting results in France and Germany.

Asset Management: Stable third-party party assets under management

2Q 2023: Operating revenues were €1.9bn, down 2.0% adjusted for foreign currency translation effects. Higher performance fees were more than offset by lower AuM-driven revenues.

Operating profit was €703 (€773) m, down 9.0% from the prior-year period. Adjusted for foreign currency translation effects, operating profit decreased by 7.3%. The cost-income ratio (CIR) rose to 62.5% (61.7%).

Third-party assets under management were €1.662Tn as of June 30, 2023, down by €6bn from the end of the first quarter 2023. Positive net inflows of €2.7bn and favourable market impacts of €2.0bn were offset by negative foreign currency translation effects of €10.5bn.

Total assets under management were €2.163Tn at the end of the second quarter of 2023, down €11bn from the end of the first quarter 2023, including net outflows of €5.9bn.

6M 2023: Operating revenues decreased by 7.5% to €3.8bn as a result of lower AuM-driven revenues. Operating profit was €1.4 (€1.6) bn, down 11.1% from the prior-year period. Adjusted for foreign currency translation effects, operating profit was down 11.8%. The cost-income ratio (CIR) rose to 62.3% (60.7%). Third-party assets under management were €1.662Tn as of June 30, 2023, up by €27bn from the end of 2022.

Oliver Bate, Chief Executive Officer of Allianz SE says: "Allianz's excellent results in the first half of 2023 demonstrate the strength of our fundamentals as we capitalize on our global scale and diversified business mix for the benefit of our customers and our shareholders. With our double-digit growth in profits we are well on track to achieving our Group targets for the year.

I am particularly pleased by the strong performance in the Property & Casualty business where we have achieved a strong 92% combined ratio, by the continued volume and profit growth of our Life & Health business, as well as by the resilience of our Asset Management segment, which recorded positive third-party net inflows for the second quarter in a row despite cautious investor sentiment.

Our solid growth is a clear reflection of our customers' continued trust in us to support them through this agonizing period of inflation and polarization. These trends not only challenge our global economy, but also affect people deeply at an individual financial level. With our results and capital position, we demonstrate that Allianz is a company that unfailingly delivers relevant solutions that people need, especially in our turbulent age."