German insurance group Allianz has reported an encouraging increase in net profits for 2004, on the back of strong business performance from its core insurance areas. However, continued difficulties and a poor final quarter at its banking subsidiary, Dresdner Bank, has once again eaten into the company’s overall income.
Overall, Allianz, one of the largest insurance companies in the world, achieved a significant increase in the operating profit for 2004, with figures improving by E2.8 billion 68.6% to E6.9 billion. Total revenues increased by 3.3% or E3.1 billion to E96.9 billion.
The definitive result was that net income was up 16.4%, from almost E1.9 billion in 2003 to E2.2 billion in 2004.
In the company’s property & casualty business, premium income rose by 0.8% to E43.8 billion, reflecting internal growth of 2.1%. Operating profit was up 63.3% to E4.0 billion. However, net income fell from E4.7 billion to E3.3 billion due to non-operating issues. As a result, significantly less profit from the disposal of investments was realized compared with the previous year.
Life & health enjoyed strong growth and an improved operating profit. Total statutory premiums rose to E45.2 billion, an increase of 6.8%, largely due to profitable growth of 43.6% at American subsidiary Allianz Life. Another key factor was the strong new business growth in Germany, due primarily to the new German retirement income act. As a result, Allianz Leben sold a record high of approximately 1.2 million insurance policies in 2004. Net income rose by E770 million to E808 million.
However Allianz’s figures for its banking operations continued to struggle due to the problems at Dresdner Bank. On a positive note, despite restructuring costs of E290 million, Dresdner Bank’s net income for the year was E142 million, compared with a loss of E1.305 billion the previous year. But higher than expected provisions resulted in a fourth-quarter loss of E218 million at the bank, causing the bank to once again drag down profits.
Looking forward, Allianz said it intends to put even greater emphasis on profitable and sustainable growth. Total revenues are expected to increase in line with 2004. Some lines of business are expected to further improve operating profitability, while others should maintain current levels.
In property & casualty, Allianz aims to maintain a combined ratio of below 95%. In life and health, the target is an operating profit of at least E1.5 billion, while, business as Dresdner Bank should earn the cost of capital of 8.85%.
Meanwhile, in related news, Allianz is expected to announced plans shortly to remove its investment banking subsidiary, Dresdner Kleinwort Wasserstein, from the ‘special case’ status it has had for the past four years, in recognition of nine straight quarters of staying in profit.