Allianz Q3 earnings beat forecasts; demand still weak

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Allianz unveiled forecast-beating quarterly earnings, boosted by life insurance and asset management, though it warned economic weakness was still hitting demand in the broader insurance market.

"Property-casualty as well as life insurance face markedly weaker demand due to the economic downturn with rising business insolvencies and rising unemployment," Europe's biggest insurer said in its third-quarter report. "Prices are moving upward only slowly - if at all - and only in specific areas of business," it added.

Allianz said it was well-positioned to take advantage of improvements in the economy, after its life and health insurance and asset management businesses helped it post a 23% rise in operating profit in the third quarter. Allianz rival AXA, Europe's second biggest insurer, on Monday posted slightly weaker than expected quarterly sales, but said the outlook for its business had improved.

"Allianz more than fulfilled the forecasts, both bottom line and at the operating level," said UniCredit analyst Andreas Weese in a client note. "While property-casualty insurance was largely in line with expectations, life and health insurance and financial services exceeded the forecasts," Weese added.

The company's main business of property and casualty insurance posted an 18% decline in operating profit from the year-earlier quarter. "While pricing is on an upward trend, our volumes remain challenged due to weaker demand, the effects of our portfolio cleaning measures and selective underwriting," Allianz said of the segment, which normally accounts for some 60% of group operating profit but in the third quarter contributed little more than half.

Allianz reported quarterly operating profit of 1.929 billion euro ($2.9 billion), above the average forecast of 1.804 billion in a Reuters poll of 18 analysts. It also swung to a quarterly net profit of 1.3 billion euro, above the 1.2 billion expected in the poll, from a 2 billion euro loss in the third quarter of 2008, when it sold its unprofitable Dresdner Bank unit to Commerzbank.

Allianz's shares have risen by 5.8% since the start of the year, lagging a gain of nearly 10% in the DJ Stoxx European insurance index.

Data from Thomson Reuters StarMine, which weights analysts' forecasts according to their track record, Allianz trades at 7.7 times 12-month forward earnings, making it cheaper than French rival AXA, which trades at a multiple of 8.4.