Allianz SE has booked an additional provision for its Structured Alpha Funds of €1.9bn in Q1 2022 before tax.
The company said that the provision will ‘negatively impact’ the Q1 group net income by €1.6bn after tax. This will result, said Allianz, in a net income attributable to shareholders of €0.6bn. Group operating profit in Q1 amounts to €3.2bn.
The firm said it believed the provision booked is a fair estimate of its remaining financial exposure in relation to compensation payments to investments and payments under any resolution of the governmental proceedings. It also said that it was seeking a timely resolution to these proceedings in discussions with the US Department of Justice and the Securities and Exchange Commission.
Allianz had previously said that it was booking a €3.7 billion charge related to the Structured Alpha Funds in February. This followed an announcement in 2020 that the SEC had launched an investigation into the Structured Alpha Funds after pension funds said Allianz had failed to safeguard their investments throughout the financial volatility caused by the pandemic.
Allianz said at the times that it expected to reach settlements with major investors in those funds in the near future. It also said in the middle of last year that it expected that the outcome of the investigation could ‘materially impact future financial results’ of the group.
Even so, some analyst had predicted the loss to be much bigger. In August, Berenberg predicted that the loss from Structured Alpha may fall somewhere between €3.5 and €6.8bn.
Berenberg analysts expected a €3.5bn, or US $4.1bn, base-case loss to be a reasonable outcome from the investigation, consisting of $1.1bn for a possible fine and $3bn for the claims from the fundholders, on the basis that a settlement is likely.
Berenberg noted that the $1.1bn estimate for the fine is equivalent to just over 4% of the total funds under investigation, which was $25bn at the peak.
