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Allianz sees Q2 net income fall by 28.6% as pandemic dents P&C result

5th August 2020 - Author: Luke Gallin

Global insurer Allianz has announced second-quarter operating profit of €2.6 billion and a 28.6% dip in net income to €1.5 billion, while the COVID-19 pandemic served to dent the performance of its property and casualty (P&C) insurance division in the period.

AllianzOverall, Allianz saw its operating profit fall by almost 19% in Q2 2020 when compared with the previous year, as net income fell by more than 28% in 2020, largely mirroring the development of operating profit.

The company’s P&C segment felt the impacts of the ongoing COVID-19 pandemic in Q2, as operating profit within this division dipped by 17.4% to €1.1 billion.

Allianz states that in Q2, COVID-19 impacts the P&C underwriting result by roughly €400 million, the majority of which relates to business interruption, with a lesser impact from entertainment and credit lines. For the first six months of the year, COVID-19 has had an impact of around €800 million on the P&C underwriting result, says Allianz.

Overall, Allianz estimates a COVID-19-related impact on its operating profit of around €1.2 billion in H1 2020.

While COVID-19 has added to the losses and served to pressure the underwriting result of the firm, natural catastrophe losses amounted to only €100 million in the period, representing a decline of 1% year-on-year, while weather losses of 1% are broadly in-line with the previous year.

In Q2, Allianz has reported a P&C combined ratio of 95.5%, comprised of a 69.8% loss ratio and a 25.7% expense ratio. This compares with a combined ratio of 94.3% in Q2 2019, comprised of a loss ratio of 67% and an expense ratio of 27.3%.

For the first six months of the year, Allianz saw its P&C unit record an underwriting gain of €717 million compared with €1.346 billion a year earlier, as the combined ratio deteriorated by 2.7 percentage points to 96.7%, although remains in profitable territory.

Giulio Terzariol, Chief Financial Officer (CFO) of Allianz SE, commented: “The impact of COVID-19 on Property-Casualty business segment revenues has been more pronounced in the second quarter of 2020 but our franchise has proven resilient in terms of revenue growth. Adjusting for the impacts of COVID-19, the underlying performance remains strong with a normalized combined ratio of less than 94 percent as our focus on technical excellence and productivity gains pays off.”

Turning to the company’s Life and Health operation, and operating profit here fell in Q2 by around €200 million to €1 billion, which the firm says was mainly driven by a favourable one-off profit in the U.S. in Q2 2019.

The present value of new business premiums declined from €15.2 billion to €11.5 billion in Q2 2020, which Allianz says was impacted by COVID-19 in almost all countries. The new business margin also fell in the period to 3.1% as a result of lower interest rates in the period, largely offset by improved products and a better business mix.

“I’m pleased by the quality of our sales in our life and health business segment in the second quarter of 2020 as shown by our robust new business margin. Our operating profitability remains strong and is well supported by our active risk management measures,” said Terzariol.

Across the group, Allianz has reported that total revenues were stable in H1 2020, although operating profit dipped by more than 20% to €4.9 billion, driven by the significant impacts of the COVID-19 pandemic. Net income also fell for the first six months of the year by 28.8% to €2.9 billion.

“The pandemic continues to be a challenge for all industries. Nevertheless, Allianz has achieved robust results and shown a remarkable resilience in the first six months of 2020. It makes us confident that we will see a solid financial performance also in the second half of 2020,” said Oliver Bäte, Chief Executive Officer (CEO) of Allianz SE.

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