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(Reuters) — German insurer Allianz S.E. is preparing itself for a “perfect storm” caused by low interest rates, weak economic growth and geopolitical risks, its chief executive said on Friday.
Europe's biggest insurer unveiled a smaller-than-expected rise in its dividend and a 2016 operating profit target that matched analysts' expectations, as CEO Oliver Baete works to fortify his company against “increasingly challenging operating conditions”.
Allianz said it aimed for an operating profit of up to €11 billion euros ($12.38 billion) this year, compared with a consensus forecast of €10.9 billion euros ($12.27 billion) in a Reuters poll and €10.7 billion ($12.04 billion) in 2015.
Rock-bottom interest rates, stuttering economic growth and tightening regulation have been hampering insurers for some time, with fresh geopolitical risks adding to the pressure.
“Brexit is on everyone's lips,” Mr. Baete told a news conference, referring to an upcoming referendum on Britain's continued membership in the European Union.
“If things get difficult again, everyone will look to whoever is stable and reliable and that's we want to be,” said Mr. Baete, presenting his first annual results since becoming chief executive in May.
Allianz would take advantage of opportunities to consolidate the insurance market but had no plans for big acquisitions, he said.
Pimco turnaround in 2016
Mr. Baete has been revamping operations to make the group more profitable and resistant to financial shocks.
His plan calls for Allianz to deliver annual earnings per share growth of 5% on average from 2016-2018.
Analysts said that target would take time to reach.
“We believe that the plan will still be delivered, however it will clearly be more back-end loaded with greater growth in earnings coming in later years,” RBC analysts wrote in a research note.
While operating profit in the insurer's main business of property-casualty and life insurance rose last year, including strong gains in the fourth quarter, Allianz continued to see investor outflows at U.S. asset management unit Pimco, which saw operating profit fall by nearly one fifth in 2015.
Allianz said investor outflows were slowing and it expected to be able to show in 2016 that it has managed a turnaround at Pimco, Chief Financial Officer Dieter Wemmer said. Pimco will focus closely on costs this year.
Full-year 2015 net profit was €6.6 billion euros ($7.43 billion).
Allianz S.E. has consolidated its position as the most valuable insurance brand in the world, reports Borsa Italiana.