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(Reuters) — German insurer and asset manager Allianz said Thursday it would set aside €3.7 billion ($4.20 billion) to deal with investigations and lawsuits resulting from the collapse of a multibillion-euro set of investment funds.
The provision resulted in a net loss attributable to shareholders of €292 million in the fourth quarter, the company said. Analysts had expected a profit.
Allianz said the outcome of various investigations and lawsuits “cannot be reliably estimated” and that it “expects to incur additional expenses before these matters are finally resolved.”
The issue centers around Allianz funds that used complex options strategies to generate returns but racked up massive losses when the spread of COVID-19 triggered wild stock market swings in February and March 2020.
Investors in the so-called Structured Alpha set of funds have claimed damages from the losses in a slew of cases filed in the United States. The U.S. Department of Justice and the Securities and Exchange commission have also been investigating the case.
The matter has cast a shadow over Allianz, one of Germany's most valuable companies. It is also one of the world's biggest money managers with €2.5 trillion in assets under management through bond giant Pimco and its Allianz Global Investors, which managed the funds at the center of the probes.
Allianz said it expects a settlement with major investors “shortly.” but discussions with other investors, the DOJ and SEC “remain ongoing.”
The quarterly loss compares with a profit of €1.8 billion in the year-earlier period.
“In spite of challenges in 2021, Allianz proved its resilience and adaptability,” CEO Oliver Baete said.
The $15 billion Structured Alpha funds catered in particular to normally conservative U.S. pension funds, from those for laborers in Alaska to teachers in Arkansas to subway workers in New York.
After the coronavirus sent markets into a tailspin early in 2020, the Allianz funds plummeted in value, in some cases by 80% or more. Investors alleged in their lawsuits that Allianz strayed from its stated strategy.
Allianz has publicly disclosed the SEC and DOJ investigations. It previously said it intended to defend itself “vigorously” against the investors' allegations. Mr. Baete has said “not everything was perfect in the fund management.”
Cyber incidents were rated as the greatest peril to business in 2022, followed by business interruption and natural catastrophes, according to the 2022 Allianz Risk Barometer released Tuesday.