Allianz : Quarterly and Full Year Earnings Release 2016

Allianz 2016: Another successful year

Allianz Group delivered 10.8 billion euros in operating profit in 2016, near the upper end of its target range and the fifth consecutive increase in annual operating results. Net income attributable to shareholders rose 4.0 percent compared to 2015, leading Allianz to raise its dividend further to 7.60 euros. Allianz will also launch a 12-month share buy-back plan worth up to 3 billion euros, representing around 4.2 percent of its share capital. Allianz, Europe's largest insurer by market value, saw further progress in implementing its Renewal Agenda in 2016, putting the company well on track to achieve its 2018 targets.

The Life and Health segment saw the strongest rise in operating profit - up 9.3 percent to 4.1 billion euros - with rising investment results as the key driver. The new business margin rose to 2.7 percent in 2016 compared to 2.2 percent in 2015, demonstrating Allianz's ability to implement strategic changes swiftly and profitably in response to the low interest rate environment.

The Property and Casualty segment saw operating result ease 4.2 percent in the year mainly due to weaker investment results, even as its underwriting performance improved. The segment's combined ratio, which measures underwriting profitability, improved 0.3 percentage points to 94.3 percent due in part to lower claims from natural catastrophes.

The Asset Management segment marked an important milestone as PIMCO generated two consecutive quarters of third-party net inflows in the second half of 2016. A 6.1 percent increase of total assets under management (AuM) to 1,871 billion euros at year-end was mainly due to positive market effects. A decline in AuM driven fees and performance fees, however, led to a 4.0 percent decrease in operating profit. Cost discipline led to an improvement in the cost-income ratio to 63.4 percent from 64.5 percent for the segment.

'Allianz had a great year in 2016, with efforts invested in our Renewal Agenda starting to bear fruit. All segments delivered well, thanks to the engagement of our excellent people, and our robust capital base puts us in a position of strength,' Oliver Bäte, Chief Executive Officer of Allianz SE, said.

'The year was filled with surprises, not all of them welcome, that challenged many assumptions, fueled geopolitical uncertainty and market volatility, and that make 2017 difficult to predict. Nevertheless, we feel confident enough to raise our operating profit target range. The group aims to achieve an operating result of 10.8 billion euros, plus or minus 500 million euros, in 2017, barring unforeseen events, crises or natural catastrophes,' Oliver Bäte stated.

Allianz returns unused capital to shareholders

Allianz SE has decided to launch a share buy-back program with a volume of up to 3 billion euros as part of a previously announced plan to return unused capital from the group's budget for external growth from the period 2014 to 2016. Based on the closing price of 156.85 euros per share on February, 10, 2017, this would represent approximately 19.1 million shares or 4.2 percent of share capital.

The share buy-back program is envisaged to start on February 17, 2017 and last no longer than 12 months. Allianz SE will cancel repurchased shares and regularly publish updates on the program. The full implementation of the program as scheduled is subject to a minimum sustainable Solvency II ratio of 160 percent.

Capital management becomes more flexible

Through capital management, Allianz Group aims for a healthy balance between an attractive yield and investment in profitable growth. In 2014, Allianz Group adjusted the payout ratio to shareholders to 50 percent of net income attributable to shareholders. The Group also set aside 20 percent of net attributable income each year for external growth and aimed to pay out any unused portion of this budget every three years starting at the end of 2016.

The Board of Management and the Supervisory Board have now decided to simplify Group capital management to make it more flexible. In future, 50 percent of Group net attributable income will still be returned to shareholders in the form of a regular dividend. Allianz also aims to keep the regular dividend per share at least at the level paid in the previous year.

However, Allianz no longer intends to link its budget for external growth to shareholder pay-outs in a three-year cycle. Rather, half of net income should be used as deemed appropriate to finance growth, or it will be returned to shareholders on a flexible basis. This remains subject to a sustainable Solvency II ratio above 160 percent.