Pimco's $10B inflows was shining light in Allianz earnings

Pimco's $10B inflows was shining light in Allianz earnings
The bond management business helped offset losses in the global firm’s insurance operations.
NOV 10, 2023

Allianz SE reported a third-quarter profit that beat analysts’ estimates as its giant bond manager Pacific Investment Management Co. continued to attract new money.

Group operating profit fell 15% to €3.47 billion ($3.7 billion), better than the €3.26 billion analysts had expected. Pimco attracted €10 billion from outside clients in the three months through September, the third straight quarter of inflows.

The company confirmed its full-year target of around €14.2 billion in profit, even as its insurance business is facing headwinds from natural catastrophe claims. 

Chief Executive Officer Oliver Baete, whose mandate was just extended through 2028, is closing in on last year’s record profit and possibly surpassing it. He has focused on smaller deals to streamline operations and stayed mostly clear of bigger acquisitions, allowing him to return billions of euros to investors through share buybacks and increasing dividends. Baete is likely to lay out new medium-term targets next year.

Third-quarter operating profit in the property-casualty insurance business fell 25%, a drop the company attributed to an “exceptionally high level of claims from natural catastrophes.” Earnings in the life-health insurance segment declined 4.9%.

Severe thunderstorms hit Europe over the summer, including hailstorms in northern Italy that resulted in record-breaking insurance payouts for the country, according to an industry report.

Pimco’s inflows were driven by fixed income strategies, after clients pulled more than €75 billion last year following a historic bond rout. Allianz Chief Financial Officer Giulio Terzariol said he expects flows to accelerate as interest rates near their peak, which makes bonds more attractive again.

“I would expect that we are going to see flows coming pretty strongly in the future”, he said in an interview on Bloomberg Television, adding that so far, investors are still staying on the sidelines.

In a potential disappointment for shareholders, the company refrained from announcing a new share buyback program as it is transitioning to a new chief financial officer. Terzariol, who held the role since 2018, is moving to Italy’s Assicurazioni Generali SpA next year. The most-recent buyback program, which started in May, is nearing completion.

“We are going to speak about our capital allocation again clearly in February,” Terzariol said. Allianz is scheduled to report full-year earnings that month. “We will continue to be very active on capital deployment moving forward,” he added.

Among the smaller deals Allianz has announced this year are the acquisition of Generali’s non-life insurer Tua Assicurazioni for €280 million, the sale of a 51% stake in Allianz Saudi Fransi and the divestment of minority stake in CPIC Fund Management Co.

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