Allianz profits down by 31.6%

After years of double-digit growth, Allianz Global Investors’ operating profit declined by 31.6% to €960m (£853m) in 2008. Net income declined by 21.5% to €369m.

Third party assets under management (AUM) shrank by 1.2% from €725 billion to €673 billion. Net flows were zero, but AUM gained €29 billion through currency effects while €81 billion were lost because of market falls, according to the group.

Speaking a the group’s conference yesterday, Marna Whittington, the chief operating officer, said that profit had declined because of the market environment but maintained Allianz was a strong underlying business.

The decline was driven by volatile income components, Whittington said: performance fees and the valuation of seed funds caused 60% of the fall. “Last year, productivity growth was moderate due to increased headcount and volatile revenues,” she added.

Fixed income assets under management decreased from €616 billion to €603 billion, and equity from €175 billion to €104 billion.

There were net inflows of €10.3 billion into fixed income and net outflows of €10.6 billion from equities.

Joachim Faber, the chief executive officer (CEO) of Allianz, said: “Our clients are heavily impacted as far as their portfolio is concerned.”

However, he added the company was navigating the market volatility comparatively well. “[We] will seek to benefit from it by increasing our market share.”

Despite the negative news, Allianz said that it was on track to reach its profit growth target of 10% per year over a full market cycle.

Mohamed El-Erian, the CEO of Allianz’s subsidiary Pimco, said he remained uncertain on the outlook for 2009 and 2010.

“2009 is going to be a really difficult year for the economy. Every component, from growth to exports, will be negative. The only component of aggregated demand that will be positive is government demand,” he said.

He said the British government’s fiscal stimulus measures had not yet gone far enough, but added, “2009 is going to be a year of most unconventional government policies.”

El-Erian summarised the fourfold impact of the financial downturn through the sub-prime mortgage crisis, the liquidity crisis, falling consumer confidence and the collapse of Lehman brothers.

“Imagine four pipes, sucking oxygen out of the room. Everybody would be affected. Some more than others, but in the end everyone would be affected,” he said.

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