Banking drags Allianz 4Q profits

Insurer Allianz SE said Thursday fourth-quarter profit slipped by nearly 52 percent from a year ago, dragged down by its banking business and lower contributions from its insurance operations.

Allianz, Europe's biggest insurer by gross premiums and the owner of Dresdner Bank AG, said it earned 665 million euros ($974.62 million) in the October-December period, down by more than half from nearly 1.4 billion euros a year earlier. The company blamed the slip on a bad quarter for Dresdner.

Revenue rose 4 percent gain to 25.9 billion euros ($37.9 billion) in the fourth quarter compared with 24.8 billion euros in the same quarter a year earlier.

Allianz shares rose less than a percent to close at 118.44 euros ($174.13) in Frankfurt.

Allianz's U.S. units include Bill Gross' Pimco, one of the world's largest bond managers; Fireman's Fund; Oppenheimer Capital; and fund managers Nicholas-Applegate and RCM Capital.

For the year, the company confirmed its preliminary figures released last month, earning 8 billion euros ($11.7 billion), up 13 percent from 7 billion euros it earned in 2006. Revenue also rose to 102.6 billion euros ($150.4 billion) in 2007 compared with 101.1 billion euros in 2006.

"Despite challenging conditions in 2007, we were able to further improve our operating efficiency and profitable growth, and to achieve a record result for the year," said chief executive Michael Diekmann.

He said the results, despite the fourth-quarter narrowing, came because of "the well-diversified business activities of the group" which meant "we were less vulnerable to shocks and cycles in individual markets and segments."

Though the company's core insurance operations, including health and life insurance, as well as property and casualty insurance, were improved, the overall results were pulled lower by Dresdner, Germany's third-biggest bank, and its investment banking arm, Dresdner Kleinwort.

For the year, the bank's operating profit came in at 730 million euros ($1 billion), or about half the 1.4 billion euros it earned in 2006.

Diekmann said that the banking operation would refocus on what he called a "more future-oriented business" including more cash management and infrastructure financing while reducing its operations with structured investment vehicles, or SIVs.

The reason, he said, was because "the model of interest arbitrage faces a tough future."

The comments reaffirmed an announcement by Allianz in November that Dresdner Kleinwort would consider a strategic change in structured finance.

The bank's write-downs in its asset-backed securities trading book amounted to 1.3 billion euros ($1.9 billion) in 2007 of which 900 million euros ($1.3 billion) was in the fourth quarter.

Because of that, Diekmann said about 450 jobs will eliminated at the investment bank in its structured finance area, among others. Most of those cuts have already happened, he said.

Allianz chief financial officer Helmut Perlet said Dresdner has just 1 billion euros ($1.5 billion) in exposure to subprime-related securities.

Despite the uncertainty about the banking operations, Allianz said its other units performed well, and that it plans to increase its dividend from 3.80 euros a share to 5.50 euros a share to its supervisory board.

"We are increasing the dividend for the fourth year in a row as a part of delivering what we promised," Diekmann said.

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