Allianz Group is setting aside €3.7 billion ($4.2 billion) to cover expected settlements with U.S. investors and government officials over the collapse of its Structured Alpha funds, the company said Friday in a news release.
A dozen public pension funds and other institutional investors sued Allianz Global Investors in 2020 for alleged mismanagement of the enhanced return strategy. Plaintiffs including the $21.8 billion Arkansas Teacher Retirement System, Little Rock; Raytheon Technologies Corp., Waltham, Mass.; the $1.9 billion Milwaukee City Employes' Retirement System; and Blue Cross Blue Shield's national employee benefits committee, claimed that Allianz GI abandoned its investment and risk management strategies and subjected investors to undisclosed risk that led to massive losses in February and March of 2020.
The Justice Department and Securities and Exchange Commission launched their own investigations as well.
In the statement, Allianz said that it anticipates settling the investor lawsuits "shortly," while discussions with the SEC and DOJ are ongoing. The decision to set aside €3.7 billion in 2021 financial statements was made, even though "the total financial impact of the Structured Alpha matter cannot be reliably estimated," and further expenses are expected, the statement said.
The charge reduced Allianz Group 2021 net income by €2.8 billion, and shareholders' net income by 2.9% to €6.6 billion. Allianz is planning a new share buyback program up to €1 billion in 2022, and will cancel all repurchased shares, the statement said.
Allianz manages €809 billion for its insurance clients while its asset managers PIMCO and Allianz Global Investors manage nearly €2 trillion combined. In 2021, Allianz operating profit increased 24.6%, due in part to higher average assets under management and continued cost control in the asset management segment, Allianz's fiscal 2021 report said.