Allianz reports 23% drop in net profit, continued PIMCO outflows

Allianz Group reported a 23% drop in net profit for the second quarter on Friday, citing a combination of market volatility and charges related to settlements with U.S. investors and regulators over the collapse of its Structured Alpha funds.

Its subsidiary, Pacific Investment Management Co., reported a second straight quarter of bond withdrawals, with investors taking out a net €28.7 billion ($29.3 billion) in the three months ended June 30, Allianz said on an earnings call.

The parent company reported net profit attributable to shareholders of €1.7 billion in the three months through June, compared to €2.24 billion one year earlier.

Despite that, Giulio Terzariol, chief financial officer of Allianz SE, said on the call that halfway through the year, "we remain confident about our long-term growth trajectory," with a projected operating profit of €13.4 billion, "plus or minus €1 billion."

Addressing the outflows from PIMCO, Mr. Terzariol said "what is happening to PIMCO is basically something that is happening everywhere" and to most of its U.S. competitors. "Clearly, the market has been tough," Mr. Terzariol said on the earnings call.

In the second quarter, Allianz third-party assets under management fell €109 billion to €1.8 trillion, a combination of €34 billion in investment assets outflows and €159.2 billion related to the market, while currency effects helped offset further losses, the company reported.

PIMCO's third-party assets under management fell to €1.39 trillion from €1.45 trillion as of March 31.

Addressing its asset management business' net income of €2.3 billion, a 57% drop for the year so far, Mr. Terzariol said, "clearly this is low," but that it was driven mainly by charges to cover expected settlements with U.S. investors and regulators over the collapse of its Structured Alpha funds.

On May 17, Allianz Global Investors announced an agreement to pay over $6 billion to restitution and Securities and Exchange Commission charges. It also said that Voya Financial would acquire most of Allianz Global Investors' U.S. investment management team and business, adding $120 billion in assets under management for Voya Investment Management, with AllianzGI receiving an up to 24% stake in Voya Investment Management for the acquisition. The sale to Voya closed in July.

A dozen public pension funds and other institutional investors sued Allianz Global Investors in 2020 for alleged mismanagement of Structured Alpha funds' enhanced-return strategy. Plaintiffs including the $21.2 billion Arkansas Teacher Retirement System, Little Rock; Raytheon Technologies Corp., Waltham, Mass.; the $4.9 billion Milwaukee City Employees' 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.