Allianz Group is setting aside an additional €1.9 billion ($2 billion) to cover expected settlements with U.S. investors and regulators over the collapse of its Structured Alpha funds, the company said Wednesday in a news release.
The announcement follows one made Feb.18 when Allianz said it had set aside €3.7 billion to cover expected settlements, with further expenses expected. The February statement said Allianz expected to settle the investor lawsuits "shortly," while discussions with the SEC and Justice Department are ongoing.
In the latest statement, Allianz said it has achieved additional settlements with investors, but a spokesman did not have further details. The decision Wednesday to book the additional €1.9 billion in the first quarter was: "In light thereof and progressing discussions with governmental authorities in the U.S.," the statement said.
"Allianz SE believes that this provision booked is a fair estimate of its remaining financial exposure in relation to compensation payments to investors and to payments under any resolution of the governmental proceedings," an Allianz spokesman said in an emailed statement.
"Allianz SE is seeking a timely resolution to the governmental proceedings in ongoing discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission. Our provision estimate is likely to cover all, but settlements have not been concluded, although the progressing discussions have allowed us to book a provision," the statement said.
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 $21.2 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.
The additional set-aside will negatively impact first-quarter net income by €1.6 billion after tax, Allianz said in the statement.
