Allianz Pays 140 Million Euros To Shut US Fund Unit Following Fraud

The logo of Allianz is seen on a building in Paris, on April 30, 2020. (Charles Platiau/Reuters)

FRANKFURT, Germany–Allianz spent around 140 million euros ($143. 11 million) on restructuring to wind down a U.S. funds unit at the center of a multi-billion fraud, the German insurer disclosed on Friday, an expense that added to a worse-than-expected 23 percent fall in quarterly profit.

Allianz agreed in May to close down Allianz Global Investors, an Allianz unit in the United States as part of a plea agreement for securities fraud. It also settled a $6 million settlement with U.S. regulators and law enforcement.

The charge was revealed in the company’s second quarter earnings report. It is an omen of the case that has hampered the reputation and finances of one of Germany’s most important companies for many months.

The expense was due to volatile markets which also reduced earnings. The net profit attributable shareholders was 1. 706 billion euros in the quarter to June 30 missed a consensus forecast of 1. 846 billion and was down from 2. 225 billion a year earlier.

Shares dropped 2.5 percent in Frankfurt mid-morning, making it one of the largest losers in the DAX blue-chip stock index.

But the insurer’s target of 2022 operating profit between 12.4 billion and 14.4 billion euros remains intact, the company said.

” We are well-placed to manage high inflation and economic pressures, which are especially evident in Europe,” Oliver Baete, Chief Executive Officer said.

Volatile markets took a toll on Allianz in the quarter, prompting it to take a 282 million euro impairment charge and also contributing to a 12 percent drop in operating profit at its life and health division.

Analysts at Jefferies rated Allianz as a buy and noted that non-operating loss and corporate expenses were “far higher than anticipated” and called the result a mixed beat .”

By Tom Sims and Alexander Huebner