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Dresdner drags down Allianz results

The German insurance giant Allianz on Thursday posted a worse-than-expected 2008 loss owing in large part to a huge charge in connection with the sale of its Dresdner Bank subsidiary.

Published: 26 February 2009 14:02 CET
Dresdner drags down Allianz results
Photo: DPA

Allianz said its net loss amounted to €2.44 billion ($3.1 billion), while analysts polled by Dow Jones Newswires had pencilled in a more modest drop of €1.86 billion.

In 2007, Allianz had made a net profit of €7.97 billion. The insurance group booked a charge of €6.4 billion in connection with the sale of Dresdner to the second biggest German bank, Commerzbank. That sale was completed on January 12 2009, “more than half a year earlier than originally intended,” the insurer noted in a statement.

Allianz shares leapt by 9.36 percent to €53.75 in early trading on the Frankfurt stock exchange, while the DAX index of leading shares was 1.48 percent higher overall. On the operating level, Allianz made a profit of €7.43 billion, but that was 25 percent below the year earlier figure, and slightly lower than an analyst forecast of €7.50 billion.

The management board would propose a dividend of €3.50 per share for 2008, the statement said, down from €5.50 in 2007.

“Our result of €7.4 billion deserves recognition considering the challenging environment,” it quoted Allianz chairman Michael Diekmann as saying.

Combined revenues last year fell by 5.3 percent to €92.5 billion, the statement said, while net income from continued business, excluding Dresdner, dropped to €4.0 billion from 7.3 billion in 2007.

“The difficult conditions in the capital markets will continue throughout 2009. We are in the midst of the toughest economic downturn for decades,” Diekmann said. “Reliable profit forecasts for 2009 are not possible in this environment.”

In the final quarter of 2008, a period marked by volatile financial markets following the bankruptcy of US investment bank Lehman Brothers, Allianz showed a net loss of €3.11 billion, compared with a profit of€ 665 million in the same period a year earlier.

In Allianz’s core activity of property and casualty insurance, the group reported a slight increase in premium income to €43.2 billion, along with an operating profit of €5.6 billion, which represented a decline of around 10 percent from 2007.

Getting rid of Dresdner was a top priority for Allianz last year. The insurance group ended up selling its loss-making bank for a total of €5.124 billion, well below the original price tag of €9.792 billion.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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