Reuters: Financial Services and Real Estate: UPDATE 2-Allianz guarded on outlook despite strong Q1

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UPDATE 2-Allianz guarded on outlook despite strong Q1 May 9th 2012, 16:07 Wed May 9, 2012 12:07pm EDT * Q1 net profit more than 1.4 bln eur vs poll avg 1.27 bln * Q1 operating profit more than 2.3 bln vs poll avg 1.98 bln * Too many risks to upgrade 2012 target-CEO * But too much uncertainty to change target * Shares flat vs 0.7 pct decline in European insurance index (Changes dateline to Munich, adds detail) By Christian Kraemer MUNICH, May 9 (Reuters) - Allianz, Europe's biggest insurer, shied away from raising its 2012 outlook after a strong first quarter, alerting investors to big risks from the euro zone debt crisis, new financial rules and rising damage claims. The company is more than a quarter of the way towards its full-year goal but Chief Executive Michael Diekmann said uncertainty was too great to consider changing the target. "The sovereign debt crisis is still far from over, the capital markets remain volatile and interest rates are low," he told shareholders at the insurer's annual general meeting. He urged caution on politicians' calls for public spending to spur economic growth, saying current low interest rates were already a stimulus. "Additional debt financed burdens might overcharge the system," he said. A flood of European Central Bank money early in the year bolstered shares and steadied debt markets, helping Allianz achieve a forecast-beating 40 percent rise in operating profit. Preliminary results on Wednesday showed operating profit of more than 2.3 billion euros, compared with an average of 1.98 billion euros forecast in a Reuters poll of banks and brokerages. Diekmann said Allianz was on track to meet its goal of earning 8.2 billion euros, plus or minus 500 million, in operating profit this year. "All three business segments contributed to the good start into 2012," Diekmann said in a statement, released ahead of final first-quarter results on May 15. But he warned that the ECB's policy action at the start of the year may only have a temporary effect, and low interest rates will continue choking the income insurers make from their investments. "There is a risk that a prolonged period of expansive monetary policy will create the next bubble, making it the precursor to the next crisis," he said. Allianz's shares were flat at 83.25 euros by 1520 GMT, outpacing a 0.7 percent decline in the STOXX Europe 600 insurance index. FOOD SPECULATION Allianz has been trying to diversify its investments away from low-yielding government bonds toward alternatives like commercial real estate and infrastructure. But it drew fire at the shareholder meeting from non-charity Oxfam, which accused Allianz's asset managers of placing 6.2 billion euros in speculative bets on food prices and aggravating hunger in poor countries. Diekmann said Allianz took the accusation seriously, particularly as it could damage the company's reputation. "We will think about whether we have to revisit the issue," Diekmann said. Shareholders also took aim at poor performance at Allianz's U.S. unit, Fireman's Fund, which Diekmann said was attributable to costly natural catastrophe damage claims, new claims in asbestos cases and a bitterly competitive market. "We will overhaul Fireman's Fund ourselves," he said. Allianz as a whole paid out 1.8 billion euros for natural catastrophes in 2011, its most costly year ever for such events, but Diekmann said claims would continue to rise in future. The insurer raised its projected natural catastrophe claims budget to 1.2 billion euros in 2012 from 1.1 billion last year. ($1 = 0.7695 euros) (Additional reporting by Jonathan Gould; Editing by David Cowell) Link this Share this Digg this Email Reprints

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