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Allianz raises profit goal; Q3 net doubles

Allianz Europe's biggest insurer, raised its forecast for 2006 profit after earnings doubled in the Q3 on fewer storms.

Net income may surpass €6 billion ($7.7 billion) this year, the Munich-based company said in a statement late yesterday. Allianz SE and was previously aiming for profit of €5.5 billion to €6 billions. Third-quarter earnings doubled to €1.6 billion, beating analysts' estimates. An absence of major disasters buoyed profit after earnings in the Q3 of 2005 were battered by €753 million of claims related to the worst Atlantic storm season on record. Last year, hurricanes Katrina, Rita, Wilma contributed to insured damages from natural disasters of as much as $94 billion, according to estimates by Munich Re, the world's second-largest reinsurer. „Despite early and loud prognostications to the contrary by storm sages, Atlantic hurricane activity has been mild,” London-based insurance broker Willis Group Holdings Ltd. said in a report published yesterday. „Insurers are looking at some of their best financial returns in decades.”

Allianz shares advanced 13% this year to €145, valuing the insurer at €62.5 billion. That gain compares with an 11% increase in the 29-member Bloomberg Europe 500 Insurance Index. The company reported preliminary earnings figures yesterday, and will provide a more detailed breakdown November 10. Allianz's property and casualty unit doubled net income to €1.09 billion from €506 million, above analysts' estimates of €981 million. Operating profit, which excludes extraordinary items, rose by 74% to €1.7 billion at the unit. Spending on claims and other costs at the division fell to 90.2 cents of each euro in premium income from 98.6 cents a year earlier. Net income at the life and health insurance unit declined 13% to €288 million, while net income at the banking business more than doubled to €283 million from €123 million a year earlier. The asset management division, which includes Newport Beach California-based Pacific Investment Management Co., had net income of €84 million, up from €42 million a year ago, Allianz said. Allianz is now targeting full-year operating profit in excess of €9.5 billion, above a previous goal of more than €9 billion, it said. „The very successful business performance again leads us to anticipate slight improvements on the forecast made at the half-year stage for the fiscal year 2006,” CFO Helmut Perlet said in the statement. This year's hurricane season, which began in June and ends this month, hasn't resulted in any major storm losses for the insurance industry.

St. Paul Travelers, the second-biggest US commercial insurer, on October 26 said Q3 profit surged more than six-fold as claims plunged a year after Hurricane Katrina. The insurer's catastrophe losses fell to $15 million before taxes from $1.5 billion in the Q3 of 2005. American International Group Inc., the world's biggest insurer, publishes earnings on November 9. CEO Michael Diekmann has revived earnings at Allianz's Dresdner Bank unit by eliminating more than a third of the workforce and shedding bad loans. Dresdner's ratio of costs to income improved to 78.8% during the first nine months, Allianz said. The measure stood at 90.6% at the end of 2005. „Dresdner Bank has almost achieved the operating profit target of nearly €1.2 billion for the full year,” Perlet said in a statement on the insurer's Web site. Operating profit, which rose 38% to €311 million in the Q3, amounted to €828 million after the H1 of the year. Allianz in June announced plans to shed 2,480 more jobs at Dresdner and 5,000 workers at its German insurance operations.

Diekmann is merging Allianz's German life, health and property and casualty insurers under one holding company and cutting the number of administrative offices to 10 from 21. He also converted Allianz's legal structure from a German Aktiengesellschaft, abbreviated AG, into a pan-European company to ease mergers and save costs. „The restructuring is a move in the right direction and will enhance the value of the company,” Stephan Kalb, an analyst at Sal. Oppenheim in Frankfurt, who recommends buying Allianz shares, wrote in a note to clients earlier this week. Allianz said it will book costs related to the reorganization of its banking division in the fourth quarter of the year. Allianz's net income in the quarter also includes a profit of approximately €300 million from the sale of Four Seasons Healthcare. CFO Perlet will hold a conference call for analysts at 3 p.m. today. (Bloomberg)