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Dresdner Losses Weigh on Allianz

May 18, 2002

Losses in its banking business, with Dresdner accounting for the lion's share, weighed on the bancassurance giant's first-quarter results, but group profit over the period soared as a result of one-off divestments.

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Allianz acquired Dresdner Bank in 2001

New subsidiary Dresdner Bank AG continues to weigh heavily on bancassurance giant Allianz AG. In the first quarter of this year, the group's banking business booked a loss of 126 million euro, with Dresdner accounting for 110 million euro.

Allianz blamed the losses mostly on the weak economy and on the slump on the stock markets.

Allianz acquired Dresdner Bank in the middle of last year. The bank already burdened the insurer's 2001 balance sheet.

Allianz management board member Helmut Perlet said that Dresdner had been able to lower administration costs by 10%. But if market conditions continued to be poor, further rationalization measures, including job cuts, could not be ruled out.

Risk provisions for the group's lending business would "more or less clearly" remain below last year's level of 1.9 billion euro, Perlet said.

Analysts were disappointed with Dresdner Bank's performance. Merrill Lynch said it had expected the bank's losses to be just half as much.

Overall, Allianz was able to post a clear rise in earnings for the first quarter. Net profit came in at 1.9 billion euro, up from 700 million euro in the year-ago period, but boosted by high proceeds from divestments.

The sale of shareholdings in Munich Re, and Mannesmann Vodafone together yielded 2.3 billion euro. The sale of a 16% stake in HypoVereinsbank was already booked last year. Analysts don't expect similar divestment proceeds in the coming quarters.

Allianz reported strong growth in its insurance business. Gross premiums income rose by more than 10% in the first quarter to 25.4 billion euro.

A drop in premiums income and a loss was reported for the group's property insurance unit in the United States. But Perlet said that restructuring of U.S. subsidiary Fireman's Fund was making good progress.

The group's asset-management unit raised funds under management by 1% to just under 1,200 billion euro. Perlet upheld the group's forecast for the full year of a 3 billion euro net profit and of 4% growth in premiums income. Shares in Allianz on Thursday closed 0.40% lighter at 258.75 euro.