ALLIANZ, the German owner of bond giant Pacific Investment Management, said its second-quarter profit jumped from a year earlier as stronger earnings from its insurance business offset weaknesses in its asset management units.

Group operating profit increased 7.1 per cent to 3.8 billion euros (S$5.6 billion) on higher results from the US life-health insurance business, Allianz said on Thursday (Aug 10). The asset management segment, which also includes Allianz Global Investors, posted lower earnings following a historic bond rout. Pimco attracted about four billion euros from external clients in the three months through June, in a sign of stabilising investor confidence.

Chief executive officer Oliver Baete is in the midst of a three-year strategic plan that is aiming for steady topline growth, better profitability and efficient capital management through 2024, while generating billions of euros in excess capital. He has largely refrained from larger acquisitions, paving the way for share buybacks and higher dividends despite a costly legal dispute in the US.

Operating profit from property-casualty insurance rose by 10.8 per cent, while the life-health insurance segment posted an increase of 22.5 per cent. The asset management units recorded a decline of 9 per cent. 

Allianz confirmed its target for operating profit this year, which is roughly in line with last year’s earnings of 14.2 billion euros. 

The group said that external clients added money at Pimco for a second consecutive quarter after outflows of more than 75 billion euros last year. 

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“There is stability coming through,” Allianz chief financial officer Giulio Terzariol said in an interview with Bloomberg TV, adding that flows in July have also been positive. “We are kind of optimistic that we will continue to see positive flows at Pimco as we go into the remainder of the year,” he said.

S&P Global Ratings has said that it expects Allianz to maintain robust operating performance throughout 2023 as the company “shows disciplined underwriting with continued price adjustments and solid cost controls”. Those measures will help safeguard the insurer against inflation risk, it said. 

Allianz has executed 11 billion euros of share buybacks since February 2017, before announcing another 1.5-billion-euro programme in May. Baete also raised the dividend after a record operating profit for 2022.

Some analysts expect Allianz to return more capital to shareholders before the end of this year. Hamburg-based Berenberg predicts that another one-billion-euro buyback could be announced alongside Q3 earnings, according to a July note.

Those expectations come after Baete said that he was in no rush to do bigger deals. “Larger merger-and-acquisition transactions are less likely to be successful,” he said in a June interview. “And there also need to be interesting bigger takeover targets. I didn’t see any.” BLOOMBERG