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Allianz, AXA dividends help allay sector worries

A logo of Europe's biggest insurer Allianz is pictured in Tokyo October 19, 2012. REUTERS/Yuriko Nakao
A logo of Europe's biggest insurer Allianz is pictured in Tokyo October 19, 2012. REUTERS/Yuriko Nakao

By Christian Plumb and Jonathan Gould

PARIS/MUNICH (Reuters) - Europe's top two insurers at least maintained their dividends for the past year, helping allay concerns that insurer payouts were being threatened by a malign combination of low bond yields and tighter regulatory requirements.

Germany's Allianz kept its payout steady at 4.5 euros per share, while French rival AXA raised its shareholder reward 4 percent to 0.72 cents, easing fears about the sustainability of insurance sector payouts highlighted by a surprise cut on Wednesday from Britain's Royal & Sun Alliance (RSA) .

Elsewhere in Europe, reinsurer Swiss Re set out plans for a hefty special dividend and announced a 17 percent rise in its regular yearly payment.

Allianz Chief Financial Officer Dieter Wemmer defended the company's decision to pay out 40 percent of earnings against some criticism it could afford to dole out even more.

"The 40 percent is a very solid and sustainable number," Wemmer told Reuters Insider TV, adding that Allianz's main competitors also were paying dividends around this level.

"What was disappointing with Allianz was the flat dividend," said Harry Wolhandler, managing director at Amilton Asset Management in Paris. "It was a bit surprising that the dividend wasn't raised, given that the yield was already unremarkable and it now remains quite weak compared with the other insurers.

"In terms of quality and solidity, Allianz is definitely by far the strongest insurer in Europe."

The dividend issue came into focus when RSA, Britain's biggest business insurer, unexpectedly cut its dividend by a fifth after weak investment returns, sending its shares sharply lower.

Yet the lack of any similar move in Thursday's statements indicated no fresh sector-wide impact from low investment returns or regulatory calls for insurers to fatten up their capital reserves.

Allianz and AXA also flagged improvements in their asset management businesses and the possibility of an uptick in global growth.

SIGNS OF STABILITY

Allianz said there were early signs of a European economic upturn.

"There seem to be first signs of stability in the euro zone and some observers expect the world economy to regain a bit of momentum towards the end of the year," Michael Diekmann, chief executive of Europe's biggest insurer, said in a statement.

AXA also sounded an optimistic note, with Chief Financial Officer Gerald Harlin telling reporters that 2012 "was the year that growth returned."

Allianz's results were helped by strength in asset management, an area in which AXA also saw improvement, though its revenue in the segment still declined.

"They're both benefiting from improvement in their asset management businesses, but ... Allianz is more exposed to that," said Berenberg analyst Peter Eliot. "In terms of ... momentum, it's definitely with Allianz at the moment."

Allianz's asset management division saw third-party net inflows increase to 114 billion euros from 38 billion in 2011, with much of the improvement coming in Europe.

The German group beat full-year earnings expectations on the back of a strong performance in its general insurance division. Fourth-quarter net profit of 1.22 billion euros was above the highest forecast of 1.18 billion in a Reuters poll. The average forecast was 982 million.

Allianz said it expected operating profit in 2013 of 9.2 billion euros ($12.3 billion), plus or minus 500 million given the uncertainty around natural disasters and market volatility.

AXA meanwhile has been struggling to turn around its U.S. business and succeeded in cutting losses from its troubled variable annuity business to 28 million euros from 325 million a year ago.

The French group missed analyst forecasts as gains from selling businesses were not repeated in 2012 and full-year net income fell to 4.15 billion euros from 4.19 billion, missing a consensus forecast of 4.43 billion according to Thomson Reuters I/B/E/S.

Overall the U.S. unit more than doubled its contribution to underlying earnings at the company's life and savings business. Net inflows in asset management, which include AllianceBernstein LP , totaled 7 billion euros worldwide, AXA said.

At 1230 GMT, AXA shares were down 3 percent, underperforming the European sector which was 1.2 percent weaker. Allianz shares were down 1 percent. ($1 = 0.7479 euros)

(Additional reporting by Matthieu Protard; Editing by Carmel Crimmins and David Holmes)

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