Allianz Drops Buy-Back As COVID-19 Hit Reaches €1.3B

By Martin Croucher
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Law360, London (November 9, 2020, 2:29 PM GMT) -- Insurer Allianz SE has said it has suffered a €1.3 billion ($1.5 billion) blow to profits caused by the COVID-19 crisis, prompting the German company to cancel a share buy-back program.

Allianz said that its operating profit had fallen 14.6% in the first nine months of the year, to €7.8 billion from €9.1 billion in the same period in 2019. The insurance giant has been battered by claims from events canceled as a result of the coronavirus pandemic and from TV productions that have been forced to stop filming.

The company announced in February that it would buy back €1.5 billion of shares from March. But the company paused the program in April with €750 million of shares still not bought as it blamed uncertainty arising from the pandemic.

And, on Friday, Allianz said it will "no longer execute the outstanding part of the program."

Oliver Bäte, chief executive of Allianz, said on Friday that the company has "delivered solid results in an environment that will remain challenging." He added that he was confident the insurer would weather the crisis.

The company's capital ratio — a measure of its financial resilience — fell to 192% in the third quarter, from 212% in the same period last year. Insurers are required to maintain capital ratios of at least 100% under Europe's tough Solvency II Directive, which indicates they can withstand financial shocks and still pay claims.

Allianz Global Corporate & Specialty, the insurer's London market business, said last month that it has set aside €488 million to pay out on claims linked to COVID-19 restrictions, most of which is expected to come from the film, TV and events industry.

AGCS said at the time that the losses were offset by fewer claims from the aviation sector, where a decline in tourism has meant far fewer planes in the air.

Allianz also said on Friday that it has seen an offset from fewer property and casualty claims from natural catastrophes.

The company's property and casualty business unit had a year-to-date combined ratio of 96% in the third quarter, up slightly on the 94.1% reported in the same period in 2019. A combined ratio is a measure of underwriting success, with a lower number indicating a profit, and a number over 100% reflecting a loss.

--Editing by Ed Harris.

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