Allianz spends a provision of nearly 4 billion euros to settle the litigation on the Alpha structured funds

Posted Feb 17 2022 at 09:25 PM

The case of the Alpha structured funds weighs down the results of Allianz. The German insurance giant announced on Thursday that it had spent a “one-time” provision of 3.7 billion euros on its 2021 accounts in order to settle the ongoing litigation in the United States against its asset management subsidiary Allianz. Global Investors in which these funds are housed. “With respect to the ongoing legal and governmental proceedings in the United States in relation to the structured Alpha funds, Allianz expects settlements with the main investors of these funds shortly”, explains the group in a press release issued after the holding of the its supervisory board. .

This provision explains the net loss of 292 million euros recorded by the group in the fourth quarter, against a net profit of 1.8 billion euros for the previous period. Over the whole of the 2021 financial year, this provision led to a reduction in net income of 2.8 billion euros, explains Allianz. The annual net profit is thus displayed at 6.6 billion euros.

Without taking this provision into account, the group claims to have had a solid financial year. “Allianz has proven its resilience and adaptability despite the challenges of 2021,” said its boss Oliver Bäte, citing in particular a “record” operating profit of 13.4 billion.

“High Priority”

For more than a year, Allianz has been the subject of civil lawsuits by American investment funds furious at having suffered significant losses during the coronavirus crisis through these structured funds called “Alpha”, distributed by Allianz Global Investors (IM). The US Department of Justice (DOJ) has even opened a criminal investigation since last summer, giving an even stronger impact to the case.

In the process, Allianz had issued a warning on its results and appointed a new head of its asset management. Its financial director, Giulio Terzariol, had described in November the settlement of this dispute as “the highest priority”.

Overall impact uncertain

This Thursday, Allianz announces that this provision constitutes only “an important step towards a resolution of the various procedures”. The group recalls that discussions with the complainants, namely the US Department of Justice and the Securities and Exchange Commission (SEC), the American stock market policeman, are continuing. “The timing and nature of any comprehensive or coordinated resolution of these cases is uncertain,” he warns.

Result: the group considers that to date, it is impossible for it to estimate “reliably” the total financial impact of this Alpha affair. “Allianz expects to have to incur additional expenses before these cases are definitively resolved”, insists the group. In the meantime, for 2022, the insurer has set an operating profit target of the same order as that of 2021.

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