The German insurer Allianz announced on Wednesday that it would book an additional provision of 1.9 billion euros in the first quarter, linked to the losses of its Alpha structured funds during the fall in the financial markets of March 2020. The group had already announced provisions of 3.7 billion euros for this purpose.
“Allianz believes that this provision is a fair estimate of its remaining financial exposure to the payment of compensation to investors and payments to be made in connection with any resolution of governmental proceedings.“said the insurer in a press release. The losses suffered in March 2020 by funds managed by Allianz Global Investors on structured products triggered investigations by the United States Department of Justice and the Securities and Exchange Commission (SEC), as well as numerous complaints from the group’s clients.
First quarter profit of 600 million euros
These funds had heavily bet on options offering investors a hedge in the event of a market reversal. This strategy had paid off for the group before the start of the health crisis. But in March 2020, equity markets fell and volatility reached record levels, leading to heavy losses for the funds concerned.
The additional provision announced on Wednesday will have a negative impact of 1.6 billion euros on net income for the first quarter, Allianz said, adding that its net profit thus amounted to 0.6 billion euros over the period. First quarter operating profit reached 3.2 billion euros.
After these announcements, the Allianz title gained 2.5% to 198.50 euros on the Frankfurt Stock Exchange.