Allianz records $4.2 billion hit in investment fund deal, says more may come

  • The problem cast a shadow over the company
  • Expects settlement with major investors shortly
  • Discussions with other investors, DOJ, SEC ongoing
  • Expects other expenses related to the case
  • Provision leads to a loss in the fourth quarter

FRANKFURT, Feb 17 (Reuters) – German insurer and asset manager Allianz (ALVG.DE) said on Thursday it would set aside 3.7 billion euros ($4.20 billion) to meet investigations and legal proceedings resulting from the collapse of a multi-billion dollar company. set of investment funds.

The provision resulted in a net loss attributable to shareholders of 292 million euros in the fourth quarter, the company said. Analysts expected a profit.

Allianz said the outcome of various investigations and lawsuits “cannot be reliably estimated” and that it “expects to incur additional expenses before these matters are ultimately resolved.”

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The problem concerns Allianz funds which used complex options strategies to generate returns but racked up massive losses when the spread of COVID-19 triggered wild stock market swings in February and March 2020.

Investors in the so-called Structured Alpha fund set have sought some 6 billion euros in damages for losses in a host of cases filed in the United States. The US Department of Justice and the Securities and Exchange Commission also investigated the matter. Read more

The case has cast a shadow over Allianz, one of Germany’s most valuable companies. It is also one of the largest fund managers in the world with 2.5 trillion euros in assets under management through bond giant Pimco and its Allianz Global Investors, which managed the funds at the center of the investigations.

Allianz said it expects a settlement with major investors “shortly,” but discussions with other investors, the DOJ and the SEC “are continuing.”

The quarterly loss compares to a profit of 1.8 billion euros a year ago. Profit for the full year at 6.6 billion euros was the lowest since 2013.

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“Despite the challenges in 2021, Allianz has proven its resilience and adaptability,” Chief Executive Oliver Baete said.

The $15 billion Structured Alpha funds were aimed in particular at normally conservative American pension funds, from those of factory workers in Alaska to teachers in Arkansas to subway workers in New York.

After the coronavirus sent markets crashing in early 2020, the value of Allianz funds fell, in some cases by 80% or more. The investors alleged that Allianz deviated from its stated strategy in their lawsuits.

Allianz has publicly disclosed the SEC and DOJ investigations. He had previously said he intended to defend himself “vigorously” against the investors’ allegations. Baete said that “all was not perfect in the management of the funds”.

($1 = 0.8804 euros)

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Reporting by Tom Sims Editing by Kirsten Donovan

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