Europe’s largest insurer Allianz signaled it might return cash to shareholders after reporting forecast-beating quarterly earnings on Friday and the first positive flows into U.S. bond fund manager PIMCO in over three years.
The performance follows strong quarterly profits from European rivals Zurichand Generali as insurers adjust their strategies and investment portfolios to cope with low interest rates.
PIMCO reported third-party net inflows of 4.7 billion euros ($5.1 billion) in the third quarter, advancing for the first time since the second quarter of 2013.
“The most positive news…is that asset management and in particular PIMCO has stopped net outflows,” DZ Bank analyst Thorsten Wenzel said in a note, leaving his “Buy” recommendation unchanged.
Globally, mutual fund assets under management had risen 6.9 percent in the year to end-September, data from Lipper showed, with most of the money – $410 billion – heading into bond funds.
PIMCO has experienced several years of cash withdrawals in several of its main funds, including its flagship PIMCO Total Return Fund. Co-founder Bill Gross, known as “the Bond King” during his years at PIMCO, left in 2014 for Janus Capital.
PIMCO has hired Emmanuel “Manny” Roman from Man Group , the world’s biggest listed hedge fund, as its chief executive officer. Roman started at the bond manager only last week.
Allianz’s shares rose more than 2 percent towards the top of Germany’s DAX index after quarterly net profit rose 37 percent from a year earlier due to strong performance across business classes.
Cash to Spend
The insurer has 2.5 billion euros available for acquisitions by the end of the year and any unused M&A budget could go on share buybacks, Chief Financial Officer Dieter Wemmer told a media call.
“There are a lot of things that might be interesting for us but the M&A market is not particularly active,” he said.
“It is not that easy to find something suitable at a reasonable price.”
M&A has cooled off in the insurance sector after a bumper year in 2015, with many players saying valuations had become too high.
More asset management mergers are seen as likely, however, after Britain’s Henderson last month announced a $6 billion purchase of U.S. rival Janus Capital in the face of increasing competition from index-tracking fund firms with lower fees.
Any asset management acquisition had to fill a gap in coverage by Allianz’s two fund managers, PIMCO and Allianz Global Investors, Wemmer told Reuters by phone.
He declined to comment on whether Allianz might be interested in any parts of Deutsche Bank’s asset management business. There has been speculation that Deutsche might sell as it battles a possible $14 billion fine from U.S. authorities.
Quarterly net profit rose from a year earlier to 1.86 billion euros, above the average forecast of 1.58 billion euros in a Reuters poll of banks and brokerages.
Allianz confirmed its full-year target for operating profit of 10.5 billion euros, plus or minus 500 million euros. ($1 = 0.9192 euros)