Problems at Allianz’s US investment firm Pimco persisted in the second quarter as clients defected and margins slipped, posing a challenge for the chief executive of Europe’s biggest insurer who aims to make a record group profit this year.
Allianz said yesterday investors withdrew more than €20bn ($26.8bn) from Pimco in the second quarter, casting a shadow over results at its insurance divisions that beat even the highest of analysts’ forecasts.
Group operating profits of €2.8bn in the quarter take Allianz more than halfway towards its goal of earning €10bn, plus or minus €500mn, in the full year.
“We expect the upper end of the target range to be in reach,” Allianz’s chief executive Michael Diekmann said in a statement.
Diekmann’s contract as chief executive expires in December but big shareholders expect the 59-year-old to stay on at the helm of the company he has led for more than a decade. A decision on his role is due in October. For the second quarter, Allianz also posted a 10.5% rise in net profit to €1.76bn topping the highest forecast of €1.66bn given in a Reuters poll of analysts.
TUI Travel
TUI Travel, Europe’s biggest tour operator by revenues, looks on track to meet its annual profit growth goal after a 21% jump in third quarter profits, powered by sales of higher-margin holidays.
The British company is currently in talks with its 55% owner, Germany-based TUI, regarding a merger deal worth around £4.4bn ($7.5bn) which would create the world’s largest leisure tourism group.
The pair have until September 19 to announce a formal merger proposal.
TUI Travel is targeting 7 to 10% growth in underlying operating profit on a constant currency basis for the 12 months to the end of September, but takeover rules prevented it from re-affirming guidance on Friday.
“I can’t comment in terms of a forecast for this year because we’re in an offer period and I’ve got restrictions in terms of the takeover code,” chief executive Peter Long told reporters on a call.
He said that there was “no business reason” for the absence of guidance in the statement.
TUI Travel and TUI announced a plan to merge in an all-share, nil-premium deal in June. Investors had long expected such a tie-up since TUI Travel was created in 2007 from the merger of Britain’s First Choice and the travel business of TUI AG.
TUI Travel yesterday reported underlying operating profit on a like-for-like basis of £92mn ($155mn) in the three months to June 30 compared to £76mn in the same period last year.
Catlin
Bermuda-based Catlin Group said first-half profit more than doubled as the insurer’s geographical spread shielded it from weak pricing that has dogged its British rivals during the period.
Catlin’s London-listed shares shot up more than 5% yesterday, making it the biggest FTSE-250 percentage gainer. Rates of insurance against potential disasters have been either stagnant or in decline mainly due to increased competition and fewer large catastrophe claims over the past year.
Catlin said its exposure to “more resilient” pricing in the US, Europe and Asia had made it less vulnerable to sinking rates in London and Bermuda, where wholesale and catastrophe reinsurance lines dominate the market. Pretax profit rose 118% to $318mn, helped also by better investment returns and a “relatively benign” first half for claims. Catlin posted a combined ratio of 85%, down from 88.1. A ratio below 100% means an insurer earns more in premiums than it pays out in claims.
CIC
China’s $653bn sovereign wealth fund, China Investment Corp (CIC), posted yesterday an 11.8% jump in profits for 2013. Created in 2007 to earn higher returns for China’s $4tn foreign exchange reserves, CIC said it was becoming harder to find investment targets given global economic uncertainty.
For 2013, CIC said its net profits reached $86.9bn compared with $77.7bn the year before. It previously put its 2012 net profit at $77.4bn, and did not explain the discrepancy at a briefing to unveil the figures. Returns on its overseas investment in 2013 fell to 9.3% from 10.6% in 2012.
CIC, whose previous high-profile investments included taking a 10% stake in UK’s Heathrow Airport Holdings for 450mn pounds ($756.5mn), has not announced any deals of note in the past year as it underwent a leadership reshuffle.
Nokian Renkaat
Finnish tyre maker Nokian Renkaat reported a second-quarter operating profit below expectations due to plummeting sales in Russia and a weaker operating margin.
The company’s April-June operating profit fell to €91mn ($121.63mn) from 120mn a year ago, below all expectations in a Reuters poll, in which the estimates ranged from €98mn to €112mn.
Nokian, which makes about a third of its sales in Russia, in April cut its profit outlook for the full-year due to weakened consumer demand in the country amid the Ukraine crisis.
The company said its margin from tyres produced in Russia and then exported to the West had improved as the rouble has weakened, this was not enough to compensate for weak sales in the country this year.
“The markets in Russia ... proved to be more challenging than estimated,” Nokian Chief Executive Kim Gran said in a statement yesterday.
Second-quarter sales fell by 12% to €370mn from the same period a year earlier. Sales in Russia fell by a whopping 43.6%.
CBS
Media company CBS Corp, owner of the most-watched US television network, reported a quarterly profit that beat Wall Street forecasts on Thursday, though weaker advertising and a decline in television licensing dragged on revenue. CBS posted adjusted earnings-per-share of 78 cents for the second quarter, beating the average forecast of 71 cents by analysts surveyed by Thomson Reuters I/B/E/S. Net earnings from continuing operations fell to $418mn from $435mn a year earlier.
The company, which operates the CBS broadcast network and premium cable channel Showtime, also raised its share repurchase programme to $6bn from $3bn and increased its quarterly dividend to 15 cents per share from 12 cents.
In its earnings report, CBS said this year’s absence of the NCAA men’s college basketball semifinals and “softness” in the second quarter ad market contributed to lower revenue. Total revenue fell 5.3% to $3.19bn, falling short of the average analyst estimate of $3.24bn.
News Corp
News Corp, publisher of the Wall Street Journal, reported better-than-expected quarterly revenue as growth in its book publishing business helped to make up for a decline in revenue in its bigger news and information division.
News Corp, whose shares were up marginally at $17.50 in after-market trading on Thursday, has been focusing more on book publishing as its newspaper business struggles with weak ad spending in an increasingly digital world.
Revenue from book publishing rose about 10% to $361mn in the fourth quarter ended June 30, helped by the popularity of the “Divergent” series of young-adult science fiction novels by Victoria Roth published by HarperCollins.
Book publishing accounts for about 16.5% of the company’s total revenue. Revenue in the company’s news and information division fell 6.2% to $1.56bn as both ad revenue and subscription sales dropped. Total revenue fell 3% to $2.19bn, slightly beating the average estimate of $2.17bn.
Net income available to the company’s shareholders totalled $12.0mn, or 2 cents per share, in the quarter compared with a loss of $1.12bn, or $1.94 per share, year earlier.
SoftBank
SoftBank CEO Masayoshi Son said in an earnings briefing yesterday that Sprint had beefed up its network to the point where it could start cutting prices and aggressively woo back subscribers - underscoring analysts’ predictions that Sprint may embark on a price war to regain market share.
SoftBank, going into its first full financial year with Sprint, Brightstar, and game companies GungHo Online Entertainment and Supercell Oy consolidated on its books, posted a 16% drop in first-quarter operating profit yesterday.
However, the decline was not as severe as analysts had expected and reflected a large one-off windfall in the year-ago quarter related to its purchase of Gungho. SoftBank kept its operating profit target for the full year to March 2015 steady at ¥1tn($9.8bn), little changed from last year’s result of ¥1.08tn.
Analysts have said a price war could be a particularly heavy burden for Sprint, which still faces billions of dollars in further spending to build up its network.
In an indication of the challenges ahead, T-Mobile’s Chief Executive John Legere taunted its one-time suitor with a tweet on Thursday that his company would overtake Sprint as the No. 3 carrier in US mobile subscriber numbers by the end of the year.