German insurer Allianz is set to take a $4.2bn (€3.7bn) hit for the collapse of its hedge funds during the pandemic and warns of more expenses resulting from the fallout.
The insurer expects settlements with major investors in the so-called Structured Alpha Funds soon.
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As of now, the firm has refrained from revealing total estimates from the implosion, as talks are still on with regulatory authorities and other plaintiffs.
In a statement, Allianz said: “Discussions with remaining plaintiffs, the U.S. Department of Justice and the U.S. Securities and Exchange Commission remain ongoing and the timing and nature of any global or coordinated resolution of these matters is not certain.
“Therefore, as of today, the total financial impact of the Structured Alpha matter cannot be reliably estimated and Allianz SE expects to incur additional expenses before these matters are finally resolved.”
The charge triggered attributable net loss of €292m in 2021 for the Munich-based insurer and lowered its annual group net income by €2.8bn.
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By GlobalDataHowever, the firm’s revenues rose 6% year-on-year to €148.5bn while operating profit increased 24.6% to €13.4bn. The figures grew 8% and 18%, respectively, in Q4 2021.
Furthermore, Allianz announced a new €1bn share repurchase programme for this year, and projected operating profit of as much as €14.4bn for 2022.
The firm is also proposing a 12.5% rise in its dividend to €10.80 a share.
In August last year, the firm had warned of provisions after its Structured Alpha funds incurred losses during the Covid meltdown of 2020.
Probe by regulatory authorities in the US followed soon after, with investors suing the firm for around $6bn in alleged damages.
The lawsuits argued that the fund had deviated from its stated strategy of using options to safeguard against risk.
German watchdog BaFin too launched an investigation into the matter, examining the role of officials in the case.
Andreas Wimmer replaced Jacqueline Hunt as Allianz’s asset management head after the debacle.
