The German financial behemoth said Wednesday that it booked 1.9 billion euros, or about $2 billion, in legal provisions in the first quarter as a result of additional settlements with investors and ongoing discussions with the US government.
The figure, which is in addition to the €3.7 billion already set aside by Allianz, reflects the company's remaining financial exposure related to payments to investors and potential government penalties, according to Allianz. The legal hit was not unexpected; analysts had predicted additional provisions. Allianz will have set aside €5.6 billion in total for the matter.
Allianz's first-quarter net income fell by €1.6 billion after tax as a result of the latest provision, with net income attributable to shareholders totaling €600 million. Allianz reported a €3.2 billion operating profit for the first quarter. On Thursday, the company will report its first-quarter earnings.
In early trading in Frankfurt, Allianz shares were up 2.4 percent. Citigroup analysts said Wednesday that the legal provision should be reassuring because "the unknown potential range of outcomes was a deterrent to some."
Allianz Global Investors, one of Allianz's investing divisions, had bet on stock options that effectively sold insurance against a market selloff. During calm markets, the strategy was profitable and consistent. When stocks fell and volatility reigned in March 2020, the funds suffered catastrophic losses, prompting the company to close two of its most aggressive strategies.
Investors in the funds sued Allianz, including the Blue Cross Blue Shield Association and the Arkansas Teacher Retirement System. The Justice Department and the Securities and Exchange Commission are also looking into the matter.
Allianz Chief Executive Oliver Bäte declined to name the investors with whom the company had reached a settlement in February, but said they accounted for the vast majority of the company's litigation exposure.