FILE PHOTO: The logo of Allianz is seen on a building in Paris, France, April 30, 2020. REUTERS/Charles Platiau
February 18, 2022
By Tom Sims and Alexander Hübner
FRANKFURT (Reuters) -Allianz announced on Friday big bonus cuts for its CEO and board, and a settlement with the “vast majority” of investors, as it braces for the outcome of U.S. regulatory investigations into a multibillion-dollar trading debacle at its funds arm.
Speaking at a news conference, CEO Oliver Baete said the issue would have a significant impact on compensation for himself and all board members, but declined to give details.
Baete’s pay in 2020 totalled 6.39 million euros ($7.27 million), and the entire board’s was 32 million euros.
Baete also said the German insurer and asset manager had settled U.S. lawsuits with the “vast majority of investors,” without giving details of the agreement.
But the fallout continues, with investigations by the U.S. Department of Justice and the Securities Exchange Commission underway, and settlements still pending with other investors.
“Ongoing governmental and litigation matters remain at a sensitive stage,” Baete said.
The issue centres around Allianz funds that 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.
The matter has cast a shadow over Allianz, one of Germany’s most valuable companies and one of the world’s biggest money managers with 2.6 trillion euros of assets under management.
On Thursday, Allianz announced that it would earmark 3.7 billion euros to deal with investigations and lawsuits in the wake of the funds’ collapse and said more expenses were likely.
The company as a result posted a fourth-quarter loss, and its 2021 profit was the lowest since 2013.
Investors in the so-called Structured Alpha set of funds have claimed some $6 billion in damages from the losses in a slew of cases filed in the United States.
The $15 billion set of funds catered in particular to normally conservative U.S. pension funds, from those for labourers in Alaska to teachers in Arkansas to subway workers in New York.
After the coronavirus sent markets into a tailspin early in 2020, the Allianz funds plummeted in value, in some cases by 80% or more. Investors in their lawsuits alleged Allianz strayed from its stated strategy.
Baete declined to specify which investors had settled.
Allianz shares were down 1% at 1031 GMT.
Ingo Speich, head of sustainability and corporate governance at Deka, a top Allianz investor, who once called the issue a “massive setback” for the insurer, expressed some relief.
He said the amount and timing of the provision were a positive for Allianz and investors.
Allianz has publicly disclosed the SEC and DOJ investigations. It previously said it intended to defend itself “vigorously” against the investors’ allegations. Baete has said “not everything was perfect in the fund management.”
($1 = 0.8794 euros)
(Reporting by Tom Sims; editing by Mark Potter and Jason Neely)
