Allianz Goes Under

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<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Nov 8, 2008
</TR><!-- headline one : start --><TR>Allianz posts $3.8b 3Q loss <!--10 min-->
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Allianz said the sale of Dresdner would be reported under discontinued operations as of Sept 1. On the whole, discontinued operations accounted for a net loss of 1.2 billion euros, along with a decline of investments that totalled 1.4 billion euros. -- PHOTO: REUTERS
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<!-- START OF : div id="storytext"-->FRANKFURT - INSURER Allianz SE reported a 2 billion euros (S$3.8 billion) loss on Friday after it said that the value of its investments declined and it wrote off the value of its Dresdner Bank unit before its planned sale to Commerzbank.
The Munich-based insurer, Europe's second biggest, reported the 2 billion euro loss during the July-September period compared with a profit of 1.9 billion euros a year earlier.
The company also abandoned its forecast for the rest of the year, noting in a statement that without 'a major equity market recovery, the operating profit outlook of 9 billion euros before banking for this year and next year cannot be reached'.
Revenue was down 3.8 per cent to 21.1 billion euros, compared with 21.9 billion euros in the third quarter of 2007. Operating profit decreased to 1.6 billion euros, compared to 2.6 billion euros last year.
The scope of the loss was not entirely unexpected as some analysts had thought that Allianz would move to report its figures with Dresdner Bank AG as a write-off.
In a statement released late on Friday, Allianz said the sale of Dresdner would be reported under discontinued operations as of Sept 1. On the whole, discontinued operations accounted for a net loss of 1.2 billion euros, along with a decline of investments that totalled 1.4 billion euros.
Still, that was partially offset by a profit of 545 million euros in continuing operations, down from 2 billion euros a year earlier.
Shares of Allianz were up 5.9 per cent to close at 65.55 euros in Frankfurt trading.
Allianz announced its decision to sell Dresdner Bank to Commerzbank AG in a 9.8 billion euros deal at the end of August, creating the country's biggest bank in terms of customers ahead of Deutsche Bank AG.
The sale was no surprise given that earlier this year Allianz Chief Executive Michael Diekmann said that Dresdner's write-downs at its investment back had eroded profit there four quarters in a row.
Under the terms of the deal, Commerzbank agreed to cover the first 275 million euros in potential losses on some asset-backed securities while Allianz said it would cover the next 975 million euros in losses related to Dresdner assets.
Aside from the write-down and drop in investment income, Allianz said its insurance operations showed solid growth. Gross premiums at its property and casualty business rose to 10.8 billion euros in the quarter compared with 10.7 billion euros a year earlier.
Its operating profit dipped to 1.2 billion euros from 1.5 billion euros a year earlier, a slip it pegged to payment delays in the credit insurance business as a result of liquidity bottlenecks that wracked the world's financial system for weeks. Allianz also said that the US crop business was hampered by the slump in commodity prices toward the end of September. -- AP

 

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<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Nov 8, 2008
</TR><!-- headline one : start --><TR>18th US bank fails <!--10 min-->
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<!-- START OF : div id="storytext"-->WASHINGTON - US BANK regulators closed Franklin Bank SSB, a Houston-based community bank, on Friday, making it the third-largest and 18th US bank failure this year as slumping home prices and the worsening economic crisis take an increasing toll.
Prosperity Bank of El Campo, Texas, will acquire all the deposits of Franklin Bank SSB, the Federal Deposit Insurance Corp (FDIC) said.
Mr Lewis Ranieri, the co-inventor of the mortgage-backed security, is chairman of the bank's parent company Franklin Bank Corp, which has been searching for fresh funds after bad mortgages drained the bank's capital position.
Franklin Bank Corp said on Sunday that it had received proposals from parties to strengthen the capital position of Franklin Bank SSB.
It said that it was in talks to restore the banking unit to a 'well-capitalised' position. The bank had previously disclosed that it had submitted new third-quarter figures to banking regulators that showed the bank to be 'significantly undercapitalised'.
The FDIC said Franklin Bank SSB's 46 offices will reopen as branches of Prosperity Bank under their normal hours, including those with Saturday hours.
As of Sept 30, Franklin Bank SSB had total assets of US$5.1 billion (S$7.6 billion) and total deposits of US$3.7 billion, the FDIC said.
Prosperity agreed to assume all of the deposits, including those that exceeded the insurance limit for deposits.
'Prosperity is committed to taking care of their existing and new customers during this volatile time in the financial industry,' Prosperity said in a statement. 'It is our goal to make sure that this transaction will be a smooth process for Franklin Bank's customers and associates.'
The failure is expected to cost the FDIC's insurance fund between US$1.4 billion and US$1.8 billion, the regulator said. The insurance fund stood at about US$45 billion at the end of June, the last time it was publicly disclosed. A financial rescue plan passed by Congress earlier this month temporarily raised the limits on deposit insurance to US$250,000 per account from US$100,000. -- REUTERS