Allianz Q1 Net Income Down 15.3% to $2B – in Line with 2017 Profit Goal

German insurer Allianz is optimistic about its prospects despite a very tough business environment, the German insurer said on Wednesday as it posted a slightly better than expected first-quarter profit.

“We are looking optimistically to the future, though I will remind you that we are operating in a very, very difficult environment,” Chief Executive Oliver Baete told Allianz’s annual general meeting, held on the site of the 1972 Munich Olympics.

Allianz also confirmed its forecast for 2017 as it said operating profit had risen 9.4 percent to 2.9 billion euros ($3.2 billion) in the quarter, while revenue was 2.5 percent higher at 36.2 billion euros [$39.5 billion].

“The key indicators show that the underlying business is delivering,” RBC Capital Markets said. “The highlights provided today suggest that the business segments are performing well.”

Shares in Allianz were up 0.7 percent at 177.25 euros by 1334 GMT in a flat STOXX Europe insurance index.

Allianz and the insurance industry are facing challenges including increased regulation, competition from financial technology startups, uncertain U.S. policy, and questions surrounding Britain’s exit from the European Union.

Despite this, the German group affirmed its forecast for 2017 operating profit of 10.8 billion euros [$11.8 billion], plus or minus 500 million euros [$545.6 million], barring unforeseen events, crises or natural catastrophes.

“Our first-quarter results were a good start into 2017 and our balance sheet remained strong,” Baete said in a statement.

But large claims and natural disasters did drag on earnings in the first quarter, when it had to pay out relatively more. Allianz said its combined ratio, a closely-watched measure of expenses to premium income, rose to 95.6 from 93.3 percent.

Allianz said net income attributable to shareholders was 1.8 billion euros [$2 billion] in the quarter, down 15.3 percent from a year ago, due largely to one-off gains from the sale of financial stakes the previous year.

Operating profit was 4 percent and net income 2 percent better than market consensus expectations, according to UBS.

Allianz’s asset management business, which includes bond fund manager PIMCO, also showed signs of strength, with third-party assets under management rising to 1.40 trillion euros [$1.5 trillion] from 1.36 billion euros [$1.5 billion] a year earlier and Baete told investors that PIMCO was “running splendidly.”

Baete pointed to property insurance as a sector that was of particular interest for Allianz for acquisitions, but sought to quell concerns from some investors that it would rush into M&A.

“We will continue to be very careful investing your money,” Baete said, noting that market prices are high.

Also at the AGM, shareholders formally ratified a proposal naming Michael Diekmann, the company’s former CEO, as the new chairman of the supervisory board. He succeeds Helmut Perlet with effect from May 7.

(Editing by Maria Sheahan and Alexander Smith)