Allianz optimistic on easing of euro crisis The eurozone debt crisis should become less acute this year despite current market nervousness over Greece and a "critical" situation in Spain, Allianz predicted, as Europe's largest insurer by market capitalisation reported improved first-quarter earnings. The German group's first-quarter net income rose 58 per cent from €915m in 2011 to €1.4bn, buoyed by a "benign" period for natural catastrophes compared with the turbulent first three months of 2011. Revenues were stable at €30.1bn for the quarter. Noting market jitters over the eurozone, Allianz said it expected the debt crisis would abate slowly in 2012 "as EU summit decisions are implemented, structural reforms in over-indebted countries make progress, public finances continue to consolidate and ECB measures prove effective in preventing a credit crunch." Oliver Bäte, chief financial officer, said the situation in Spain was "very critical." Allianz booked a loss of €77m on a stake of about 7 per cent in Banco Popular. Mr Bäte said the insurer's joint ventures with the bank remained "very solid." Allianz, which is one of the biggest investors in financial markets, with more than €1.6tn of assets under management, said yields on German government bonds were likely to creep up as the "safe haven" effect that is driving German bond prices faded this year. "As far as the stock market is concerned, solid corporate earnings, low interest rates and relatively attractive price/earning ratios provide a sound foundation for a significant recovery of equities," said Allianz. However, as we have seen in recent weeks, a renewed pick-up in risk aversion can easily send stock markets south again, no matter how positive corporate sector fundamentals appear to be. Allianz's operating profits for the quarter were 40 per cent higher at €2.3bn, with Mr Bäte hailing a "very good start" in comparison with 2011, which he said had been "tough for the entire insurance industry." But Allianz did not raise its forecast for operating profits for the year of between €7.7bn and €8.7bn. The insurer said: "Given the lower losses from natural catastrophes and higher investment result, it would be inappropriate to simply annualise the current quarter's operating profit and net income to arrive at an expected result for the full year." Mr Bäte said Allianz saw a "trend toward higher natural catastrophe impacts" in spite of the relatively calm first quarter and had increased its budget this year for the cost of such disaster-related payouts. Operating profits from general insurance were up 79 per cent while operating profits from life and health insurance rose more than 17 per cent, driven by better investment results, despite customer reluctance to buy investment products. Allianz recorded a net income of €84m from valuation gains on an investment in The Hartford, a US insurer. A further €100m or so should come in the second quarter from the Hartford transaction, Allianz said. Shares in Allianz rose 1 per cent in early trading to €77.92.