Allianz boss gets bumper pay rise despite Structured Alpha debacle

Allianz chief executive Oliver Bäte received a 24% pay rise in 2021, a year when a scandal at its US asset management business wiped out nearly 3 billion euros in profits annual.

Bäte’s total compensation for the year rose to €7.9m, from €6.4m in 2020. His base salary was increased by 12% while his variable compensation jumped by 36%. %, according to the group’s annual report, which has been published. Friday.

Last month, when Bäte unveiled its annual results, he told reporters that management will bear “a fair share of the burden and there will be a significant impact on our compensation for each member of the board”.

Allianz said in a statement on Friday that the wage increase would have been even higher had it not been for the Structured Alpha scandal, as 2021 was a banner year. The group said net profit was “a key determinant of target achievement percentage”, adding that bonuses had been “reduced by approximately 24% due to provisions recorded for Structured Alpha”.

Without the Structured Alpha hit, Bäte’s total salary would have increased by almost 50% to 9.5 million euros, according to a person familiar with the matter.

Bäte declined to comment through a spokesperson.

The group’s operating profit soared 25% to a record 13.4 billion euros in a sharp reversal of a lackluster 2020 performance that was marred by Covid-19.

Structured Alpha funds, managed by Allianz Global Investors, were introduced to investors as a safer and better alternative to passive investments that tracked blue chip indices. However, during the market turmoil at the start of the pandemic in 2020, the funds suffered heavy losses. Investors later sued the company for alleged misconduct, accusing it of employing a “reckless strategy”.

After an internal investigation, Allianz issued a profit warning in August last year and apologized to investors. It is under investigation by the US Department of Justice and the Securities Exchange Commission. The disclosure of the DoJ investigation erased nearly $7 billion from Allianz’s market capitalization in a single day.

Last month, Allianz settled the dispute with a number of investors and subsequently provisioned 3.7 billion euros. As the provision reduced the group’s tax burden, the impact on net income was €2.8 billion.

However, Bäte warned in February that the final financial burden would be greater as talks with “certain remaining investors” as well as the DoJ and SEC were underway. “We expect Allianz Group to incur additional expenditure before these issues are finally resolved,” Bäte said.

In its annual report, the group said “discussions” with the remaining plaintiffs, the DOJ and the SEC were ongoing. He stressed that the “timing and outcome” of those talks were uncertain.

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