Allianz shares drop 7% as insurer faces U.S. probe into funds

Shares of Allianz (ALVG.DE) declined 7% on Monday after the German insurer said the U.S. Department of Justice had begun an investigation into losses at its fund management division.

The DOJ investigation follows lawsuits by U.S. investors claiming close to $6 billion in losses from the funds, saying Allianz failed to safeguard their investments during the coronavirus market meltdown.

Allianz, in disclosing the DOJ investigation, warned of a “relevant risk” that the matter could “materially impact future financial results of Allianz Group,” without providing an estimate.

In March 2020, Allianz was forced to shutter two private hedge funds after severe losses, prompting a wave of litigation from pension funds for truckers, teachers and subway workers, with new suits filed as recently as last month.

The suits allege that the Allianz Global Investors money management arm, in its Structured Alpha family of funds, strayed from a strategy of using options to protect against a short-term financial market crash.

Allianz disclosed last year that the U.S. Securities and Exchange Commission was also investigating the matter. Allianz said it was cooperating with both investigations.

“We believe that the potential costs or provisions associated with the investigation could be substantial and might lead us to reconsider our view of the group’s earnings or capitalization,” ratings agency S&P said on Monday.

Shares of Allianz traded as low as 189.90 euros ($225.64) and were down 7.2% at 195.06 euros per share at 1422 GMT.

A spokesman for Allianz Global Investors declined to comment. The DOJ didn’t immediately respond to a request for comment.

($1 = 0.8416 euros)