PIMCO, The World’s Biggest Bond Fund, Expects Greece And Other European Economies To Default – Allianz Global Investors Capital: Greek Default ‘Inevitable’

Greek cabinet approves austerity budget (Telegraph, June 22, 2011):

Pimco, the world’s biggest bond fund, shrugged off last night’s vote of confidence in the Greek government warning that it expects Greece and other European economies to default on their debts to resolve their problems.

“For the next three years, we’re going to see different economies work out different problems. For European economies, especially Greece, it would be through default,” Mohamed El-Erian, chief executive of Pimco, said in Taipei on Wednesday in a video conference.

“Nothing has been done to enhance growth,” he said. “No single (Greek) indicator has shown strength. They are afraid a restructuring would hurt European banks.”

However, he doubted a Greek default could trigger another global financial crisis: “Ireland, Portugal, Italy and Spain would have to be involved. But Greece is too small in terms of economic impact.”

Horacio Valeiras, chief investment officer of fund firm Allianz Global Investors Capital (AGIC), predicted that Ireland and Portugal, countries that also received financial bailouts in the wake of the global credit crisis, will have to restructure their debts.

“We are not investing in Greece, Ireland, Spain and Portugal,” he said at the press briefing. He sees default in Greece as “inevitable”.

California-based Pimco (Pacific Investment Management Company), is based in California and is the world’s biggest bond fund manager with nearly $1.3 trillion in assets under management.

Allianz Posts 2 Billion Euro Loss, May Miss Forecast

Nov. 8 (Bloomberg) — Allianz SE, Europe’s second-biggest insurer by market-value, posted a 2 billion-euro ($2.6 billion) loss and said it may miss operating profit forecasts for this year and next because of the turmoil in financial markets.

Allianz had a net loss including discontinued operations in the third quarter, compared with net income of 1.9 billion euros a year earlier, the Munich-based insurer said in a statement today. That was less than the 3.85 billion-euro estimate of 14 analysts surveyed by Bloomberg. Net income from continuing operations, which reflects the sale of Dresdner, was 545 million euros, the company said, missing analysts’ estimates of 782 million euros.

“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,” Allianz Chief Financial Officer Helmut Perlet said in the statement.

Allianz, led by Chief Executive Officer Michael Diekmann, agreed on Aug. 31 to sell Dresdner Bank to Frankfurt-based Commerzbank AG for cash and stock. Commerzbank shares lost about 40 percent of their value in the month ended Sept. 30. Discontinued operations, which reflect the sale of Dresdner effective from Sept. 1, accounted for “transaction-based impairments according to IFRS 5” of 1.4 billion euros as well as for a net loss of 1.2 billion euros from Dresdner’s operations, Allianz said.

Read moreAllianz Posts 2 Billion Euro Loss, May Miss Forecast