Allianz vows to support London arm DKW

Allianz, the German insurer, yesterday sold off its Mexican fund management business to HSBC for $200m (£125m) but said that it intended to stand behind its investment banking arm, Dresdner Kleinwort Wasserstein, for at least the next two years.

The insurer, along with many of its rivals, has been struggling to offset huge losses on its investments and has been seeking to divest itself of assets. It confirmed the loss of a further 4,700 jobs at its Dresdner Bank business which are in addition to the 11,000 already announced by the bank this year and are mainly in back office and IT functions. They are not expected to affect London.

The news came as Allianz reported that it had made a profit for the first half of the year of €102m (£71.7m). "The trend is pointing in the right direction, but we are not out of the woods yet. Even though current conditions are friendlier, we are continuing with our ongoing review of all business segments," Michael Diekmann, the bank's chief executive, said.

But the insurer gave public backing to its investment banking division, Dresdner Kleinwort Wasserstein, which has operations in London. None of the redundancies are likely to affect DKW.

"We have looked at DKW over the past 12 months, and we have confidence that with its current capital it can be successful, so I would rule out a sale in the next two years," Mr Diekmann said.

The unit is part of Dresdner Bank, which Allianz bought for €24bn two years ago and has been a drain on profits at the insurer. It yesterday said that Dresdner had made a pre-tax loss of €450m, but had broken even on its operating profits. Costs in its banking arm had been cut by €659m and the latest round of job cuts is expected to bring cost savings of €1bn over the next two years. Provisions for bad debts fell 38 per cent to €699m.

Despite the problems at Dresdner Bank, Mr Diekmann yesterday said he was committed to DKW for the next two years, quashing fears that Allianz may try to sell off the investment banking division. It made an operating profit of €213m in the first half of the year, and has now been profitable for the third successive quarter.

Allianz's Mexican business, Afore Allianz Dresdner, was yesterday deigned to be "too small" to exist on a stand-alone basis and Mr Diekmann said synergies with Allianz Dresdner Asset Management were "less obvious" going forward.

Afore has 1.25 million customers and manages more than $1bn in pension funds. It has a market share of 4.5 per cent.

HSBC, which operates in Mexico under the Bital brand, is one of the five largest banking institutions in the country already, with nearly six million customers. It yesterday said the acquisition of Afore would allow it to grow its market share.