By Tom Sims and Alexander Hübner

FRANKFURT, Reuters -Germany’s Allianz (ETR) stated Wednesday that it will set aside another 1.9bn euros ($2b) to prepare for U.S. regulatory inquiries into a multibillion dollar trading scandal at its funds arm.

Germany’s top-rated financial company and the largest asset manager in the world has been impacted by the collapse of an investment fund set worth $15 billion during early 2020’s market panic.

This new provision is on top of the 3.7 billion euro that the company had set aside in February for litigation and U.S. regulatory inquiries into the demise of the funds. The total amount is now 5.6 billion euro.

Allianz announced Wednesday that its first quarter net profit was 600 million Euros, which is less than analysts expected.

Allianz disclosed that the U.S. Justice Department and Securities and Exchange Commission are investigating the collapse of funds. Investor lawsuits have also been filed against Allianz.

Allianz suggested that an additional provision be made to cover all costs. This certainty indicates that a deal with the U.S. government may be in sight.

Allianz explained that “This provision booked represents a fair assessment of its remaining financial exposure with respect to compensation payments for investors and payments under any resolution to the governmental proceedings.”

Allianz claimed it sought a timely resolution to the DOJ’s and SEC talks.

In mid-morning Frankfurt trading, its shares traded 2.3% higher than the blue-chip stocks.

Oliver Baete, CEO of the company has apologized to shareholders and investors for this matter. He acknowledged that “not everything was perfect with the fund management.”

Baete took a loss last year as top managers. Baete however earned 9% less in 2021 than the previous year.

Allianz’s shareholders have been concerned and the reputation of Allianz has suffered. The pension funds are a major source of revenue for one Germany’s most famous brands.

Allianz Funds were involved in the issue. They used options strategies that generated returns, but suffered massive losses due to COVID-19 spreading. This caused stock markets swings of unprecedented proportions in February and March 2020.

The issue already has adverse effects on earnings for Allianz with 2.6 trillion euro of assets. The 2021 profit of Allianz was its lowest in three years.

Structured Alpha fund investors have claimed $6 billion damages for losses in U.S. court cases.

These funds cater to U.S. typically conservative pension funds. They include funds for teachers in Arkansas, workers in Alaska, and subway workers in New York.

Arkansas Teacher Retirement System was among the two dozen or so lawsuits against Allianz that were filed in the aftermath.

Arkansas’ pension fund had $1.6 Billion in three Structured Alpha funds by the end 2019 and stated in its lawsuit filed in July 2020 that it suffered losses of at least $774 Million due to negligent mismanagement of these funds.

According to minutes from a board meeting it was able to secure a $642million settlement.

($1 = 0.9489 euros)