The Department of Justice is investigating Europe’s second-largest insurer by premiums amid allegations it may have misled U.S. pension schemes over investments designed to generate above-market returns, or “alpha,” irrespective of whether stocks rose or fell.

Shares plunged as much as 9.5%, heavily underperforming a flat broader German equity market.

“There is a relevant risk that the matters relating to the Structured Alpha Funds could materially impact future financial results of Allianz Group,” the company said in a regulatory filing on Sunday evening, adding it has “immediately started its own review of this matter.“

Asked if there was any reason to suspect criminal activity, a spokesman for Allianz Global Investors—which sold the structured products—said he could not comment on the specifics of the case given the ongoing DOJ investigation, adding that the company was fully cooperating with authorities.

The complicated, multilayered derivatives strategy employed by these products proved disastrously ineffective during last spring’s pandemic-related market meltdown.

This lead to heavy Structured Alpha–related losses and the liquidation of the two most aggressively managed funds—precisely at a time when they were supposed to offer investors superior protection for their capital. 

An initial analysis of the matter prompted Allianz to argue in July 2020 that decisions taken during February and March of last year were entirely in accordance with the fund’s strategy and merely resulted from unforeseen circumstances that were too dramatic to have been properly modeled. 

No provisions booked

However, a number of U.S. clients, reportedly including Raytheon and the New York subway authority MTA, disagreed and have since sued Allianz for cumulative combined damages currently estimated at $6 billion. One of those was the Arkansas Teacher Retirement System, which claims to have lost at least $774 million.

In its filing to the Southern District Court of New York from a year ago, ATRS alleged that far from being market neutral, the structured alpha funds took “aggressive positions that deviated from the investment strategy and [abandoned] the risk controls Allianz was required to have in place.“

The Allianz Global Investors spokesman told Fortune the investor losses were “significant” but said the company would “vigorously defend” itself against the litigation. 

Prior to the DOJ’s intervention, the German insurer had already been the subject of a separate probe by the Securities and Exchange Commission into the affair. 

“It is currently neither feasible to predict how the SEC and DOJ investigations and the pending court proceedings may be resolved, nor the timing of any such resolution,” Allianz added.

Since it could not “reliably estimate the amount of any possible resolution including potential fines,” Allianz said, it has not booked any provisions against its future earnings at present.  

Allianz’s asset management business accounted for 25% of the group’s €10.8 billion operating profit last year, with its core insurance underwriting activities making up the rest.

The company is due to report first-half results on Friday, Aug. 6.