Company Reports

Allianz is one of the best-performing multiline insurers in our European insurance coverage. The company combines a unique set of assets to generate returns that are better than average. In its property and casualty division, the company has continued to invest in technology and data to not only improve customer experience, but also improve its policy and claims processing. By improving the speed of its first notice of loss, the company gets ahead of inflation and can manage repairs and claims more effectively. While the division has not earned economic returns, from an underwriting perspective it is one of the better-performing segments. The business still has work to do in its commercial insurance division.

Allianz has reported results for 2023 with a net profit of EUR 9.1 billion for shareholders or EUR 22.61 in core EPS. Both are above the EUR 8.15 billion and EUR 20.42 that we forecast, though the actual EPS delivery is 2% below company-compiled consensus. After these results, the Allianz board is proposing a EUR 13.8 per-share dividend. This is quite a bit above the EUR 12.79 per share that we estimated. Further, the business has announced another buyback program of up to EUR 1 billion. This will start in March and is set to be completed by the end of December. This is on top of the EUR 1.5 billion buyback program initiated last year, which has been completed. The 2023 results deliver a 15.6% return on equity for shareholders. This is above the 11% cost of equity that we apply to the business.

Allianz is one of the best-performing multiline insurers within our European insurance coverage. The company combines a unique set of assets to generate returns that are better than average. In its property and casualty division, the company has continued to invest in technology and data to not only improve customer experience, but also improve its policy and claims processing. By improving the speed of its first notice of loss, the company gets ahead of inflation and can manage repairs and claims more effectively. While the division does not earn economic returns and has been suffering from an environment of declining investment returns, from an underwriting perspective it is one of the better performing segments. The business still has work to do in its commercial insurance division.

Allianz is one of the best-performing multiline insurers within our European insurance coverage. The company combines a unique set of assets to generate returns that are better than average. In its property and casualty division, the company has continued to invest in technology and data to not only improve customer experience, but also improve its policy and claims processing. By improving the speed of its first notice of loss, the company gets ahead of inflation and can manage repairs and claims more effectively. While the division does not earn economic returns and has been suffering from an environment of declining investment returns, from an underwriting perspective it is one of the better performing segments. The business still has work to do in its commercial insurance division.

Allianz has reported a lighter quarter, yet the business still looks sound in the first nine months. The business has increased sales by 4.5% though operating profit has fallen by almost 15%. This lower operating profit of EUR 3.5 billion has mainly been hit by higher claims for natural catastrophes, which Allianz reports are the highest in a decade. The business has confirmed its EUR 14.2 billion full-year operating profit guidance, plus or minus EUR 1 billion. And that is substantially ahead of our EUR 11.6 billion full-year forecast. The EUR 1.5 billion buyback is almost complete. Solvency is strong at 212%.

Allianz has reported EUR 4.647 billion in net income for the first six months, or EUR 10.58 in earnings per share. This places the business a little light against the EUR 23.36 full-year EPS as per Refinitiv collected consensus but looks better than our full-year EPS estimate of EUR 19.34. This means that with EUR 58.8 billion in shareholders’ equity Allianz has delivered a return on equity of 7.9%, implying for the full year the business should deliver above the 11% cost of capital that we apply. Allianz confirms its EUR 14.2 billion operating profit guidance, plus or minus EUR 1 billion. The company’s solvency II ratio has advanced to 208% from 201% at the end of last year. This rise has mainly been driven by organic capital generation, after tax and accrual of the dividend, net of the dividend payment and share buyback. We maintain our EUR 250 fair value estimate and our rating of no economic moat.

Allianz reported earnings for the first quarter of 2023 above our expectations. The headline is the company delivered an operating profit for the first three months of EUR 3.7 billion. This leaves Allianz on track to hit its full-year target of EUR 14.2 billion. Our full-year 2023 estimate was EUR 10.2 billion. We have now raised this to EUR 11.6 billion. We raise our fair value estimate to EUR 250. We maintain our no moat rating.

Allianz has been in front of investors a lot lately. It is a high-profile business, and if you add to that a high-profile fund implosion, attention has focused. Then came supply disruptions that started to affect the transport and manufacture of new autos. This was compounded by chip shortages and rising steel prices leading to rising auto repairs and rising used-car prices. What was initial relief for the travel insurance industry and insurers with travel exposure has been short-lived. As airlines have suffered staff shortages and conflict has burdened travel, travel insurance demand is likely to fall and travel insurance claims will be rising. Then came the U.S. Department of Justice and SEC ruling. While Allianz had not fully provisioned for fines and restitution, we think it was news of CEO Oliver Baete’s rise in compensation and the ban from operating U.S. mutual funds that left the market stumbling.

When looking at the exposure of insurers to the unfolding banking crisis, we believe this is limited. The main impact of the crisis currently seems to be contagion, so investors are selling shares cheaply. However, exposure to United States bonds is either in government bond securities, or exposure to Credit Suisse, Silicon Valley Bank, and other U.S. regional banks is immaterial, which is 50 basis points or less of their investment portfolio. Some do hold larger bank debt holdings of up to 5.5% of shareholder investments, but nearly all that debt ranks as senior. AT1 debt tends to be very minimal or there is no exposure as a policy with board-level approval. The vast majority of corporate debt held is investment-grade. We maintain our fair value estimates and moat ratings across our European insurance coverage. Allianz remains our Best Idea. Admiral is one of our top picks.

Best Idea Allianz has reported solid full-year results, yet we believe investors are focusing on the 2% miss in earnings per share versus consensus. Allianz has reported a 12% rise in group operating profit to EUR 14.2 billion. That is slightly ahead of our full-year estimate of EUR 13.6 billion, by EUR 600 million—a little lighter than the EUR 700 million we predicted around Allianz's third-quarter results. Despite investors not digesting well the results, we still find these to be good numbers. Allianz's solvency capital has improved by 2 percentage points to 201% since the end of the third quarter. Management has announced the proposal of a EUR 11.4 dividend that is the full year and final—this is a 5.6% rise. Roughly half of the EUR 1 billion share repurchase plan initiated Nov. 21, 2022, has been brought back as of Feb. 3, 2023.

Allianz has been in front of investors a lot lately. It is a high-profile business, and if you add to that a high-profile fund implosion, attention has focused. Then came supply disruptions that started to affect the transport and manufacture of new autos. This was compounded by chip shortages and rising steel prices leading to rising auto repairs and rising used-car prices. What was initial relief for the travel insurance industry and insurers with travel exposure has been short-lived. As airlines have suffered staff shortages and conflict has burdened travel, travel insurance demand is likely to fall and travel insurance claims will be rising. Then came the U.S. Department of Justice and SEC ruling. While Allianz had not fully provisioned for fines and restitution, we think it was news of CEO Oliver Baete’s rise in compensation and the ban from operating U.S. mutual funds that left the market stumbling.

Allianz has been in front of investors a lot lately. It is a high-profile business anyway, and if you add to that a high-profile fund implosion, attention has focused. Then came supply disruptions that started to affect the transport and manufacture of new autos. This was compounded by chip shortages and rising steel prices leading to rising auto repairs and rising used-car prices. What was initial relief for the travel insurance industry and insurers with travel exposure has been short-lived. As airlines have suffered staff shortages and conflict has burdened travel, travel insurance demand is likely to fall and travel insurance claims will be rising. Then came the U.S. Department of Justice and SEC ruling. While Allianz had not fully provisioned for fines and restitution, we think it was news of CEO Oliver Baete’s rise in compensation and the ban from operating U.S. mutual funds that left the market stumbling.

At Allianz's recent inside series, we developed a greater sense of where the business is and wants to go in mid- and large commercial insurance. Of Allianz's near EUR 60 billion in property and casualty gross written premiums, around 35% of this can be assigned as commercial insurance. That is made up of 16% large corporates; 12% mid-size corporates; 4% credit insurance; and 2% reinsurance. These combined amount to gross written premiums of around EUR 21 billion and the residual EUR 39 billion is mostly (40%) accounted for as retail. Ten percent falls to Allianz Partners; 8% to fleet; and 8% to small- to medium-size enterprise. With claims inflation of around 8% this year, Allianz Global Corporate and Specialty has done well to achieve rate rises of something north of 10%. This is helping to keep loss ratios year to date below 70%. Like many commercial insurers, Allianz is looking to mid-size corporates for growth and we anticipate that this will have been the focus of this year's internal strategic dialogue held in June. Our expectation is for higher capital allocation to be made to commercial for mid-size corporate growth in the capital allocation process held in November 2022. We would anticipate Allianz Global Corporate and Specialty combined ratios heading to sub-95% over the course of 2023.

Allianz has reported typically strong results for the third quarter and first nine months. The results are by and large technically driven, and we like the beat. Our conservative estimate is that we’re probably behind what the business will deliver for the full year by around EUR 700 million in operating profit. The company has announced another EUR 1 billion buyback that will start soon and last for a year. Capitalisation remains good at 199%. We maintain our EUR 230 per share fair value estimate.

After we analysed the Aug. 5 results for Allianz, we raise our fair value estimate to EUR 230 per share as the company continues to beat on. The performance of Allianz property and casualty has been stellar year to date, delivering double-digit top-line growth even after currency effects. Further, the underwriting quality delivered far exceeded our expectations with a 94.1% combined ratio in the business unit overall. Allianz has used travel disruption as an opportunity to grow Allianz partners significantly and Allianz global corporate and specialty is benefiting from rate increases in the broader market. We have raised our outlook for gross written premium in this division this year before dropping back to longer-term and more subdued levels. Our long-term estimate is for a combined ratio of around 95.4% and we stand marginally below that for the full year at 95.1%.

Allianz has been in front of investors a lot lately. It is a high-profile business anyway, and if you add to that a high-profile fund implosion, attention has focused. Then came supply disruptions that started to affect the transport and manufacture of new autos. This was compounded by chip shortages and rising steel prices leading to rising auto repairs and rising used-car prices. What was initial relief for the travel insurance industry and insurers with travel exposure has been short-lived. As airlines have suffered staff shortages and conflict has burdened travel, travel insurance demand is likely to fall and travel insurance claims will be rising. Then came the U.S. Department of Justice and SEC ruling. While Allianz had not fully provisioned for fines and restitution, we think it was news of CEO Oliver Baete’s rise in compensation and the ban from operating U.S. mutual funds that left the market stumbling.

Allianz shares are trading down around 2% today as the company reported first-half 2022 results. For the second quarter of the year, the business beat consensus on operating profit but missed consensus on net income. Operating profit came in at EUR 3,495 million versus our full-year estimate of EUR 9,398 million, which includes the EUR 1.9 billion provision for the Structured Alpha Funds. The first-quarter posting of EUR 3,238 million showed a business well ahead of what we are forecasting, and Allianz does not show a lot of cyclicality in its results. Management has reiterated its EUR 13.4 billion operating profit guidance, give or take EUR 1 billion. Adjusted for the Structured Alpha Funds provisions, it is something in the region of EUR 11.5 billion that we believe the business can easily make. Today’s results announce the completion of the EUR 1 billion share buyback as of July 15 and a solvency ratio of 200%. That solvency has a negative-1-percentage-point sensitivity to a 50-basis-point rise in interest rates and we think it already includes half of the negative-20-percentage-point sensitivity to a 30% fall in equity markets. We maintain our fair value estimate of EUR 210 per share for now while we update our model. We maintain our rating of no economic moat.

We are adding Allianz to the Best Ideas list with a EUR 210 fair value estimate; the shares are currently trading in 4-star territory. The company has no moat, a stable moat trend, medium uncertainty, and Exemplary capital allocation, in our view. We believe the unraveling of the Allianz Global Investors U.S. Structured Alpha Funds has led to a bit of a smear on the name. Concerns around inflation and travel insurance have also resulted in a bit of a hangover on the price of its shares. While we went through the events surrounding the collapse of the Structured Alpha Funds we were frequently shocked by the turns of events, but we believe the outcome is relatively settled and contained. Our belief is that it is the Allianz Global Investors U.S. mutual funds that have been affected by the ban by the Securities and Exchange Commission, and this will lead to a less than EUR 500 million reduction in fees. While we are concerned about inflation, we have incorporated a deterioration in underwriting with a lagged improvement in pricing, and we think the disruption in travel will improve.

Allianz has been in front of investors a lot lately. It is a high-profile business anyway, and if you add to that a high-profile fund implosion, attention has focused. Then came supply disruptions that started to affect the transport and manufacture of new autos. This was compounded by chip shortages and rising steel prices leading to rising auto repairs and rising used-car prices. What was initial relief for the travel insurance industry and insurers with travel exposure has been short-lived. As airlines have suffered staff shortages and conflict has burdened travel, travel insurance demand is likely to fall and travel insurance claims will be rising. Then came the U.S. Department of Justice and SEC ruling. While Allianz had not fully provisioned for fines and restitution, we think it was news of CEO Oliver Baete’s rise in compensation and the ban from operating U.S. mutual funds that left the market stumbling.