Allianz again exceeds expectations – “Results show strength”, says CEO Bäte

Munich Allianz again exceeded analysts’ expectations in the third quarter. Europe’s largest insurer achieved an operating profit of 3.5 billion euros in the months from July to September. Allianz reported this on Wednesday evening. The company thus slightly exceeded the expectations of the experts. In their consensus estimates, 14 analysts had expected an average of just under 3.4 billion euros.

Allianz’s result for the first nine months of the year was 10.2 billion euros. For the year as a whole, the group is now assuming a profit in the upper half of the target range of 12.4 to 14.4 billion euros. “Our excellent results in this quarter once again prove Allianz’s resilience and strength in a dramatic geopolitical and market-related environment,” said CEO Oliver Bäte.

The fact that the insurer informed about its quarterly figures on the evening before the planned publication date on Thursday morning was due to a new share buyback program that the Dax group is launching. From mid-November to the end of 2023 at the latest, the insurer wants to buy back shares worth one billion euros. Analysts such as Andrew Sinclair from Bank of America had recently expected a corresponding announcement.

Competitors have been buying back shares since the summer

The major Allianz competitors Axa, Generali and Zurich had already announced in the summer that they wanted to invest in their own shares. They could easily afford that at the time, as they all had a higher solvency ratio than Allianz. With this important metric, insurers demonstrate their resilience to setbacks.

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In Germany, the supervisors are demanding a rate of permanently over 100 percent. Most recently, the average solvency ratio was 260 percent, according to the industry association GDV. However, Allianz was only around 199 percent due to the high burden of incorrect speculation in the structured alpha funds. Because share buybacks are an additional burden on the quota, Allianz was still reluctant to launch a new buyback program in the summer.

The group’s major competitors, on the other hand, were more flexible. Axa announced a buyback program of over one billion euros, Generali over 500 million euros and Zurich even over 1.8 billion Swiss francs.

The fact that Allianz is now following suit – it is the group’s seventh program since 2017 – shows the dilemma in which the Dax group is stuck. On the one hand, investors reward share buybacks because a smaller number of shares increases earnings per share. This tends to lead to higher prices. The Allianz share, which is still in the red for the year, could use such support. On the other hand, buybacks also weigh on the solvency ratio.

Non-life insurance drives profit

In particular, business with property and casualty insurance has recently been going well at Allianz. The total sales of the Allianz Group after nine months were 116 billion euros and thus 5.3 percent above the same period of the previous year.

This was mainly due to the strong demand for car, household and liability insurance. In what is usually the most profitable of the three corporate divisions, sales increased by an above-average 12.7 percent to 53.8 billion euros after nine months. There was an increase in operating profit, which rose by more than 13.5 percent to 4.7 billion euros compared to the previous year. This was primarily due to strong growth in operating investment income due to rising interest rates and investments in inflation-linked bonds.

In life and health insurance, the second most important segment, the Group felt the effects of lower one-off premiums in Germany, among other things. Operating profit fell in the third quarter to one billion euros after 1.3 billion euros in the previous year. Analysts had expected an average of 1.14 billion euros here.

Investors withdraw wealth

Asset management, the smallest of the three group divisions, has recently felt the effects of lower income from assets under management and lower commissions. The area, in which the two asset managers Pimco and AGI are combined, earned 2.4 billion euros after nine months and thus 2.5 percent less than in the same period last year. Assets under management for third parties fell by EUR 43 million to EUR 1.726 billion. Together with its own investments, the group managed 2.245 billion euros at the end of the first quarter.

The consequences of the burdens caused by the failed Structured Alpha funds are still evident in the targets that the group continues to miss. For example, the return on equity (ROE), which was only 9.4 percent in the third quarter, would have been 12 percent without the charges from the structured alpha funds. Earnings per share also continue to suffer. It was only EUR 11.37 after EUR 16.64 in the same period of the previous year.

This has no consequences for the shareholders. The Dax group had already decided last year that special effects such as the Structured Alpha problem will have no impact on the dividend payment. Shareholders can therefore expect a high payout next spring.

More: Munich Re benefits from rising demand for insurance cover

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