|Shares Out. (in M):||454||P/E||8.8x||8.7x|
|Market Cap (in $M):||55,420||P/FCF||0.0x||0.0x|
|Net Debt (in $M):||14,260||EBIT||0||0|
|TEV (in $M):||69,680||TEV/EBIT||0.0x||0.0x|
Sign up for free guest access to view investment idea with a 45 days delay.
If you like to shop for stocks where sentiment/headlines are negative, allow me to introduce you to Allianz, the parent company of asset manager PIMCO. Unless you’ve been living under a rock, you’re well aware of Bill Gross’s abrupt departure from PIMCO a few weeks ago. This resulted in the stock declining by over 10% (vs. 4.5% for the S&P 500) since the announcement, equating to an $8.3 billion loss in market value—implying Mr. Gross is one valuable man! [Note: Janus, where Gross joined, has had a market cap lift of ~$0.4B].
BUSINESS OVERVIEW (all numbers are pro forma based on a ~$100 billion estimate of future outflows due to Gross’s departure)
Property & Casualty (P&C): ~45% of op. profit
“Now you see that our underwriting result from 2006 to 2011 had continuously decreased…largely driven by claims ratio. So therefore, end of 2010 we initiated…a claims initiative where we really tried to address all the elements which are important to be excellent in claims management. So starting at a faster notification.
We also have redesigned processes and structure with regard to claims. Again, we have a personal responsibility, again, when it comes to single claims. We have clear allocations of claims handling units towards brokers and also towards agents, which makes it much, much easier to respond to the needs of these distribution partners as we are handling that. We have introduced a new steering system in order to support everything we want to do on the claims side.
We have put out a central number which customers can call in any claim. Obviously, they still can continue to come through their agents, but we really push this number, as we can provide a better service, a faster service to our customers. And at the same time, we know that claims costs are lower if we are fast enough at the claim. And we can do proactive claims management, be that steering into body shop networks, be that steering into our repair network we have. We're one of the few companies having a repair network on the non-motor side in Germany. So this all is possible if we get really fast notification on the claim side.”
“[One] initiative was our IT support of the broker. So our portal was considered…to be relatively poor, at least worse than what our competitors have been offering. So we also, thanks to a good support from IT, we were able to update that relatively quickly. We had some quick wins and are now in the process of continuously improving that broker platform towards the need of the different categories of the brokers. Fourth point and sixth point, in a way, were everything around operations in underwriting and claims. The feedback was that we did not really have allocated distinguished underwriters and claims people allocated to those brokers, especially the large ones, especially the ones which are professional in their respective lines of business. So we changed that and have now clear interfaces to those brokers, which also means, because broker's business obviously is a people business, that people know each other, again so they do not have to call into a call center when they have a claim but they have a physical contact point to get into our organization and then get all the services organized they need.
And last but not least, we're working on the business reporting system…We didn't really have a good overview on what profitability we have with each and every of the brokers along the lines of business, et cetera, so we're improving that. And that we also understand what is our share of wallet with regard to those brokers in order to be in a better position to negotiate with our partners when it comes to business development for the future years. So this is what we have been initiating in the broker channel.”
“If you look at the total motor business in premiums, for the first time in 2012, we have been increasing the portfolio. Also on the number of contracts, we have been able to stop the erosion we had. So we have been flat and we're optimistic to turn that into positive turf moving forward. Now as we are looking into profitability, it's important to understand that we have put a new tariff behind that product. We have, as we have chosen [to] price these modules individually. We have introduced new factors, new relativities of the factors, new combinations. This led in some to a substantial improvement in the first-year loss ratios, as we always look after this business and follow the business on a cohort basis also here. So if we compare that to previous product implementations, then we're substantially ahead of what we have seen there.”
Per management: “The 2 percentage point improvement in combined ratio is very much linked to underlying loss ratio improvement. Actually, the expense ratio deteriorated by 50 base points, so it is all better underwriting results reflects our underwriting and pricing discipline and all the actions we have taken, and should lead us also in an even more exciting year 2014.”
Life & Health (L&H): ~35% of op. profit (93% Life/7% Health)
Health Insurance (100% Germany): ~7% of L&H 2013 op. profit
Per management: “Value of new business was certainly disappointing in 2012, has recovered back to almost EUR 1 billion. The 2.1% new business margin should not be the end of the story. The last quarter was already at 2.6%. And when you go to recalculate the new business for the last 12 months with the interest rates of year end, then we would have shown already [a] 2.4% [margin]. And I give you this calculation more as a starting point for 2014, that actually a 2.5% new business margin.”
Balance Sheet Strength
Per management: “Our economic solvency will, when we move to Solvency II final calibration, will probably go down, let's say, around 30 points. So is this concerning? No, because whether you have a Solvency II ratio of 220%, or 180%, or 190%, that is really not making any difference because the target is 100% Solvency II ratio, and certainly, as a group, we want to keep a buffer above it that we can also stand a new renewed financial crisis far in the future or near in the future. So therefore, it's more announcement of a number change and not of a content change because we are still running under the Standard & Poor's model AA with a surplus margin, which actually expanded slightly during the year 2003 [ph], so our capital base is as strong as ever. And I would call our current position absolutely fit and proper for purpose in Solvency II and whatever else is coming.”
Asset Management: ~20% of Allianz op. profit
Per management: “Translating the fee into operating profit. Operating profit, 7% up. Could have been 10%, so we still count that the dollar helps us in the future. And it is very much volume- and margin-driven as the slide shows you here, where, on performance fees, you'll see already the first step to normalization. We are EUR 250 million lower than the year before, and this trend will continue also in 2014. Please remember that we had a couple of private funds mainly investing into subprime mortgages and really created fantastic returns for the investors, and also very decent performance fees for the fund managers. And we are currently building up a new generation of these funds, and I hope we can talk about it in the following quarters. But at the moment, we don't see any performance fees coming out of this.”
Despite the continued net outflows in Q1’14, management remains upbeat about the future of its asset management businesses: “So on the Asset Management side, we do have a couple of product innovations, and they are already contributing to our third-party business. We've lined up a couple of things here. Allianz Global Investors. That's just been in the U.K. We've got a lot of praise for our infrastructure debt team there. The active ETFs from PIMCO are working great. We do have over EUR 20 billion now. So there's something in -- that happened on the Asset Management side that keeps me pretty optimistic.”
Per management: “In P&C in Germany, we still have some integration work to do in Turkey. Our merger in Benelux is working very well, but we have to finalize that. We've just started last month the Iberian platform in Brazil with good expectations. There are some more work to do in Allianz Worldwide Partners, where we are now integrating the hedge portfolio from Allianz France. We have started our IT center consolidation project. That gets us down to 6 instead of 140 today. That's obviously something that will run for, not only 2014, but we are targeting 2017 to be ready. The restructuring time and [indiscernible] obviously, we do make some good progress in China. We have a reinsurance program where we increased the sessions [ph] to Allianz with -- we have a higher volume than some negotiators or reinsurance partners. And we have some FTE-reduction programs that Dieter has alluded to.”
“So it's EUR 10 billion +/- EUR 500 million. I think that is strong and confident. You know that we've always shied away a little bit from touching the EUR 10 billion. Now we have them. It's our midpoint. And yes, you are right, we expect major delivery in the P&C side, with hopefully some upside on the Life and on the Asset Management side. And if Dieter [in charge of Finance, Controlling, Risk] wants to make a big bonus, then he will drive corporate down.”
Per management: “Now on the acquisition strategy you know that we are trying to prove to you that we keep rational and don't want to spend too much money on it, but do some smart stuff that helps us to gain scale and distribution power. We've done the insurance distribution agreement with HSBC for Continental Europe, very much in line with our Turkey strategy. And then we did the acquisition of Yapi Kredi, and we've entered into a European automotive partnership with Ford. It didn't cost us anything. And then we are, as you know, in exclusive negotiations with Unipol in Italy. So I think that's all very consistent with our communication."
|show sort by|
Are you sure you want to close this position ALLIANZ SE?
By closing position, I’m notifying VIC Members that at today’s market price, I no longer am recommending this position.
Are you sure you want to Flag this idea ALLIANZ SE for removal?
Flagging an idea indicates that the idea does not meet the standards of the club and you believe it should be removed from the site. Once a threshold has been reached the idea will be removed.
You currently do not have message posting privilages, there are 1 way you can get the privilage.
Apply for or reactivate your full membership
You can apply for full membership by submitting an investment idea of your own. Or if you are in reactivation status, you need to reactivate your full membership.
What is wrong with message, "".