Sunday 26 January 2014

Analysis of Talanx

A German B2B insurance company

Company: Talanx

Business: A German mainly B2B insurance company. They are divided into five divisions: Industrial Lines (covering all the insurance needs of industrial companies. My own company are insured with HDI-Gerling that they are called and I am very happy with the premium we pay), Retail Germany (retail and commercial customers covering property/casualty), Retail International (the same as previous division but outside of Germany), Reinsurance (non-life reinsurance via especially Hannover Rückversicherung that Talanx own to 50.2%) and finally Financial Services (which is among other things an internal reinsurance part for the entire group). The Talanx group contains many companies and the full list can be found here.

Active: They are active all over the world. Traditionally main focus has been Germany and Europe but they are expanding strongly and are today active in more than 150 countries.

P/E: 10.0

contrarian values of P/E, P/B, ROE as well as dividend

The P/E of Talanx is excellent with 10.0 and the P/B also great with 0.5 which gives us a very clear buy from Grahams formula! The earnings to sales are so, so with only 3% and what is maybe worse is the ROE that is down at 5.4%. The book to debt I also do not like very much since it is at a ratio of 0.1. In the last four years they have had an excellent growth of almost 6.2% which gives us a motivated P/E of  16 to 20 which means that Talanx is undervalued by the market today. They pay a very nice dividend of 4.2% which represents 42% of their earnings so they can keep that up without too much issues. The comment is regarding that the growth data was only based on four years instead of five which I usually try to use.

Conclusion: Graham says buy and I also find it very interesting. It is indeed so interesting that I will add it to my Stocks of Interest list with the next update. Several of the key values are indeed great. I do however not know if I would go for Talanx or Hannover Rückversicherung. Both are cheap, both pay nice dividends. HaRe is however much smaller but they also have a much better ROE. Either way both companies look great and are worthy to look further at and maybe even to invest in.

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Kenny said...

Det här är ett bolag som jag också lägger till på min intresselista. Tack för uppmärksammandet!

Fredrik von Oberhausen said...

Kenny wrote that he will also add this company to his stocks of interest list which pleases me since that is part of why I am writing this blog. Not only that I find out about companies but also you guys that are reading some of my publications.

In the end... there will always be good, cheap, out of favour companies somewhere in the world and to find those companies are not always easy.

I am glad that I have soon finished MDax so that I can start looking around a bit more in the world for more interesting companies.

Anonymous said...

Thanks Fredrik!

Talanx shares seem to be undervalued and "strong buy" by Grahams indicators. Do you is there any good reason for that? Why "Mr. Market" values Talanx shares so low?

- Lasse -

Fredrik von Oberhausen said...

Hmmm... good question Lasse!

Honestly I do not know.
The only thing I can think of is that just like the banks the insurance and re-insurance companies are sitting with huge balance sheets due to their float which often is directly invested on the stock market.

During the financial crash this made a significant drop in the balance sheets which maybe shareholders understood less for insurance companies than for banks and are therefore still not really interested in stepping in again.

But like I said I really do not know.

If someone has a good answer then please let us know!