Friday, April 15, 2016

Analysis of Allianz 2016

Allianz, a German financial service company

Company: Allianz 

ISIN DE0008404005 | WKN 840400 

Business: A German financial service company. They offer six different products / services: Private Insurance (Car, Health, Family House etc.), Business Insurance (large and medium sized companies), Asset Management (fixed income products, stocks and commodities), Global Lines of Business (reinsurance, life insurance and real estate), Global Services and Assistance (assistance, health & automotive) and finally Sustainable Solutions (micro-insurance and investments). 

Active: Over 70 countries with 85 million customers (apparently still). 

P/E: 10.2

Here you can find the previous analysis of Allianz 2015

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

The P/E is very good with 10.2 and so is the P/B with only 1.1 which in the end gives a very clear buy signal from Graham. The earnings to sales are ok with 6% but the ROE is only so, so with 11% and the book to debt ratio is very low with 0.08 but it is also nothing spectacular due to the line of business they are in.
The the last five years they have had a so, so yearly revenue growth rate of 2.8% which then gives us a motivated P/E of 10 to 14 which means that Allianz is today slightly undervalued by the market.
They pay an excellent dividend in the size of 5% which corresponds to 50% of their earnings which is fully acceptable and hopefully they will be able to keep increasing the dividends and earnings also in the future.

Conclusion: Graham says yes to Allianz and so do I. The P/E, P/B and dividend are all excellent and the ROE is acceptable enough. Allianz as well as MüRe are little piggy banks that one should keep for long periods and collect the dividends and increase the holding when they drop down for various reasons. If I would not have had a no buy period for stock in Germany due to my future move then I would have used my check list on Allianz to see if it would pass those tests.

If this analysis is outdated then you can request a new one.


raheel said...

I agree that it seems to be cash cow on cheap, but the combined ratio above 100% stops me pulling the trigger on this. What's ur opinion on its combined ratio?

Fredrik von Oberhausen said...

Hi Raheel,

From what I see... at least Allianz themselves claimed to have a combined ratio of 94.6% for 2015 which is the year that I looked at. They seem to be around 96%+-2% at least for the last five years.

There are many small insurance companies (working in niches that would never be able to generate enough for the large insurance companies) that can keep a much lower combined ratio but from what I have seen the larger ones are very often well above 90% which to me means that Allianz is not sticking out from the crowed with their reported combined ratio for the last five full years.

Generally speaking a combined ratio above 100% is bad. If it is a one time big event that happened then it can be a good moment to jump in (such as MüRe in and after 2011) but if it happens due to heavy competition and the only way to survive and to keep bringing in premiums is to go above 100% then one must take a serious look at those competitors and find out which one will survive the best. Waiting with the investment would then probably be a good option.

raheel said...

Thanks for the reply, my source of info was:

Anonymous said...

Ah, ok, I see. That is one segment of the total Allianz group. By the look of it that specific segment seems to be in the heavy competition part which just as i mentioned before to be able to survive they have significantly pushed up premiums but at the cost of over 100% to survive and to squeeze competitors which should also be mentioned.

The competitors that does not have the backup of other profitable segments will at some point perish as we all know.

-Fredrik von Oberhausen

Fredrik von Oberhausen said...

Oh, and you guys have probably already understood it but this analysis of Allianz means the start of the analysis of all the companies on DAX.

Two new companies have even been introduced during 2015 and it will be nice to see what they will look like!