• Operating Profit: EUR7.9 billion, a record level.

• Shareholder Net Income: EUR5 billion, up almost 8%.

• Property and Casualty Operating Profit: EUR4 billion, with 8% growth.

• Life and Health Value of New Business: Up 12% compared to last year.

• Asset Management Net Inflows: EUR50 billion in the first half of the year.

• Combined Ratio: 93.5% for the second quarter.

• Solvency II Ratio: Increased to 206%.

• Return on Equity (ROE): Above 17% for the first half.

• Share Buyback Program: Extended by EUR500 million.

• Total Payout for 2024: EUR6.9 billion.

• Warning! GuruFocus has detected 6 Warning Signs with ALIZF.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Allianz SE (ALIZF) reported its best financial quarter ever, with record operating profit of EUR 7.9 billion and shareholder net income of EUR 5 billion, up almost 8%.

• The company has increased its share buyback program, demonstrating confidence in its financial strategy and commitment to shareholder returns.

• Strong performance was noted across all segments, with significant business volume growth and profit contributions from Property and Casualty, Life and Health, and Asset Management.

• Allianz SE (ALIZF) has successfully expanded its market presence in Southeast Asia, particularly in Singapore, through strategic acquisitions.

• The company maintains a strong solvency position with a Solvency II ratio of 206%, reflecting robust capital management and resilience against market volatility.

Negative Points

• Allianz SE (ALIZF) faced elevated net catastrophe activity, particularly in Germany, impacting its financial results.

• Claims inflation continues to trend above CPI inflation, driven by rising costs for car repairs and spare parts, affecting the company's expense management.

• The company is experiencing challenges in maintaining customer retention, which is crucial for sustaining growth.

• There are concerns regarding the integration and profitability of the Singapore acquisition, given local market dynamics and regulatory challenges.

• The New Caledonia event highlighted potential tail risks in the portfolio, raising questions about risk management and policy wording adequacy.

Q & A Highlights

Q: Can you provide insights on your capital deployment strategy, particularly regarding M&A and share buybacks? A: Claire Lepoutre, CFO, explained that Allianz has been disciplined in capital deployment, focusing on organic growth and M&A with expected double-digit returns. The company generated around EUR8 billion in cash last year, with EUR6.9 billion allocated for payouts, leaving approximately EUR1 billion for deployment. Allianz remains rigorous in evaluating capital deployment opportunities.

Q: With strong pricing in P&C, is there potential to push for more volume growth? A: Claire Lepoutre, CFO, confirmed that Allianz is ready to push for more volume growth, especially in retail, where pricing has been the primary growth driver. The company is well-positioned to capture more volume growth due to its proactive pricing actions compared to competitors.

Q: How do you view the strategic importance of your asset management business, particularly in light of industry trends? A: Oliver Bate, CEO, emphasized that Allianz's asset management is a strong pillar, with significant margins and inflows. The company sees it as a competitive advantage, especially when combined with life insurance offerings, and intends to continue building on this strength.

Q: Can you elaborate on the impact of the New Caledonia event on your financials and any lessons learned? A: Oliver Bate, CEO, explained that the New Caledonia event highlighted the need to revisit policy wordings to ensure coverage aligns with public security expectations. The event was an outlier due to the lack of public security, and Allianz is pursuing legal action for reimbursement from the French government.

Q: What are your thoughts on the current US commercial market and potential capital structure adjustments? A: Claire Lepoutre, CFO, noted that the US commercial market shows mixed trends, with some lines softening and others hardening. Regarding capital structure, Allianz is comfortable with its current setup but remains open to adjustments if needed to optimize capital deployment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.