EUR 850.00 For Business Accounts Only

Morningstar | Allianz's 1Q: Good Life and Non-Life; Poorer Showing Asset Management; Stock Fairly Valued

Allianz reported operating profit of EUR 3.0 billion for the first quarter of 2019. This is a little ahead of our estimate of EUR 11.6 billion for the full year. And this result, which beats us, flows all the way down to net income. Management are maintaining guidance of EUR 11.5 billion for the full year, plus or minus EUR 500 million. Currently, it looks like results will be on the plus side and we are still impressed with how well management execute in this business. We maintain our EUR 200 fair value estimate and no-moat rating.

Better results have come from the property and casualty segment. Here, total revenues have risen by about 6%. Pricing has improved by nearly 200 basis points. And the combined ratio posted 93.7, which is better than our 94.7 forecast. However, there is still some distance to travel with the third-quarter heavy claims. Natural catastrophes have been typically light over this period, but more so than normal. Italy remains highly profitable. We are a bit ahead of the business on forecasts for non-technical.

The life and health business is, in our opinion, also doing well. We forecast about EUR 3.85 billion of operating profit for the full year, and currently it looks like this will be closer to EUR 4.0 billion. We don t get a lot of insight into what is driving this within these figures, but we think margins are looking a bit better and sales are up in U.S. and Germany.

Profit from the asset management business looks light at EUR 575 million in contrast to our full-year target of EUR 2.5 billion. The cost-income ratio has deteriorated by as much as we have seen pricing in P&C to 63.7% as the business continues with growth investments. Assets under management have increased by EUR 112 billion to EUR 1.55 trillion, and this is mainly, and pleasingly, at PIMCO. Although a lot of this is market movement, 140 basis points from net flows, three-year benchmark outperformance looks good and this should eventually flow through. We think this makes the cost/income ratio more defendable. There is definitely work to do at Allianz Global Investors. This accounts for 15% of group AuM. Asset management divisions, formed out of proprietary management, typically prove to be sub-optimal parts of an insurance business.