GuruFocus -
- Overall Growth: 11% year-to-date, up from 7.5% in the first half of the year.
- Core Return on Equity (ROE): 17.5%, up 15% year-on-year.
- Operating Profit: EUR11.8 billion for the first nine months, with a third-quarter operating profit of EUR2 billion.
- Combined Ratio (P&C): 93%, at the low end of the outlook range.
- Value of New Business: EUR3.5 billion for the first nine months, with a third-quarter value of EUR1.2 billion.
- Life and Health New Business Growth: Up 31% in the third quarter, with a new business margin of 6.1%.
- Asset Management Net Flows: EUR70 billion year-to-date, with a third-quarter setback of EUR20 billion.
- Assets Under Management: Up 7% year-to-date, reaching EUR1.8 trillion.
- Shareholder Core Net Income: EUR2.5 billion in the third quarter, up 23% year-on-year.
- Core Earnings Per Share (EPS): Up 25% year-on-year.
- Solvency Ratio: Up 3 percentage points from the second quarter, at 2.9%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Allianz (ETR:ALVG) SE (ALIZF) reported strong growth and profitability across all segments, with a core ROE of 17.5%, up 15% from last year.
- The company achieved a record value of new business at EUR 3.5 billion in the first nine months, indicating robust performance in life and health segments.
- Assets under management increased by 7% year-to-date, with net flows of almost EUR 70 billion, significantly higher than the previous year.
- The P&C segment showed a combined ratio of 93%, at the low end of the outlook range, reflecting effective management of natural catastrophe impacts.
- Allianz SE (ALIZF) expects its year-end operating profit to be in the upper half of the outlook range, demonstrating confidence in continued financial strength.
- The asset management segment experienced a setback with EUR 20 billion in net outflows for the quarter, primarily due to lower performance fees.
- Natural catastrophes and weather-related events continue to pose challenges, with a NatCat impact of 3.4% this quarter, above the expected 3% load.
- The commercial segment faced a deterioration in the attritional loss ratio, influenced by large losses and the Arch transaction.
- The life segment's CSM was negatively impacted by lapse assumptions, particularly in the US market, affecting the overall CSM growth.
- The company noted a softening rate environment in the large commercial and specialty business, which could pressure future margins.
A: The Q4 NatCat events, including hurricanes in the US and floods in Spain, are expected to be within our budget, with losses anticipated in the double-digit range. Regarding the P&C expense ratio, improvements are attributed to mix changes and productivity gains, but it's challenging to isolate specific contributions due to various factors. The Arch transaction also positively impacts the expense ratio.
Q: Why did the AZ Life CSM fall despite strong new business, and what caused the attritional loss ratio increase in commercial lines?
A: The AZ Life CSM decline is due to assumption updates, particularly lapse assumptions in the US, which are neutralized when moving from gross to net due to reinsurance. The attritional loss ratio increase in commercial lines is influenced by the Arch transaction and higher large losses, which are seen as volatility rather than a trend.
Q: Why does Allianz's CSM benefit from declining yields, and how should we view the expected in-force return?
A: The positive CSM impact from declining yields is linked to protection business appreciation and profit-sharing effects. The expected in-force return can vary based on the underlying business model, with VSA using a market rate plus expected over-return, and BBA using a fixed locked-in rate.
Q: How does the attritional loss ratio compare to expectations, and why is the life investment result lower this year?
A: The attritional loss ratio is impacted by several factors, including large losses and weather events, but underlying improvements are evident. The life investment result appears lower due to unusually high results last year, with current figures aligning with expectations.
Q: What is the outlook for commercial lines margins given rate softening and trade normalization?
A: We expect flat margins across commercial lines despite rate softening and trade normalization. The current combined ratio for trade remains strong, and we anticipate maintaining similar levels going forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.