The Allianz Machine Beats On; Shares Undervalued

Allianz shares are trading down around 2% today as the company reported first-half 2022 results. For the second quarter of the year, the business beat consensus on operating profit but missed consensus on net income. Operating profit came in at EUR 3,495 million versus our full-year estimate of EUR 9,398 million, which includes the EUR 1.9 billion provision for the Structured Alpha Funds. The first-quarter posting of EUR 3,238 million showed a business well ahead of what we are forecasting, and Allianz does not show a lot of cyclicality in its results. Management has reiterated its EUR 13.4 billion operating profit guidance, give or take EUR 1 billion. Adjusted for the Structured Alpha Funds provisions, it is something in the region of EUR 11.5 billion that we believe the business can easily make. Today’s results announce the completion of the EUR 1 billion share buyback as of July 15 and a solvency ratio of 200%. That solvency has a negative-1-percentage-point sensitivity to a 50-basis-point rise in interest rates and we think it already includes half of the negative-20-percentage-point sensitivity to a 30% fall in equity markets. We maintain our fair value estimate of EUR 210 per share for now while we update our model. We maintain our rating of no economic moat.