Investors agree with Allianz's outlook after strong full year results

(Alliance News) - Analysts praised Allianz SE's full-year result on Friday, after the German insurer swung to a quarterly net profit, contributing to the rises in both annual profit and revenue.

Analysts also agreed with Allianz's outlook for 2023.

UBS rates Allianz at 'buy' with a EUR233.00 price target. Jefferies also rates the company at 'buy', with a slightly higher price target of EUR250.00.

On Friday, LLBW raised the Allianz price target to EUR240 from EUR220, and reiterated its 'buy' rating.

Allianz shares were down 2.5% at EUR215.50 each on Friday afternoon in Frankfurt.

Net profit in 2022 was up 1.1% to EUR7.18 billion from EUR7.11 billion, as operating profit jumped by 5.7% to EUR14.2 billion from EUR13.4 billion a year earlier.

The German insurer said revenue for 2022 increased by 2.8% to EUR152.7 billion from EUR148.5 billion a year earlier. This was largely driven by the Property-Casualty business segment due to strong price and volume effects.

Basic earnings per share was EUR16.36, up from EUR15.96 a year ago.

In the fourth quarter, revenue amounted to EUR36.7 billion, down 4.5% from EUR38.4 billion quarter-on-quarter.

"Statutory premiums declined in the Life & Health business segment, mainly due to softer single-premium sales in Germany and unit-linked products in Italy," Allianz explained.

Net profit, however, amounted to EUR2.11 billion, swung from a loss of EUR165 million a year earlier. Net income attributable to shareholders amounted to EUR2.0 billion, compared to EUR292 million the year prior.

Quarterly operating profit surged by 13% to EUR4.0 billion from EUR3.5 billion, driven by strong performance in the Life & Health business segment.

UBS noted that Life & Health profit beat market expectations by 57%. It said this was driven by investment and technical margin.

Jefferies said that operating profit in the fourth quarter was 12% above market expectations. UBS also noted this profit beat.

However, Jefferies said that profit from the Property-Casualty arm was 11% below its expectations during the quarter, driven by a lower investment return and a higher combined ratio of 94.7% due to higher attritional losses.

"The higher attritional losses have been a result of high inflation as well as a normalisation in frequency," Jefferies added.

Chief Executive Oliver Bate said: "With our record results for both revenue and operating profit in 2022, Allianz has consolidated its position as one of the world's largest, most resilient, and trusted global financial institutions. Our performance is the product of thoughtful design, reliable execution, relentless simplification, and disciplined capital management. Also, customer and employee satisfaction as well as brand strength reached new all-time high scores."

Looking ahead, Allianz is targeting an operating profit of EUR14.2 billion for 2023, plus or minus EUR1 billion.

UBS said it expects ordinary profit of EUR14.2 billion, meanwhile Jefferies estimates Allianz to bring in EUR14.3 billion profit.

UBS said: "2023 guidance appears broadly in line with consensus expectations across all divisions as well as overall."

It added: "The uncertainty on the Property-Casualty attritional combined operating ratio could raise some concerns and mean the stock could be marginally weak, though with OP guidance largely met, and positive January inflows into PIMCO, we would expect any pullback to be marginal."

Allianz said January has seen inflows of EUR10 billion, putting a stop to the sustained period of outflows. UBS said this is above its expectations.

By Xindi Wei, Alliance News reporter and Sophie Rose, Alliance News reporter

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