Analysis of Allianz SE (ALVX:GER)

Allianz SE is a German financial services company founded in 1890 and with 140,000 employees. The company is the holding company of the Allianz Group (Allianz SE and its subsidiaries). Its activities include property and casualty insurance, life insurance, health insurance and asset management. It also provides a range of reinsurance coverage.

Allianz trades at a reasonable price of 13.3 times recurring earnings, 0.86 times sales and 4.88 times free cash flow. This is a tiny bit worse than tangible book value, since the ratio is 1.8 times. But it is still acceptable.

The dividend is substantial, with a yield of 3,71%, despite a very reasonable distribution ratio of 49,45%. Allianz therefore has a margin of safety to continue paying and growing its dividend in the future. It has done so regularly in the past, with an average annual growth rate of 11% (over the last five years).

Just like the dividend, the profit and the value of the assets increase over the long term. Cash reserves, on the other hand, tend to remain stable. The company thus demonstrates a certain capacity to create value for its owners, even if we would have liked a more upward trend in cash reserves over the long term. Thanks to these good predispositions, the Allianz share price has almost doubled over the last five years (which is better than the German index which rose 72%).

The net margin is correct, with 7.5%, the return on assets is very slightly up, at 0.79%, for a return on equity of 11.46%.

The long-term debt-to-asset ratio is slightly up, but remains at very reasonable levels, at 3.87%. The total debt could theoretically be wiped out in less than two years, using all free cash flow. Another positive sign is that the number of shares outstanding is stable, which avoids any dilution of earnings for shareholders.

With its very long history, Allianz is a behemoth, the leading European insurer and the fourth largest asset manager in the world. Since 2007, it has owned the entirety of the French insurer AGF. Despite its immense size, its business remains relatively simple, hardly subject to risks of technological obsolescence and protected from new competitors.

The current price of 203.90 euros, reflects quite well the intrinsic value of Allianz, with perhaps still a very slight undervaluation. In summary, not necessarily a stock to buy, but at least to hold.