Analysis of Allianz SE (ALVX:GER)

I was talking to you a little over a year ago of this German insurance giant, Allianz. Let's see how the situation has evolved with the publication of the 2018 figures.

Valuation & dividend

Paradoxically, while the stock has gained 3% since last year, Allianz's valuation ratios are even more attractive than last year, thanks to the excellent 2018 results. Indeed, ALVX is now trading at:

• 11.10 times current recurring earnings
• 12.16 times average recurring earnings
• 1.35 times book value
• 1.75 times tangible assets
• 0.86 times sales
• 3.34 times current free cash flow
• 3.25 times average free cash flow

EBIT and EBITDA also represent 8,92% and 9,23% of the enterprise value respectively.

On the dividend side, it's fireworks, since the yield amounts to 4,59%, for an average annual growth of 5,61% (over the last five years). Moreover, this generosity is not achieved by squandering resources since the dividend represents:

• 51.02% of current recurring profit
• 55.88% of average recurring profit
• 15.36% of current free cash flow
• 14.92% of average free cash flow

It should be noted that the payment of half of the profit in the form of dividends is not a coincidence. It corresponds to Allianz's policy.

Balance sheet & result

Just like the dividend, profits, cash reserves and asset values are increasing over the long term. Allianz is therefore clearly succeeding in creating value for its shareholders and this is reflected in the share price, which has almost tripled over the last ten years.

The German insurer's net margin is decent, at 7,77%, but what's most impressive is its free cash flow margin, at 25,82%. The latter explains why the valuation ratio to FCF is so low and the same goes for the dividend payout ratio to FCF. Slot machine, printing press, cash cow... call it what you want: Allianz has an impressive ability to generate cash!

From a profitability point of view it is not as marked, but still quite correct, with an ROE of 12.19%, an ROA of 0.83 (increasing) and a CFROA of 2.92%.

The long-term debt-to-asset ratio, although slightly up, remains quite reasonable at 3.65%. The company would be able to wipe out all of its debt, which is only 0.57 times its equity, in less than a year and a half.

It should also be noted that the number of shares in circulation has been falling for two years, which increases the shareholder's share of the pie.

Conclusion

Allianz is an insurance giant, one of the world's leading asset managers. The German company has a 129-year history that speaks clearly in its favor. With its attractive valuation and excellent fundamentals, it could even bring Graham and Buffett's disciples into agreement on many points. Its size protects it from new competitors and its field, although using modern means of communication, is not under threat of technological obsolescence. Allianz also has overheads that would make any manager green with envy. Its goodwill is increasing and capital expenditures are relatively low. We have also seen that debt is completely under control and that the margin, particularly in FCF, is remarkable. The German insurer undoubtedly has many characteristics specific to franchises, not to mention that it is a relatively defensive stock, with a beta of 0.88% and an average volatility (17.32%). In short, it is the kind of stock that you can buy and forget in a corner.

I bought Allianz almost two years ago, currently making a profit in CHF with dividend of 14%. I still think that the stock is slightly undervalued and I will of course hold it. Is it a stock to buy or to strengthen? Despite all the good things I think about Allianz, and even if its price is quite correct, I think that the margin of safety is no longer as good as it was when I bought it almost two years ago.