As Europe’s biggest insurance company, Allianz (AZSEY) is strong. But how strong is an open question.
Allianz has a leading share of both the life and property casualty insurance in markets in Western Europe. It also has a strong presence in Asia, Eastern Europe, and the United States. All together it serves more than 76 million customers in 70 countries.
Property-casualty insurance has produced the biggest chunk of Allianz’ profit during the past few years. But perhaps its most valuable asset is Pimco, the largest bond manager in the United States and home to the world’s biggest mutual fund, the $242 billion Pimco Total Return Fund.
Allianz has grown its money management business to the point that it has more than $2.1 trillion assets under management. In addition to Pimco, it owns money-management groups NFJ Investment Group, RCM, and Allianz Global Investors.
The big issue for Allianz is that its insurance and investment operations generate small profit margins. Because of its leverage, the company is vulnerable to major volatility in financial markets.
Despite the growth in Allianz’ asset management unit, its book value per share has stood little changed over the last five years. And return on shareholders' common equity didn’t exceed the company’s cost of capital during that period, according to Morningstar.
On the plus side, Allianz has a dividend yield of 4.9 percent, and the dividend payout soared 42 percent over the past two years.
The company’s profit dropped a larger-than-expected 84 percent in the third quarter, as Allianz had to write down its investments in Greek government debt and in financial company stocks.
Net income registered 196 million euros ($256 million) in the quarter, down from 1.26 billion euros a year earlier. Revenue dipped 1.8 percent to 24.1 billion euros.
"Overall we believe Allianz has reported a reasonably strong operating performance, which is overshadowed by huge write-downs," DZ Bank analyst Thorsten Wenzel wrote in a note to shareholders after the report.
The company next reports earnings around Feb. 11.
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