Allianz builds believers on commercial insurance; targets can be beaten

Global insurance group  Allianz is making believers among equity market analysts, with reviews from its latest Inside Allianz investor meeting generating conviction that commercial insurance can power past targets.

Analysts at Deutsche Bank Securities fall fully in line with CFO assurance that P&C operating profits should “comfortably” exceed the €6.6 billion target for 2024. It’s “no surprise” to Deutsche which is forecasting a full €7.4 billion. The combined ratio need not even hit target, but can be “more than compensated” by higher volumes and some investment returns.

Comments follow an investor presentation of non-life commercial lines, Allianz non-life Germany and Allianz Global Investors.

“Our overwhelming impression was that overall, the three operating units are set to beat their 2024 strategic plan targets,” Berenberg analysts said, crediting “better pricing and stronger growth in non-life commercial lines and Allianz non-life Germany” plus growth in higher-margin private market assets at Allianz Global Investors.

Those three segments have increased their contribution to group EBIT from 23% in 9M 2021 to 30% in 9M 2022, putting the group on track to “comfortably beat” the €6.6 billion target, Berenberg concurred.  In non-life commercial, Berenberg calculates the latest 9M EBIT tally as “well ahead” of the run rate needed to hit the €1.5 billion FY2024 target.

Commercial is universally praised for pricing power vis-à-vis inflation-fuelled loss cost trend. Deutsche and Berenberg both praise apparent margin expansion on 13% pricing growth over ca 7% loss cost trend.

“Pricing remains ahead of loss cost inflation, and the growth outlook in the midcorp segment of the business is particularly strong,” Berenberg said in its note to investor clients.

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