Analysts praise Allianz growth strategy but remain wary on Alpha Funds settlement

Allianz’s recently revealed growth strategy for the coming three years has been broadly welcomed by analysts responding to its strategy presentation who say it is achievable without overstretching its capacity.

Deutsche Bank analyst Hadley Cohen called the recent series of strategy announcements "a very confident and reassuring set of presentations, demonstrating the true underlying quality of the business (across the board)."

The earnings side of the Allianz story focused on P&C, where underwriting income should grow by roughly 7 percent per annum, ahead of 6 percent growth in the segment operating profit after "continued drag" from investments.

Roughly two thirds of that and the group's 4 percent operating profit growth target are put to volumes and margins, ahead of the gain from improvements to capital efficiency.

Asset management is in for a 5 percent annual growth contribution at the EBIT level; life and health for 3 percent.

Those figures constitute "broad based earnings improvement based on plausible assumptions," analysts at Moody's went on to tell debt investors.

Investors may have already been expecting growth in such a range, brokerage analysts noted. Consensus earnings estimates were "largely already reflecting" the type of bottom-line growth being promised by management, DB’s Cohen claimed.

The greater positive surprise and investor reassurance may have come from declarations on dividend and the $35 billion reinsurance deal Allianz secured for its US fixed annuities, BofAML analyst Michael van Wegen claimed in his note to clients.

Allianz freed $3.6 billion in capital on a deal to reinsure the US fixed annuity business, then promised shareholders to pay a minimum of either 50 percent of net profit or a 5 percent per annum increase in DPS. Terms of the US reinsurance deal appear better than could have been expected, DB's Cohen added.

Don't mind the more modest reaction in share prices, vis-a-vis those positive surprises: uncertainties over a final settlement with authorities over the structured Alpha Funds continue to pinch sentiment, analysts at BofAML and DB said in unison.

Analysis of the insurer’s claims over the last three years finds:

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