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Allianz – Share buyback

Allianz reported solid earnings last week, along with a promised €3 billion share buyback, A strong Solvency II ratio and a higher than expected dividend of €7.60 per share. The results are nothing but positive for holders of Allianz shares.

The company reported growth in its main business segments; fourth quarter profits increased by 23 percent, net income increased to €1.74 billion form €1.42 billion a year ago.

Putting figures in perspective, anyone who bought the share a year ago would have paid €135 for each share. That translates into a capital gain of 19 percent. The dividend and promised share buyback are icing on the cake.

The share buyback story

Allianz have a historically used accumulated cash as a source of growth by taking over businesses. Over the past 3 years Allianz had accumulated over €3 billion forcing Chief Executive Officer Oliver Baete to look for deals across the Globe in the past months.

However, for the time in its 127 year history, the company decided to break with tradition and instead opt for a share buyback. CEO Oliver Baete added that a share buyback made sense at this stage since, in his opinion, the company is worth much more than its market value.

Allianz said that going forward half of the net income will be used to finance growth if appropriate of returned shareholders on a flexible basis.

The German insurer has been cautious about deals since the failed acquisition of Dresdner Bank in 2001. Allianz ended the relationship with the bank in an emergency sale weeks before the Lehmann Brothers collapse. Allianz will continue to look for opportunities to grow externally when opportunities fit.

PIMCO’s turnaround

Pacific Investment Management Co. had circa $5 billion in third-party inflows last month, almost as much as the entire fourth quarter, suggesting that the worst is over for the bond investment firm owned by Allianz.

Pimco has seen assets decline by about a quarter from their peak as the surprise departure of co-founder Bill Gross in 2014 led to a flight from bond funds. Redemptions continued well into last year. The last two quarters of 2016 registered net subscriptions for the first time sin Bill Gross left.

Company profile

Allianz SE is a German financial services company headquartered in Munich. Its core business are insurance and asset management. The Group is the world’s largest insurance company and the largest financial services group according to data compiled by Forbes magazine. Allianz has operations in Australia, Belgium, Bulgaria, Canada, Colombia, Germany, India, Indonesia, Italy, Malaysia, Pakistan, Slovakia, The United Kingdom and the United States.

Allianz is also known for providing naming rights for the Allianz Arena, home of football club Bayern Munich. Allianz also own the Allianz Parque in Sao Paulo, the Allianz Riviera in Nice, the Allianz Park in London and the Allianz Stadion, the new home of Rapid Vienna.

This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. 

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