Best Idea Update: Allianz Beats On. Shares Remain Undervalued

At Allianz's recent inside series, we developed a greater sense of where the business is and wants to go in mid- and large commercial insurance. Of Allianz's near EUR 60 billion in property and casualty gross written premiums, around 35% of this can be assigned as commercial insurance. That is made up of 16% large corporates; 12% mid-size corporates; 4% credit insurance; and 2% reinsurance. These combined amount to gross written premiums of around EUR 21 billion and the residual EUR 39 billion is mostly (40%) accounted for as retail. Ten percent falls to Allianz Partners; 8% to fleet; and 8% to small- to medium-size enterprise. With claims inflation of around 8% this year, Allianz Global Corporate and Specialty has done well to achieve rate rises of something north of 10%. This is helping to keep loss ratios year to date below 70%. Like many commercial insurers, Allianz is looking to mid-size corporates for growth and we anticipate that this will have been the focus of this year's internal strategic dialogue held in June. Our expectation is for higher capital allocation to be made to commercial for mid-size corporate growth in the capital allocation process held in November 2022. We would anticipate Allianz Global Corporate and Specialty combined ratios heading to sub-95% over the course of 2023.