"We are the leading stock market retail stock in Germany"
Mr Bäte and Ms Coste-Lepoutre, why is Allianz increasing the dividend payout ratio?
Oliver Bäte: Allianz's share price has recovered so strongly that, from a return perspective, paying out a dividend is increasingly preferable to buying back shares. In addition, our investors now favour predictable capital management measures. Shareholders want to be able to plan their dividends.
Why are investors reorienting themselves?
Bäte: The shareholder structure has changed. We are the leading stock market retail stock in Germany, because Allianz is one of the companies with the highest number of private investors. In addition, more than 70% of our employees are Allianz shareholders. In 2015, it was only 15%.
So, the interest of institutional investors is declining?
Bäte: If anything, the trading structure on the stock exchange has changed. More and more investments are in passively managed funds. Above all, however, hedge funds are heavily involved, switching between short and long positions. This leads to higher volatility. Share buybacks are not helpful in this environment because they lead to higher capital costs.
It would then have been logical to cancel the share buyback programmes in principle.
Bäte: We are very careful with our shareholders' capital. That is why we want to flexibly return those surplus funds that we do not need for acquisitions or organic growth through a buyback programme. However, unlike some of our competitors, we will take a close look at M&A options.
Why did you choose a rate of 60%?
Claire-Marie Coste-Lepoutre: This increases the dividend by a good 20% compared to the previous coupon, so it is very attractive for investors. As mentioned before, we also want to retain the flexibility to make acquisitions in the future.
Bäte: Ultimately, we can afford 60% for two reasons. Firstly, the divisions have transferred more and more cash to the holding company in recent years. Secondly, since last year, we no longer need any capital for our new life insurance business because its profitability has increased significantly. Almost nobody has realised that yet.
Regarding the forecast: If you had stayed precisely in line with the system of previous years, you would have had to target an average operating result of 14.7 billion euros in 2024 instead of 14.8 billion euros.
Coste-Lepoutre: The operating result for 2023 is 14.746 billion euros. We have, therefore, taken the liberty of rounding up the forecast. This also signals our optimism for the current year.
Where do you think the additional momentum in the operating result is coming from?
Bäte: We are relying heavily on asset management with the outstanding performance of Pimco. Net inflows were better again last year – with the exception of October. In the first weeks of 2024 they are even excellent. However, we also want to improve further in the retail part of the property and casualty segment.
There appears to be some pent-up demand in this area, as the division's profitability is strongly driven by corporate business.
Coste-Lepoutre: The two customer segments are at different stages of the cycle. In view of the underlying conditions, they each generated an excellent result last year. The price increases are slowly being reflected in the figures, and this will be particularly evident in 2024.
Does this solve the problem of inflation?
Coste-Lepoutre: It is still unclear how inflation will develop. On the claims side, we are working very actively to reduce the impact of general price increases on us.
Bäte: Ultimately, we don't know how claims inflation will develop. We hope that the price and claims measures will put us in the lead. I believe that it will take two to three years to restore the balance in the German and other markets. I think we are significantly ahead of the curve here.
How will you get the claims burden in the retail business under control?
Bäte: I can't remember in my 16 years at Allianz that we ever had been better than HUK-Coburg in terms of both the combined ratio and growth – which, I'm happy to repeat myself, is really top. But we achieved that in 2023.
Where does the success stem from?
Bäte: We have greatly improved our contract design. But we have also made progress in claims processing, for example, through workshop management, which was invented by HUK-Coburg a long time ago. One example: In the comprehensive insurance control tariff, we save our customers an average of 1,000 euros per claim. This ultimately curbs the rise in premiums. Now, we have to do an even better job of convincing customers to sign up for these control tariffs. Incidentally, we are the service leader in Germany for the first time.
How is the US property crisis affecting Allianz?
Coste-Lepoutre: We are a long-term investor. Compared to Allianz's total investments, our exposure to US commercial property is only 5% of our portfolio of 740 billion euros. Pimco mainly manages this 5%, and the money comes primarily from life insurance.
Where exactly are the investments in US commercial property?
Coste-Lepoutre: On the equity side, we have no stress because our investments are located in the city centres of popular US cities. We also see opportunities for acquisitions in this market phase.
However, the solvency ratio fell from 212% at the end of September to 206% at the end of December.
Bäte: In the solvency statement, you can see that we carry the changes in the market value of properties and other illiquid assets through our balance sheets. We have nothing to hide. Investors should be able to understand this.
What can we expect from the Capital Markets Day in December?
Bäte: The main topic of the Capital Markets Day will be: How can we achieve intelligent growth in a very volatile world? After all, volatility offers opportunities for growth. We want to use our strength, which is also fuelled by improved productivity, to this end.
The new Allianz management team
The new management duo at Allianz held the annual press conference together for the first time on Friday – in an online format. CEO Oliver Bäte (58) appreciates the greater reach among journalists. Cost considerations are also likely to play a role in the fact that Allianz has favoured online presentations for several years. Bäte and CFO Claire-Marie Coste-Lepoutre have been a well-established team for years, although the 48-year-old has only been at the helm of the finance department since the beginning of the year. They know each other from their positions as CFO of the Allianz industrial insurer AGCS and as regional CFO for Allianz Benelux.
