Europe’s largest insurance company and a major asset management firm, Allianz SE (AZSEY, Financial), reported its Q3 results on November 7 sending the stock on an upward trajectory and delighting investors and analysts with the decent and impressive set of numbers. The best part in the earnings call was the increase in the dividend percentage as per the new dividend policy enacted by the company from November 6 of the fiscal year. Let’s dive in and peek into the quarterly numbers as well what the new management policy is all about.
The number mix was catchy
The better than expected figures in a phase of unrest after Bill Gross’ left the company in an unexpected move was rather welcome news by the company’s investors. The quarter was a solid one with improvement of revenue by 14.5%, operating profit up by 5.2% and net income increase of 11.2%. Revenue stood at 28.78 billion euros, operating profit at 2.65 billion euros and net income attributable to investors grew to 1.61 billion euros. The net income beat the average estimate of 1.57 billion euros in a Bloomberg survey of 13 analysts.
Also the outlook for the upcoming quarter was optimistic and the management have confirmed that they are confident to deliver net earnings in the upper end of the range of 10.5 billion euros.
The spectacular performance of the company after Bill Gross’ departure has aided in total revenue rising 9.8% in the first nine months of the year to 92.20 billion euros. Operating profit has increased 6% to 8.14 billion euros, while net income has improved 5.5% to 5 billion euros.
Allianz CFO Dieter Wemmer stated, “Net outflow development after the resignation of Bill Gross is within our expectation. … Our unchanged outlook for the full year 2014 and the newly established multi-year dividend policy are visible demonstration of management confidence about the future of Allianz.”
The new dividend policy
The company pledged to pay a higher share of profit to shareholders- the insurer said that it would seek to raise dividend to 50% of net income from 40%, its pay-out ratio since 2008. Under the new dividend policy, the insurance company aims to keep its dividend per share at least at levels paid in the previous year. The insurer has plans to evaluate and pay out the unused budget earmarked for external growth every three years. The first such evaluation is scheduled to take place in the end of 2016.
However, the management was clear that such pay-outs would not be allowed to push the Solvency II ratio below 160% –Â this ratio being the barometer of financial stability of a company.
Like most German corporations, Allianz pays dividend on an annual basis, and the payment date for the FY2014 dividend is on May 7, 2015. Therefore, investors might assume that there will be a substantial hike in their dividends when they get paid next year.
The company is known for paying dividends on a regular annualized basis, and it was only once that the dividend saw a cut in 2008 within the past 13 years when the market conditions were not appropriate for the business. In fact, if the company’s dividend payout is compared with others operating in the financial sector, it has really done well with the dividend yield being never below 4% in the past five years.
It is imperative that it is not possible to guarantee any dividend pay-out all the time to the investors, but such a dividend increase gives a strong signal regarding the financial stability which the company envisages over a period of time.
Concluding words
Allianz is on an exceptional growth trajectory, and the new shareholder friendly remuneration policy makes the stock further attractive from the investment perspective. The stock is already moving upwards after the announcement was made recently and investors want to keep themselves invested in such a stock that offers maximum rewards to its shareholders.
