German insurance company Allianz SE (ALV.DE) reported a 2.5% increase in the fiscal 2017 first-quarter revenues, compared to the first quarter last year. However, the company reported a 15.3% y-o-y decline in the 1Q17 net income and also missed analysts’ estimates. Still, the stock of Allianz continues to trade at $190 levels. Last year, the company used the valuation gains in its investment portfolio to book profits. That was the main reason for the decline in net income this year. Additionally, as explained below, there are several other facts that keep the stock bullish. The stock of Allianz ended Wednesday’s trading session at $192 in the OTC market.
The Munich-based company reported fiscal 2017 first-quarter net income of €1.82 billion, or €3.99 per share, on revenues of €36.2 billion. This compares with a net income of €2.144 billion, or €4.59 per share, on revenues of €35.4 billion in the first quarter last year. The earnings estimates of analysts were €1.9 billion.
During the quarter, operating profit was €2.9 billion, up 9.4% on a y-o-y basis. Life/Health insurance division reported a 35.5% y-o-y increase in operating profit to €1.16 billion. The asset management division reported an operating profit of €572 million, up 24.4% on a y-o-y basis. However, the Property/Casualty division reported a 12.7% decrease in operating profit to €1.26 billion.
Dieter Wemmer, CFO of Allianz SE, stated that the Property and Casualty division is still on track to meet its FY17 target despite the decline in operating profit caused mainly due to storms in Europe and Australia.
Notably, during the quarter ended March 2017, assets under the management of Allianz increased to €1.403 billion, from €1.36 billion in the same period last year.
Allianz stated that it still anticipates an FY17 operating profit of €10.8 billion, plus or minus €500 million.
After including €3 billion spent on share repurchase, the solvency II capitalization ratio stood at 212% at the end of the first-quarter. Through May 5, 2017, the company had acquired 6.7 million shares representing 1.5% of the outstanding capital. Thus, considering the increase in revenues, strong financial health, and reaffirmation of FY17 operating profit, fundamentally, the stock is expected to consolidate and rise further.
The historic price chart indicates firm support for the stock at 190. The stochastic RSI indicator is in the oversold region. Thus, an uptrend can be anticipated in the short-term.
To gain from the uptrend, we are looking at the possibility of investing our surplus amount in a call option contract offered by a suitable binary broker. Before opening the trade, we would make sure that the broker offers a call option with a weekly expiry period. Finally, we would go ahead with the purchase of the contract only if the stock trades near $191 in the OTC market.
Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.
