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Allianz will lay out 2 billion euros for share buybacks next year on top of a 3-billion-euro plan announced last February. Outgoing Chief Financial Officer Dieter Wemmer explains the rationale...Allianz SE
Allianz will lay out 2 billion euros for share buybacks next year. This is on top of a 3-billion-euro plan committed last February. Dieter Wemmer, Allianz’s outgoing Chief Financial Officer, explains the rationale behind the decision.
Today, companies in Germany’s DAX are estimated to have a combined market value of about 1.3 trillion euros. This is significantly higher than the combined market value of about 900 billion euros for companies in the Swiss market index SMI. Yet, the total value of DAX companies amounts to just 40 percent of Germany’s gross domestic product. For SMI companies, it’s around 150 percent of Switzerland’s GDP.
This has implications for German companies as they are today locked in competition with international corporations that have significantly higher market capitalization. SAP, the most valuable DAX company, is valued at 120 billion euros. Allianz is valued at 90 billion euros. Both are far behind Apple, Alphabet and Amazon, together being valued at more than 1.5 trillion euros. These companies have achieved top rankings by creating sustainable growth expectations through their ability to tap into new digital growth areas.
Companies with a high market value are better protected against takeovers, can more easily pursue inorganic growth through business acquisitions, and have more freedom to invest in innovation. Therefore, it enables growth and helps safeguard a company's position in global competition. A company can use standard instruments like dividend payments or share buyback programs to highlight its confidence in future profitability, which usually drives market capitalization.
With share repurchases, shareholders have a choice between taking profits immediately or, if they are confident about the future course, remaining with the company. In addition, financial service providers who use their risk capital more efficiently free up capital. This should not be jeopardized by taking on poorly understood risks, but be returned to investors.
In times of low interest rates, returns from equities play an important role in providing long-term savings for retirement. This is reflected in the increasing demand for capital market-related life insurance products and the fact that Allianz’s five largest shareholders are investment funds representing private savers. Our customers and shareholders value our attractive returns. These are sustained by years of financial success, our liquidity position and a healthy balance sheet. By doing so, and by announcing our second share buyback, Allianz has contributed to the strengthening of the equity culture in Germany.
The Allianz Group is one of the world's leading insurers and asset managers with more than 86 million retail and corporate customers. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing over 650 billion euros on behalf of its insurance customers while our asset managers Allianz Global Investors and PIMCO manage an additional 1.4 trillion euros of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we hold a leading position in the Dow Jones Sustainability Index. In 2016, over 140,000 employees in more than 70 countries achieved total revenues of 122 billion euros and an operating profit of 11 billion euros for the group.
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