TALANX (=) : Q126: Beat again

研报英文原文证据摘录

TALANX (=) : Q126: Beat again

Investment case, valuation and risks

Talanx (Neutral, Target Price EUR105)

Investment case

Talanx has seen significant earnings increases in recent years, as improvements in the

primary segment's underwriting, higher bond yields and acquisitions have fed through.

Notwithstanding this, we think the company has been holding back profitability to

manage the bottom-line, which makes it easier to show growth and hit targets even in

a softening price environment. The accumulation of distributable profits at the HoldCo

will allow the company to increase the dividend pay-out ratio, we think. And we also

anticipate further M&A, given the accumulation of cash and capital at the majority owner

HDI, and their stated preferences. With the shares having outperformed c.100% since

2022, we think the shares are now fair valued.

Valuation methodology

We value Talanx by discounting the expected distributable capital generation through to

2031, and apply a Gordon Growth valuation thereafter. We also compare this with a) the

valuation of the primary business stand-alone on the same basis plus the value of

Talanx's 50.2% stake in Hannover, as per our TP for the latter; b) the value of Talanx

assuming 100% ownership of Hannover Re, and then deducting the value of the

Hannover Re minorities.

Risks

To the upside:

One risk to the upside for Talanx is that we have under-appreciated the prudence in the

earnings, and they elect to allow their earnings to increase more quickly rather than add

further to reserves. Dividends may ramp-up further and faster than we anticipate.

Accretive and synergistic acquisitions would also be a positive.

To the downside:

One risk to the downside is that the pricing environment in either reinsurance or primary