Wednesday, September 17, 2014

Company Review: Munich Re (MUV2)

 On my last post i did an review of a company called Allianz SE (ALV) to add some comparison i decided to do another review of an yet another insurance company.

Muenchener Rueckversicherungs Gesellschaft AG in Muenchen is a Germany-based holding company engaged in reinsurance and insurance business fields. The Company diversifies its operations into reinsurance, primary insurance, Munich Health and Asset management. The Reinsurance business comprises five divisions: Life; Europe and Latin America; Germany, Asia Pacific and Africa; Special and Financial Risks, and Global Clients and North America. The business covers a range of products from traditional reinsurance products to solutions for risk assumption. The Company's primary insurance activities are combined into the ERGO Insurance Group (ERGO) and offers direct insurance, life, property-casualty, health, legal expenses and travel insurance products. It covers the Company's international health reinsurance business and health primary insurance outside Germany and engages the risk management services. The Asset management business handles the investment activities of Munich Re and ERGO.

Munich RE is a reinsurance company, this means that other insurance companies moves some parts of the responsibilities of an insurance to Munich RE. In other terms Munich RE sells coverage to insurers such as Allianz SE or Axa SA to help them shoulder claims. 

Munich RE (MUV2) is currently trading at €153.30 with an P/E 7.73 | EPS 19.84 | Market Cap 26.51B | Div/Yield €7.25/4.73%

Dividend And Dividend Policy

Dividend policy is designed to give shareholders an appropriate share in the company’s success. The minimum amount set aside for the dividend is 25% of the consolidated result. The actual basis, however, is the current dividend level of €7.25 per share, which we will strive not to undercut in future dividend payments, depending on the actual results and the capital position. There have not been any cuts in dividend since 1970.

Dividend has been on a increasing trend

In 11 year period dividend has increased from €1.25 to €7.25  this represent an increase of 480% and a average increase of 43.66% annually. But if you make same calculation on a 5 year period the increase is only 26.08%  (€5.75 to €7.25) an average yearly increase of 5.21%.

On other hand the company also buys back shares. In 11 year period the total share amount has decreased from 229,580,233 to 179,341,212 that's around 21% less shares out there than 11 years ago. 

The dividend payout ratio (graph below).


One of the cool facts about this company and a one thing that makes it just a little bit more interesting is that, one of the biggest shareholder in this company is Mr. Warren E. Buffet.

1 11.6% of the share capital are attributable to Warren E. Buffett and are held by several companies of his group (Berkshire Hathaway Inc., OBH Inc., National Indemnity Co.). According to the notification dated 15.10.2010 the investment serves the purpose of making trading profits and not of implementing strategic objectives.

Full Disclosure:

The stock itself have not moved at all during this year, this makes me wonder what's going on. So i did my research and it seems that there is some pressure in the industry right know and it looks like there is not going to be any relief anytime soon. As i was scouting around the world wide web i found this and it quite frankly tells me not to buy this one yet, even the head line says it: But on other hand, Mr Warren Buffet seems to hold on to it. Could this stock be one of those "buy when others don't want to", it could. So the stock haven't moved but the good dividend yield with a good low payout ratio and the words on the company's website under Outlook 2014 that says "Uplifting annual guidance after strong half-year performance" plus share buy backs, it is a company that deserves to end up on my watchlist, and i may buy it before the dividend release if the price is right.

thanks for reading!

What do you think of this review? Any help? Have you been watching insurance companies lately?

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