Lower reserve releases cut Allianz UK profit

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Allianz UK made a first-half 2011 operating profit of £77.5m, down 1% on the £78.4m it made in last year’s first half.

The company attributed the drop to lower reserve releases from prior years during 2011.

Allianz’s combined ratio increased slightly to 96.1% from 95.3%. However, chief executive Andrew Torrance hailed the ratio as “very pleasing”.

Allianz’s first-half combined ratio compares favourably with its peers Aviva (96%), RSA (98.5%) and Zurich (98.4%), but these ratios are all lower than the first half of 2010, while Allianz’s increased.

The results of Allianz’s German parent company, released last week, had already indicated that the UK division’s profit would be down and the combined ratio up.

Despite the slight decline in underwriting performance, Allianz UK’s gross written premium (GWP) increased 6.1% to £914m (H1 2010: £861.2m).

The premium growth was driven mainly by Allianz’s personal lines book, where gross written premium rose by 12.2% to £392.5m ( H1 2010: £349.7m). This was partly attributed to rising rates and policy count in brokered private motor, an “ahead of plan” performance from the commercial partner and legal protection businesses and growth in animal health business Petplan’s policy numbers.

Allianz’s commercial lines GWP increased by a more modest 1.9% to £521.5m (H1 2010: £511.5m). This was mainly driven by commercial motor.

In other commercial lines, Allianz was only able to achieve low-single-digit rate increases, which Torrance said was “a reflection of a market which remains highly competitive and a policyholder base operating in an economy showing only very muted signs of a return to normality.”

He added that the company cut its exposure to unprofitable commercial business during the first half of 2011.

Torrance said a highlight of the first half was the company signing a five-year deal with BMW that made Allianz the sole underwriter for the car manufacturer’s personal lines insurance products from 1 July.

Allianz said the BMW motor book alone gives the company the opportunity to build a portfolio of over 60,000 policies and a GWP of over £150m over the five years of the contract.

“The winning of this new business and establishment of the new contact centre represents a major achievement and a significant step on the road to our goal of £1bn profitable GWP for Allianz Retail,” Torrance said.

Allianz UK H1 2011 results in £m (compared with H1 2010):

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