Reduction in underwriting profit seen as consequence of rates.
Allianz cited the need for higher rates as the reason for its drop in pre-tax profit of 13%, falling to £42.3m in the first quarter against £48.6m for the same period last year.
Its gross written premiums rose 6% to £383.3m from £361.6m, boosted by its commercial lines GWP that grew by 7.2% compared to the first quarter of 2007. The combined ratio for commercial lines stood at an impressive 91.3%.
But its retail division, which grew 4.2% in GWP, had a combined ratio of 105.7%. Overall, the first-quarter combined ratio was 97.1% versus 96.1% the year prior.
Chief executive Andrew Torrance said: “In motor, a significant driver of higher claims costs is the growing penetration of credit hire. Within the claims operation, a great deal of effort has been devoted to minimising this impact with specific training for handlers and faster processes being introduced.”
Torrance said the dip in profit was in line with Allianz’s plan.
“This reflects a reduction both in underwriting profit and in investment income,” he said. “The former is the inevitable consequence of rates which in many areas are still only just moving into positive territory allied in continuing claims inflation. In the latter area, investment returns were lower than in 2007 reflecting lower equity market levels.”
The insurer anticipated that 2008 will continue to be tough for underwriters with UK business books, even if the flood losses of 2007 do not recur.
Torrance said: “The combined effect of lower rates, claims inflation and enhanced commission means that profit levels on current business in many areas are inadequate. A crucial focus for this company in the balance of 2008 will be to achieve improved rate strength across our book of business.”
