Allianz UK can fix troublesome commercial lines - Torrance

Allianz Insurance chief executive Andrew Torrance (pictured) is confident his company can fix the troublesome parts of his company’s commercial lines book.

The company posted a commercial combined ratio of 99.1% for the first nine months of 2012, which Torrance described as “unacceptably poor”. The company generally aims for combined ratios around the 96% mark.

Part of the reason for the increase from last year’s 95.1% was the £26m of summer flood-related claims that Allianz incurred. Roughly £20m of the total hit the commercial book.

Torrance told journalists following the release of the results this morning: “We are very happy with the areas in which we are active in the market. We believe that we can fix these areas where we are not making as much money as we like.”

The particularly troublesome areas for Allianz within commercial lines are liability and mid-market property. Liability achieved rate increases of 7.5% in the year to date, but Torrance said higher prices were needed for a more sustained period.

Meanwhile, mid-market property only achieved rate increases of 2.5%, which Torrance said was below where it needed to be.

“We have a corrective action programme in place for those right now. That will mean shedding some exposure,” he said.

“We will still continue to have substantial businesses in both those lines once we have corrected them - I have no doubt about that.”

Jackson plans

Another area where Allianz UK is likely to shed gross written premium (GWP) is in its legal protection business. The line is performing well: GWP was up 40% to £68m and the business is running at a combined ratio of around 90%, which Torrance described as “very pleasing”.

The GWP is driven mainly by the company’s after-the-event (ATE) legal protection, however, which will be hit by the introduction of the Jackson reforms in April 2013.

Despite the expected cuts in ATE insurance, Torrance was sanguine about the prospects for Allianz UK’s legal protection business.

He said: “While we expect to see some contraction in GWP in 2013 relative to 2012, we will expect it will be a bigger business in 2013 than it was in 2010. I’m pretty optimistic about how all that is going to develop.”

Torrance said the company’s plans for how the legal protection business would look post-Jackson “had moved on considerably over the past three months” and that the company was “very content that we are going to have a substantial legal expenses business going forward”.

He said he was not yet in a position to share the plans, however.

Allianz UK as a whole posted a nine-month 2012 combined ratio of 96.7% (9M 2011: 95.8%) despite being hit by the £26m flood losses.