Allianz UK makes cuts to commercial book as it misses targets

Allianz UK has cut some unprofitable liability business from its commercial book in the first quarter as the division’s current-year performance missed targets.

However, as indicated by parent company Allianz’s results earlier this week, the UK company as a whole had a solid first quarter. Operating profit increased 1.4% to £34.9m (Q1 2011: £34.4m) and the combined ratio was almost static at 97.1% (Q1 2011: 96.9%).

The company said it has reported a combined ratio of below 100% for 37 consecutive quarters.

Allianz UK chief executive Andrew Torrance explained that while the commercial division’s first-quarter all-year combined ratio was an “attractive” 96.3% (Q1 2011: 94.8%), the accident year performance of the business overall is below targets. Accident year results exclude prior-year reserve releases and additions.

“Consequently, during Q1 we have reluctantly shed volume in poorer performing accounts whilst continuing to grow in the better performing packages and commercial motor segments,” Torrance said in a statement.

He added that the commercial liability account has seen a “marked deterioration” in claims experience, in part driven by recession-related claims. “We are working to correct this, a task which will continue in the balance of the year.”

As a result, commercial lines gross written premium (GWP) was down slightly at £253.3m (Q1 2011: £254m).

In Allianz’s personal lines account, gross written premium grew 16% to £220.3m (Q1 2011 (£189.5m), and the combined ratio improved 1.8 percentage points to 97.9% (Q1 2011: 99.7%).

Within personal lines, the broker account gross written premium increased 10.1% overall. The 22.2% growth in broker private motor GWP, despite “disappointingly flat” rates, was offset by a 3.5% reduction in household GWP.

“This continues an unwelcome trend first seen during the second half of last year where the market appears to be pricing on the basis that bad weather has been abolished!” Torrance said.

Retail corporate partners business GWP was up 27.1% compared with the prior year. Torrance said a particular highlight is the motor account, which doubled its GWP over Q1 2011 thanks to the partnerships with Volkswagen Audi and BMW. The lifestyle component GWP grew almost 10%.

Summing up the Q1 results, Torrance said: “I believe 2012 is shaping up to be another challenging year for the economy, the insurance market and therefore for our business. Achieving our planned financial results is going to be tough as both the personal and commercial lines markets remain extremely competitive.”

However he added: “Our top line continues to grow which, together with the profit figure delivered in the first quarter, confirms the underlying strength of our business. Our profit and growth record over the last five years has seen us outperform all of our major competitors and the aim of the company is to continue to do just that in 2012.”