Allianz UK reports ‘tremendous’ 12% year-to-date profit rise

Allianz Insurance made an operating profit of £128.7m in the first nine months of 2013, up 11.9% on the £115m it reported in the same period last year.

The UK insurer’s combined operating ratio (COR) improved by one percentage point to 95.7% from 96.7%, while gross written premium (GWP) rose 1.8% to £1.46bn from £1.43bn.

Allianz Insurance chief executive Jon Dye said: “Our operating profit has risen nearly 12% compared with the same period last year, which is a tremendous result.”

He added that the one-point COR improvement “confirms that we are continuing to make an excellent level of underwriting profit, while at the same time growing our top line by nearly 2.0%”.

However, he warned of waning appetite for rate increases in the market as a whole for both commercial and personal lines.

Commercial improvement

Allianz’s commercial lines business enjoyed an improvement in underwriting profitability. Its COR fell 2.3 percentage points to 96.8% in the first nine months of 2013 from 99.1% in the same period last year.

Commercial GWP increased by 2.2% to £763.1m from £746.2m.

Dye said Allianz was able to raise rates in commercial lines in the third quarter. But he added: “Unfortunately, there is concern that the appetite in the market for rate increases is weakening, at a time when the medium to long-term reality of the risk environment in which commercial insurers operate requires further increases.

Commercial motor remained a “strong” area of growth, according to Dye, with both the motor fleet and motor trade accounts performing well.

He added that the property and casualty accounts needed more rate increases. He said: “Our underwriting colleagues will continue to push hard to secure marked improvements, while at the same time looking for growth in these areas.”

Personal lines dip

Allianz’s personal lines business suffered a slight deterioration in its COR to 94.5% from 94.2%.

GWP increased 1.2% to £696.6m from £688.1m.

Dye said Allianz’s broker account had fallen “behind plan” because the company had chosen not to chase volume in an increasingly competitive market.

However, the household account is growing “ahead of plan”, Dye said, because of greater volumes of business being traded at acceptable rates.

The pet insurance business’s profit and GWP were both ahead of plan, Dye added.

Flight to quality

The Allianz Legal Protection legal expenses insurance product continued to trade strongly, Dye said, despite an “unsettled background” caused by the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act (Laspo) in April.

The reforms reduced the requirement for traditional after-the-event legal expense insurance, forcing insurers to adapt their products.

Dye said: “There is evidence of a flight to quality as our post-Laspo after-the-event proposition is attracting business partners and law firms with a clear strategy for the new legal environment.

“Our before-the-event legal services scheme has also made a good start, supporting our high net worth business, Home and Legacy, and we are confident of further developments in this area.”

Good weather

Dye said that despite the St Jude storm in October insurers had enjoyed good weather in 2013, and that companies’ CORs should be viewed in that context.

He also warned that good property performance as a result of the benign weather could hold back rate increases in other classes.

He said: “As we enter the home stretch of the financial year, I believe we are in very good shape and well positioned to deliver results that will rank among the best in the industry in terms of delivering profitable growth.”