Allianz Insurance sees 5.6% drop in GWP due to Covid-19 impact

Allianz Insurance, part of Allianz Holdings, has reported a 5.6% decline in gross written premium (GWP) in the 12 months to 31 December 2020 due to the economic impact of the Covid-19 pandemic.

In its full-year financial update, published today (19 February 2020), the firm revealed that its GWP had fallen from £1.99m in 2019 to £1.88m last year.

The firm attributed this to the financial impact of the Covid-19 pandemic, affecting not only its commercial book, but also its motor and casualty lines thanks to “increased mid-term adjustments, return premiums, reduced exposures and lower new business levels”.

Allianz Insurance stated that the total impact of coronavirus-related business interruption (BI) claims on its business amounted to £175m, net of reinsurance. To date, it has made 1,800 payments for these claims, which equates to £40m. This includes 78% of valid SME claims.

As at the end of January 2021, payments have already been made on 75% of all valid BI claims.

Jon Dye, chief executive of Allianz Holdings, said: “The results we are announcing today demonstrate the resilience of our business and the benefits that can be gained through managing a large and diverse portfolio.

“The Covid-19 crisis has impacted different lines of business in different ways, for example the reduction in claims frequency in some books and the significant claims for business interruption.

“Other external factors impacting the 2020 figures included rising claims inflation and supply chain challenges, large losses, weather events and the general slowdown in economic activity.

“But our business is resilient. Our successful 2020 result was built on the ability of our colleagues to adapt to new working environments, the trust and support of our brokers, intermediaries, customers and suppliers and our flexibility to adapt our products, processes and protocols to the changing demands and dynamics of the market.”

Commercial pressure

Allianz Insurance also reported a 10.2% improvement in its operating profit, increasing from £98m in 2019 to £108m in 2020. Its combined ratio fell by one percentage point in the same time period, moving from 98.5% to 97.5%.

For Allianz Insurance’s commercial lines business, “rising claims inflation, weather events and the pattern of large losses combined to put pressure on the book, along with issues due to lack of rate strength” it said.

However, the firm added that it made “good progress to improve underlying profitability, driving premium increases in excess of claims inflation while addressing areas of volatility to deliver improved portfolio performance in a number of areas, especially property lines”.

The engineering, construction and power insurance business recorded a successful year in 2020, with growth in both premium and profit.

Personal lines performed well last year too, Allianz Insurance said, primarily due to Petplan, which has grown into a £500m business.

It added: “Allianz Legal Protection and the Corporate Partner business have both undergone significant restructuring and both returned to profit in 2020.

“Allianz Musical Insurance saw a decline in premium income as a result of the downturn in the live music industry but remains robustly profitable.”

Group-wide improvements

Allianz Holdings as a whole recorded a huge 97% increase in GWP in the 12 months to 31 December 2020 due to the acquisitions of LV= General Insurance and L&G General Insurance.

These business purchases saw the firm’s overall GWP escalate from £1.99m in 2019 to £3.92m last year, while operating profit improved by 196%, moving from £98m to £290m. The combined ratio dropped by 4.1 percentage points, falling from 98.5% in 2019 to 94.4% in 2020.

Allianz Holdings owns Allianz Insurance and LV= General Insurance (LV= GI). L&G General Insurance is part of LV=GI.

Dye added: “The strengths that have delivered these robust results in 2020 will also serve us well as we look to the future.

“The UK is still in the midst of the coronavirus crisis and is yet to work through the implications of the Brexit deal.

“But Allianz has a strong platform from which to deliver further profitable growth and we will maximise this potential by continuing to invest in the skills of our people and the products and services we provide to our customers, focusing on our digital and data capabilities.”

LV=’s ‘extraordinary year’

Regarding LV=GI specifically, GWP increased by 30% between 2019 and 2020, from £1.57m to £2042m – however 2020’s figure includes L&G General Insurance, which became part of LV= GI in January 2020.

Operating profit also improved by 126%, rising from £81m in 2019 to £183m in the 12 months to 31 December 2020. The firm attributed this to “a combination of being more efficient in the way we manage our business as well as an improved performance in our motor business”.

Combined ratio dipped by 5.6 percentage points to reach 91.3% in 2020 versus 96.9% in 2019.

In LV= Broker, GWP increased by 16% “primarily due to significant growth across a number of lines including standard motor, specialist motor and home”. Meanwhile, growth in LV= Retail remained flat, “reflecting our more cautious approach to pricing in a soft market”, the insurer added.

LV=GI further noted the impact on claims following the pandemic. Initially, the firm’s motor book saw a reduced level of claims frequency, which in turn led to improved profitability. It expects “the performance of this line of our business to return to more normal levels throughout 2021”, however.

Although home insurance claims remained “fairly static” in 2020, LV=GI did observe some new trends last year as a result of more people staying at home in compliance with lockdown regulations. This included a 225% increase in fire claims, a 40% increase in the proportion of blockages and a 21% rise in the proportion of bicycle thefts from gardens.

Steve Treloar, chief executive of LV= General Insurance, called 2020 “an extraordinary year”.

He continued: “The impact Covid-19 had on everyone’s lives was unprecedented and from a business perspective it certainly wasn’t without its difficulties.

“In a short space of time, we were faced with the challenge of getting all 4,000 of our people safely working from home, which I’m pleased to say we successfully managed. Throughout the year, we also focused our efforts on ensuring we supported our customers, our partners as well as our local communities.

“I’m proud of what our people achieved and our business remains in a robust position.”