Allianz UK focuses on ‘balance between volume and margin’ to weather cyclical market storm

Despite Allianz UK achieving a 52% improvement in its operating profit between its full-year 2023 and 2024 financial results, the insurer’s chief executive, Colm Holmes, told Insurance Times that he is “never happy” and has plans for “much more” business growth in 2025.

Allianz UK published its 2024 full-year financial results on 28 February 2025, recording an operating profit of £114.3m for its personal lines business and £146.5m for its commercial lines arm.

Although these headline figures appear positive on the face of it – with Holmes describing the insurer’s performance as “acceptable” and “strong in the areas we wanted it to be in” – the chief executive is cognisant of the fact that cyclical market conditions and underlying inflationary headwinds have buffeted the insurer’s numbers to a certain extent, especially in terms of personal lines.

He explained: “2023 was a tough year for the industry. Inflation [was] running very high across the UK. What you saw at the end of 2023 and into 2024 was the actions that insurers took with regards to rate feeding through that.

“If I look at the performance of the business, very much our personal lines business is where we saw the largest increase year-on-year, [with a] 7.3% improvement in combined operating ratio (COR) between 2023 and 2024, so that was the biggest contributor.

“Most insurers were caught out in 2023 by the sheer rate of inflation that hit that market and, as a result, what you saw was [a] very hard rating environment [at] the end of 2023 into 2024.

“What you’re seeing with a lot of insurers is [their financial] results in 2024 reflected the fact that it was coming off the back of a hard market.

“Inflation is still very much there. Inflation hasn’t gone away. It’s still in the mid-single digits that we’re seeing inflation in the motor space – and in the home space for that matter.

“So, while the market has softened, it’s softening against the backdrop of continued – albeit much more manageable – inflation levels. That’s good for consumers.”

Holmes added that he does not expect a further 7% COR improvement in 2025.

The highest recorded rate of inflation in the UK, according to the Office for National Statistics, was 11.1% in October 2022. This is based on the Consumer Price Index, which measures changes in the prices consumers pay for a representative basket of goods and services on a monthly basis.

This inflation peak – the highest recorded rate for 41 years – aligns with Holmes’ commentary. Inflation had only decreased to 10.5% by December 2022 and was 10.1% in January 2023. This compares to a current rate of inflation of 2.8% as at February 2025.

Cyclical trend analysis

For Holmes, most insurers anticipated that as 2024 concluded, so too did the hard market across many lines of business – he believes specialty lines, financial classes, property and casualty softened in particular following a year of premium prices dropping throughout 2024.

He identified personal lines where the majority of market softening was occurring, with “a levelling off” being the current state of play for commercial lines. However, “strong rate” is still “being taken in commercial motor fleet”, he added, which “needs to come into that space”.

Holmes continued: “Like most things in the UK market, it’s not all lines that are softening at the same time. There are some lines that are hardening and lines that have gone through probably the longest hard market that I’ve been in.

“[The] commercial space [is] beginning to level off and soften.”

Comparing motor and home, Holmes noted that the motor market has seen more extreme fluctuations between hard and soft market conditions and rates. Although the home market is following a similar trajectory, it is not reaching the same extremes that the motor market attracted, he added.

He said: “[There is] a natural expectation in the UK when you come off very soft markets and very hard markets that levelling off in the UK happens very quickly because it is the most competitive insurance market the world.

“Therefore, reaction times tends to be incredibly quick in the UK to changes [in] the market environment.”

Volume and margin see-saw

Of course, Allianz UK has its own strategic goals, ambitions and plans that it will be actioning and focusing on in 2025 – not simply responding to the cyclical market conditions.

However, knowing how to efficiently navigate varying market movements is imperative to ultimate business success. For Holmes, this tightrope comes down to the “balance between volume and margin”.

He explained: “In terms of what we do, it’s just about being disciplined around our underwriting. It’s ensuring that we can provide a competitive rate [and] competitive products that drive the growth in the margin that we need.

“Areas where the market is a little softer, we saw [a] pullback where we weren’t comfortable that the rates were where we needed them to be.

“It is a balance between volume and margin. It’s not one or the other. It’s always that disciplined, profitable growth that we’re constantly looking at and making sure that we’re driving the cost of our business down, making sure the ease at which we do business with brokers is improved and if we get all of those right, [we can] maintain margins across the cycle rather than have large spikes and dips.”