Allianz’s operating profit nosedives by 35%

Insurer Allianz has reported a 35% drop in its operating profit between 2018 and 2019 – this has fallen from £171.2m last year to now stand at £110.6m.

Published in its full-year results, announced today, Allianz stated that this decrease has been impacted by an upsurge in fire, theft and escape of water (EOW) claims within its commercial property business line.

One-off events have also affected the drop, for example the Ogden rate change and payment protection insurance (PPI) redress payments relating to historic written business from the 80s and 90s – Jon Dye, chief executive at Allianz Insurance, estimated that PPI redress payments amounted to around £40m in 2019.

Allianz’s gross written premium (GWP) has also declined since last year, falling from £2038.2m in 2018 to £1990.7m in 2019. Combined operating ratio (COR) has risen slightly from 96.4% to 97.8%, as has net income – this is recorded as £138.1m for 2019 compared to £136.1m in 2018.

Commercial lines

Across the insurer’s commercial lines portfolio, it recorded a 9.3% increase in GWP – this totals £1289.4m for 2019 versus £1180.2m in 2018; COR has also risen from 94.8% to 98.4% between 2018 and 2019.

This improvement has been driven by overall rate increases, as well as growth in volume as Allianz acquired the commercial business from LV=.

Despite this, Dye added that rate increases are not keeping pace with claims inflation.

“The market has allowed us to achieve rate, but not enough rate to keep up with claims inflation,” he said. “Fundamentally, we have not across the year achieved sufficient rate to deal with the inflation that we can see through coming most lines of business actually. We need to push that on and we have, over the last six months, seen some positive movement, but I would say not enough across the whole portfolio in commercial.”

This is linked to an influx of large claims within Allianz’s commercial property division, around fire, theft and EOW.

Shrinking personal lines

Allianz’s personal lines portfolio is noticeably shrinking, as the firm expected after transferring its motor and home business to LV= at the end of last year – this included placing some poorer performing lines, such as some household and legal protection products, into run off.

Its GWP has decreased by 18.3% - in 2018, this amounted to £858m but in 2019, this figure stood at £701.4m. COR has also correspondingly shrunk from 97.9% in 2018 to 96.2% in 2019.

Dye said: “I look back on 2019 with great pride on behalf of everyone at Allianz Insurance. [While] our operating profit fell short of our expectations, we achieved so much in positioning our business for a successful future.

“The completion of the transfers of business between Allianz and LV=, the establishment of shared services to support these businesses and the completion of the LV= and [Legal and General] deals have created a tremendously strong platform from which we can grow profitably.

“Like all businesses, we have challenges. We know where they are and we are executing plans to address them.

“We have a strong track record in delivering profit and growth on a sustained basis, and with the right people and skills in place to continue to do this, I feel confident about our future.”