Torrance to get tough on no-profit policies

Allianz is willing to walk away from unprofitable business as it seeks to boost rates in commercial, retail broker motor and household business lines, according to chief executive Andrew Torrance.

“Rates are going up, but not to the level we want, and we will continue to push on that,” Torrance said.

“Lapse performance was very good in the first quarter. We are willing to see more business lapse in second quarter to get more rate strength.”

Torrance acknowledged that an increase in business lapse will mean achieving rate increases on a smaller book of business.

However, he said: “I’m not going to chase premium income for the sake of premium income.

“I’m wedded to the notion that every piece of business on our books should make an adequate contribution to our profit. I am willing to see loss-making business go out the door at a rate of knots.”

Allianz achieved rate increases in commercial lines of 2.1% for business renewing in Q1, which Torrance described as “insufficient”. He wants to see an increase of two to three percentage points in Q2.

He added that commercial business rates need an increase of 10 percentage points “to bring returns up to a reasonable level”.

Retail broker motor rates increased 6.7% in the first quarter, but Torrance said: “Economic reality seems at last to be intruding into the private car market – but it has got a way to go yet.”

The number of policies in the broker motor account reduced in the first quarter of the year as a result of rate increases.

Rates in the household account, Torrance said, do not see the same levels of hardening as those in retail motor.

However, he said they need to increase because of the growing number of events producing losses in the low hundreds of millions of pounds, notably the Cumbrian floods and the winter freeze.

Allianz’s IFRS operating profit for Q1 slipped 10.7% to £36.7m, from £41.1m in the same quarter last year.

Gross written premium grew 4.4% to £411.3m, and the firm’s combined ratio remained relatively stable at 96.5% against 96% in Q1 2009.

Torrance describes the outcome as “a robust set of results to start off the year” that are slightly ahead of the company’s projections.