Allianz’s UK arm has estimated £23m in flood losses in H1, but some savvy shifts in strategy have helped to keep profits on a broadly even keel

Allianz UK is the latest insurer to release its UK flood losses for 2012, as it put out estimates of £23m for the year to date.

RSA has led the way so far with estimates of £50m, followed by LV= at £25m, and only last week Investec analyst Kevin Ryan forecast that flood losses would push Aviva’s first-half 2012 combined ratio to 99.1%.

And with more insurers likely to come out of the woodwork with figures in their first-half 2012 results, it won’t be long before they hit that magic £500m aggregate number put out by the ABI last month.

It is hard to see that figure reach anywhere near that of the £2.5bn recorded by insurers in 2007 as a result of severe flash flooding.

However, the need to find a replacement for the Statement of Principles, which expires in June next year, has been only intensified by the recent bad weather, with two possible solutions from the ABI and Marsh still on the table.

North-south divide

The flooding had minimal impact on Allianz’s financial results, with operating profit down 3% at £75.3m for the first half of this year.

Considering that flooding normally affects insurers’ personal lines homeowner accounts, it is interesting that, of Allianz’s £23m flooding estimate, commercial accounted for £17m, compared to £6m for retail.

Though, given that most of Allianz’s personal lines property book is weighted towards the south of the country, and that a lot of the residential flooding was in the north, it does not come as such a big surprise.

The right formula

Further evidence of Allianz’s resilience to the flooding was a flat combined ratio of 96.8%, while the insurer’s parent group profit climbed 3%.

Allianz chief executive Andrew Torrance’s steady but successful formula has proved particularly strong in the face of the current economic crisis, as the insurer has focused on writing a bigger chunk of more profitable lines and cutting back on exposures in liability and mid-market property.

Other areas of strength have been the retail division, where the broker business’s combined ratio improved to 95%.

Despite the threat of more floods this year, Allianz, for one, should be well placed to weather any other potential storms.

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