Results dip for Allianz amid claims inflation and Ogden losses

Jon Dye, CEO, Allianz Insurance

CEO Jon Dye said the business is "still in good shape" despite the slip in performance.

Jon Dye, CEO at Allianz, has attributed the company’s mixed year so far to the Ogden rate and high claims inflation.

Gross written premium at the insurer reached £1.49bn for the first nine months of 2019. This was a decline of 2.8% on the £1.53bn reported for the same period in 2018.

Similarly, operating profit fell 12.0% from £113.6m to £100.0m.

The combined operating ratio deteriorated slightly from 96.0% to 96.5%.

In a briefing call with journalists, Dye explained: “It’s obviously a couple of ticks down from where we were this time last year, but we’re still in good shape.”

These latest set of results follow Allianz’s decision to buy the remaining stake in LVGI, announced in May 2019. Transfers of business to and from Allianz and LV have been occurring since June 2018.

Commercial
In commercial lines, GWP grew 13.0% from £856.1m to £967.7m.

Dye said the increase was the result of transfers of commercial lines business from LV as well as underlying growth.

However, the COR worsened from 95.8% to 97.3%.

“In motor and in property, we are seeing levels of claims inflation which are well ahead of the underlying level of inflation,” explained Dye.

The CEO explained that unfavourable changes in exchange rates had markedly increased the cost of materials used in repairs.

Additionally, Allianz reported that its property account is experiencing a “one-in-ten year for large losses”.

Dye continued: “We can see an increase in some arson claims and we can see increases in theft. This is what you tend to see when the economy is under pressure. When people are desperate they do desperate things and that turns itself into significant property losses.”

The CEO described the claims behaviour as “recessionary” and said that Allianz would be keeping a close eye on its drivers.

Personal
GWP in personal lines declined from £678.0m to £523.2m, while the COR improved from 97.2% to 94.8%.

Dye said that the portfolio is experiencing underlying growth and that the fall is entirely due to transfers of personal lines business to LV.

“We are still a substantial personal lines player, notwithstanding the fact that our car and home portfolios are now pretty much fully transferred over into the joint venture with LV,” he stated.

However, the CEO explained that Allianz had taken a hit of £11m from to the adjustment in the Ogden rate to -0.25%.

Dye revealed that the insurer had reserved on the basis of a rate of zero at the end of 2018.

Discussing the change, he commented: “A rate of zero and one from the government, would have been a sensible outcome economically.”

Network
Dye confirmed that the closure of Allianz’s branches in Woking and Luton, proposed in May 2019, had now been completed.

A total of 97 staff were put at risk of redundancy, with 81 eventually being offered new roles.

“The business has all transferred to the new receiving branches, and that’s gone extremely well,” he explained.

Dye continued: “In many cases, what we have found is the brokers are now nearer to the branch that has received them than they were to either Woking or Luton previously.”

According to the CEO, the restructuring of the insurer’s local branch network has now been completed for the immediate future.

“I wouldn’t expect us to look at that in 2020,” Dye said when asked if there were likely to be further branch closures.

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