Insurer chief sets positive tone as the firm prepares to add two new corporate partners

Allianz Insurance is planning double-digit rate increases in its broker private motor book in the second half of 2010, according to chief executive Andrew Torrance. That’s on top of the 15 percentage points already put through in the first half.

Torrance also hinted that Allianz would be signing up two corporate partners, to be announced in the second half of the year, although he declined to name the companies concerned. A partnership agreed between the insurer and the Volkswagen/Audi group on 1 January was, he said, “developing very nicely”.

“As we look into 2011, we are beginning to see the prospect of an underwriting profit in the motor account – and not before time, I might add,” Torrance said.

Allianz’s broker private motor book ran at a 116% combined ratio for the first half of the year. While Torrance said this was an improvement over the industry-wide 2009 combined ratio of around 120%, he added: “It underlines the distance there is to go in that market.”

Torrance noted that the number of broker private motor policies was falling “modestly” as a result of the company’s rating action. However, he does not expect to lose more than 2%-3% of policyholders during the rest of the year, and is optimistic that the company will lose even fewer. “The market is moving at this sort of rate, so the rate of policyholder loss has been falling month by month in 2010,” he said.

There is also a shortfall in broker household account prices, Torrance believes. Allianz Insurance increased its rates by two percentage points in the first half of the year, and the company is looking for a further two to three percentage point increase in the second half. “I don’t believe today’s household rates have adequate margin built into them to deal with the weather events that are part and parcel of writing the account,” he said.

Despite the rate increases required for broker personal lines in motor and household, Torrance was pleased with the performance of Allianz Insurance’s retail book overall. Its combined ratio improved 4.3 points to 95.6% from 99.9% and its gross written premium increased 5.4% to £349.7m.

He also expressed satisfaction with the overall result, despite the first-half combined ratio worsening to 95.3% from 94.9%, and the IFRS operating profit dropping 11% to £78.4m from £88.3m, which Torrance attributed to low investment returns. “We are very pleased by the continued growth in the business,” he said. “We are very much on track to deliver our planned year-end results and to meet the expectations of our shareholders.”

While declining to name the corporate partners with which Allianz is in discussions, Torrance hinted that one would be in the personal lines household arena. He also indicated that one of the deals would be of comparable size to the Volkswagen arrangement, while the other “will potentially be a bit smaller”.

For key figures and performance indicators, click on the image, above right.