Low interest rate environment to blame as investment income falls 17%, says chief executive

Allianz Insurance’s operating profits dropped to £41.1m in the first quarter of 2009, compared with £43.3m for the same period last year.

“Operating profit fell 5% driven by the low interest rate environment. Investment income fell £5.4m to £26.7m [a fall of 17%] in the first quarter of 2009 relative to the first quarter of 2008,” said Andrew Torrance, chief executive of Allianz Insurance.

Gross written premium (GWP) rose from £383.3m to £393.8m for the first quarter of 2009, while the combined operating ratio (COR) improved to 96% from 97.1% in 2008 Q1.

Commercial lines’ GWP rose 8% to £245.4m for the first quarter of 2009, while the COR improved from 93% to 92.2%.

Meanwhile, the retail business suffered a 5.5% drop in GWP from £156.9m in the first three months of 2008 to £148.4m. Paul Oates, senior analyst at Moody’s, said: “The UK motor book has suffered because of the influence of aggregators.” Torrance admitted the motor account was still a problem area, but added: “[In retail] we will see a significant improvement over 2009, but it will be 2010 before it reaches the COR I believe we need to make.”

The household book grew by 14% but still produced an underwriting loss, according to Torrance. “This [growth] is thanks to the launch of the new Clear range of household products during the quarter,” he said. “More than 1,000 policies have been sold by SSP users in the two months to the end of March. But we saw an uptick of freeze-related claims, which meant it made an underwriting loss for the first quarter of 2009.”

Animal Health (Petplan) saw corrective underwriting action to improve profitability, with GWP growing by 7%.

“There appears to have been little recessionary impact on this part of the business, but the position is being closely monitored,” said Torrance.

Allianz Insurance has been awarded an AA- rating while its parent company is an AA from Standard & Poor’s, both with a stable outlook.

“Overall, the message is that financial performance was robust in challenging economic times,” said Torrance.

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