Insurer posts strong combined ratio of 88% in commercial lines.

Allianz’s half-year operating profit grew to £94m from £91.1m in the same period last year but the overall profit performance for the company’s interim results has been mostly padded by prior year releases.

In the insurer’s interim results, gross written premium income reached £802m, increasing by 3.1% from £777.7m in H2 2007. Combined ratio hit 95.7% versus 95.5% for the same period last year.

Commercial lines GWP grew by 4.5% compared with H2 2007 and the combined ratio at the end of the quarter stood at an impressive 88.1%. But in retail, business grew by just 1% and the combined ratio reached 107.1% versus 99.6% last year.

Andrew Torrance, chief executive officer for Allianz, said: “The overall profit performance for the first six months of this year has been satisfactory but, nonetheless, driven largely by prior year releases. The fact is that the underlying profitability of the business we are writing today is unsatisfactory.”

But he added that the company is seeing a consistent, month-by-month rise in rate strength on renewals and, in June, it was in positive territory in each of its general commercial lines for the first time this year.

He said: “This is pleasing and shows that the market is starting to move in the right direction, albeit more slowly than we would like. For example, I have said that a 5% year-on-year increase is required in 2008 on our commercial property and liability books. This has not yet been achieved but we are intent on moving to this level as quickly as possible.”

Torrance said Allianz’s motor portfolio continues to deliver inadequate returns due to soft market conditions and rising claims costs. He noted that the cost of credit hire claims continues to rise and has added around three percentage points to 2008 claims costs relative to those in 2007.

He also said the company is experiencing an increase in fraudulent claims as the credit crunch means individuals and businesses are struggling to meet their financial commitments. Allianz is giving its underwriters and claims teams additional training to prepare for a jump in expected fraudulent theft and arson claims.