Allianz UK gives update on LV deal as it reveals profit cut
Allianz UK has suffered a 30% drop in operating profit in the first nine months of 2017 after a string of mainly commercial claims totalling £46m hit in the third quarter.
The insurer has also announced that it expects to share with UK brokers “detailed plans” of its joint venture with LV= in the new year following the deal’s approval by the European Commission.
Allianz UK nine-month 2017 results
|Nine months 2017||Nine months 2016||Change (%/points)|
|Operating profit (£m)||84.6||121||-30.1|
Allianz UK profit drop
Allianz UK reported an operating profit of £84.6m in the first nine months of 2017, down from the £121m it reported in the same period last year.
The combined operating ratio (COR) rose 1.3 percentage points to 98.2% (nine months 2016: 96.9%). This was driven by a four-point deterioration in the commercial COR to 95.5% (nine months 2016: 91.5%).
The commercial drop was partly offset by a 0.9 point improvement in the personal lines COR to an almost break-even 100.2% (nine months 2016: 101.1%).
Allianz UK chief executive Jon Dye said that the insurer had seen “an unusual number of large losses” in the third quarter across commercial property, fleet, liability and private car, which totalled £46m.
He added: “This made for a challenging period but these events happen to insurers from time to time and should not be seen as the start of a trend.”
Despite the hits, Dye noted that the £46m of claims and the £17m the insurer has paid out to tackle the current year effects of the cut in the Ogden discount rate to minus 0.75% in March had not stopped Allianz UK from delivering a “reasonable underwriting profit” in the year to date.
He added: “This illustrates the financial benefit of a strong and diverse portfolio and our ongoing focus on delivering profitable growth.”
The Ogden rate cut has affected insurers’ results in two key ways: strengthening reserves for business written in previous years and paying a higher claims bill for business written in the current year.
While the profit fell, the company grew its top line in the first nine months of 2017. Overall gross written premium (GWP) was up 2% to £1.65bn (nine months 2016: £1.61bn), driven by a 6.1% increase in commercial lines GWP to £880.2m (nine months 2016: £829.8m).
Personal lines GWP was down 2.3% to £767m nine months 2016: £784.9m) because of the insurer’s decision to exit the direct home and motor market last year.
Allianz UK is in the process of combining its personal lines business with that of fellow insurer LV=’s personal lines business under a joint venture. The venture will also see Allianz UK take on LV=’s commercial business.
Dye said: “The announcement of the joint venture with LV= has created a lot of positive interest. The European Commission has recently given its approval for the joint venture which is an important step forward. We now await the PRA’s approval scheduled for December with great anticipation.”
He added: “Subject to receiving this regulatory approval, our intention is to communicate detailed plans to the broking community in the New Year.”