Torrance blames tough conditions in motor as ratio hits 109.6%, but group profit rises 36.8%
angelique ruzicka Andrew Torrance, chief executive of Allianz Insurance, has admitted that the 2008 performance of its retail business was “not acceptable”.
He said of the insurer’s retail operation: “The combined ratio is not acceptable, we want underwriting profits not losses.”
The division posted a combined ratio of 109.6% for 2008, down from 102.5% in 2007. Its gross written premium stood at £612.6m, down from £624.2m in 2007.
Torrance said conditions in the retail market were particularly challenging for the private motor business.
“This is a highly competitive and currently unsustainable market place with a number of structural issues. These include poor profitability delivered by larger motor brokers, the ongoing impact of the credit hire industry and the commoditisation of insurance products driven by aggregators,” he said.
The chief executive added that there was a need for rates to increase. “We are taking action in these areas and will see a significant improvement for 2009.”
Commercial lines fared better, posting a combined ratio of 86.9% for 2008, compared to 98.3% in 2007. Gross written premium for commercial lines rose to £918.6m in 2008, from £906.2m in the previous year.
Torrance admitted, however, that commercial lines profitability would have looked different had it not been for reserve releases.
“The favourable run-off of prior-year claims reserves enabled the business to deliver an exceptionally low combined ratio. It would have been around 100% at the break-even level without reserves, so that is why rates have to increase. Reserve release was around £100m.”
Allianz’s operating profit rose 36.8% to £193.6m, while its combined ratio was down 3.8% to 95.2%. Gross written premium edged up to £1.531bn in 2008, from £1.53bn in the previous year.
Allianz SE’s capital currently stands at 161% of the regulatory requirement and it is rated AA with a stable outlook by Standard & Poor’s.
Torrance said: “Customers can also be reassured by the Allianz Insurance AA- stable outlook in Standard & Poor’s rating. I believe we have entered an era where ‘boring’ is the new ‘sexy’.”