But chief executive optimistic about insurer’s ‘positive’ prospects for 2009.

Andrew Torrance, chief executive of Allianz Insurance, has admitted that the company’s profit is not at an acceptable level, after it had to be propped up by prior year claims reserves.

Pre-tax profit rose 15% to £140m in the year to 30 September 2008, up from £97.4m in the same period last year. Support from reserves amounted to about £100m, which was too high, Torrance said.

“We are intent on taking rating action to make business written today acceptably profitable,” he said.

In commercial lines, efforts to raise rates in the third quarter did not reach the plus-5% target that Allianz had set for both property and casualty lines.

“Property did, however, move into positive territory to plus-1.5%, while casualty advanced marginally over the second quarter to plus-2.5%,” said Torrance.

“The global catastrophe was more expensive than first thought and will result in a hard market in commercial lines. The long, soft market is at an end.”

In personal lines, Allianz’s motor rates increased – a trend that must continue if the book is to reach acceptable profitability.

“Withdrawing from the third-party motor market and moving up the rates offered to underperforming brokers will also help in terms of profitability in the medium term,” he said.

“This is at the expense of growth, but is an outcome we accept.”

The chief executive is still optimistic about Allianz’s future, however. “Despite this disappointing performance in the third quarter, the early indications for the fourth quarter and the prospects for 2009 are much more positive as the market recognises the impact of the unprecedented events in the financial markets over the summer.”

Torrance said credit hire was one of the biggest drains on profitability. A team of 30 people at the insurer will focus on the issue.

“We will do everything to combat it as it is costing policyholders too much. Credit hire companies are submitting the most inflated claims. There’s a great deal of sharp practice going on and we don’t want it affecting our claims costs,” he said.

Allianz said its exposure to the Lehman Brothers collapse was less than £1m. Torrance pointed to Allianz UK’s AA rating – and its parent company’s AA rating – by Standard & Poor’s. He said the group was well capitalised with a solvency position of 157%.

“We understand customers are feeling uncertain about where they can place their trust,” said Torrance. “The broking community has an important role to play in delivering the best advice it can to customers, to help them select insurers who will be there to pay claims over the long term.”