Allianz taking rate to match inflation in P&C; has tamed volatility ‘massively’

Allianz is currently enjoying “stable” growth in insurance rates across its P&C portfolio to match current inflation trends and is focused on disciplined underwriting to ensure the bottom line grows in turn, officials assured early Friday (February 18).

“At the moment we see rate increases which keep pace with inflation,” chief financial officer (CFO) Giulio Terzariol told an online press conference following publication of Q4 results. “We cannot predict what inflation will do down the road, but for the time being we are getting rate increases to meet the current level of inflation we are seeing.”

Underwriting profits in the segment improved in 2021, as witnessed by a 2.5 percentage point decline in the combined ratio to 93.8%, now within sight of the group’s 93% target. That decline came as a reduction in Covid impact helped offset a rise in nat cat to 3.1% from 1.7% in 2020, officials said.

But Allianz won’t go chasing any and all growth. 2020 difficulties in the global corporate and specialty unit AGCS taught lessons on underwriting discipline, chief executive officer (CEO) Oliver Bäte claimed.

“We have really learned a lot – not just AGCS but the whole commercial segment,” Bäte said. “We are not writing this business for the top line; we are writing this business for the bottom line.” The group “massively reduced potential volatility” on a combination of exposure reductions, limits and “more stringent reinsurance regimes.”

Third party capital could be a part of the solution, Bäte indicated. “We should not think of ourselves as risk warehouses,” Bäte said. “We underwrite, then we need to find the best capital sources for the risk adjusted returns, and they may be outside our own balance sheet. That is the way to proceed going forward.”

The AGCS unit managed to bring its combined ratio down to 97.5% in 2021, an 18 percentage point improvement over a troubled 2020, despite an increase in the nat cat burden. The unit swung from a €482 million 2020 operating loss to a €256 million gain in 2021.

“Underlying performance is even stronger than what we are showing here,” CFO Terzariol said of the 97.5% 2021 combined ratio. “We look confidently on delivery at AGCS in this and coming years,” he said.