Allianz UK delivers impressive growth and profits in 2011

 

Statement from Chief Executive Officer, Andrew Torrance

2011 was a very successful year for Allianz UK. Financially the year was one of achievement across the business as the numbers in this release clearly illustrate. However, alongside the figures I can also reflect on many other performance indicators that demonstrate that Allianz UK is in very good shape.

Turning first to the financials, the sluggish macroeconomy and the continued upwards pressure on claims costs provided a challenging environment within which to grow our business. Despite this backdrop, we were able markedly to grow our top line and bottom line compared to 2010.

Our Commercial Lines business faced a challenging year with the market continuing to be very competitive. Within this testing environment our Commercial Motor business had a very good year whilst Commercial Property avoided any large fire losses and therefore delivered an underwriting profit well ahead of plan. The result for the Packages account was less buoyant as we were hit by an increased number of recession related claims. These type of claims also negatively impacted the Liability account. The Commercial Engineering business also found the macroeconomy preventing it from achieving either top line or profit growth, although the business continued to make attractive returns. As has been the case in recent years, the overall Commercial result continued to benefit from reserve releases with the underlying accident year result continuing at inadequate levels in this low interest rate environment.

Retail Division delivered strong financial performance with, in particular, excellent top line growth in both the Broker Motor and Household accounts. The level of rate increase in the Private Motor account was less than in 2010 but was still well ahead of claims inflation at almost 9.0%. Policy numbers grew in both accounts, but more particularly in Motor.

Our Corporate Partner business also performed well in the year with the VW, BMW and Orange relationships all delivering strong growth.

Legal Protection grew well and delivered a good underwriting profit, whilst Animal Health (Petplan) also grew to achieve record policy numbers and delivered a pleasing profit performance.

2011 marked the fifth anniversary of our purchase of both Home & Legacy and Premierline. Home & Legacy had an excellent year with revenues 10% ahead of 2010 and profit markedly exceeding the 2010 level. In Premierline we hit our plan for premiums in 2011, but more work is still necessary to obtain an underwriting profit from the business.

I indicated earlier that the health of a business should not be judged by its financial results alone. In an age where many organisations state that their ambition is to put the customer at the heart of everything they do, I am pleased to report that Allianz UK received a number of positive indicators that we are successfully “walking the talk”.

Using the well established and independently applied Top Down Net Promoter methodology, I am very pleased to say that our broker partners working with Retail have improved their rating of the division so that we now stand in second place in a table of our peers, up from fifth position in 2010. The introduction of the successful Clear product range has undoubtedly been a significant factor but I believe that Retail’s more segmented approach and improvements in service and training have also paid dividends.

In similar vein, the Top Down Net Promoter results for Commercial showed the division in pole position against its peer competitors for the third year in succession. It is notable that Allianz Commercial is the only company with a positive absolute score, an achievement which I believe is the direct result of the division’s outstanding technical and trading skills. Pleasingly, Engineering also retained its loyalty leadership position, in their case for the fourth successive year.

A further illustration that Commercial Division as a whole is held in high esteem by its customers is the retention of the Best Commercial lnsurer title for the second year in succession at the Insurance Times awards. Here we were the only award winner to retain the trophy from the previous year.

Underpinning these strong results has been the success of our fight against fraud, both by our claims handlers and by our underwriters. Realised savings from fraud in 2011 were just shy of £50M, a sad indictment of the society in which we operate. This fight will be continued with renewed vigour in 2012, both within the company and through Allianz UK’s support of the industry’s expanded focus in this area – all of which is for the benefit of honest policyholders.

Looking ahead more broadly into 2012, it is hard to see anything other than a further challenging year for the industry. Economic growth will continue to be sluggish and unemployment is likely to continue to rise which will do nothing to mitigate the pressure of recession related claims. In this environment interest rates will also remain low, placing continuing pressure on the industry’s investment income returns.

More positively, there now appears to be substantial momentum to tackle the systemic failure in the motor claims compensation system. By year end 2012, referral fees will be banned and there now appears to be real appetite on the part of government both to reduce the fixed legal fee for handling small bodily injury motor claims and to take concrete steps to end the whiplash claims epidemic. The OFT’s involvement may also bring improvements to the excessively high costs and dubious practices within the credit hire industry. Effective action across these areas will reduce motor claims costs and ultimately deliver lower premiums to our policyholders.

As for the prospects for Allianz UK, I begin the year with a sense of optimism and confidence in the ability of the organisation to prosper. We have in place the right strategy, the right capabilities, the right shareholder and a great track record of delivery through the sustained efforts of the people in this company. I am confident that 2012 will be another successful year.

As published on Allianz.co.uk on 27th February 2012

 
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