Allianz Deutschland AG

Allianz Deutschland AG
Operating profit higher again in 2008
Operating profit rises third time in a row, by 3.7 percent, to 2.2 billion euros. Premium income almost matches previous year / Introduction of new operating model completed with success in 2008 / Growth opportunities: New insurance products, strategic partnership with public health insurance fund, banking business

In spite of the challenges posed by the crisis in the financial markets, on the basis of preliminary figures Allianz Deutschland AG and its subsidiaries brought in about the same high premium income in 2008 as the year before, at 26.0 billion euros. Even with higher claims for storm and flood damage and for large losses, as well as massive slumps in the stock markets, the operating profit increased by another 3.7 percent, to 2.2 billion euros. The net profit for the year rose a substantial 19.2 percent, to 2.3 billion euros.
“When even leading financial entities are fighting for survival or about to be dismantled, the private economy’s inherent powers of self-healing may be hard to set free, because confidence is in short supply everywhere,” said CEO Gerd Rupprecht at the annual press conference in Munich. But, he said, Allianz has a contribution to make here, too. “Right now is when values like security, reliability and solidity are just what everyone is looking for,” he added.

Premium income remains high
Premium income at Allianz Deutschland AG, at 26.0 billion euros, almost matched last year’s good performance. “That means we successfully maintained our market position even in a phase of profound restructuring,” was Rupprecht’s summation.
In property and casualty insurance, premium income decreased 0.9 percent, to 9.3 billion euros. In auto insurance, price competition became even more intense than in 2007. Another influencing factor here was the lower average premium on existing policies. In the fleet business, Allianz deliberately shed business that was unprofitable. Revenues in auto insurance were down 3.9 percent, to 3.4 billion euros. Premium income in the other insurance lines grew a total of 0.9 percent, to 5.9 billion euros. Last year Allianz expanded into a new area of business, pet health insurance, that is still largely untapped in Germany compared to other countries. “That’s a good example of how you can find new clienteles within a saturated market,” Rupprecht explained. By year’s end, Allianz had attracted nearly 7000 clients for the new product since it was launched in July 2008.
In life insurance, total premiums acquired in new business rose 17.7 percent, significantly faster than the market as a whole. Germany’s GDV insurance association announced a 7.6 percent increase in new business. Nevertheless, new and increased premiums decreased 1.7 percent, to 4.9 billion euros, because of decreases in one-time premiums. Allianz Leben enjoys a market share of more than 30 percent here, primarily because of its outstanding position in company retirement plans. Corporate clients’ reluctance to fully fund pension reserves externally had a particular effect here. But in business involving ongoing premiums, the Company again benefited from private clients’ continuing demand for retirement products. The IndexSelect private pension sold especially well. Lower one-time premiums meant that premium income in life insurance fell slightly short of the previous year’s high levels, by 0.2 percent, at 13.5 billion euros.
Private health insurance continued to feel the effects of the health care reform that took effect in 2007. The higher income ceiling for mandatory public insurance coverage, combined with a 3-year waiting moratorium, slowed new acquisitions in private full coverage. But premium income, at 3.1 billion euros, almost matched the previous year’s figure. Allianz expects the new AktiMed® products in full-coverage insurance to produce a turnaround. Since most policies were signed and effective on January 1, 2009, this change for the better will show its first effects in the current year.
Operating profit – Reorganization also pays off in terms of costs
The last service region made the transition in the fall of 2008, so that the entire Company is now working with the new operating model. That completes the Company’s successful reorganization, which continues to pay off: administrative costs decreased again, by 2.1 percent for the past year.
In property and casualty insurance, the combined ratio – the ratio of costs and claims to premiums earned – increased from 92.6 percent to 95.3 percent in 2008. The reason was larger expenses for claims, including Hurricane Emma and the Hilal hailstorm.
In spite of larger claims for storm and flood damage and for large losses, as well as hefty slumps in the stock markets, the operating profit rose another 3.7 percent, to 2.2 billion euros. Sales of owner-occupied real estate in property and casualty insurance made a particular contribution here. The net profit for the year increased a substantial 19.2 percent, to 2.3 billion euros.
Investments – Financial strength as a competitive plus
The value of the investment portfolio of Allianz Deutschland AG decreased from 184.1 billion euros to 170.8 billion euros. Net investment income decreased 13.8 percent, to 7.4 billion euros. But Allianz Deutschland AG has weathered the crisis in the financial markets well so far, and risk-bearing capability arouses no concerns. Every stress test indicates that Allianz Deutschland can meet solvency requirements. Thus Allianz Deutschland AG’s conservative investment strategy has paid off in the financial crisis. The broad diversification of investments among many different segments played a particular role in limiting the impact of the crisis. Since mid-2007, the insurer has disposed of nearly 15 billion euros worth of stock. The sales were carried out at an average DAX level well above 7000.
Allianz views its excellent financial strength as an important competitive plus – especially in life insurance. “It’s particularly in private retirement insurance that clients entrust their money to us for the long term,” Rupprecht explained. “Our investment policy and our systematic risk management system have given Allianz Leben reserves that are far above average in every investment category,” he added.
Growth opportunities from strategic initiatives and new products
In the difficult economic environment of 2009, Allianz Deutschland AG intends to open up growth opportunities with strategic initiatives and with new and improved products.
In private health insurance, the Company will rely on a new strategic alliance: since the beginning of the year, it has been working closely with Kaufmännische Krankenkasse – KKH, a public health insurance fund, as an exclusive product partner for private supplemental health insurance. As of April 1, 2009, KKH will merge its fund with BKK Allianz, the Allianz companies’ corporate health insurance fund, and as “KKH-Allianz” will continue to expand its outstanding position in the market for public health insurance, with an initial total of more than 2 million members.
Even after the sale of Dresdner Bank, Allianz will maintain its integrated consulting approach and continue to offer clients solutions for insurance, retirement and asset management from a single source. “With Oldenburgische Landesbank AG (OLB), which will now be an Allianz Deutschland AG subsidiary, we can tailor our product portfolio even better to our clients’ needs and our agents’ expectations,” said Rupprecht. “We’ve already developed a competitive range of products for insurance clients there, with attractive terms,” he added.
On the product side, at year’s end Allianz brought Invest alpha-Balance onto the market, a new guarantee concept for fund-based retirement insurance. The special feature is that the concept provides an optimized interplay between market opportunities, with fund investments, and reliable, high-return investments in Allianz Leben’s coverage assets. Thus the insurer is addressing clients who believe, as Allianz does, that stocks will ultimately pay off again.
The company will be presenting additional new and improved products in 2009. These particularly include multi-line products especially intended for younger target clienteles.
Outlook
Because the future evolution of the financial crisis and its impact on the economy are so uncertain, multi-year business forecasts are especially fraught with difficulties.
Allianz believes that the intense price competition in property and casualty insurance has bottomed out. The Allianz CEO believes the German government’s “scrapping premium” for vehicles more than nine years old will also have effects on car insurance: “In the first few months of this year we calculated out nearly 30 percent more insurance bids than for the same period last year.”
In life insurance, the insurer expects companies to remain wary of spending on company retirement plans again this year. Private clients have likewise shied away from longer-term commitments. Yet, he points out, saving for old age – especially in times of crisis – is more important and necessary than ever. “For that reason, we foresee good opportunities for expanding the share of life insurance among Germans’ assets,” Rupprecht said.
Allianz foresees growth opportunities for both sides in the intermeshing of the public and private health insurance systems.

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