Allianz Says German Operations On Track for 2014

By Ulrike Dauer

Europe's largest insurer by market value and premium revenues Allianz SE (ALV.XE) said Tuesday its German insurance operations are on track to deliver on its 2014 business targets, helped by a number of initiatives to boost revenues and cut costs.

In an online presentation to investors, Allianz said it will reach its targets for 2014 by cooperating further with automotive firms, introducing new products in all three insurance operations and reducing complexity as regards processes and products. It will also make customer interaction and claims handling more efficient by moving more products online, and continue with reducing headcount by 400 in the unit's headquarters in Munich.

Allianz's business initiatives are closely watched by competitors such as France's Axa SA (CS.FR) and Italy's Assicurazioni Generali SpA (G.MI). Growth in the saturated German insurance market is challenging, due to tough competition in motor insurance and because every German statistically already has at least one life policy or pension product.

In February, Allianz said 2013 operating profit for its German unit would fall below the 2012 figure of EUR2.1 billion, due to a lower expected contribution from capital investments and restructuring costs for the small German Allianz Bank banking operations that will be closed by the end of June. Allianz's German operations, which contributed 24% to the group's 2012 operating profit of EUR9.3 billion ($12.2 billion), are key in reaching the group's 2013 operating profit target of between EUR8.7 billion and EUR9.7 billion.

In its German property and casualty insurance business, Allianz aims for 2014 gross premium revenues of EUR9.5 billion, up from EUR9.2 billion in 2012, according to the investor handout. The combined ratio, a key measure of an insurer's underwriting profitability, is expected to drop to 95% from 96.8% in 2012. A 95% combined ratio means that an insurer spent 95 cents on claims and other costs for every euro in premiums earned and booked an underwriting profit. The expense ratio is expected to fall to 26% in 2016 from 27.6% in 2012.

Both life and health insurance suffer from volatile financial markets and the current low interest rate environment. In the life business, Allianz wants to maintain its position as No. 1 in Germany by PREMIUM REVENUE market share, while the health insurance business is expected to make a "reliable earnings contribution."

Munich-headquartered Allianz has undergone major restructuring in all current business lines over the past eight years. Between 2006 and 2008, it shed several thousands of jobs at its German insurance operations and cut the number of regional branches to 10 from 21.

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