In 2007, Allianz Delivered Strong Growth and an Underwriting Profit Despite the Weather

Financial Highlights:

• Net written premiums increased by 9.0% and reached an all time record level for the Group
  
  
• Weather events during 2007 cost £83m but despite this, Allianz recorded a strong profit performance
  
  
• Commercial Lines NWP grew strongly, up 10.9% over the same period last year
  
  
• Retail business NWP grew by 6.3% compared to last year

Divisional results breakdown:

Statement from Chief Executive Officer Andrew Torrance:

The company delivered an excellent combination of profit and growth in 2007. Net written premiums grew by 9.0% to a record £1.4bn whilst an underwriting profit of £30.4m was achieved. Pre tax profit declined by £42.3m from the record levels in 2006 to £197.1m but this was achieved after meeting weather-related claims of £83m. Overall, the 2007 result demonstrates the strength of Allianz’s UK business model.

Nevertheless, the need to increase rates to a level where insurers can reasonably expect to make an acceptable level of profit without relying on prior year reserves releases has been a theme of mine for some time. Underlying exposures continue to grow as the summer’s flood events clearly demonstrate, whilst there continue to be significant inflationary pressures on claims costs, in particular on bodily injury claims. Whilst I am pleased to say that both private and fleet motor rates are now moving consistently upwards, we are only just beginning to see the green shoots of increased rate strength in the property and liability accounts. This needs to move forward if acceptable accident year returns are to be made and capital retained in the UK market.

The Group will continue to pursue a strategy of only underwriting business where there is a realistic prospect of achieving a decent level of return. As already mentioned, a very pleasing level of growth was achieved in both our Commercial and Retail businesses, without deviating from this principle, through affinity partners, enhanced distribution relationships and improved sales management.

During 2007, we took a number of minority stakes in brokers which we consider to be winners in the fast-changing commercial marketplace. We continue to believe that the best interests of commercial customers will be served by a vibrant and independent intermediary market.

The growth of our 2006 acquisitions, Home and Legacy and Premierline, has been slower than the aggressive plans we set for these businesses. Nevertheless, we are very enthusiastic about their future prospects and we anticipate that 2008 will be a strong year for both.

There are a number of projects being undertaken across the Allianz SE family and these have all progressed well during 2007. Sharing knowledge and expertise across the Group has already delivered significant improvements to our combined ratio and we anticipate greater benefits still in 2008. The Innovation programme, which was launched at the end of 2006, has generated over 1000 ideas towards improving efficiency and improving customer service.

Providing excellent levels of customer service is at the heart of building a successful business. I am therefore very pleased to report that we received a significant number of thank you letters from our policyholders following last year’s severe weather events and I congratulate our claims handlers for their focus on our customers’ needs while they were under significant workload pressures.

In order to achieve our profitable growth target, our people need to have the necessary skills to deliver the strategy. This which is why we continued to invest in the Underwriting Academy and Excellence in Claims programmes. I take particular pride in the fact that our CII exam pass rate consistently outperforms the industry norm.

With the uncertainties caused by the impact of climate change in particular, generating year-on-year profit growth has become an even more challenging target. This ambition is not helped by the industry’s reluctance to really push through the rate increases which are clearly necessary. However, we have a strong business model here at Allianz. The core ingredients of a successful company comprising a skilled workforce, financial strength, and a customer focussed attitude are all present within our organisation and this leads me to look forward to 2008 with great optimism.”

Andrew Torrance
Chief Executive