Financial Highlights

• Gross Written Premiums up 4.1% over same period in 2009
• Robust IFRS operating profit delivery of £119.1m but below 2009 level primarily due to reduced prior year claims releases
• Combined ratio remains at an excellent 95.8%
• Commercial GWP growth of 2.8% driven by rate strength with an excellent combined ratio of 95.9%
• Retail GWP growth of 6.0% also driven by rate strength with the combined ratio improving by over four percentage points to 95.6%

Divisional Results Breakdown

Statement from Chief Executive Officer Andrew Torrance

I am pleased that we are continuing to grow our top line performance at levels that are ahead of Plan expectations and that we have bettered our performance compared to the same period last year. Our operating profit of £119.1m is also ahead of Plan but markedly lower than in 2009, a year favoured by exceptionally strong levels of prior year claims run-off.

Our Commercial business has grown its top line by 2.8% compared to YTD Q3 2009, which is a satisfactory outcome given the tough prevailing market conditions. I remain disappointed that the commercial lines market steadfastly resists efforts to push through rate rises at levels that are necessary for insurers to make a decent level of return for the risks they carry. As a result of this ongoing ‘absence of common sense’ I can only remain pessimistic about the prospects for the last quarter’s level of premium increases in this market. In this difficult market environment, we are not growing our exposures at present.

Positive rate strength in our Engineering business also continues to prove difficult to achieve in both the inspection and engineering insurance portfolios. In the former area, we have enjoyed more success in raising rates during Q3 and we intend to build on this momentum in Q4. Overall, this business continues to deliver profits ahead of Plan.

The performance of our Retail business continues on its upwards trajectory and I am very pleased to report that the division’s GWP growth stands at 6.0% compared to the same period last year, albeit largely driven by rate strength increases.

In our Retail Broker portfolio, we are expecting the planned contraction in our motor book, which was necessary to restore profitability, to reverse over the next six months as a result of the further roll-out of our Clear private car motor product which has already achieved very healthy sales volumes. In addition, the hardening motor market has allowed us to increase rates by 22.5% YTD, which is well ahead of Plan. The household market is not hardening in the same way as private car but we have been able to achieve YTD rate strength of 5.2% and through increased distribution grown premiums by 29%.

The Corporate Partner business within Retail continues to grow its top line and is well ahead of planned sales volumes with the new Volkswagen/Audi Group relationship making a healthy contribution. The division has also shown that it can provide innovative solutions for customers as demonstrated by the recent launch of the BMW and MINI tyre insurance product. This helps pay for the unexpected repair or replacement costs of tyres damaged either accidentally or by a malicious act. We are in discussion with other blue chip business partners and I am very confident that we will be announcing further major partnerships over the next few months.

Our Animal Health business has delivered GWP growth of 5.0% and, after corrective pricing action, policy numbers have been rising since June with consecutive record new business months in August and September. The YTD underwriting result and COR are both at excellent levels.

Allianz Legal Protection delivered an excellent 19.0% GWP growth compared to prior year and the business is delivering ahead of plan levels of profit and COR.

In conclusion, we are experiencing another strong year and barring losses from major weather events, I expect us to deliver a positive set of results for 2010 which are modestly ahead of the Plan we set.

Improving rate strength remains high on our agenda, where we have exceeded expectations within our Retail business, particularly in our motor book, and where we have performed creditably in a highly competitive commercial lines market.

Andrew Torrance
Chief Executive, Allianz Insurance
11 November, 2010

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