Allianz Commercial offers best of both worlds for customers: Müller

The creation of Allianz Commercial, the new €20bn commercial insurance business of Germany’s Allianz group, will significantly strengthen the insurer’s offer to its growing middle market customer base, but not lead to a reduced service for large corporate customer that formerly used AGCS, vows group CEO Joachim Müller.

In an interview with Commercial Risk just before the annual symposium of German risk and insurance management association GVNW, Müller explained that the combined resources of AGCS and Allianz’s worldwide commercial insurance business would deliver greater underwriting expertise and support services such as risk engineering and claims. It will also deliver a more consistent global footprint for the company’s growing global programmes customer base in both large and middle market segments.

More sceptical risk managers and brokers may suggest that the merger of AGCS with Allianz commercial’s middle market business is driven by a desire to deliver further cost-savings and more margin for shareholders.

Müller insists, however, that the combination of the two operations into a stronger and more focused group will add value for customers – both large corporate and middle market – and enable it to expand business among middle market customers operating cross-border, in particular.

Impressive turnaround

So it seems a positive development for former AGCS customers. The AGCS business was firmly back on track and delivering healthy profits again after its serious re-underwriting process, which accelerated when Müller took over from Chris Fischer Hirs in December 2019 and launched the ‘New AGCS’ strategy in 2020 to drive this turnaround.

Serious progress has been made over his term in charge as the market hardened and faced up to the huge challenges presented by the Covid-19 pandemic, subsequent war in Ukraine, supply chain challenges and inflation.

In parallel, a similar remediation exercise took place across Allianz’s mid corporate portfolio from 2021 with a central ‘Global Commercial’ team established to steer underwriting globally, working with the national Allianz companies to turn around results in that segment.

AGCS operating profit increased to €479m in the first half of 2023 from €351m, and premium written rose to €6.58bn from €5.92bn. Its combined ratio improved to 90.8% in the first six months from 93.3%.

This compares with 2019 when the combined ratio deteriorated to 112.3.% from 101.5% in 2018. The group had to post a reserve strengthening, shown in a total runoff development of minus €591m, driven by financial lines in Australia and the UK, product recall in Europe and general liability in North America. The operating profit fell by €566m to a loss of €284m.

But the vastly improved figures appear to justify Müller’s claim that the merger of AGCS into Allianz Commercial is a front foot move and not just another cost-saving and margin improving effort.

“We were ahead of the targets in terms of profitability, loss ratio and expense ratio and the top line. We changed the shape of the business with a focus on profitability rather than volume, significantly reduced some line sizes thus improving profitability. There were fundamental changes in the core portfolio and set up… I can only say that both AGCS and the Allianz Mid Corp businesses were in a better shape than ever before and this is something that can really open a new chapter,” explained Müller.

“AGCS was a very federalised structure with many country CEOs that, with Allianz Commercial, has now been transformed into a truly global structure. The mid corporate business has improved significantly with very profitable growth in recent times, but it faced the same challenges as the large corporate business,” he continued.

“A €600m company faces the same challenge in property as a €400m company. The business is underwritten in the same way using the same tools; there was a lot in common so this was a natural evolution. We are building a common platform rather than having a range of local systems that are not aligned. This will enable us to make far better use of our resources across the business and upscale. There is a great opportunity for us, for example, in the ‘no man’s land’ area of companies with revenue between €100m and €500m, especially those at the upper end,” said Müller.

Clear risk appetite

He believes brokers will benefit from a clearer message and appetite from Allianz Commercial. “Risk appetite will be more aligned because having two different operations confused the brokers in the past, particularly in Europe and Asia where we had a lot of strong local country operations at both levels. Having single unified distribution teams will be a very positive development,” he said.

The underlying focus on profitability though will not change within Allianz Commercial as Müller stressed that lessons had been learned and would not be forgotten. “For us, it’s about profitability and good underwriting. If we can grow in profitable lines and sectors then we will, but it is not about growth for growth’s sake,” he said.

The improved capture, analysis and use of data through latest technology and platforms will clearly be key to the success of any underwriting operation as risks continue to evolve at such a pace. Allianz Commercial has a great opportunity to use its combined resources in this sense, said Müller.

“Underwriting is about pricing and therefore data, and about the capture and usage of that data. The combination of the mid-sized and large corporate businesses will improve the data source for all the business and analysis of portfolios, and inevitably give an upside to the combined ratios. This will be even better when we transition to a single overarching platform rather than local operating entities. The insurer that manages this will be best placed from both a cost and growth perspective, and it will support investment in new solutions and opportunities,” he explained.

Müller added that the much larger volume of policies handled by the mid-sized business will have a positive knock-on effect for the larger corporate business from a data analysis perspective.

Another added benefit for customers will be the combination of risk engineering teams that number over 500 in Allianz Commercial and so can be even more targeted to industry verticals. The same can be said for the enhanced claims capability offered by the newly combined Allianz Commercial group worldwide, said Müller.

Global programmes

And, clearly, the global programme expertise of the former AGCS operation will come as a major benefit for the mid-sized sector that continues to expand across borders in search of new revenue and profit.

“Global programmes were the core of the AGCS business but mid-sized companies operate across borders more and more so the capabilities and expertise can be shared, offering cutting-edge solutions to a much wider customer base. We still have a leading position in the large corporate market but can now also bring this expertise and solutions, notably also in our specialty lines, more to the mid-sized market,” said Müller.

For Müller, therefore, the creation of Allianz Commercial represents a real win-win for customers of all sizes and brokers.

“Overall, the large corporate customers will enjoy the same level of service they enjoyed with AGCS, with wider risk consulting, claims support and the like provided by the wider network of 11 regions. This will clearly enhance our global programme offering for the mid-sized customers who will benefit from the deeper and wider expertise made available in a clearer and more efficient manner,” he said.