Latest insurer results show solid performance despite tough conditions

Munich-based Allianz reported an impressive 21% rise in operating profits to €9.5bn, its highest yearly total since the start of the financial crisis, said the company’s Chief Executive Michael Diekmann.

Revenues for the insurer, which underwrites both life and non-life insurance around the world, were 3% higher in 2011 at €106bn.

Mr Diekmann said the results were achieved despite external factors that included continued low interest rates, changing regulations, the downward trend in the European economy, the euro debt crisis, the US fiscal cliff and the worsening political situation in the Middle East. On a positive note, Mr Diekmann said that the debt crisis in Europe had now begun to ease and that the burden of natural catastrophe claims had dwindled.

hide

All the group’s main business units achieved double-digit growth, said Mr Diekmann. Property and casualty insurance grew gross written premiums by almost 5% to €46.9bn in 2012, achieved through a 50:50 mix of rate increases and new business.

Premiums rose in almost all markets, with significant growth in Australia and Latin America, where premium of €2.4bn equals Allianz’ established business in central and eastern Europe. Property and casualty premiums also increased in most European countries, except Spain.

Allianz Global Corporate & Specialty (AGCS), the group’s specialty and corporate insurer, also grew significantly. Gross premiums written at AGCS exceeded €5bn for the first time since the unit was established in 2006. Premiums were also 8% higher in 2012 at €5.3bn. The unit attracted some €967m of new business.

Allianz is looking to grow AGCS further, in particular in emerging markets. AGCS premium income from South America, Asia, Russia and Africa should increase from the current level of €600m to around €2bn within the next five years, Mr Diekmann told a press conference in Munich.

Despite higher revenues and fewer catastrophes in 2012, AGCS reported a lower operating profit-€420m in 2012 compared with €549m in 2011. The combined ratio for AGCS also deteriorated to 96%, compared with 93% in 2011.

The deterioration reflected increased loss activity-both large and catastrophic-at AGCS. The 2011 combined ratio also benefited from an extraordinary subrogation payment from prior years relating to the World Trade Center loss.

Overall, Allianz reported improved profits and combined ratio for all property and casualty business. Operating profit for p/c insurance rose 12.5% to €4.7bn while the group’s combined ratio improved by 1.5 percentage points to 96.3%.

In all countries the combined ratio was well below 100%-except the US where the combined ratio was 129.5%, Mr Diekmann said.

Allianz rival AXA also reported increases in its revenues, although it was not able to emulate Allianz’ increased profits for 2012. The Paris-based group increased total revenues by 2% to €90.1bn but saw its net income fall 4% to €4.2bn.

Property and casualty revenues were up 3% to €28.3bn, mainly driven by an overall 3% increase in prices. Commercial insurance increased 3% to €11.2bn, also reflecting an average 3% rate increase.

In line with other global insurers AXA produced more growth in emerging markets, mainly driven by Turkey and Mexico. Revenues in mature markets increased 2% to €22.3bn, reflecting higher rates in France, the UK and Germany, although revenues fell 3% in southern Europe because of the poor economic conditions. High growth markets expanded 12%, albeit to just €3.8bn.

Underlying earnings from property and casualty insurance business were up 1% to €1.9bn, reflecting better technical profitability and higher volumes, despite a €117m reserve strengthening to adjust for the higher frequency and average cost of legal bodily injury claims in Turkish motor and liability.

Revenues at AXA Corporate Solutions, the group’s corporate insurance provider, were 3% higher at €2.1bn. The majority of the growth was due to rate increases, with revenues rising by 17% in construction, 9% in property and 2% in motor, offsetting a 6% fall in aviation and a 2% reduction in liability due to the non-renewal of a large contract.

AXA Corporate Solutions reported a combined ratio of 97.8% in 2012, compared with 97.9% in 2011.

AXA’s combined ratio improved 0.8 percentage points to 98.8%-98.3% in mature markets and 101% in high growth markets.

Also reporting results, Swiss Re Corporate Solutions, the direct commercial business of the Zurich-based reinsurer, grew its net earned premiums by 18.4% to $2.3bn. Growth was across all lines of business, although is not expected to continue at such high levels, the company said.

The unit’s net income increased by 142% to $196m while the combined ratio for Corporate Solutions was 96.2% in 2012 compared with 107.9% in 2011, reflecting positive reserve developments of 3.9 percentage points.

Swiss Re continues to expand its corporate insurance business and expects to grow revenues to $4 to $5bn by 2015.

Swiss Re grew its non-life reinsurance premiums by 21.6% to $12.3bn last year. The reinsurer saw its net income increase by 172.1% to $3bn, reflecting prior-year reserve releases and good underwriting results.

The combined ratio for reinsurance was 80.7% in 2012 compared with 104% in 2011, reflecting lower than expected catastrophe losses and positive reserve developments-which flattered the combined ratio by 8 percentage points. Adjusting for the reserve development the combined ratio would have been 90.1%.