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AGCS reserve strengthening stunts Allianz’ P&C performance

21st February 2020 - Author: Charlie Wood

Global insurer Allianz has seen its property and casualty segment full year results negatively impacted following €600 million of reserve strengthening within Allianz Global Corporate & Specialty SE (AGCS).

AllianzAGCS was also afflicted by lower operating investment income, although this was partly compensated by an improved expense ratio.

As a result, the combined ratio deteriorated by 1.5 percentage points to 95.5%.

Total revenues for Allianz’ P&C segment rose from €55.4 billion in 2018 to €59.2 billion in 2019.

Operating profit decreased by 11.9% to €5 billion in 2019 compared to the previous year.

“Our Property-Casualty business segment performed below expectations in 2019, following a disappointing reserve strengthening at AGCS that overcompensated for a solid accident year, underwriting and productivity gains,” said Giulio Terzariol, Chief Financial Officer of Allianz SE.

”Most of our operations have been performing very well. We remain committed to our goal of improving the combined ratio to 93 percent by the end of 2021.”

Outside of Allianz’ P&C segment, the company posted robust results across the board, with Internal revenue growth hitting 5.9%, driven by all business segments.

Total revenues increased by 7.6% to €142.4 billion, compared to €132.3 billion in 2018. 2019 net income was up 6.1% to €7.9 billion.

Operating profit grew 3% to €11.9 billion and is in the upper half of the group’s announced target range of €11 billion to €12 billion.

Operating profit growth was mostly driven by the Life/Health business segment due to a higher investment margin, a positive one-off profit in the United States, and volume growth. Operating profit within L&H rose to €4.7 billion.

Allianz’ Asset Management business segment also reported a strong 6.9% increase in operating profit, resulting in €2.7 billion, due to higher average third-party assets under management and positive foreign currency translation effects.

”2019 was another successful year with record results for the Allianz Group. This reflects the trust of customers and shareholders and the engagement of our excellent people,” said said Oliver Bäte, Chief Executive Officer of Allianz SE.

“Allianz continued to make important strategic strides in 2019 like our acquisitions in the UK and Brazil and being awarded the first fully foreign-owned insurance holding in China. We also contribute to society: As one of the initiators of the newly launched UN-convened Asset Owner Alliance we committed to transition our own investment portfolios to net-zero by 2050.”

“In the fourth quarter of 2019, operating profit amounted to 2.8 (2.8) billion euros. Reserve strengthening at AGCS led to a lower operating profit from our Property-Casualty business segment, which was mostly offset by an increase in our Life/Health and Asset Management business segments. Our Life/Health business segment operating profit increased mostly as a result of an improved investment margin.

“The strong increase in operating profit from our Asset Management business segment was mainly attributable to a rise in assets under management (AuM) driven revenues and performance fees. Net income attributable to shareholders grew 9.5 percent to 1.9 (1.7) billion euros in the fourth quarter of 2019 due to an improved non-operating result.”

Giulio Terzariol, Chief Financial Officer of Allianz SE, added, “Allianz had a successful financial year 2019, with operating profit of 11.9 billion euros in the upper half of the Group’s announced operating profit target range.

“Active risk management led to a strong Solvency II capitalization ratio of 212 percent, showing the Group’s resilience in today’s negative interest rate environment and providing a safe haven to our custom-ers and shareholders. We look to generate 12 billion euros in operating profit in 2020, plus or minus 500 mil-lion euros – barring unforeseen events, crises or natural catastrophes.”

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