Allianz Holdings CEO on "a tough year for the industry"

Earlier today, the insurance giant Allianz published its financial results for full-year 2022, reporting record results for both revenue and operating profit in 2022 and consolidating its position as one of the world’s largest global financial institutions.

But how has the insurer fared in the UK during what has been described by CEO of Allianz Holdings, Colm Holmes (pictured), as a “tough year for the industry”? Across Allianz’s insurance businesses in the UK, the following revenues have been recorded:

Digging into the key financials shared by Allianz Holdings, Holmes revealed that GWP is up about 4.4% across the business to about £3,966 million. Allianz Personal has reported a 3.6% rise in GWP to £2,635.4 million while Allianz Commercial is up 6.4% to £1,330.2 million.

However, reflecting the challenging trading conditions registered by the market in 2022, the operating profit of the business dropped 58.3% to £132.3 million, down from £317.6 million in 2021 while its combined operating ratio rose 6pp to 99.2%.

Behind the operating profit decrease

Examining the causes of this operating profit decrease, Holmes pinpointed that the UK market saw some of its worst weather conditions in 2022 with three storms in February alone and subsidence losses as a result of the summer heatwave – capped off with a December freeze that resulted in high escape-of-water losses in household and also saw increased frequency and severity in motor claims due to the impact of the freeze on drivers.

“But in 2022, by far the greatest impact on our results was the impact of inflation,” Holmes said in a media briefing with Insurance Business UK. “This was driven by supply chain issues, the energy crisis, and labour shortages. These have all had a knock-on impact on our business, both our prior reserves and our current-year loss ratios.”

He noted that the significant growth and improvement seen across a number of lines of business with Allianz Holdings was offset by the impact of inflation. Overall, Allianz experienced gross inflation of 9.5%, which was ahead of predictions and pricing assumptions made at the beginning of 2022. But looking at collision and accidental damage, he said, the inflation rate actually registered as being in the 20s in terms of its impact due to supply chain concerns.

“Inflation is something that we saw very early on in 2022,” Holmes said. “But our expectations and that of the Bank of England was that it would peak earlier and then come down very quickly. I think we all now accept that inflation went higher than anybody's expectations and it's likely to stay with us far longer than was originally anticipated.

“There's a number of things we do to mitigate that. We obviously have supply chain contracts with a lot of our providers that have fixed pricing within them. We look at our entire cost base to see where we can eliminate costs. We have been working with a number of companies to look at Green Parts as replacement parts for vehicles, to reduce the cost of the impact of vehicle damage etc. And we've looked at how to fill labour shortages by using the extensive reach of the Allianz group.”

As part of a large global insurer, the business is lucky to be able to access enhanced resources that help it alleviate many of the supply chain pressures facing the wider market but Holmes highlighted that it is not possible to mitigate inflation to the extent of completely eliminating its impact on claims. As a result, the insurer has also been rating to deal with inflation and to offset its ongoing impact in 2023.

He added that Allianz Holdings expects, “rate to continue to be an issue in 2023 as we deal with the impacts of inflation through increased insurance premiums.”

What 2023 will bring for the business

Despite the challenging market conditions, Holmes highlighted that there is a lot to look forward to as the business faces into 2023 and beyond. He has always maintained that the business’s greatest asset is its people, he said, and Allianz Holdings is “incredibly proud” of the support it has been able to deliver for colleagues to help them navigate the tumultuous external environment.

The business has also continued to develop its relationships with its broker partners and customers alike, with benchmarking research carried out in 2022 confirming that Allianz is No.1 in the market for Commercial Mid-Market, Petplan, LV= and Engineering Inspections. As somebody passionate about strong relationships with brokers, he said, receiving that affirmation that Allianz is maintaining its reputation in both commercial and personal lines for the service it provides has been fantastic.

“Looking forward to 2023, we expect it will continue to be a difficult year,” he said. “Inflation and supply chain disruption will continue to impact on our business – and of course, that will impact on rate in 2023 which we expect will continue to drive a hard market.

“We've also been calling on our broker partners to work with us to deal with the issue of underinsurance which we see as a problem that already existed prior to this economic downturn and is worsening as as inflation rises. So, we’re going to continue to work hard with our broker partners in 2023 to deal with the thorny issue of underinsurance in the UK market.”

What are your thoughts on this story? Please feel free to share your comments below.