Fierce competition in Germany's €20 billion motor insurance market kept non-life insurance premiums under pressure in the first half of the year, Allianz's German unit reported today.
Premiums in Allianz Deutschland's property and casualty insurance business fell 1.1 per cent to €5.7 billion from €5.8 billion in the first six months of last year, Allianz Deutschland said in a statement.
"The main reason for the decrease is the overheated competition in automotive insurance, which prohibits sustainable pricing in some segments," Allianz said in describing business developments in its home market.
When the insurer reported earnings for the whole group earlier this month, analysts had worried about flagging profitability in its non-life business.
Allianz, the market leader in German automotive insurance, said today it was pursuing a profit-oriented underwriting policy in face of the difficult market and would also realign its Internet auto insurance business to more clearly define its products.
Premium income in the automotive segment fell by 3.9 per cent to €2.3 billion in the first half, while income from other property and casualty insurance lines rose by 0.8 per cent.
Auto insurers have been fighting a debilitating price war for years that pits stock-exchange listed companies like Allianz, AXA and Generali against not-for-profit mutual insurers like number two player HUK Coburg.
Allianz Germany's property and casualty combined ratio, which measures costs and claims as a percentage of premium revenue, rose to 100.6 per cent in the first half from 98.9 per cent in the same period last year, showing the non-life business had swung to an underwriting loss.
The company said the ratio had worsened due to the high cost of expanding its sales network and that it expected the ratio to improve in the second half of the year.
Revenues in Allianz Germany's life insurance business rose 3.9 per cent to €6.9 billion as customers, unsettled by sliding financial markets, sought classic retirement insurance.
Operating profit at the German unit fell 43 per cent to €646 million, while net profit fell by nearly two-thirds to €521 million, Allianz said.
"The economic environment will remain difficult in the second half of 2009," Allianz Deutschland AG Chief Executive Officer Gerhard Rupprecht said in the statement, adding that Allianz's financial strength is an advantage as customers seek reliable insurance partners in the crisis.
Mr Rupprecht earlier this year had called for sustainable prices in car insurance, but rival HUK said no single company could end the price war on its own.
Reuters