Property and casualty insurance providers are in for another tough year in 2010, with prices weighed down by a sluggish economy and too much supply, Allianz said today.
"Any impetus from new business is likely to remain generally weak given the subdued economic outlook," Europe's biggest insurer by market capitalisation said in its annual report.
In particular credit insurance, which covers defaults, is still suffering direct fallout from the crisis, it said.
Allianz said it expected competition to remain tough for property and casualty insurance.
"The market is still awash with sufficient capacity, meaning that prices, too, look set to remain under pressure," the report said.
Because insurers successfully skirted the worst of the financial downturn and had unusually low payouts for damage claims last year, they are likely to continue offering risk cover at lower prices in a bid to gain or keep market share, it said.
Allianz's property-casualty business contributed more than half of the group's €7.2 billion operating profit in 2009.
The German group also said the outlook for life insurance was "marred" by consumer caution about making long-term premium commitments given economic uncertainty and rising unemployment.
"Extremely low long-term interest rates are no help in this respect either," Allianz said.
Low official interest rates hurt insurers' return on their main investments, which are in government bonds.
However, consumers will need to do more for their retirement and healthcare due to the radical restructuring of government pension systems to cope with high public debt, the report said.
This situation should boost demand for asset management, with consumers expected to seek active investment strategies, it added.
Allianz competes against France's AXA and Italy's Generali as well as a host of not-for-profit mutual insurers in its home market.
Allianz chief executive Michael Diekmann - whose total compensation rose by €1 million to €4.8 million in 2009 - said despite the challenging market, he was confident of achieving solid results this year.
Allianz swung to a 2009 net profit of €4.3 billion from a loss of €2.2 billion in 2008, when it was hit by the crisis and the sale of its loss-making Dresdner Bank.
It is expected to achieve net profit of €4.8 billion this year, according to Thomson Reuters StarMine, which weights analysts' forecasts according to their track record.
Allianz's share rose 0.5 per cent to €90.11 by 10.30am, in line with the Stoxx Europe 600 index of insurance shares.
In a note in the report, the company also said it sold 1 billion shares in Industrial and Commercial Bank of China (ICBC) in February, with a capital gain of €400 million.
An Allianz spokeswoman said the company still held 2 billion shares - less than 1 per cent - in ICBC following the sale.
Allianz shares were up 0.37 per cent at 11.54am.
Reuters