Allianz 2020 Interim Results: Expanded business delivering as planned

Authored by Allianz

Allianz Holdings plc, the holding company which owns Allianz Insurance and LV= General Insurance (LV= GI) announces its interim results for the six months ending 30 June 2020.

Allianz Holdings:

Financial highlights:

• GWP doubles following acquisitions of LV= General insurance and L&G General Insurance
• £93m (109%) increase in Operating Profit
• 3 percentage point improvement in COR
• Over 950 COVID-19 Business Interruption claims, totalling £14m paid out to date.  Total impact £80m net of reinsurance
• COVID-19 travel insurance claims impact £10m
• £30m made available to car and motorbike customers through Green Heart Support
• £10m donated to COVID-19 Support Fund

Jon Dye, CEO, Allianz Holdings said: “This set of results is broadly in line with our expectations and has been achieved against the backdrop of an unprecedented human, economic and social crisis. Allianz is growing in a way which is making our business more resilient and better prepared to meet the challenges within the market and the wider economy.

“These results could not have been achieved without the hard work, dedication, flexibility and indeed creativity of our people. I would like to thank all of my colleagues for the support they have given our customers, our communities and each other during a financial quarter unlike any other.”

Allianz Insurance:

Allianz Insurance experienced a small decline in premium income (3%) compared to HY 2019 with both Commercial and Personal lines books running slightly behind prior year. Factors driving this performance include the reduction in corporate partner business in Personal and the Motor and Casualty lines in Commercial seeing the impact of increased mid-term adjustments, return premiums, reduced exposures and lower new business levels.

Total Operating Profit declined by 16% (£14m) compared to HY 2019. COVID-19 business interruption claims impacted the HY 2020 result by £80m, net of reinsurance, although the final figure will be dependent on the result of the ongoing FCA High Court Test Case.These figures have been partially offset by the claims effects of the economic slowdown, in particular in Commercial Motor and Pet.

In Commercial, all lines other than Motor saw incurred claims higher than planned as result of the February storms and COVID-19. Motor claims frequency is now moving back towards pre-lockdown levels. The Engineering, Construction & Power insurance business has bucked the trend, growing strongly in the first half of the year supported by some large wins in Q1 and has produced a good level of profit.Reduced economic activity resulted in reductions in new business enquires in Packages, Motor Fleet, Motor Trade and Casualty during Q2. These are now slowlyimproving but are not yet back to normal levels. We remain concerned about recessionary impacts in all aspects of the Commercial book.

Service levels have remained high across Commercial lines during the crisis demonstrating the value Allianz’s investments in digitalisation and service bring to our customers and brokers. Engagements with brokers have increased during Q2 with positive feedback evidencing that we are working together more efficiently and productively. Over 950 payments have been made against COVID-19 Business Interruption claims, totalling £14m to date.

Personal Lines have performed well in the first half of the year. Petplan new business performance in Q2 was particularly positive, demonstrating strong, organic growth, supported by high service levels delivered by the remote workforce. Allianz Musical Insurance has weathered the crisis well but premium incomes are depressed by the impact of COVID-19 on the live music industry. Allianz Legal Protection has maintained a strong service position for customers but is also seeing COVID-19 impact as court cases and legal processes slow down.

The first half of 2020 has been dominated by COVID-19 and Allianz has worked hard to provide support to brokers, customers and communities. In Q2, Allianz Insurance and LV= GI donated a total of £10.1m to the COVID-19 Support Fund, set up by the insurance industry in partnership with the Charities Aid Foundation, to provide immediate relief to charities affected by COVID-19. In addition, Petplan paid over £700,000 to pet charities to cover their lost revenue from rescue pet premiums during the crisis.

Allianz has continued to respond positively and flexibly to adjustments to exposure, change of use and policy conditions, and payment restructuring during the crisis. A special mention should be made of our Engineer Surveyors who have continued to work throughout the lockdown to provide engineer inspection services with priority given to key sectors including the NHS.

Q2 also saw the introduction of the Allianz Claims Hub, a digital platform for brokers and motor fleet customers to report motor fleet claims and track all types of motor claims. Allianz’s Claims App, Allianz Notify, has also been launched to enable fleet drivers to quickly and easily report their own claims.

LV= General Insurance:

*Includes L&G General Insurance which became part of LV= GI in January 2020.

**Numbers reported for 2019 have been restated to be shown on a consistent Allianz accounting basis.

Steve Treloar, CEO, LV= GI, said:“In the first half of the year LV= GI achieved strong growth through the acquisition of the general insurance business of L&G. We have firm foundations as a business with great products and excellent service and we continue to look at ways in which we can adapt our products to ensure we’re meeting the needs of all customers. These are unprecedented times and I’m proud of everything we’ve done over the last few months to support our customers through COVID-19.”

LV= GI grew strongly in the first six months of the year with 31% growth in premiums to just over £1bn (HY 2019: £775m) following the acquisition of the general insurance business of L&G, and operating profit at £106m (HY 2019: £34m) with an improved combined ratio (COR) of 89.8% (HY 2019: 97.9%).

Operating profit has significantly improved compared to HY 2019, primarily as a result of claims frequency being below normal levels due to fewer cars being on the road during the lockdown. As previously announced, £30m of premium refunds has been made available through Green Heart Support for direct car and motorbike customers struggling financially as a result of COVID-19 but the impact of this will mainly come through in the financial results for the second half of the year.

In response to COVID-19, motor rates have been moderated given the current levels of claims frequency. However, the underlying drivers of cost and claims inflation remain unchanged, driven by a number of factors including vehicle theft, the increasing cost of repairing cars due to technology and the delay of the whiplash reforms. Approach to motor pricing continues to be done on a cautious basis given the uncertain market outlook. Home claims in Q2 have been broadly in line with expectations and COVID-19 has more recently led to 6,000 travel insurance claims at a cost of around £10m.

LV= GI’s award winning service continues to attract and retain customers with satisfaction levels remaining very high, and the business was again ranked in the top ten in the Institute of Customer Service UK Customer Satisfaction Index for the third consecutive time.

The first half of the year saw LV= GI launch its first monthly subscription insurance product called Flow. Flow car insurance is a flexible, online product with a significantly shorter question set, no long-term commitment, no instalment charges and the freedom to change or cancel the policy whenever the customer wants to, with no additional costs. Car insurance is the first product to be made available with Flow with additional products currently being explored.

In responding to COVID-19, LV=GI continues to help customers cope across the direct, broker and intermediary channels by temporarily changing cover to reduce premiums, not charging administration or cancellation fees and waiving excesses on claims for the hardest hit financially. Free enhancements to cover for customers who are NHS and key workers was also provided and the amount paid to some suppliers, including bodyshops, breakdown drivers and home contractors, was increased. It is also expected that customers will need further help through Green Heart Support and the £30m available when the Government’s furlough scheme ends later this year.

In order to strengthen the service it provides to customers, LV= GI also recently announced proposals to reshape its business by fully integrating the acquired general insurance business of L&G into LV= GI and ensuring a greater focus on customer service and technical capabilities in its existing Claims function. These changes are proposed to take place over the next 2.5 years and it’s expected that around 600 of the 4300 roles in LV= GI could be impacted but where possible redundancies will be minimised by finding suitable redeployment opportunities and through natural attrition.

Commenting on the outlook for Allianz Holdings, Jon Dye said: “We continue to live in times of significant uncertainty. COVID-19 will have an impact on our everyday lives, our business operations and our society for months and years to come. The economic outlook is challenging and it is difficult to predict the effects of Brexit. However, I believe that Allianz will emerge stronger from the current crisis and our priorities will continue to be the support we can offer to our customers and to our colleagues.

”We are finding ways to work more efficiently and more productively with our brokers and I believe we are the partner with whom they can change their business for the future. The flexible product and service propositions we are introducing will continue to benefit our intermediaries and policyholders.”