Allianz pins hopes on P&C to drive profit gains through 2024

Global insurer  Allianz will heavily leverage top line growth and margin improvement in property and casualty (P&C) lines to deliver its headline vow for 5-7 percent EPS growth through 2024, officials told analysts and investors Friday in unveiling a new three-year strategy.

Value growth in commercial lines remains somewhat "overdue" and productivity in P&C "is something we still need to drive at," chief executive officer Oliver Bates (pictured) said in opening remarks to Capital Markets Day.

P&C will deliver the group's top growth rate for operating profit through 2024 at an estimated 6 percent CAGR, ahead of 5 percent from asset management and 3 percent from life and health or the 4 percent target rate for the group as a whole, a presentation of the three-year strategy showed.

Those P&C operating profit gains are exclusively a result of growth in underwriting income, at 7 percent per annum through the period, as investment income offers "continued drag," chief financial officer Giulio Terzariol added.

Revenue gains in P&C at 3-4 percent per annum will lead the growth, followed by a boost expected from improved capital management, officials indicated.

Rate growth will remain supportive of those top line trends in commercial through 2022, Chris Townsend, Allianz board member overseeing the line, told the conference.

"Rate has clearly been our friend," he said of a 26 percent rise in renewal rates in 20209 and a 15 percent pace to date in 2021. The rate increase "will continue in 2022, albeit on a more muted level, but in excess of loss cost inflation."

The large-cap commercial business is poised for growth after a recently completed management and business overhaul. Actions to date should push the sub-segment's combined ratio down to 98 percent this year and 95 percent over the coming three years, Townsend said.

"The key is volatility," Townsend said of the large client commercial exposures. "We think the actions taken around pricing, reinsurance, and terms and conditions will drive down that corridor of volatility" towards a "considerable improvement on what it was before," he noted.

Directions in new commercial growth are "not expected to significantly increase natcat exposure," he added.

The mid-corporate segment between SME and large-caps bears significant hopes for growth and brings in more of Allianz's focus on a digital and scalable approaches that can be unified globally across markets, Townsend indicated.

Mid-corporate will also see the top improvement in combined ratio, expected to drop 4pps over the strategy horizon to 93 percent, Townsend claimed.

Expect a move from a property focus towards more profitable lines for the mid-corporate segment plus select product focuses on industry packages, offers for mini-multinationals, renewables and more, "all of which we are well placed to provide," he said.

P&C combined ratios should come down mildly in turn, including a move to a 92 percent ratio for the group as a whole. The retail sector, at some 65 percent of net premiums earned in P&C, can manage a combined ratio in a 91-2 percent range. Commercial may get to a 93 percent mark.

"I think that this is a very realistic expectation," CFO Terzariol said.

Adjusted for natcat, retail is close to target "so it doesn't take us a lot to get into the range of 91-2 percent," he said. Commercial may have further to go, but "it is an improvement we feel we can achieve," Terzariol said.

The mix of business growth and the expected reduction in volatility, along with the contribution of unit Euler Hermes, should be a roughly €0.5 billion uplift to segment operating profit for 2024, the presentation showed.

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