Re/insurer of the year: Allianz
As one of the world’s largest insurance groups, Allianz has some big responsibilities on its hands.
Serving 88m customers in more than 70 countries and with over 140,000 employees, few firms are exposed to the breadth and depth of risks as the German giant.
But the firm has regularly set the standard for its approach to integrating risk into its capital management strategy.
Much of that is down to the finance team and chief risk officer Tom Wilson at Allianz, whose leadership in risk and capital management has influenced practices across the insurance sector.
As the binding capital constraint, solvency management and communication has evolved significantly after Solvency II was introduced.
Allianz establishes its target solvency ratio based on stress scenarios. The next step was to explain to stakeholders how the ratio would fluctuate within a range around the target, and what actions management would take if the ratio breached the range.
Allianz’s solvency ratio at Q3 2018 stood at 229%. Wilson explains that in its latest announcement, Allianz has said its Solvency ratio will not drop below 180%.
He explains the shift in tactics, saying: “We maintain our management ratio concept, but took the mid-point and the 220% upper-end out of our communication, because once we are above 220%, everyone’s expectations are that we will immediately do a share buyback, and that may not be the best use of capital.”
The greater focus on capital, largely prompted by Solvency II, has allowed insurers to think carefully about their capital is best deployed.
In many cases this has led to product mix, back-book management and portfolio rebalancing activities.
In terms of product mix, Wilson says that Allianz is meeting its communicated strategy to reduce traditional products to 20% of new business while bringing the RoE of all life businesses above 10%.
In terms of back-book and portfolio rebalancing, Wilson points to the sale of Allianz Life Korea and the Allianz Taiwan life back book portfolio.
“However, we have also made impressive investments in terms of building our franchise in Africa and adding to our Asia-Pacific franchise. We are consistently following our longer-term rebalancing objectives by active portfolio management, while maintaining a very attractive dividend yield and share buyback and earnings per growth perspective.”
Solid financial results substantiate the approach. Allianz’s Q3 2018 figures show operating profit grew 20.6% year-on-year to €3bn, driven by its property-casualty business, which experienced lower claims from natural catastrophes, a better underlying claims development and a decreased expense ratio, as well as strong premium growth.