Allianz Leben: High market share for "Riester" products

Allianz Lebensversicherungs-AG (Allianz Leben) made a successful start during the first year of the pension reform in 2001. By the close of the year, the German market leader in private and corporate retirement provision had sold more than 300,000 "Riester" contracts. These new retirement products were ushered in under the rules of the pension reform introduced by labor minister Walter Riester. At a stroke, this gave the Stuttgart-based company a market share of more than 20 percent in the new market for state-subsidized pension provision. "This already gives us an extremely good basis for future growth", commented Dr Gerhard Rupprecht, Chairman of the Board of Management of Allianz Leben, when he presented preliminary balance-sheet figures.

Aside from the pension reform, the increasing readiness of the Germans to make provision has been a major factor in the positive development of business. The 550,000 contracts concluded over the year increased the number of policies written by 37 percent over the fiscal 2000. The first half of 2001 was dominated by the reform of pensions covering reduced earning capacity that already came into force on 1/1/2001. It created a pent-up demand for occupational disability insurance cover. 56 percent of the new contracts commenced in 2001 included cover for disability.

During the second half of the year, business generated under the Act to Promote Private Old-Age Provision (Altersvermögensgesetz) played a key role. Since July 2001, Allianz has been one of the first companies to offer two products qualifying for state subsidy, entitled "Private Pension" and "Fund Pension". These two products were approved by the Federal Insurance Supervisory Office. Customers will receive the state subsidy from 2002.

Early entry into this future-oriented market, combined with strenuous sales efforts, enabled Allianz Leben to conclude 300,312 "Riester" pension plans by the end of the year. Customers had a clear preference for the classic private pension insurance, which accounted for around 90 percent of the "Riester" contracts concluded. Around 10 percent of customers opted for the fund-linked annuity. Preliminary figures released by the German Insurance Association (GDV) indicate that Allianz Leben gained a 21.2 percent market share in "Riester" business.

According to Allianz Leben, exclusive access to around 900 branches of Dresdner Bank has contributed to this sales success. Rupprecht reported that around half the fund-linked annuity insurance policies purchased were sold through Dresdner Bank. He continued that it was precisely in the area of pension products along banking lines that the market opportunities of Allianz Leben had improved substantially since the takeover of Dresdner Bank. A threefold increase in new business was posted between August and December – in the wake of the takeover – by comparison with the period January to July. "The use of Allianz specialists in the branches of Dresdner Bank has definitely paid off," explained Rupprecht, “cooperation is yielding the first tangible successes”.

Allianz Leben increased new premiums written during fiscal 2001 to nearly 2 billion euros, compared with 1.9 billion euros in 2000 ( 1 percent). If the extraordinary effect of a major contract during 2000 is ignored, this would represent growth in new premiums of 17.4 percent. Incoming premiums generated by new contracts went up by 32.1 percent to 569 million euros, which means that Allianz substantially exceeded overall development in the market. Single premiums declined by 8.2 percent to 1.3 billion euros (excluding extraordinary effect 13.6 percent). Premium income at 8.3 billion euros was down by 1.4 percent on the level for 2000 (excluding extraordinary effect 1.9 percent).

It should also be taken into account that sales capacities in the year 2001 were deliberately focused on old-age provision business with state subsidy, which requires intensive deployment of consultancy resources. 80 percent of the new “Riester” contracts commenced on January 1, 2002 and only started generating premium income at this point. Initial premiums are low and then climb significantly in several stages until the year 2008. Gerhard Rupprecht commented: “Pension provision is a long-term business. We sowed the seeds in 2001 and we will increasingly be able to reap the fruits of our work from 2002 onward”.

At 2.4 percent, Allianz Leben was also able to keep the administrative cost ratio (= ratio of administrative costs to gross premiums written) in 2001 constant at the low level of 2000. This was despite substantial investments in training field staff and office personnel, and investment in efficient infrastructure for the new products. “This means we’re continuing to maintain our position as one of the most cost-efficient provider of insurance services in Germany,” explained Rupprecht.

Allianz also developed numerous activities in the area of corporate retirement provision. The company intends to position itself as the first full-service provider in the market delivering all five options for corporate pension provision. A pension scheme has already being introduced in November 2001. Pending approval by the Federal Insurance Supervisory Office, a pension fund is scheduled to come on stream in the 2nd quarter of 2002. Allianz Dresdner Pension Consult (ADPC) was also set up in autumn 2001 to advise interested companies and sectors on the full range of opportunities available for corporate retirement plans, without being tied to a specific product. 2001 also saw successes in this particularly promising area of business. For example, 458 new group contracts were concluded, 12.5 percent up on fiscal 2000.

Allianz Leben increased its market share of mortgage finance through life insurance for the fourth consecutive year. Every fifth mortgage backed by a life insurer in Germany last year was financed by Allianz Leben. Although the market for real-estate finance in Germany underwent a further slide last year and reached new all-time lows, the volume of payments made at Allianz Leben increased by 17.4 percent to 1,036 billion euros.

The value of the investment portfolio at Allianz Leben rose during 2001 by 5.5 percent to 91.6 billion euros. In view of the emerging deterioration in the economy, Allianz Leben took an early decision not to progress the long-term policy in 2001 for expanding the proportion of stocks held in the portfolio. It also decided to reduce exposure to sectors particularly subject to risk. The relative weighting of equities was reduced from 30 percent in 2000 to below 25 percent based on market values. Although the decline in equity markets during the course of 2001 brought about a tangible reduction in valuation reserves, they are significantly above the market average at 11 percent.

The number of employees at Allianz Leben rose by 2.5 percent to 5,621 during the course of the year. Additionally, there were a further 372 (2000: 359) apprentice trainees.

Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue” and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz Group's business and markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) interest rate levels, (vii) currency exchange rates including the Euro – U.S. dollar exchange rate, (viii) changing levels of competition, (ix) changes in laws and regulations, including monetary convergence and the European Monetary Union, (x) changes in the policies of central banks and/or foreign governments, (xi) the impact of our acquisition of Dresdner Bank, including related integration issues, and (xii) general competitive factors, in each case on a local, regional, national and / or global basis. The matters discussed in this release may also involve risks and uncertainties described from time to time in Allianz AG’s filings with the U.S. Securities and Exchange Commission. Allianz AG assumes no obligation to update any forward-looking information contained in this release.