Rainer Schwarz: I wouldn't say that. What we've seen is that when clients entrust their money to a provider, now they're even more alert to security and financial strength. As a well-capitalized company, we're profiting from that. But naturally many clients are anxious. We're seeing that, too. Fund-linked products are not so much in demand right now. But classic products, especially traditional retirement insurance, enjoy greater demand. Many people are putting their money into short-term investments.
"Financial strength and security"
Mr. Schwarz, revenues were up in the first half of 2009, but operating profits were down. Has the financial crisis now taken hold at Allianz Deutschland AG, too?
Rainer Schwarz: "Clients are more alert to security and financial strength"
What about the operating profit?
The large decrease in the operating profit is primarily the result of an exceptional effect. The sale of real estate last year generated large gains that didn't recur in 2009.
But of course we're also not totally unaffected by the crisis in the financial markets. As a capital investor, we feel the impact of what happens on the stock exchanges. Our net investment income decreased by nearly 10 percent in the first half of the year compared to a year ago. But the crisis has also shown that our investment strategy is the right one. We respond promptly to negative trends – we'd rather pull out a bit earlier than be forced into emergency sales later. So we started significantly reducing our percentage of equities back in mid-2007, when the DAX was still around 8000 points.
What do you invest in, then? Can you give us any examples?
One example is that we took advantage of the significantly higher interest rates on corporate bonds, and sharply increased our holdings there. That paid off. The markets have calmed down some since then, and share prices have performed well. Another option that's interesting to us is investments in alternative energies – such as wind power plants – that will ensure reliable income over the long term.
Are you planning to build up your stock portfolio again?
We think equities are attractive in principle, and we'll certainly begin investing more heavily again in stocks when we think the time is right. We constantly watch and analyze the markets for that.
Back to the business figures. Premium income for auto insurance was down again. What are you doing to return to growth here?
We're not interested in growth at any price, not at the expense of showing a loss. Our top priority is to make money. So we pursue a profit-based underwriting policy. Our goal is to grow sustainably and profitably.
That's why, starting this fall, we'll be organizing our products in auto insurance even more clearly. Depending on how much advice and service clients want, they'll be able to pick from three choices: First, our classic auto products, which they can sign up for with their agents. Then, "Allianz auto.online service" is our new product for anyone who would rather take out insurance over the Internet, but doesn't want to get along entirely without an agent's advice. And then of course there's our direct insurance line.
The combined ratio in property and casualty insurance has gone up. Why?
The change is basically the result of a higher expense ratio. Since we didn't have last year's positive non-recurring factor from the reduction of the reinsurance ratio to Allianz SE, the expenses of expanding our sales network and other growth initiatives are more evident in the costs. The loss ratio improved only slightly in the first half despite lower losses from storm and flood damages. For one thing, even though net income from settling claims from last year was within the normal range, it was significantly lower than it was a year ago. For another, we had a significant increase in water damage after the long freeze. We expect the combined ratio to improve again in the second half, unless there are major expenses for natural disasters.
What will the next six months bring?
It's very difficult to make any really meaningful projections at the moment. The economic environment, and especially the situation in the job market, is tense. The capital markets will remain volatile in the next few months as well. Last but not least, we have to see what claims the weather brings us during the second half. In July, for example, we've already had a few minor storms.
That's why it's all the more important to work with maximum effort and dedication on every lever we can influence ourselves – for example on the cost end. We've completed the reorganization of our German insurance business, and thus laid an important base for a successful future. Our conservative investment policy has proved its worth in the crisis. We are a financially strong, customer-oriented company. By founding Allianz Bank, organizing a cooperative arrangement between our health insurance line and KKH, and our new products in auto insurance, we've made important choices for our future course.
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