The year 2017 looks to be the most expensive year for insurers in terms of natural catastrophes. And yet, for Allianz investors there is no cause for alarm. Even in a year marked by numerous natural disasters, persistent low interest rates, and political uncertainties, we delivered an operating profit of 11.1 bn euros and achieved 6.8 bn euros in net income attributable to shareholders. Our robust balance sheet demonstrates our strength and resilience: Our Solvency II capitalization ratio was again strong, amounting to 229% as of December 31, 2017.
These are all clear signs that the Renewal Agenda, our global strategy program, is producing results. One of its objectives is technical excellence – and the figures show how good a grip our people have on the business. We are also making good progress on the other objectives laid down in our Renewal Agenda. Above all, we are placing a stronger focus on customer satisfaction, in addition to financial figures – and customer satisfaction has reached above-average levels in 60% of our businesses. We are growing again, too: Our total revenues increased by 3% this past year, reaching 126 bn euros by year-end. We are making progress in steering our company culture towards a culture of “Inclusive Meritocracy”; I am particularly proud of these developments, which have been confirmed by the annual improvements in our employee engagement survey. I have great respect for how both our in-house employees and our sales partners are coping with the double challenge of implementing the Renewal Agenda while continuing their daily work to provide our customers with the most comprehensive and uncomplicated service possible. My sincere thanks go to them all.
- These are some of the joint achievements we are proud to report for 2017: Asset Management delivered outstanding results, with PIMCO performing strongly and AllianzGI prospering as well.
- In life insurance, we have managed to set ourselves even further apart from the competition by successfully shifting the portfolio to less capital-intensive products, thus adding more value for customers. We were rewarded with a newbusiness margin of 3.4% and a 30% increase in the value of new business.
- We have made some important investment decisions, most recently the increase in our stake in our credit insurer Euler Hermes, a global leader. In the United Kingdom we have entered into a joint venture with the insurer LV=, thus creating the third-largest retail insurer in the country with substantial long-term growth potential. In North Africa, we officially launched operations under the new name Allianz Maroc at the beginning of the year, thus expanding our presence in the region. Acquisitions in Nigeria and Saudi Arabia will further strengthen our position. Last but not least, we have invested in Lemonade, a digital insurer whose market presence and technology-driven business model will serve as an example for customer-oriented and end-to-end digitalization.
- At the same time, we have divested businesses that did not offer satisfactory profitability prospects and will probably be better off in someone else’s hands. This includes the decision to sell our shares in Oldenburgische Landesbank AG, as well as to transfer a large life portfolio in Taiwan. Furthermore, our 2017 balance sheet was no longer negatively impacted by our South Korean life insurer, the sale of which was concluded in the previous year.
Our strength is also noticed by the general public: According to Brand Finance, Allianz’s brand value is the highest of all globally operating insurers. The Allianz brand stands for quality and expertise, trust and reliability – all attributes that have lost none of their appeal in the digital age.
What does all of this mean for you, our investors? The market capitalization of Allianz grew by 12.6 bn euros in 2017. As a result, the value of your shares increased 22.0%. We have proposed to the Supervisory Board that the dividend for the 2017 financial year shall be increased to 8.00 euros, a 5% plus and the fifth dividend increase in succession.
In addition, as a further step to increase your company’s capital efficiency, we have launched another share buy-back program for 2018 worth up to 2 bn euros. The program also shows how confident we are that we will continue to grow our value even in uncertain times. Note, however, that we do not intend to make this a habit – rather, we are taking advantage of current business conditions. Looking at the entire year 2017, the total return on your investment in Allianz shares (share price plus dividend payment) was 27.3% – compared to an average total return across all STOXX Europe 600 Insurance stocks of 11.7% and across all DAX stocks of 12.5%.
So, what’s next?
We are very much aware that we continue to have a lot of work ahead of us. In particular, we need to become more productive and we need to be quicker and more rigorous in tackling necessary changes, especially in the area of digitalization. This will be one of the most urgent goals to pursue this year and over the next few years. It specifically concerns our property-casualty insurance, but not only. The key levers are to reduce complexity and to consistently simplify products, structures, and sales processes; we also need to increase agility, establish scalable platforms, and, of course, continue digitalizing everything we do.
Our aim is to utilize the valuable time and energy of our fantastic staff, both in the back office and in the sales force, to provide even better, even more personal support for our customers. We want to hold on to the things that customers would miss – and let go of things that generate costs without adding value. High productivity is directly reflected in customer value, brand value, and growth, which is why we invest in new digital learning platforms, for example, so our employees can get fit for the future. We systematically look into what skills our staff might need as we go forward, and how the significance of different fields of work might shift – because we want to be able to shape change rather than merely react to it.
With the support from our Supervisory Board, our wonderful employees, and a sharp strategic focus, your Allianz is moving in the right direction. We are well prepared to meet future challenges and continue weathering difficult market environments. Thank you for trusting us to keep creating value for you in the future.