Thomas Naumann, the Chief Strategist of Allianz, discussed success-critical decisions in the digital age with the editors of Versicherungswirtschaft, a German magazine focused on the insurance industry.
Traditional hierarchies are a thing of the past. How is Allianz repositioning itself at the management level?
We are impacted by a series of trends that, in my view, are structural, not temporary. This naturally redefines what we need from our employees as well. For example, knowledge of technology, an understanding of the importance of productivity, and creativity are more in demand. Much will depend on the agility with which we respond to the insights and ideas of all employees, regardless of their job title or place in the hierarchy. Employees who interact with customers, for example, can lend considerable expertise and provide good solutions.
The transformation of the holding company is moving rapidly. Is it too fast for management?
I don’t think so. The overwhelming majority of employees and executives is totally committed to and enthusiastic about the vision and implementation of our Renewal Agenda.
Our Renewal Agenda has five main pillars that support one another. The most important of these are: A consistent focus on the customer, end-to-end digitialization, and the change in corporate culture that this requires. The consistent customer focus is the absolute number-one priority, the very objective. End-to-end digitialization is the tool that brings us there. Technology is not an end in itself. It always comes down to the customer having a better service experience. Allianz wants to be the leading service provider, protecting the life and assets of its customers, taking their worries away and helping them thrive financially.
The cat is out of the bag now: Digitialization and automation cost jobs. Allianz is responding with plans to eliminate some 700 jobs in Germany by 2020. Is this the beginning of further downsizing?
My colleagues have already spoken about these measures at Allianz Deutschland. Apart from that, I wish to point out that productivity gains have always been critical to remaining competitive. Allianz would not be living up to its responsibility if, as a market leader, it were to simply lean back and let events unfold. Technological progress will have a profound effect on how people work in the coming years, including in our industry. One thing this means is that we will have to grow in some areas while scaling back in others. To maintain our competitiveness, all Allianz companies must always adapt to changing market conditions and customer needs.
Digitialization and automation also produce new jobs. Will they be enough to compensate for the jobs that are lost?
I don’t know. But in my view, it’s not that relevant whether the numbers from these two trends cancel each other out in one company because we’re talking about people here, not numbers. What’s important is that all of us—employees and executives alike—do what we can to prepare ourselves for the future. We need to familiarize ourselves with new technologies, learn new skills and be open to new things. This is not a task we can leave to others or to the government. We need to do our part.
Will we even need sales offices in the foreseeable future or will everything just be done digitally?
No, our brick-and-mortar sales offices won’t go away. Using the latest digital technology to support our robust sales network is making it even stronger. This gives us a tremendous competitive edge and generates new growth opportunities for our agencies and Allianz. The “digital agency” links online services with the personal support of an agent.
At any rate, large corporate acquisitions by Allianz are expected. What is the objective with these?
We want to grow and, in the course of our work, we naturally look at potential acquisitions as well. We’ve long said that acquisitions, especially in the areas of loss and accident insurance and asset management, can be attractive. And we’ve already made successful acquisitions in this area in recent years, such as small asset managers in the United Kingdom and the Unites States. But we’re disciplined and only act when we can generate sustainable value. With prices as high as they are, that’s not always possible and then we prefer to pass on such an opportunity.
The stock price is up and the business figures look good. You have 86 million customers. You have considerable financial muscle. How can Allianz continue to generate adequate growth, and in which business fields?
Most importantly, our customer satisfaction is also up. When it comes to the willingness to recommend us, we are now outperforming or even leading the market in 55 percent of our business operations. That’s five percentage points higher than last year. Employee satisfaction is also up. That shows that it’s possible to increase customer satisfaction, employee satisfaction and financial performance all at the same time, which many people doubt is achievable. There is tremendous growth potential here in many of our established markets. More growth emerges when you provide customers with high-quality services at competitive prices. We’re expanding our product portfolio to include new retirement solutions and protection against cyber-threats, for example.
Which markets is Allianz focusing on most?
We are equally interested in both developed markets, where we can leverage economies of scale, and growth markets, where we can build upon our experience in other areas or on technological innovations. The focus is on capital-efficient, cash-flow-generating business. Nearly half of our operating earnings in 2016 were from loss and accident insurance, more than one-third from life and health insurance, and one-fifth from asset management.
You’re investing in wind and solar farms. Is that a profitable investment, and how much should it be expanded?
Investments in renewable energies need to pay off. Anticipated profits from wind and solar farms have fallen in recent years amid declining energy prices and inflation expectations. But at four to six percent, depending on the country and currency, the returns are still attractive. One main reason for this is that there is little or no correlation between the specific risks associated with such investments and other capital market risks. We are also pleased, of course, that these investments help us meet our social responsibility and support global climate targets. If the prices for wind and solar farms remain attractive, we will continue to expand these assets, which today amount to about four billion euros.
You have invested in Italian highways through a consortium. Is this a model for Germany, and what would you be interested in here?
We see huge advantages in public-private partnerships. We have already used this model to finance highways and other public infrastructure projects in many European countries. Personally, I am continually surprised at how critically people in Germany view private investments in public infrastructure.
Infrastructure is the new magic word. How heavily have you been involved up to now, and what is your aim?
We have invested over ten billion euros in infrastructure projects, either through loans or equity investments. We increased our infrastructure investments by over four billion euros in 2016 alone. Examples range from the construction of a brand-new sewer line under the Thames in London to local transit systems in Spain, as well as natural gas lines and electrical grids in four European countries. We plan to continue expanding these investments in a meaningful way. It’s hard to say by how much—that depends on the available projects and the prices.
What is the purpose of the billions spent to buy back Allianz shares?
It’s quite simple: We’re returning equity that we don’t need to our shareholders. The shares that we buy back are redeemed.
The global insurance market is increasingly defined by government restrictions. Does Allianz have a response to this?
We have always been accustomed to working in strongly regulated environments. So regulation doesn’t scare us. What’s much more important is that they serve the customer. Sometimes they do a good job of that, sometimes less so.
Allianz is very successful in Turkey. Is this a model project for other countries, and if so, why?
Yes, we used new technologies there to develop attractive products and services that really resonated with our customers, but it’s not just Turkey. We also have many other companies in all business segments that are successful this way. One primary example is our largest company, Allianz Deutschland. Learning from the successful units within the Allianz Group is part of our DNA and a key factor in our success.
Brexit, Trump, Middle East, Southeast Asia. How much do these flashpoints affect your business?
Political unpredictability and macro-political or financial policy uncertainties hinder economic development. This weighs especially heavily on growth and investment activities. Fluctuations on the capital markets are also exacerbated, or can also be tempered by means of cheap money, for example. In this environment, it’s important to have a well-diversified portfolio of business, financial strength, and resilience. Allianz has all of that.
This article has been translated from an interview conducted in the Versicherungswirtschaft Magazine, 8/17 edition
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