Ogden rate, large losses and claims inflation knock Allianz UK COR in Q3

Jon Dye, CEO, Allianz Insurance

Allianz reported operating profit of £100m for the year to date in its Q3 results, with its combined operating ratio slipping to 96.5% from 95.7% at the half year.

While the operating profit was up by £14.2m in the three months to the end of September, Allianz UK CEO Jon Dye, pictured, described the combination of the Ogden rate change which the provider booked in the period and the rise in the effect of large losses as “two fairly unhelpful effects in the same quarter”. He also highlighted the impact of claims inflation on the results.

Allianz had been working since the start of the year on the basis of the Ogden rate being changed to 0%.

However, with the new rate coming in at -0.25% the insurer took an £11m hit on its reserves portfolio.

“I’m completely comfortable with the way we approached it,” Dye stated.

“At the end of last year zero was a sensible number but it turned out not to be the number that the government chose. We would say the government got it wrong again.”

Claims

Dye noted that the business had an “unusual year” for medium to large claims over £2m.

The property account experienced a one-in-10 year for large losses, with an increase in recessionary type claims.

He clarified that though the country was not in a recession, claims for fire and theft were “behaving in this context as if it is”.

The insurer also noted that the cost of claims was increasing ahead of inflation and highlighted the impact of the weakness of sterling against the Euro and the US dollar.

According to the insurer this weakness has driven up the price of materials brought in from abroad to use in repairs across the motor and property classes.

In addition there have been signs that labour costs are also increasing, Allianz said.

“We are clearly in a market where there is quite substantial claims inflation running through both the property and the motor classes,” Dye summed up.

“That is having an impact on Allianz and others in the market place.”

Closures

Gross written premium for the nine months reached £1.49bn with commercial lines coming in at £967.7m, up 13% year-on-year as the COR crept up to 97.3%.

Personal lines saw GWP slip to £523.2m due to the ongoing impact of moving business to LV as the COR was stable at 94.8%.

Dye confirmed that the process of moving business to LV was “pretty much” completed with only a few schemes to go which would be done by the end of the year.

In its half year results, Allianz had confirmed plans to close offices in Woking and Luton.

The branches have now shut with business transferring to other locations. Some 76 people found jobs elsewhere in the business with 46 people being made redundant.

Dye said there were no plans to close any more branches this year or in 2020.

“Our strategy here hasn’t changed,” he concluded.

“We believe it is important to have the branch network that puts our underwriters and business development colleagues close to the brokers that they are serving.”

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