Insurer Allianz warns Irish market 'is not sustainable'
Tuesday November 10 2009
GERMAN insurance giant Allianz yesterday warned the state of the Irish general insurance market was "not sustainable" after their local division posted a 74pc plunge in operating profits for the third quarter of the year.
The stark local commentary came as Allianz SE celebrated a surge in third-quarter revenue from €545m in 2008 to €1.32bn this year, as investment income recovered from write-downs a year earlier.
In Ireland, Allianz's property and casualty insurance business posted operating profits of €5m, starkly lower than the €19m in the same quarter last year but enough to lift the €5m operating losses at the half-year point to breakeven for the first nine months.
Deteriorating
However, Allianz's combined ratio, the litmus test of an insurer's profitability, rose to 104pc in the last quarter, meaning the insurer incurred costs of €104 for every €100 in premiums earned.
"The prevailing view is that the insurance industry in Ireland is making money; these figures show a market that's not profitable," said Allianz Ireland marketing boss Damien O'Neill. "It's not sustainable."
The deteriorating earnings at Allianz came as gross written premiums fell 9.5pc in quarter three while claims rose marginally and operating expenses fell about 7pc.
Mr O'Neill said the falling premiums represented a "double whammy" as Allianz suffered from "people not insuring" and "falls in the sums insured".
Lower sums insured are a particularly prominent feature of the commercial insurance market, which accounts for about half Allianz Ireland's business since many commercial insurance policies are linked to wage bills, which are falling in line with employment and pay cuts.
Mr O'Neill said falling sums insured also applied in personal lines, where property values are falling and new transactions are scarce on the ground.
"The options for insurers are hardening rates and cost containment," Mr O'Neill said.Allianz has already put through "double digit" increases in its personal lines and is increasing rates on commercial lines.
On cost containment, Allianz cut its operating costs by 6.8pc in the most recent quarter and about 100 staff have signed up for a voluntary redundancy scheme, with the last workers to leave in November.
- Laura Noonan
Irish Independent
