Natural catastrophe losses hit the 2023 property/casualty profit for Allianz SE in 2023 but the group reported higher income in all of its segments, while watching rising economic, technology and geopolitical threats, its chief executive officer said.
Geopolitical tension that brought war close to Germany’s border is among a number of issues concerning Allianz, said CEO Oliver Bäte in a conference call. Others are increasing natural catastrophe costs, inflation, political polarization and AI, he said.
Climate change has been a know problem for a number of years but the real costs are hitting the industry now, he said.
Allianz had a strong performance in 2023, with high return on equity across all segments, particularly a strong life/health gain, Bäte said. The property/casualty segment can do better and will improve in 2024 while dealing with the consequences of inflation, he said.
Fourth-quarter net income attributable to shareholders rose to €2.15 billion ($2.33 billion) from €1.10 billion a year ago. The property/catastrophe combined ratio worsened to 94.9 from 94.3.
The operating profit for the year was €14.75 billion, a record level and 7% higher than the previous year, said Chief Financial Officer Claire-Marie Coste-Lepoutre in the call.
The group has a conservative outlook for 2024, which some might call pessimistic but Bäte said is cautious given the many uncertainties outside the group’s control. The operating profit outlook is
€14.8 billion plus or minus €1 billion.
In the P/C segment, Allianz had a high catastrophe load of €500 million for the fourth quarter — about €300 million of that in Germany, Coste-Lepoutre said. The retail combined ratio was higher than commercial due to the nat cat load, she said.
Nat cat losses for the year rose to €2.32 billion from €1.78 billion the previous year, driven by a series of storm, hail and flood events throughout the second half, according to a slide presentation.
The P/C, life/health and asset management segments a registered strong growth in 2023, Bäte said. Allianz is able to manage results if any of those segments comes under pressure, he added. Allianz will continue to improve the P/C expense ratio this year and had a good investment result in the segment despite volatility, Bäte said.
Commercial lines recovered well following the COVID-19 crisis, and Allianz, as a leading entertainment insurer, retains its dominance, Bäte said.
Allianz Global Corporate & Specialty saw double-digit growth, as the group consolidated by forming the Allianz Commercial unit and the MidCorp middle market unit, with gains in lines such as renewable energy, he said.
Through Allianz Global Partners, the group reported strong growth in health and travel insurance, two areas that recovered well since COVID-19 with key dominance in customer service, he said.
In the L/H segment, the new accounting regime highlighted strong cash flows and new business margin, Bäte said. This means new business no longer consumes capital for investors, he said. The life segment is now self-funding so Allianz “can push the growth button,” Bäte said. As the world’s third-largest life insurer, Allianz’s
life assets under management are in-house and self-financed, he said.
Coste-Lepoutre said the L/H segment’s fourth-quarter growth came mainly from the U.S. business and Italy.
The asset management segment was under severe stress in 2022 and early 2023 due to fast-rising interest rates. The majority of Allianz’s asset management business is in fixed income, putting pressure on asset value and performance, according to Bäte.
For the year overall, Allianz’s Pimco unit saw inflows revive, and early 2024 is seeing continued growth, he said.
Allianz earlier sponsored a €250 million catastrophe bond giving the group three years of protection against European windstorms. The risk transfer capacity transaction is part of the overall catastrophe reinsurance purchased by Allianz. It supplements and diversifies the group’s sources of reinsurance protection against natural catastrophes and provides protection from January 2024 to December 2026.
The cat bond will be triggered by an insurance industry loss index, Allianz said.