German insurer Allianz avoided another year in the red in 2003 thanks only to a windfall asset sale after its troubled Dresdner Bank unit turned in a second consecutive annual loss of over Euros 1 billion. CEO Michael Diekmann admitted the group had some way to go in turning round Dresdner.
But Diekmann signalled a radical overhaul of the group was not on the cards, saying American property and casualty insurer Fireman’s Fund and industrial insurance arm Allianz Global Risks (AGR) would not be sold. He said the businesses, along with its French insurer AGF Assurances, would stay in the group, adding that he saw no role for Dresdner Bank in sector consolidation.
The company’s banking arm — primarily Dresdner Bank — racked up the highest losses of Allianz’s four divisions. It reported a net loss of Euros 1.27 billion, only a slight improvement on the previous year’s Euros 1.35 billion loss. Ratings agency Standard & Poor’s said Dresdner was likely to burden the group ahead. “Concerns persist about the continued magnitude of challenges that Dresdner Bank’s management is facing,” S&P said, warning that failure for Dresdner to break even in 2004 could result in a downgrade of its debt.
In fact, only one of Allianz’s four core businesses — the property and casualty insurance operation — showed a profit last year. Health and life insurance, banking as well as asset management were in the red. Profitability at property and casualty improved with the combined ratio — a measure of claims and costs as a proportion of income – dropping to 97.0 percent from 105.7 in 2002. The group said this number should fall below 97 this year thanks to more careful risk and cost control. The further this ratio falls below 100 the less company income is eaten up by these expenses. Net profit at property and casualty was Euros 4.5 billion. The life and health insurance arm ended 2003 with a loss of Euros 48 million and asset management made a loss of Euros 270 million.