Allianz plans to sell US consumer business

German insurer Allianz is planning to sell the personal insurance business of its US subsidiary Fireman's Fund as the unit continues to miss its targets, a German newspaper reported. Fireman's Fund's commercial coverage focused on small and medium-sized US businesses will be integrated into Allianz' industrial insurance unit called Allianz Global Corporate & Specialty, Sueddeutsche Zeitung reported on Saturday.
Allianz declined to comment. Fireman's Fund has been a headache for Europe's biggest insurer for years, repeatedly reporting operating losses and prompting calls by some analysts for a sale of the business. The US insurer aimed to return to profit partly by turning itself into a niche player, concentrating on six industrial sectors and 17 sub-sectors, and cleaning its books of less profitable business.
But Allianz Chief Financial Officer Dieter Wemmer last month said Fireman's Fund was a "disappointment" after its underwriting loss widened substantially. The combined ratio, which measures costs and claims as a percent of premiums, deteriorated to 121.2 percent in the second quarter, compared with 100.2 percent in the year-earlier period.
"The target of making a little underwriting profit this year is completely out of reach," Wemmer told analysts in the insurer's second quarter earnings call. That contrasted with comments made in March by Allianz board member Gary Bhojwani, who is responsible for Fireman's Fund and who had said that the unit aimed to turn an underwriting profit in 2014. Allianz said last month that it had to bump up reserves for past large losses at the unit but stressed that management was looking to achieve "accelerated improvements" at Fireman's Fund and would not rule out cost-cutting as part of the effort.
Despite the problems, Wemmer assured analysts that there was no systemic problem with reserving at Fireman's Fund. Allianz Chief Executive Michael Diekmann, whose contract runs out in December, wants to clear the group of one of the major issues that have dragged down the US business in many of the 23 years that it has belonged to the German group, whether his contract is prolonged for another two years or not, the paper said.