Why does Allianz decrease 25% in the section of Property-Casualty in 2023 Q3 yoy?
As we can see the property-casualty is decreasing significantly by 25%. To confirm whether it is individual risk or macroeconomic effect, we need to check out the market performance.
“Operating profit soften[ed] by 14.6% to €3.5 billion; driven by the Property-Casualty business segment affected by a 7.3 percentage point impact by natural catastrophes on the combined ratio, the highest in a decade,” said the company’s statement on the results.
Based on above description, the half of the decrease is driven by natural catastrophes on the combined ratio.
Definition of the combined ratio: The combined ratio represents the sum of incurred losses and expenses divided by the earned premium. It gauges how efficiently an insurance company operates in its daily business
Allianz had higher natural catastrophe losses in the third quarter of 2023 because of a series of events that affected Central Europe and Italy. According to the web search results, some of the main events were:
- - Severe floods in Germany, Belgium, Luxembourg, and the Netherlands in July, which caused widespread damage and claimed more than 200 lives¹².
- - A powerful earthquake in central Italy in August, which damaged buildings and infrastructure and injured dozens of people³ .
- - A series of wildfires in southern Europe, especially in Greece, Turkey, and Italy, which burned thousands of hectares of land and forced evacuations of residents and tourists .
These events resulted in exceptionally high claims for Allianz, which amounted to €1.284 billion in the third quarter, significantly above the prior year and around 2.5% above budget². These claims had a 7.3 percentage point impact on the combined ratio of the property-casualty business segment, the highest in a decade². This means that Allianz paid out more in claims and expenses than it collected in premiums in that segment.
https://commercial.allianz.com/news-and-insights/reports/claims-in-focus.html
- fire/explosion (excluding wildfires) is the largest single identified cause of corporate insurance losses, accounting for 21% of the value of all claims.
- Natural catastrophes (15%) ranks as the second top cause of losses globally by value of claims.
- Between 2017 and 2021, these claims have an approximate value of €88.7bn
The top 10 causes of loss
The analysis shows that almost 75% of financial losses arise from the top 10 causes of loss, while the top three causes account for close to half (45%) of the value. Despite improvements in risk management and fire prevention over the years, fire/explosion (excluding wildfires) is the largest single identified cause of corporate insurance losses, accounting for 21% of the value of all claims.
During the past five years such incidents have caused in excess of €18bn worth of insurance losses from over 12,000 claims and are responsible for 13 of the 20 largest non-natural catastrophe loss events analyzed. Even the average claim from such an incident totals almost €1.5mn. Claims are becoming more severe due to factors such as higher property and asset values, more complex supply chains and the growth in concentrations of exposures. Costs associated with the impact of business interruption following the aftermath of a fire can significantly add to the final loss total of an incident, given the time it can take to get production back up and running at a large manufacturing plant, while soaring inflation will only challenge claims costs further.
Natural catastrophes (15%) ranks as the second top cause of losses globally by value of claims. Losses continue to rise with climate change and changes to exposures (such as increasing economic activity in natural catastrophe zones).
Analysis of more than 20,000 claims around the world, with an approximate value of €13.7bn, shows that hurricanes/ tornados are the most expensive cause of natural catastrophe loss, accounting for 29% of the value of all claims, driven by the fact that two Atlantic hurricane seasons out of the previous five (2017 and 2021) now rank among the top three most active and costliest seasons on record. Collectively, the top five causes of loss — hurricanes/tornados (29%); storm (19%); flood (14%); frost/ice/snow (9%) and earthquake/ tsunami (6%) account for 77% of the value of all nat cat claims.
Insurers are also seeing new and more unusual loss scenarios. During 2021, the ‘Texas Big Freeze’ in the US and flooding in Germany stand out as events that were both large but had unexpected claims. For example, the ‘Texas Big Freeze’ in February caused huge disruption to infrastructure and manufacturing, with many companies forced into temporary shutdowns by widespread power outages, bringing some large contingent business interruption losses. The event is estimated to have caused economic losses up to $150bn, while Winter Storm Uri caused $15bn in insured losses nationwide.
