Allianz Group's maximum exposure to the Ethiopian Airlines crash and subsequent grounding of Boeing Co.'s 737 Max 8 aircraft is €150 million, CFO Giulio Terzariol told journalists May 14.
But he added that it was "rather unlikely" that the insurer's Boeing claims would reach that level, and that even if they did, "that would definitely be something we are able to sustain." He also said Allianz's Boeing exposure is limited by reinsurance.
Allianz has set aside reserves of €50 million for the Boeing claims, Terzariol said. Given the potential for claims on Boeing's product liability because of the global grounding of the 737 Max 8 jets, which is still in force, Terzariol said he could not exclude the possibility that the reserve would increase in subsequent quarters. But he noted that the company had not yet received any product liability claims notifications and added: "I wouldn't expect any significant increases of reserves regarding product liability."
Grounding liability cover is typically part of aircraft manufacturers' product liability insurance policy.
Terzariol was speaking after Allianz reported first-quarter profit of €1.97 billion, up 1.6% year over year, mainly driven by a 14.2% jump in the property and casualty segment's operating profit to €1.46 billion.
The Boeing claims were part of the reason why the Allianz Global Corporate & Specialty business unit, or AGCS, which insures large international companies, saw its combined ratio jump to 99.7% from 94.6% in the first quarter of 2018. The company also incurred claims from the collapse of the Vale dam in Brazil. Allianz booked claims of €100 million for Boeing and Vale combined in the first quarter.
Allianz is working to improve underwriting performance at AGCS, and is targeting a combined ratio of between 95% and 96% by 2021. The unit reported a 101.5% combined ratio for the full 2018 year.
Terzariol said that, like its peers, the company was seeing commercial insurance rate rises, but that these, and the remedial actions the company is taking, would take time to show up in the combined ratio.
"I am not surprised that at AGCS we still have a combined ratio of 99.7%," he said, adding that the 2021 target "can be achieved," particularly when rates are rising, but that "there is still more homework to do for us."
Press reports emerged in late April that Allianz was in advanced talks to buy U.K. insurer Legal & General Group PLC's home insurance business. Terzariol declined to comment, but indicated that the company would look into doing further deals in the U.K. nonlife insurance market.
Allianz's U.K. unit bought a 49% stake in Liverpool Victoria Friendly Society Ltd.'s U.K. nonlife business in August 2017, and plans to increase its stake in this business to 70% by the end of 2019.
Terzariol said the combination of the Allianz U.K. and LV businesses would create a "nice platform," adding: "Clearly if we have the possibility to add some books [of business] to our franchise in the U.K. we are going to look at that." But he also noted that the group's presence in the U.K. "is pretty strong already."