The German insurance group Allianz is folding its operations in Ukraine

Allianz decided to stay just on the other side of the fence

Photo: Konstantin Melnitskiy

The largest international insurance company Allianz SE (Germany) is folding its retail business in Ukraine and has started looking for buyers of its Ukrainian daughter company Allianz Ukraine, three sources of Capital on the domestic insurance market informed the publication.

“The company is on the verge of major changes, but we will be able to announce them no sooner than next Tuesday,” reads the message sent out to partners of Allianz Ukraine at the end of last week. While players on the domestic insurance market of Ukraine also spoke about changes in the senior management of the company, Allianz Ukraine denied such rumors. “There have been no changes of senior management in our company and Garry Andreasyan was and remains the director general,” the press service of Allianz Ukraine informed.

Change of focus

The German company Allianz SE confirmed information about the folding of its retail business in Ukraine. Allianz Ukraine will now focus on corporate business. As for retail business, this sector is currently under review, the press service of the German insurer clarified. “Allianz Ukraine continues to fulfill its obligations to private clients and even conclude agreements with them. “However, in connection with the decision to focus on the insurance of major corporate clients we plan to review all lines of business and analyze internal processes,” says Andreasyan.

Thankfully, in this sphere the Ukrainian company succeeded. Indeed, Allianz Ukrainian is in the top 10 corporate insurers in Ukraine. Last year the company boasted premiums of UAH 112 mn, thus earning 27^th place in the ratings of Ukraine’s largest insurance companies.

Profits or growth

Comparatively low place in this rating has surprised experts on more than one occasion as the mother company of Allianz Ukraine is considered to be one of the largest insurers in Europe and second to the French AXA. But in Ukraine the Germans always have preferred to conduct corporate business, even before the crisis in 2009 when the majority of foreign insurance companies were actively increasing the turnover of Ukrainian daughter companies thanks to the retail business.

Allianz Ukraine decided to open regional offices in the autumn of 2013 inviting full teams of retail experts to work, following the decrease in proceeds from legal entities by 10.1%. In particular, many people moved to Allianz Ukraine from Nasta, which was facing serious financial problems. Industry experts believe that in the foreseeable future many of these employees may be left jobless.

Russian double-cross

While in the first half of 2013 the share of retail business in the portfolio of Allianz Ukraine was 16%, over the same period in 2014 it was 18%. The paradox is that over those six months the insurer’s losses were nearly UAH 11 mn, though earlier the company was highly profitable.

The reason of the company’s unprofitable activity in 2014 was not the retail business, rather the sharp upswing in the value of hard currency, which forced the company to reevaluate its obligations as to re-insurance premiums, Allianz Ukraine affirms. But the Germans are folding the business not due to the losses of Allianz Ukraine, rather the situation in Russia. Allianz SE is not a direct owner of the Ukrainian daughter company. It operates through the Russian company Alliance, which is also owned by the German insurance group.

Over recent years the insurance business in Russia continues to show huge losses for the mother company. Indeed, in 2013 losses amounted to

EUR 38 mn. In 2014, Allianz SE decided to fold its business in Russia in connection with the difficult situation on the Russian insurance market caused by the price competition over the last two years, according to official information published by the Russian insurer. In the opinion of a number of industry experts, Allianz Ukraine became a hostage of this situation. “The Ukrainian insurer is such a small business for Allianz SE that the German insurance giant will simply not divert resources for its management if Russia’s Alliance is sold,” says a financial analyst on condition of anonymity.

Some insurers see a trend in the behavior of the Germans. As one of the largest western financial structures, Allianz SE is demonstrating the behavior of strategic investors on the Ukrainian insurance market,” said President of the Ukrainian Insurance Federation Andriy Peretyazhko. He says foreign owners of other Ukrainian insurance companies could follow in the footsteps of the Germans. “And foreigners no longer want to work in a segment in which there are no transparent conditions for running a business,” Chairman of the Board of the Salamandra Ukraine company Yuriy Yavtushenko is assured.