* Need 3-5 years to reach consistent profit
* To become niche insurer with focus on 6 sectors
* U.S. manufacturing renaissance to boost growth
FRANKFURT, Dec 13 Allianz will need at
least three years to turn its troubled U.S. unit Fireman's Fund
into a dependably profitable niche insurer, an Allianz board
The U.S. property-casualty unit has been a headache for
Europe's biggest insurer, which has repeatedly had to build up
loss buffers at the unit, while seeing it slide to an operating
loss last year.
It has also reported a widening underwriting loss for the
first three quarters of this year and was forced to bolster its
reserves for potential claims by over $400 million.
"It will take 3-5 years to get this company to where it is
making a sustainable, consistent profit," Gary Bhojwani, Allianz
board member responsible for the U.S. insurance business, told
"We've begun the process in 2012, so I believe you will see
the first signs of real progress here in the latter part of
Bhojwani, 44, who joined Allianz's board in January, is
working to keep underwriters focused on ensuring policies are
profitable and is turning Fireman's Fund back into a niche
player, concentrating on six industrial sectors comprising 17
"We are going back to focus on dedicated industries and
build up expertise where we know we can get the right rate," he
The broad categories are healthcare, hospitality, real
estate, manufacturing, professional services, and
"There is a fair bit of granularity where we have identified
our ability to compete and where we like the market attributes,"
Bhojwani said of the sub-segments.
Allianz would be willing to maintain existing business
outside its target areas, provided it was profitable and trouble
free, but it would not be adding to those positions, he said.
Staying consistent and focused are qualities Bhojwani said
he admires in the insurance operations at Berkshire Hathaway
and particularly at Chubb Corp.
Aside from improving underwriting and targeting niches,
Fireman's also needs to cut the proportion of premiums coming
from long-tail business, so-called because losses take three or
more years to develop.
This would help avoid future unwelcome surprises in
reserving, after the company had to plump its buffers for
professional liability, workers' compensation, asbestos and
other environmental claims, mostly linked to long-tail risks.
"We've taken significant charges in 2012 and we need to
break that cycle," Bhojwani said, pointing out that the company
now brings in outside advisors to help review reserves.
Bhojwani said no headcount reductions were planned.
"Our expense ratio is high but our bigger problem is our
loss ratio," he said. "I am most focused on that."
Favourable growth and demographic developments will keep the
U.S., the world's biggest insurance market, attractive to
Allianz, Bhojwani said.
"Over the next 5-10 years, we will see a manufacturing
renaissance in the U.S. driven primarily by the country's new
found energy independence," he predicted, adding that focused,
non-generalist property and casualty underwriters could be
well-positioned to make a profit in that market.
The long-term prospects for Allianz are good, he said.
"There are certainly going to be some bumps in the road over
the next 1-3 years but on the 5-10 year horizon, the future is