Germany’s largest insurance company Allianz has a new chief executive, Oliver Bäte. He is now taking on the challenge of leading the gigantic corporate structure into the digital age.
Like his predecessor, Michael Diekmann, who headed the Munich-based insurer for 12 years, Mr. Bäte (pronounced BAY-tuh) is facing a familiar raft of problems: Low interest rates, which limit the insurer's own investment returns, the shifting of the business to less-profitable Internet channels and job cuts.
“This is one of the most fundamental changes the industry has seen in a long time,” said Alexander Vollert, a member of Allianz's management board who is in charge of property and casualty insurance.
Mr. Bäte needs to find solutions and new revenue streams while his company is still profitable. In 2014, sales grew by 10.4 percent to €122 billion ($139 billion). Operating profit rose 3.3 percent to a record €10.4 billion. But the outlook for this year is less promising, and Allianz is expecting its financial results to stagnate.
It becomes more and more difficult to reach the targets. If somebody would offer me a compensation package, I would quit my job. An independent sales agent working for, Allianz
Mr. Bäte wants to focus on less-costly online sales and other new channels such as social media.
“Around 2,400 of our agents are already on Facebook and answer questions from customers, among others,” Mr. Vollert said.
Allianz has already invested €100 million in new computing and telecommunications infrastructure and to allow customers to buy car insurance online. Another €80 million to €100 million will be invested toward this effort.
“We are upgrading the technology again and optimizing additional products for our online shop,” Mr. Vollert said.
But the new investments in digital products come at the expense of the jobs of insurance agents, whose work and revenue has decreased over the past years. Some allege privately that Allianz is setting unrealistic sales goals for agents to force many out of business -- and ease the company's transition to digital sales.
“It becomes more and more difficult to reach the targets,” said one agent, who didn’t want to be identified. He has worked as an independent agent for Allianz for 10 years. The agent said he thinks that Allianz wants to ruin his business. Some agents created a Facebook group called “Critical Allianz Agents” with 630 members out of a total 10,000 agents.
Members of the group complain about the small profit shares they are in line to receive this year. They fear an increase in online products will make their jobs obsolete and resent the additional sales pressure brought on by low interest rates, which are shrinking Allianz's investment returns and accelerating the insurer's move to cut costs and personnel.
“If somebody would offer me a compensation package, I would quit,” said the agent.
Sales in online shops, over the phone and on websites such as Check24, a comparison website, have risen five-fold over the past few years. At the same time, sales generated by agents have fallen 11 percent.
“Industry 4.0 is reducing the number of employees by 30 percent,” said Mr. Diekmann, the former Allianz chief executive, in February as he presented the insurer's annual report.
Mr. Bäte wants to introduce insurance packages that combine several individual services for one particular person or family.
At Allianz headquarters in Bavaria, Mr. Bäte is preparing for more flexible, modular and simpler products that clients can build on their own online. He wants by the end of the year to draft a new strategic plan for Allianz, people close to the insurer said. He is reportedly on a listening tour to all parts of Allianz, including the workers’ council.
He is unlikely to shy from tough decisions.
“Mr. Bäte can also be emotion-less, if he has to,” said a former colleague, who worked closely with Mr. Bäte at McKinsey, the global consultancy. Mr. Bäte worked at McKinsey from 1993 to 2007 before joining Allianz’ board as chief operating officer in 2008.
While he is said to be open, curious and enthusiastic, he has his feet firmly on the ground, colleagues say.
“At McKinsey, Mr. Bäte was known as a dry analyst, who could cut through complicated relations,” the ex-colleague said.
Mr. Bäte wants to introduce insurance packages that combine individual services for a person or family. For instance, a package that covers liability, legal insurance, personal property and homeowners' insurance – with customers slicing and dicing to suit.
He's also bringing on younger talent. Allianz recently hired new executives who have lived abroad. Many are women.
“We can offer all customers, who live in an area with many ticks that summer, an insurance against any ramifications from tick bites,” said Mr. Vollert.
In addition to digitalizing the company, Mr. Bäte must deal with older problems, such as low interest rates and troubles with the U. S. asset manager Pimco, whose founder, Bill Gross, left the company last year and took many investors with him.
Pimco had been a profitable haven for cautious U.S. investors in the run-up to the financial crisis. But Pimco's funds volume sank after the crisis took hold and volume plunged to €117 billion from €293 billion, precipitating Mr. Gross's departure.
Allianz's 2013 revenue from asset management, which includes Pimco, represented about 7 percent of its €110.8 billion in 2013 revenue. Despite the fact that Pimco recovered and acquired new investors, the fund's business still suffers.
Allianz so far has ruled out a sale.
The other big challenge are low interest rates, which aren't generating the returns to let the insurer make good on its older policies.
Allianz still has to pay off on policies that guarantee a 4 percent return to their holders.
At the same time, government bonds are only generating less than 1 percent return and regulators have so far prevented Allianz from investing more of its clients' money into the riskier stock exchange.
As a result, insurers are looking to invest in government-backed infrastructure projects, such as wind parks, but the availability is often limited and the legal framework remains questionable.
To tackle these challenges, Mr. Bäte will have to engineer a cultural change, turning staid Allianz into a hip, relevant Google or Tesla.
This will be a challenge, because Allianz is still “working under the old ecosystem,” as someone close to Mr. Bäte and Allianz put it.