Allianz Insurance

A German Heavyweight Celebrates

allianz advertising-Interfoto
Allianz was launched in Berlin.
  • Why it matters

    Why it matters

    Allianz has no time to look back if it wants to stay ahead of the pack in the fiercely competitive, fast-digitizing insurance industry.

  • Facts

    Facts

    • Allianz received its license as a transport and accident insurer on January 13, 1890.
    • The firm was one of the first insurance companies to offer machinery insurance.
    • Former chairman Kurt Schmitt was the economy minister under Adolf Hitler.
  • Audio

    Audio

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With his stern gaze and high forehead, glasses and a three-piece suit, Carl von Thieme looked every bit the entrepreneur he was.

Thieme was 46 when he launched Allianz Versicherungs on Kochstrasse in Berlin in 1890, only 10 years after establishing Münchener Rückversicherungsgesellschaft, or Munich Re.

Germany had been booming since 1871, the year the German Empire was proclaimed. The next few years were known as the “Gründerjahre,” or founding years, marked by a period of rapid industrialization.

Not satisfied with owning the world’s largest reinsurance company, Mr. von Thieme was enthusiastic about the direct insurance business, which offered higher growth rates and profits. He teamed up with banker Wilhelm Finck in Berlin and, on February 5, exactly 125 years ago, Allianz was entered into the commercial register.

Officially, the company was never supposed to be a subsidiary of Munich Re. But for a long time, the two companies were closely aligned through business agreements, interlocking financial arrangements and staffing overlap. They were known as the “Siamese twins” of the German economy.

Yet, there was a deliberate effort to maintain some distance between the two. Munich Re customers feared the competition a new direct insurer would bring, and concessions were made to allay such fears.

On January 13, 1890, Chancellor Otto von Bismarck officially granted Allianz a license as a transport and accident insurer. At first, Allianz avoided the fire insurance business, which was widespread in the industry.

Allianz was one of the first insurance companies to offer coverage for machinery, as well as for burglary, theft and liability.

New business segments were quickly added. Allianz was one of the first insurance companies to offer coverage for machinery, as well as for burglary, theft and liability. Reports of spectacular factory and traffic accidents fueled fear – and demand for insurance. The new era of accelerated industrialization demanded protection against disasters, a boon for the insurance business.

Allianz opened its first foreign office in London in 1893, and acquisitions followed. Its stock had its debut on the Berlin stock cxchange in 1895.

The company was put to its first big test only a year after entering the fire insurance business with the San Francisco earthquake of April 18, 1906. Gas lines exploded and fires destroyed entire blocks. The economic damage amounted to what was then an unimaginable sum of $350 million, and Allianz had to shoulder some of the financial burden.

The next disaster arrived in April 1912, with the sinking of the Titanic, also an Allianz insurance customer. Despite these setbacks, Allianz had become Germany’s largest property insurer by 1914. Business continued to boom until World War I began.

In 1918, Allianz launched the German Imperial Automobile Club and Munich Re automobile insurance. The company was going mobile.

It also began to offer “turmoil insurance” against damage caused by political unrest. The instigator was Kurt Schmitt, a young lawyer who, after working at Munich Re for a short time, switched to Allianz and became its chief executive in 1921, after his predecessor Paul von der Nahmer had developed cancer.

Schmitt founded the life insurance subsidiary and acquired a large number of ailing insurance companies, including Frankfurter Allgemeine Versicherungs AG, or FAVAG, which collapsed in 1929.

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Carl von Thieme launched Munich Re and later Allianz. Source: Allianz

 

Mr. Schmitt had a reputation as an outstanding businessman, but he also had a dark side. He had associated with leading National Socialists, even before Adolf Hitler seized power in 1933, and dined with Hermann Göring several times. He was appointed economy minister in the Hitler regime and often appeared in public wearing an SS uniform.

“There was a grotesque disparity between his political intuition and understanding and his abilities as a business owner and negotiator,” wrote Gerald Feldman, an historian whom Allianz hired to study the company’s role in the Nazi era.

The directors of Allianz, he noted, were “no rabid anti-Semites but anti-Semitic enough to agree with the Nazis’ early measures, and they also put up little resistance later on, when the regime intensified its persecution of the Jews.”

A number of senior executives, such as Schmitt’s successor Hans Hess, known within the company as “Papa Hess,” behaved “very decently” toward Jews and also provided active assistance, according to Feldman.

Yet Allianz was unwilling to turn down new business from the Nazis, providing insurance coverage for factories in concentration camps, and for the shipments of Jewish belongings and securities that had been confiscated. The company also took over Jewish insurance companies. “Allianz was involved,” Feldman wrote.

The longer the war lasted, the more the insurance company’s business suffered. Claims had risen rapidly, but bombing raids paralyzed the workflow. By the end of the war, Allianz’s assets were destroyed, its real estate holdings decimated and its investments in German Reich bonds worthless.

From an accounting standpoint, Allianz was bankrupt in May 1945. But only a few days after the war had ended, a note affixed to the main door at Allianz’s office read: “We will meet on May 18 and see what happens next.” It was an appeal by a company director to his staff.

 

The longer the war lasted, the more the insurance company's business suffered.

Rebuilding was difficult. Because important Allianz buildings were in the Soviet sector, the company decided to move to Munich’s Schwabing district in 1954, with its life insurance business settling in Stuttgart. From then on, Allianz expanded.

Wolfgang Schieren, the seventh chief executive, known in the company by his nickname “General,” looked outside Germany for growth. Among his acquisitions was Italian insurer RAS in 1971. These helped Allianz become Europe’s largest insurance company. Foreign revenue jumped from 2 to more than 40 percent of total revenue.

Mr. Schieren was the embodiment of tradition at Allianz. He was a focused student, a member of a dueling fraternity and a proven agent on the “front” – his euphemism for sales. He adhered to an inconspicuous and patriotic conservatism.

Mr. Schieren was also conscious of his power, expressed in hidden ways. The slogan he chose for the company “…hoffentlich Allianz versichert,” or “Hopefully it’s insured by Allianz,” was as much a symbol of the German economic miracle as the company crest, a stylized eagle.

The company had business relationships with Siemens, Thyssen and Karstadt, as well as Dresdner Bank, RWE and MAN. It was networked everywhere. Mr. Schieren was the secret game master of the German economy, outdone only by Deutsche Bank – much to his annoyance.

In 1991, when Friedrich Schiefer was about to be named the first CEO who had not risen through the Allianz ranks as an insurance salesman, the appointment was thwarted at the last minute.

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The Titanic was insured by Allianz. Source: DPA

 

After German reunification, Mr. Schieren acquired the former East German government’s insurance monopoly, as well as the Fireman’s Fund Insurance Company in the United States. He resigned as CEO after increasing premium revenues from 3.4 billion to 48.7 billion deutsche marks, and remained chairman of the supervisory board until his death in 1996. Allianz owes its position today to the man with the cold eyes.

Successor Henning Schulte-Noelle gradually relaxed his predecessor’s military approach. He successfully completed more than 50 acquisitions, making Allianz one of the world’s biggest financial firms, including the acquisition of U.S. investment management firm PIMCO.

Mr. Schulte-Noelle was not in Mr. Schieren’s world of cross-shareholding, with Allianz as the spider in the web. That model was no longer sustainable. Giving and obeying orders isn’t the way modern financial capitalism works.

Allianz sold one investment after the next, but it also failed to create a broad-based financial services company through the acquisition of Dresdner Bank. In 2002, the company slid into the red for the first time since the end of World War II.

Michael Diekmann, who took the reins in 2003, radically restructured the company, selling off more investments, raising rates and cutting costs. In 2008, Mr. Diekmann sold Dresdner Bank to Commerzbank.

Mr. Diekmann will step down after the shareholders’ meeting in May. With the appointment of his successor, Oliver Bäte, Allianz did something that was impossible in 1991: The company has chosen someone without a background in insurance sales to become the new CEO. Mr. Bäte worked at McKinsey before coming to Allianz.

The old spirit from the days of the “General” has dissipated once and for all. The new chief executive’s job is to pragmatically steer the company through the new digital age, in which the old insurance rep model is no longer sacrosanct.

The Internet now represents the front line for Allianz. And zero interest rates are now threatening the once-appealing institution of life insurance – something Mr. von Thieme would never have dreamed of.

 

Hans-Jürgen Jackobs is Handelsblatt’s co-editor in chief. Kerstin Leitel reports on banks and insurance companies from Handelsblatt’s Munich office. To contact the authors: jakobs@handelsblatt.com, leitel@handelsblatt.com

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