insurance policy

Predecessor Casts Long Shadow

  • Why it matters

    Why it matters

    The new Allianz CEO came in guns blazing with initiatives to modernize, digitize and disrupt the insurer but now his old boss is returning as head of the supervisory board, Oliver Bäte might have to march to the beat of a more familiar drummer.

  • Facts

    Facts

    • Oliver Bäte became the CEO of Allianz on May 5, 2015.
    • Allianz reported net profit of €6.9 billion in 2016.
    • The company has more than 140,000 employees.
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    Audio

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Oliver BAETE wird im Mai neuer Vorstandsvorsitzender der ALLIANZ
Allianz CEO Oliver Bäte may soon have to look over his shoulder once his predecessor Michael Diekmann becomes chairman of the company's supervisory board. Source: Picture Alliance

If you ask Allianz CEO Oliver Bäte about the qualities of his predecessor Michael Diekmann, he tends to get a bit effusive. Mr. Diekmann “was a great supporter,” he told Handelsblatt. “He was always a great collaborator.” He is delighted, he said, that the former CEO will return to Allianz as chairman of the non-executive supervisory board this spring.

The impression Mr. Bäte gives is that Allianz, Germany’s largest insurer, will be lining up with a dream team at its upcoming annual general meeting. More likely, however, is that the current Allianz boss is about to feel the heat with Mr. Diekmann as his head overseer.

It took Mr. Bäte just one year as chief executive to antagonize some of Allianz’s more veteran employees. His numerous initiatives to catapult the 127-year-old insurer into the digital age met resistance. It was too much at once, too uncoordinated and yielded too few results, his critics said. They’re now hoping that under Mr. Diekmann, the supervisory board will slow the CEO down.

It is one idea after the next, and the employees can barely keep up.

This hope already seems to be playing out. A few months ago, Mr. Bäte wanted to strengthen Allianz through acquisitions, true to his motto: “If you’re not growing, you’re dying.” Those close to him even said recently that he was considering takeovers overseas.

Now all of a sudden, he doesn’t want anything to do with acquisitions, and his budget for takeovers will go toward buying back shares. The company doesn’t need “frantic external growth,” he now says. It feels like Mr. Bäte is already steeling himself for the future power dynamic. He knows full well that Mr. Diekmann was always opposed to takeovers.

The 62-year-old Mr. Diekmann successfully managed Allianz for 12 years. Mr. Bäte was actually his preferred successor. Yet the two men couldn’t be any more different. Mr. Diekmann, who studied philosophy and jurisprudence, is perma-tanned and well-heeled. He appears reserved. He’s quiet and chooses his words carefully, with the air of an elder statesman.

Mr. Bäte is 10 years younger. He’s energetic, usually doesn’t wear a tie and is more approachable. He recently referred to himself as the “Chancellor of Allianz” on a German YouTube news show. In other companies such a boss would be considered cool but not at Allianz. Here in Munich, etiquette takes precedence for many people.

Mr. Bäte apparently has a knack for rubbing people up the wrong way. A 14-year stint at the consulting firm McKinsey still seems to shape his approach, with the CEO constantly pushing new projects. Today it is modernizing IT. Tomorrow it is simplifying the products. Here, an app for additional health insurance benefits; there, a digital folder for the customer to manage their contracts.

One person involved called the different plans “gimmicks” and “toys.” And don’t forget that Allianz is supposed to be bringing its more than 60 subsidiaries closer together. “Mr. Bäte thinks in terms of presentation slides,” said one source who knows him well. However, he doesn’t follow through on his plans, the source said.

It is one idea after the next, and the employees can barely keep up. For many of them the overall strategy behind these measures is a mystery. The talk coming out of almost every division is that the new path has to be “translated” for the workforce, even if some of Mr. Bäte’s proposals make business sense.

Many at Allianz want Mr. Diekmann to return so that things can go back to normal.

The rumbles of complaint aren’t just confined to the company’s headquarters. They have also hit the heart of the business, the sales division, which has more than 8,000 self-employed representatives exclusively selling Allianz products and is a power base for the company. “The representatives are really angry,” said one who runs an Allianz agency in northern Germany. They constantly have to reach higher and higher goals to earn a certain commission, he said.

New, complicated products are frustrating this salesman and the rest of his team, he said. Take a household insurance policy for example. Customers can choose a number of additional services, such as a bicycle insurance. “I need at least an hour and a half to explain the product,” the salesman complained. And then the insurance is still up to 30 percent more expensive than a comparable product from a competitor. Allianz doesn’t appear to be moving away from its long-standing habit of using higher prices to counter its shrinking market share.

The northern German salesman said he didn’t want to hear anything more about the CEO’s digitization plans. Representatives have complained of losing out on commission after an overhaul of their own personalized Allianz homepages. The company blames this on a technical fault and says there have been some “unfortunate individual cases.”

Such a statement does little to appease disgruntled representatives. Many at Allianz want Mr. Diekmann to return so that things can go back to normal. They speak of the chairman of the board “putting on the brakes.” The clear sentiment in company circles being that “employee representatives see Mr. Diekmann’s return as positive.”

Mr. Diekmann still has a strong network within Allianz, and the resistance to his former pupil can’t have escaped his attention. What is more, the new chairman of the board has moved into a room in the shared offices of ALFA in Munich. The letters stand for the initials of the supervisory board members Ann-Christin and Paul Achleitner, former Siemens manager Peter Löscher and the head supervisor of the Deutsche Börse, Joachim Faber. Those close to Mr. Bäte worry that Mr. Diekmann could be negatively influenced by the Achleitners. Paul Achleitner’s relationship with Mr. Bäte is considered tense.

It is already clear that Mr. Diekmann will not be arriving on the scene with a pat on the back for Mr. Bäte. With his acquisitions policy reversal, the CEO was presumably demonstrating his obedience.

According to many senior managers, Mr. Diekmann didn’t want to put a lot of resources into mergers and acquisitions. Allianz sank billions into Dresdner Bank, a loss-making deal that Mr. Diekmann likely remembers all too well. “The only thing that counts in Allianz is cash,” one insider said.

Mr. Diekmann’s concerns about takoevers were felt by Mr. Bäte when he was head of the company’s Southern Europe board. He initiated three acquisitions between 2012 and 2014, in France, Turkey and Italy. There was massive internal opposition to the acquisitions. In the end, Mr. Bäte pushed them through. All proved to be a strategically correct moves for Allianz, but they didn’t change Mr. Diekmann’s basic attitude toward acquisitions.

Two weeks ago, the latest rumors were that Allianz was seeking to take over Australian insurer QBE or that it could buy parts of Italy’s Generali. But now Mr. Bäte says he wants to honor a promise made by Mr. Diekmann. The former CEO had said at the end of 2013 that unused billions from the budget for takeovers would be distributed to shareholders after three years. Only last year, Mr. Bäte considered stock repurchases to be “unimaginative.”

One thing is clear: Allianz CEO Oliver Bäte is quick to adapt.

 

This story first appeared in Wirtschaftswoche. To contact the author: matthias.kamp@wiwo.de

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