ALLIANZ: GIVING CREDIT WHERE CREDIT DUE

Nothing has dominated the media and the presidential election campaign more in the past few months than the tumultuous financial crisis strangling economies worldwide. Virtually all the news has been bad.

Who could have ever imagined (other than Karl Marx) that some of the great symbols of American finance, such as Lehman Brothers, Merrill Lynch, Bear Sterns, AIG, Freddie Mac, Fanny Mae, and Washington Mutual would either expire or be severely burned in such a crisis? The rest of the world has not escaped the pain of the crisis either. Many European banks along with icons Fortis and Hypo Real Estate have been put on life support. And, Iceland is in the midst of a true meltdown.

With events moving at the speed of a particle collider there is no telling how many more companies will be placed on the “burn after acting” list. Even some of America’s most secure and stable insurance companies such as The Hartford and Met Life have been forced to scramble for fresh capital in an effort to protect their financial ratings and stability. There have also been questions raised regarding the strength of Prudential.

However, through all the bad financial news one company has emerged as a pillar of strength with its reputation not only maintained, but actually enhanced. That company is Allianz SE of Munich, Germany.

A Tower of Strength

While other companies have fallen like fall leaves, Allianz SE has remained strong and stable. In fact, Allianz SE exhibited such strength in the crisis that it was in position to bailout The Hartford to the tune of $2.5 billion dollars. Allianz SE is often mentioned as the one company best prepared to purchase pieces of failed companies such as AIG. In order to shore up and prevent the failure of banks, the German government has made available a $680 billion rescue package. Allianz SE, the owner of Dresdner Bank, has responded by saying, “Thanks, but no thanks.” A spokesperson for Allianz was quoted as saying, “We (Dresdner) are well capitalized and don’t have a direct need for outside help.”

How is it that a company such as Allianz SE can stand so strong while other seemingly well capitalized powerful companies are brought to their knees? The answer is actually fairly simple – it boils down to strong, consistent, honest and focused leadership.

For almost a decade I had the opportunity to observe the top leadership of Allianz SE. After Allianz acquired LifeUSA, I was Chairman and CEO of Allianz Life of North America and served on the Allianz SE International Executive Committee. As a member of the executive committee I met quarterly with the board of management of Allianz SE in Munich. In addition I was invited to attend and participate in a number of international Allianz SE management meetings. It was at these meeting that I gained an appreciation and respect for the senior management of Allianz SE. Two of the Allianz leaders who stood out as especially impressive were Michael Diekmann, the Chairman of Allianz SE and Helmut Perlet, the chief financial officer of Allianz SE.

What impressed me about these two leaders? Again, the answer is simple. These two leaders and most of the members of the board of management were focused on what the company was about. They were consistently true to their vision and they exhibited the strength and integrity not to be deflected or moved by peer group pressure. When other companies appeared to be outperforming Allianz and there was pressure to follow, they stayed the course. From my perspective, the most impressive entrepreneurial management trait they exhibited was the ability to recognize, understand and seek to manage risk.

Some equate fear of risk as a fear of failure, but that is incorrect. Some companies become so paralyzed by fear of failure that they fail to take any risk. Michael Diekmann, Helmut Perlet and other senior executives understood that without risk there is no potential for success. However, it is the approach to risk that determines the potential for success. Michel Diekmann and most of the board did not fear failure, but they did fear failure to understand and manage risk. The knew that risk not understood, examined and managed is nothing more than a gamble, and gamblers, no matter how sophisticated they may appear, eventually lose. (As I have written before, the core reason companies failed during this crisis was a failure to recognize risk or the suspension of an understanding of risk.) It is this respect for, understanding and desire to manage risk, that has paid dividends for Allianz SE and allowed it to remain strong as other companies failed.

Triggered by proposals put forward for the development of Allianz Life, I had many a heated battle with Helmut Perlet who is a tough but fair task master. Despite our often “energetic” exchanges, I liked and respected Mr. Perlet because he never attempted to judge the proposal (for which he had no experience), but he always pushed hard to make sure the risks inherent in the proposal were understood and could be managed.

Certainly Allianz SE has not been immune to failures. The purchase of Dresdner bank (approved by Diekmann’s predecessor) comes to mind, but that is the nature of business. What separates Allianz SE from those companies that failed as a result of their failures while Allianz SE remains strong is an understanding of the risks that are taken and a strategy to manage those risks in good times and bad. It comes from a very fundamental philosophy that approaches every decision on the basis of understanding the downside as well as the upside and preparing for both. Most companies expose themselves to real risk and ultimate failure when they make decisions based only on the upside.

I have clearly voiced my concern and disagreement with many of the tactical decisions that have been made by Allianz in North America. I am disappointed that the value of the Allianz brand and potential market success is being destroyed by poor tactics, inexperienced and plain old incompetent management. However, I remain impressed by and respect the strategic leadership provided by Michael Diekmann. Despite pressure to “do what everyone else is doing,” Diekmann has remained consistent, focused and determined to do the right thing the right way. Unfortunately, it has taken a crisis to show that such management is, in the end, always the best. It is not how someone leads in a crisis, it is the preparation for crisis that identifies the true leader. Clearly, the shareholders, customers and employees owe Michael Diekmann a debt of gratitude for they type of strategic leadership he brings to Allianz SE.

8 responses to “ALLIANZ: GIVING CREDIT WHERE CREDIT DUE

  1. Pingback: Five Reasons Why Allianz SE Will (Should) Buy Hartford

  2. Thanks Bob, a really interesting insight into the boardroom. I’m certainly glad to be under the leadership of MD. Only hope I get to see Munich HQ for myself at some point!

  3. Per SalsyDSt1rea: cucciola scusa se non ti ho risposto, ma sono al verde, dopo ti spiego tutto e ti mando un messaggio! Ahahah, Louis che vuole una bambola che vola e che dolcioso Niall: “Tutto quello che hanno questi ragazzi” awwwww! <3Sono fantastici, non ho niente da dire! BUON COMPLEANNO ZATN!!!!!

  4. That’s a brilliant answer to an interesting question

  5. yummi that looks delightful and probably tastes grand. but in all honesty, preparing our traditional dishes takes up so much time that I've given up!!!Did any one of you ever prepare "cossa mahshi?"(stuffed courgettes) or "stuffed artichokes"they are both delightful but ….suzy vidal

  6. WOW! What a great looking breakfast! I want some of that orange custard. Great job on the kayaking- such a fun activity. I try to continue eating as normally as possible on vacation with a treat here and there

  7. If you’re reading this, you’re all set, pardner!

  8. That’s a nicely made answer to a challenging question

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