This Just In: Allianz Admits it has Problems with U.S. Life Operations

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It is interesting to see that Michael Diekmann and the senior management of Allianz SE have finally acknowledged what most everyone (except for the senior management of Allianz Life) has known for a long time, and that is that incompetent, bureaucratic and visionless management at Allianz Life has led the company into a deep spiral of decline that only seems to get worse.

Regular readers of this blog will likely remember that back in August of 2008, I posted a blog that highlighted the problems of Allianz’s US life operations in a piece titled “Allianz Life – The Sad Decline of a Great Insurance Company

The question raised at that time was, “How can a company, once so successful, fall so far so fast?” Now, along comes Allianz CEO Michael Diekmann who Friday (Feb. 27) admitted in an investor conference that its US life operations need “fixing.” I could say “I told you so” but instead I’ll simply say it’s a welcome admission, because if you don’t admit the problem there is no way to fix it.

Although Diekmann characterized the problems of Allianz Life in purely technical terms — operating losses and widening credit spreads that have hit its fixed-annuity business – it is easy to see that this is just a smokescreen for the real problems. It does not take a detective to read between the lines and see that Diekmann is finally acknowledging that things at Allianz Life are going downhill because of weak management.

Amidst all the other current challenges Diekmann is facing, I give him credit for standing up to admit the problem with Allianz Life. However, for purely political reasons, Diekmann was far less candid in his remarks when it came to what caused this humiliating slide of a great company like Allianz Life and how he intends to fix the problems.

However, I am not so constrained by the politics and don’t need to sidestep those issues. Sure, this has been a tough economic environment, but using the economic melt-down as an excuse for poor performance at Allianz Life is nothing more than a cover-up for real problems that go much deeper. At the core of the Allianz Life problems is a full-blown bureaucratic management system that has systematically destroyed any vestige of an entrepreneurial culture at Allianz Life.

Bureaucratic managers have been moved into the company and they brought with them the calcifying stench of a bureaucratic culture. And the bottom-line is: bureaucrats and bureaucracies are simply inept at managing in times of financial stress and we’ve had a lot of that lately. The result: falling sales, declining income, excessive employee turnover, and flagging staff morale. You get the picture.

Allianz Life is an easy fix. A good recession is a terrible thing to waste. The cruel irony in this situation is that the difficult economic times create a real opportunity for Allianz Life — and any life or annuity company — to grow and perform better. It is a terrible waste of a perfectly good economic crisis to use it as a shield for failed management leadership. Times of economic uncertainly should be boom times for insurance companies because what they do best is sell the security of certainty. If an insurance company has problems in these times it can only be because of incompetent and bad management.

Allianz Life should be an easy fix because at its core it is a great company. Trust me, there are people working at Allianz Life who are even more frustrated at the performance of the company than is Michael Diekmann, because they know just how great the company can be, but feel hindered by senior executives who seem only intent of making themselves look good and feathering they own nest.

Allianz Life has one of the most powerful distribution systems in the industry and it feels deserted by a management group that seems to not understand or care about those in the field representing the company. As they should, the Allianz executives care about compliance, but for the executives leading Allianz Life, the “process” of compliance has become the be-all-and-end-all of the relationship, causing the customer and the agent to suffer.

Allianz still has a great name in the financial community and in these economic times Allianz Life should be benefiting from and leveraging the reputation of Allianz to grow, not to pull the Allianz name down.

The reality is that Allianz Life has the resources and potential to be a shinning light in the Allianz universe, while becoming a respected leader in the North American market. That Allianz Life has not done so and for Diekmann to now acknowledge the company as a “serious problem” for Allianz in North America, is a clear signal that what we have here is a failure of management. A failure for those who placed these bureaucratic managers in senior leadership positions with the company and clearly a failure for the senior executives of Allianz Life who are in way to deep for them to swim.

In a way, I feel bad for the senior executives of Allianz Life, because their instinct is simply to manage following the tenants of a bureaucracy. It is, after all, all they know. They are nice people and good little bureaucrats. It is not their fault that they have been placed in positions of authority and responsibility while lacking the vision or capability to convert the challenges they face into opportunity. Clearly, these executives lack any semblance of the ability to “reminisce about the future” or to build basic “parallel interests” with those who could once again make Allianz Life a great company.

Yes, it is a good first step for Michael Diekmann to finally acknowledge publicly what many already knew. Allianz Life is in a death spin downward at a time when it should be climbing and growing. But, acknowledging the problem is not a solution. Solutions require effective, creative and swift action. Allianz Life will continue to flounder and fail unless and until the visionless, bureaucratic management currently ensconced at Allianz Life is replaced with leaders who have the ability to understand and build an entrepreneurial culture in a bureaucratic world. If that change can be accomplished soon, then the future for Allianz Life – its owners, customers, agents and employees – will be bright. And, if is not, then I will leave it up to you to imagine just how bad it will get.

7 responses to “This Just In: Allianz Admits it has Problems with U.S. Life Operations

  1. It never ends...

    More layoffs are coming. Wholesalers fired on the VA side, and people running into the barn door offices hiding from the reality of not knowing how to lead people. It is really sad to watch. Look to the leadership Tom Burns!

  2. So what is YOUR solution Mac? You have no problem offering up all that is wrong. Please don’t suggest that Diekmann beg you to take the helm….YOUR decision to name your patsy Mark as your successor was the beginning of the end! I have a suggestion for you…stop whining about not being in the spotlight anymore and GO AWAY!

  3. Right ON “It Never Ends”! Tom Burns and his schticky cheerleader facade can no longer cover up his incompetence. Just another example of poor leaders (Mark & Doug) making poor hiring decisions!

  4. The only way to move forward is to hire new leaders who can actually LEAD!!! Mac and Mark were both great managers of people and great leaders. However, when the bureaucrats from Novato and Munich began calling the majority of the shots instead of allowing a more than capable Mark to do so (Jan’s buddy Haywire and Chuck’s buddy Vince are perfect examples), even a great leader like Mark was rendered completely ineffective. Look for the root of the problem and you will find the answer – Bureaucrats never have been and never will be able to lead – especially in uncertain times…

    AZLife’s best bet is to buy The Hartford and once again “merge away” all of the problems its bureaucrats have created by being unable to LEAD!

  5. Is it possible that the Germans will allow their #1 target in North America to be acquired by a Canadian insurance company? After bailing on their Canadian operations several years ago, I can’t imagine the boys in Munich letting the Canadians get the best of them once again. Then again, they too sold a lot of variable annuities with guaranteed benefits that could be sitting under water and requiring lots of capital these days – just like at The Hartford.

    What interesting times! Who was it who once said that companies who turn “uncertain times into opportunities” will be the ones left standing at the end of the game?

  6. Looking To The Future

    You say that Allianz “has one of the most powerful distribution systems in the industry.” Senior management at Allianz has recently talked about “reciprocal committment” whereby those IMO’s who are 100% committed to Allianz will receive 100% comittment from Allianz but those who are not will receive committent from Allianz proportionate to how much business they give Allianz versus other insurance companies. What are your thoughts on that with regard to the distribution system you speak of?

  7. Good question with regard to the “comittment” of the distribution system toward or from Allianz Life, or any company for that matter. It is such a good point that it cannot be properly answered in the “comment” section, but I will post a new blog that offers a more detailed response.

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