(Reuters) — Allianz S.E. on Tuesday set out plans to overhaul its business to help the insurer to overcome a tough business environment, boost sales and profitability and attract new customers.

Like other insurers, Allianz is facing declining investment returns, tighter regulation and a difficult insurance market, prompting Chief Executive Oliver Baete to take action.

His plans, designed to make Europe's largest insurer more profitable and more resistant to financial shocks, include a target of €1 billion ($1.07 billion) in annual productivity gains by 2018, which would be reinvested.

Bernstein analyst Thomas Seidl said the plan to reinvest savings was disappointing. "The market expected some effect on the bottom line," Mr. Seidl, who has a "market-perform" rating on the shares, said in a note.

"The information published today does not materially change our view on Allianz," Mr. Seidl said.

Allianz shares were 1.3% lower at €161.15 ($171.58) by 1345 GMT, outperforming a 1.9% drop in the German blue-chip index.

They have risen 18% since the start of the year, broadly in line with the STOXX Europe 600 insurance index.

Mr. Baete said in a presentation to investors the company would focus more on its customers and this alone was expected to add at least 5 million clients and €6.5 billion ($6.92 billion) to revenue by 2018.

A new digital joint venture in China with search engine group Baidu and the investment firm Hillhouse Capital would help to address concerns that Allianz has fallen behind in Asia's major growth market, where digital premiums are expected to exceed €100 billion ($106.47 billion) by 2020.

"This will restart our ambitions in Asia that we've forgotten a bit over the last few years, particularly in China," Mr. Baete said.

Allianz will also build on markets where it is already profitable and "reposition" uncompetitive operations to release capital to boost growth elsewhere.

Mr. Baete has spent much of this year out of the public spotlight since taking charge in May, working on plans to boost growth, profit and the share price.

The productivity initiatives he outlined to investors on Tuesday are aimed at achieving return on equity of 13% by 2018. The comparable figure for 2014 — adjusted to exclude unrealized capital gains and losses on bonds and other items — was also 13%. Mr. Baete warned there might not be a "straight line" in achieving its renewal plan targets.

"The targeted RoE of 13% is not overwhelming but reassuring. From a bondholder perspective, this is giving comfort," Assenagon asset manager Michael Huenseler, who holds Allianz bonds in his portfolio, said.