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MUNICH, Germany-Allianz A.G. Holding's commercial property business turned a profit in 1996, and the company plans to introduce new products and expanded coverage for the more selective business it writes.

Despite a premium volume drop of 11% to 652 million DM ($380.4 million), Allianz posted a profit of 70 million DM ($40.8 million) last year compared with a loss of 100 million DM ($58.3 million) in 1995.

Manfred Illner, a member of Allianz's executive board, attributes the shift to selective underwriting.

"The drop in volume is partly due to the soft market, but more than half of the reduction came from our giving up unprofitable business," he said, referring to commercial property and casualty business, especially for companies unwilling to adjust their risk management to meet Allianz' new, stricter criteria.

Allianz has a 16.4% market share of the commercial property insurance sector in Germany, down from 17.1% in 1995, reflecting business lost to non-German insurers.

Last year, Allianz revised its commercial property rates-they were raised in some cases and lowered in others-and introduced stricter criteria for risk evaluation. The changes affected 4,500 clients, which altered their policies as a result, Mr. Illner said.

The changes were made at year-end renewals; other policies will also be changed when they come up for renewal.

Commercial property rates for the remainder of its 13,000 industrial clients will be changed in 1997 to continue to benefit companies that implement high risk management standards.

Changes will take place beginning with midyear renewals.

As of April 1, Allianz plans to expand coverage limits within "certain bounds," Mr. Illner said, declining to elaborate. Coverage will be extended to include cleanup costs and other employee property losses, he said. An example is employee cars damaged by emissions.

While such coverage was available in the past, it required a separate policy and premium. Mr. Illner declined to comment on the extent of rate reductions for buyers.

German insurers last year announced they would cut property rates in an effort to keep more German business in the domestic insurance market (BI, Sept. 23, 1996).

Allianz also will introduce a new all-risk product to commercial buyers. The "building-block system" will allow each company to put together coverage it needs under one policy, Mr. Illner said. Endorsements will be available on all-risk policies that will let companies customize insurance as their needs change.

On another front, he said industrial casualty business brought Allianz a slight underwriting loss but a 3% increase of premium volume to 324 million DM ($189 million).

Mr. Illner expects an end to the soft market relatively soon, despite growing capacity in the reinsurance industry. "It just can't continue to drop," he says. "In every sector, we can expect some consolidation" in pricing.