Allianz boss under fire: the arrogance of success

Alliance boss Bäte: “Competence, integrity and stability”

Photo: Sven Hoppe / dpa End 948 the »Handelsblatt« chose the insurance manager Oliver Bäte as Manager of the Year. Not only did he deliver record profits, but he also managed to break the Alliance to turn digital and at the same time to preserve the brand essence of the group – »Competence, Integrity and Stability« -, it said in the laudatory speech. For Bäte, competence means only offering products and services that the company is really familiar with. For him, integrity means maintaining a balance between shareholder and customer interests. And stability is the foundation for customer trust.

Now you don’t have to give too much to the praise of such awards. Every supposed top manager makes mistakes, and prices are usually a very reliable counter-indicator. Just think of all the bankers of the year who stumbled into some scandal soon after receiving their honor.

But the way in which Bäte has betrayed the so-called identity of the Alliance (competence, integrity, stability) over the past year and a half is remarkable. The corona pandemic has demystified the success manager.

The current scandal – which would actually be more of a scandal if it hadn’t happened to Bäte of all people – It’s easy to tell: Allianz, one of the largest asset managers in the world, has launched hedge funds with which investors in the USA lost a lot of money in the wake of the upheavals on the stock exchanges at the beginning of the pandemic. As a result, the first investors filed a lawsuit against Allianz last summer that they had deceived customers about the true nature of the funds.

Lost trust Of course this is a common as well as hypocritical game: Professional investors, of all people – and these were mostly investors Allianz’s so-called “Structured Alpha Fund” – are quick to take legal action if one of your bets goes wrong. Anyone who craves an excess return of ten percent, as Allianz promised, must be aware of the high risk.

But that simple is obviously not the case here. The group is said to have deviated from its own investment rules set out in the fund statutes. The allegations are to be taken seriously, and now the US Department of Justice (DoJ) is investigating in addition to the American Securities and Exchange Commission. Allianz rejects the allegations, the outcome of the legal dispute is open.

It is already clear, however, that the alliance with Bäte at the top made mistakes. Bäte has proclaimed the motto “simplicity first” for the alliance. This is his way of translating Principle 1 of the brand essence (“competence”) into one of his beloved Anglicisms. The disputed funds are anything but simple, and the Allianz people may not have understood the product they sold correctly.

Certainly, however, the alliance leadership around Bäte underestimated the problem. Therefore, now that claims for damages are said to have accumulated over six billion dollars and a penalty by the DoJ cannot be ruled out, it had to issue a profit warning. The share price crashed, brand principle 3 (»stability«) is in danger, Bäte has lost the confidence of investors for the time being.

But what weighs heaviest is that Bäte and Allianz have aroused doubts about their “integrity” (brand principle 2). In the hedge fund affair, the impression arises as if the group wanted to downplay the matter in order to preserve the image of a group vis-à-vis the stock exchange that is robustly and without problems navigating through the corona pandemic. In doing so, Bäte has put the interests of the shareholders above that of the customers. Because the tactic did not work, the alliance ultimately harmed its shareholders.

Bäte let the restaurateurs hang Things are getting worse by the fact that it is already Baete’s second mistake in the corona pandemic. The first concerns the insurance business – and thus the very core of Allianz. When hundreds of thousands of restaurateurs had to close their businesses in the first lockdown after the outbreak of the epidemic, Allianz abandoned customers who believed they had taken out business closure insurance to protect themselves against such a catastrophe.

Under the leadership of Bätes, the insurance industry dealt with the Bavarian Minister of Economic Affairs Hubert Aiwanger a so-called » Bavarian solution «. Insurers who joined the model did not recognize the claims of their customers, but paid “voluntarily” 15 Percentage of the damage. Around 70 percent of the failures are already through State benefits such as bridging allowances and short-time working allowances are balanced. The latter, however, flows to employees and not to the companies.

The alliance then rolled out the model nationwide and thus limited its damage in the Pandemic – at the expense of customers. In fact, the claims of some insured persons may be legally controversial, courts have now passed very different judgments. Alone: ​​That shows that it was first and foremost a failure of the insurer to sell products with sloppily formulated terms and conditions (“competence”). The action of the alliance was all the more shabby when Bäte in the 000170323273 interview with SPIEGEL shortly before the Bavarian solution, the motto was to pay in cases of doubt (“integrity”).

Also in the dispute over the business closure insurance, Bäte put the interests of the shareholders above those of the customers. The manager of the year 948, like many other CEOs these days, likes to talk about the stakeholder culture , a corporate management that takes into account not only the concerns of the shareholders but also those of the customers, employees and society as a whole.

And how easy can all seem to be brought under one roof, since even the largest investors in the world today demand “ESG” from companies, consideration for the environment (“social”) and good corporate governance (“governance”) ).

How seriously managers mean it is not evident in good weather phases such as before the pandemic, but in crisis situations. Bäte failed the first hardness test.