Rome wasn't rebuilt in a day. As difficult as it is to create and manage globe-spanning organizations, reconstructing them after a disaster may be even harder, for then their leaders must contend not only with such environmental factors as business cycles, but with the habits, the cultural tics and tendencies, that led to or exacerbated problems in the first place.
Such is the challenge facing Michael Diekmann, the chief executive of Allianz. The preeminent German insurer has been reeling from a string of disasters, some natural or unavoidable, like the World Trade Center attack and the 2002 European floods, and others of its own making, such as the ambitious expansion efforts of Diekmann's predecessor, Henning Schulte-Noel, which culminated in the ill-timed E24 billion purchase of Dresdner Bank in 2001.
As Senior Editor Andrew Capon notes in this month's cover story, Diekmann has wasted little time attacking Allianz's problems since taking over as CEO last April, shoring up the company's capital base and ordering up sharp cuts at Dresdner ("Back to Basics," page 20). No less ambitious than Schulte-Noelle, Diekmann wants to transform Allianz into a genuine rival to AIG, the world's biggest insurer. But to get there, he must eradicate the bad habits that caused weak financial controls and, above all, restore discipline among the group's insurance underwriters. This he is doing by exerting strong centralized risk controls to determine capital allocations to the group's far-flung global units and to create uniform underwriting standards.
The initial results are promising. The company's share price has soared from a March 2003 low of E38 ($48) to a recent E103; Dresdner's operating loss shrank from E1.5 billion in 2002 to E69 million for the first nine months of 2003. But Diekmann understands it will take time to change the way Allianz does business and turn it into the world-class competitor he envisions. As he tells Capon in a wide-ranging interview, his first in a non-German publication since taking the top job: "A turnaround of this magnitude is not something that gets done in 12 months. This turnaround will continue into 2004 and won't be completed, including Dresdner Bank, until the end of 2005."
For Allianz's shareholders it should be well worth waiting for.