Following are excerpts from a CNBC interview with Oliver Bäte, CEO of Allianz, and CNBC's Geoff Cutmore and Steve Sedgwick.
GC: Let's welcome Oliver Bäte, the CEO of Allianz, to the set, good morning, nice to see you-,
OB: Good morning.
GC: This morning. Can I just, straight off the top, just ask you to address some of the growth worries that we're hearing expressed here, at the World Economic Forum? You've been busy, reconfiguring Allianz, now, as we look at full year 2019, maybe the-, the tailwinds may not be so strong.
OB: No, the tailwinds are not strong. Last year, when we talked, people looked at me strangely when we said we'll have volatility in the second half of the year, so we had prepared for that, it was very good, and you will see that, in the results coming out, that-, for the industry, that some of us have done very well, and others not so. Now, as we look in to 2019, we don't see immediate headwinds in Europe, it's more in-, in other countries, and in specialty industries that are affected by the slowdown in trade from China and the United States, so that is not a general turndown, but more certain industries that are particularly susceptible to distortions from the China/US conflict.
GC: And yet you are still keen on being a presence in China, and you-, you have an opportunity, through this insurance licence, and congratulations on that-,
OB: Thank you.
GC: Are you worried, at all, that foreign companies operating in the country could become collateral damage, in the difficult negotiation that's taking place?
OB: It's an interesting question. We think very long-term, so when we make these investments, or commitments, to countries, we don't make them for the next 18 or 24 months, so despite disruptions, short-term, we believe that China is also thinking very long-term, and they are recognising that the path to becoming a global powerhouse, and influencing the world, has certain consequences, in terms of behaviour, and that's not easy for them to accept. But they have been a very reliable partner, over many, many years, that's not very fast, in terms of development, but very steady and consistent, so we are very much looking forward to strengthening our presence in China.
SS: There's been some terrific advocates of the Asian emerging Chinese demographic story, none greater than, perhaps, the likes of Tidjane Thiam, who spotted this one a long time ago, as well. Allianz is obviously tapping in to that same zeitgeist, or feeling, that there is something really big happening there, as well. Is that going to act as a necessary offset to what's going on in Europe? Because I'm hearing-, very much hearing very candid comments in Europe, here, about our-, our slow performance, our lack of ability to adapt, the fact that our economy hasn't been able to raise interest rates in the current cycle, as well, and the fact that we're behind on a technological basis, as well. I don't want to write Europe off, because, you know, I like to think I'm a keen European, but people are very worried about where we're at, compared with Asia, compared with the States.
OB: It's true, it's-, it's very true, and there is cause for concern. I'm an optimist, we have been doing very well, don't forget, the last few years, we are at the top of the cycle, and probably over the top of the cycle, and everybody knows we need to make reforms. It's very difficult to do, because we have parts of the population that we have left behind, and they need to be addressed. In my opinion, we are overtaxing people that are working every day, and we have too many people that are getting money out of the system that are not contributing, so these things have to be addressed. By the way, they have nothing to do with globalisation, right-,
OB: That in the US, you don't have proper access to education, healthcare or a pension, has nothing to do with globalisation. So we need to do our homework, and in Europe, we have to make sure we do the reforms that are necessary, particularly investing in technology and technology infrastructure, we are really behind.
GC: Can I push back a little bit on that? Because to the audience who work hard every day, they'll hear that, and they'll hear another capitalist who's saying that more money should go to capital. Is there not a case here for the business community also revisiting the way that the wealth that's being created is being distributed? Because it's not only about tax, it's also about income.
OB: I agree with you, and income for the middle class has not grown as it has for the top part of the society, and for the large corporations, it's very true, and we need to revisit that. Now, looking from Germany, we probably have a little bit of a different view, we didn't have the increasing divide, on the income basis, that many other countries, particularly the US, have seen, so maybe I'm a bit tainted by the balance that we have enjoyed in Germany, but it's true, we need to rebalance that. There is a big debate on how to do that, the immediate reaction is to go to 19th Century recipes, 'Why don't you have just higher tax on income?' I personally have a different view. It's-, you need to think about how you innovate and grow, rather than constantly think about redistribution. The lack of growth is our challenge, not constantly thinking about how you take it out of one pocket in to another.
SS: Oliver, we've just had some German data, and I'll-, I'll just read it to you as it is, and then get you to comment on it. Germany's growth in its service sector actually accelerated better than expected in January, the latest PMI survey is showing, compensating for the first contraction in manufacturing activity in more than four years, I think that underlines a lot of what the conversation we've had so far-,
SS: As well, is, but service sector boosted, we've got the PMI, the broad flash composite figure, to 52.1 from 51.6, the previous month, just barely in contraction for manufacturing, but I'll tell you the number, it's 49.9, as well. Germany is in a strong position, you've just alluded to the fact that there isn't the wage distortions that there are in other countries, as well. Is it possible that Germany can change its psyche, and, and don't get me wrong, I'm a big advocate of the-, the safeguards that Germany's put in, but actually go forth and spend, at all kinds of levels, at an individual level, where they save at two, three times what the British do, for instance, as well, and at a government level, as well?
OB: Um. I'm sorry for being Germanic, I actually think the world is overspending, not underspending. We have higher debt levels today than we-, we had before the financial crisis, the world – particularly the western world – has been over consuming, not underspending, so I have a totally different opinion. The issue is how you spend and where you spend. A lot of debt that states have raised went in to consumption, and redistribution, rather than in investment, like in to education, in to infrastructure, we talked about technology. So I have a totally different opinion-,
OB: I think we should spend more on infrastructure and the future. That's true. But generally saying, 'Let's increase spending,' I'm not a big fan of.
SS: For the sake of spending-,
OB: For the sake of spending. I don't think that solves any of the structural problems that we have.
SS: Good to hear you sticking to your guns, sir. Nice to see you-,
OB: Thank you very much.
SS: Thank you very much indeed for your time, as ever-,
SS: We do appreciate it.
OB: Thank you-,
SS: Oliver Bäte, who is-,
OB: For having me on.
SS: The CEO of Allianz.