Allianz said its new life insurance products without long term interest rate guarantees will require less capital backing, benefiting both policy and share holders.
Europe's biggest insurer is launching the savings products in Germany early next month in response to low capital market interest rates and tighter European Union insurance regulations.
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The policies will give the insurer more flexibility in using its risk capital than classical life insurance savings products that carry guaranteed interest rate, Allianz said on Tuesday.
"When we have more flexibility and less capital constraint, we can share more return with the customer," Allianz's Chief Financial Officer Dieter Wemmer said in a presentation to analysts and investors.
Wemmer said the new products combined the customer's perspective with that of the shareholder.
"We're offering a better deal for both of them," he said.
Low interest rates in the wake of the financial crisis have slashed the income insurers can earn from their investments in safe assets like government bonds, making the burden of meeting past pledges to policy holders increasingly onerous.
In addition, new EU safety rules for insurers known as Solvency II, due to come into force in the next few years, are expected to place a heavier capital burden on business with returns that are guaranteed over the lifetime of the policy.
Allianz, by far the biggest life player in its home market, will offer the new policies alongside traditional guarantee products and was not reacting to Solvency II in a "slavish" way, Wemmer said.
For several years, German insurers have been required to trim the minimum interest rate they are allowed to offer on the guarantee products.
The rate now stands at 1.75 percent for new policies, which further reduces to around 1 percent once insurers' costs have been deducted.
"Many customers ask if that's really a worthwhile promise," said Alf Neumann, a board member at Allianz's German life insurance unit.
Rival insurer Ergo has also reworked its product offering.
Allianz hopes its new policies will attract customers because they can offer a higher overall return if capital is not tied up to meet the annual guarantee.
As well as revamping its product line, Allianz is also seeking better yields from its investments.
In the presentation, Allianz's German life business said it aimed to double its exposure to alternative investments such as real estate, private equity funds, infrastructure and renewable energy to roughly 20 billion euros ($26.2 billion) in the medium term.
It also expected to ramp up its activity in direct debt financing in areas such as residential and commercial mortgage lending, as well as in corporate and infrastructure loans, bringing the total volume to around 25 billion euros in the medium term, from 16.3 billion euros now.
(Reporting by Jonathan Gould and Ludwig Burger; Editing by Elaine Hardcastle)