FRANKFURT (Reuters) - Allianz will need at least threeyears to turn its troubled U.S. unit Fireman's Fund into adependably profitable niche insurer, an Allianz board membersaid.

The U.S. property-casualty unit has been a headache for Europe'sbiggest insurer, which has repeatedly had to build up loss buffersat the unit, while seeing it slide to an operating loss lastyear.

It has also reported a widening underwriting loss for the firstthree quarters of this year and was forced to bolster its reservesfor potential claims by over $400 million.

“It will take 3-5 years to get this company to where it ismaking a sustainable, consistent profit,” Gary Bhojwani, Allianzboard member responsible for the U.S. insurance business, toldReuters.

“We've begun the process in 2012, so I believe you will see thefirst signs of real progress here in the latter part of 2013.”

Bhojwani, 44, who joined Allianz's board in January, is workingto keep underwriters focused on ensuring policies are profitableand is turning Fireman's Fund back into a niche player,concentrating on six industrial sectors comprising 17sub-sectors.

“We are going back to focus on dedicated industries and build upexpertise where we know we can get the right rate,” he said.

The broad categories are healthcare, hospitality, real estate,manufacturing, professional services, andTechnology-Media-Telecoms.

“There is a fair bit of granularity where we have identified ourability to compete and where we like the market attributes,”Bhojwani said of the sub-segments.

Allianz would be willing to maintain existing business outsideits target areas, provided it was profitable and trouble free, butit would not be adding to those positions, he said.

Staying consistent and focused are qualitiesBhojwani said he admires in the insurance operations at BerkshireHathaway and particularly at Chubb Corp.

SHORTER TAIL

Aside from improving underwriting and targeting niches,Fireman's also needs to cut the proportion of premiums coming fromlong-tail business, so-called because losses take three or moreyears to develop.

This would help avoid future unwelcome surprises in reserving,after the company had to plump its buffers for professionalliability, workers' compensation, asbestos and other environmentalclaims, mostly linked to long-tail risks.

“We've taken significant charges in 2012 and we need to breakthat cycle,” Bhojwani said, pointing out that the company nowbrings in outside advisors to help review reserves.

Bhojwani said no headcount reductions were planned.

“Our expense ratio is high but our bigger problem is our lossratio,” he said. “I am most focused on that.”

Favourable growth and demographic developments will keep theU.S., the world's biggest insurance market, attractive to Allianz,Bhojwani said.

“Over the next 5-10 years, we will see a manufacturingrenaissance in the U.S. driven primarily by the country's new foundenergy independence,” he predicted, adding that focused,non-generalist property and casualty underwriters could bewell-positioned to make a profit in that market.

The long-term prospects for Allianz are good, he said.

“There are certainly going to be some bumps in the road over thenext 1-3 years but on the 5-10 year horizon, the future is verybright.”