Talanx posts significant increase in premiums and Group net income in first half of 2013
- Gross written premium in first half of 2013: EUR 15.0 billion (+10 percent)
- Premiums abroad boosted significantly by acquisitions in Poland
- Second quarter affected by losses from natural catastrophes
- Flood damage costs EUR 232 million – within the estimated range
- EBIT: EUR 1.0 billion (+19 percent)
- Group net income: EUR 407 million (+15 percent)
- Group net income of around EUR 700 million expected for full year
The burden resulting from the flood affected all four divisions and came to a total net sum of EUR 232 million before tax. Of this figure, EUR 137 million affected the reinsurance business while EUR 95 million related to primary insurance, mainly in Germany.
The Talanx Group sold shares in Swiss Life in the first and second quarter, which resulted in a total after-tax gain of around EUR 96 million, of which EUR 74 million related to the second quarter.
The Group was also pleased with year-on-year growth in the second quarter: gross written premium was up 9 percent at EUR 6.5 (6.0) billion. The underwriting result fell by 15 percent to –EUR 467 (–406) million. Net investment income grew by 27 percent to EUR 1.0 (0.8) billion. Operating profit grew by 60 percent to EUR 502 million, while Group net income increased by 39 percent to EUR 204 (147) million.
Shareholders’ equity (excluding minority interests) fell by EUR 568 million in the second quarter as a result of valuation effects in the investment portfolio and the dividend payment in May. The Talanx Group’s capitalisation nevertheless remains very solid. The Solvency I ratio stood at 206 percent at the end of June.
The sale of 8,200,000 shares in Talanx AG by Haftpflichtverband der Deutschen Industrie Versicherungsverein auf Gegenseitigkeit (HDI V.a.G.) increased Talanx’s free float by around EUR 200 million at the beginning of July, or by 3.2 percentage points to 14.4 percent. In doing this, HDI V.a.G. strengthened Talanx AG’s position on Germany’s MDAX stock index.
Business development of the divisions
Gross written premium in the Industrial Lines Division was up 7 percent in the first half of the year, at EUR 2.4 (2.2) billion; currency adjusted, the level of growth would have been 8 percent. Premium growth was mainly due to pleasing growth abroad and rate increases in Germany. The underwriting result amounted to –EUR 11 (58) million. This was due to damage caused by the flood and other major losses in the second quarter. The net burden of major losses was much higher than in the previous year. Moreover, additional provisions at HDI-Gerling in the Netherlands in the first quarter had a negative impact on results for the first six months. This led to a rise in the combined ratio to 101.2 (92.6) percent. Net investment income fell by 5 percent to EUR 108 (113) million owing to low interest rates. As a result, operating profit (EBIT) in Industrial Lines amounted to EUR 78 (157) million. Group net income dropped to EUR 47 (99) million.
Gross written premium rose by 4 percent year-on-year to EUR 664 (637) million in the second quarter of 2013. The underwriting result amounted to –EUR 13 (–7) million. Net investment income fell by 4 percent to EUR 53 (55) million, while operating profit (EBIT) dropped to EUR 45 (60) million. Group net income fell to EUR 28 (45) million.
In the Retail Germany Division, gross written premium grew by 3 percent to EUR 3.6 (3.5) billion. This increase was driven by moderate growth in life insurance at bancassurance companies. This more than offset slight declines in premiums in the property/casualty lines caused by adjustments to premiums and restructuring.
New business in Germany, measured in terms of the Annual Premium Equivalent – APE – declined to EUR 315 (327) million. Premium adjustments also had an impact here, particularly in motor insurance, where they increased the profitability of German business again. In life insurance, on the other hand, new business in APE grew by 5 percent, particularly in single-premium business. New business with regular premium payments declined, although growth was achieved in occupational disability insurance. The underwriting result fell slightly to –EUR 732 (–711) million. While the underwriting result in the property/casualty lines improved thanks to measures to increase profitability and positive run-off results, the underwriting result in life insurance decreased owing to participation of policyholders in net investment income. Net investment income rose by 7 percent to EUR 872 (812) million, largely owing to the realisation of unrealised gains to help finance the additional interest reserve (“Zinszusatzreserve”) required in accordance with German GAAP. The combined ratio improved to 99.9 (108.6) percent. Operating profit (EBIT) increased to EUR 90 (73) million, while Group net income grew by 4 percent to EUR 52 (50) million.
Gross written premium rose by 2 percent year-on-year to EUR 1.5 billion in the second quarter of 2013. The underwriting result fell to –EUR 436 (–376) million, while net investment income increased to EUR 485 (422) million. However, operating profit dropped to EUR 24 (35) million. Group net income totalled EUR 9 (32) million.
The Retail International Division achieved substantial growth supported by its acquisitions in Poland. The two companies Warta and TU Europa were included in the financial statements for the whole of the first six months. In the results for the first half of 2012, only TU Europa was consolidated for one month. As a result, gross written premium grew by 61 percent to EUR 2.2 (1.3) billion. The Central and Eastern Europe region increased its gross written premium by 181 percent through the acquisitions. Growth in Latin America totalled 12 percent, or 21 percent in local currency. In its retail business outside Germany, Talanx is focusing on its core markets of Poland, Turkey, Brazil and Mexico. The underwriting result increased by 181 percent to EUR 17 (–21) million. Net investment income grew by 24 percent to EUR 146 (118) million. Operating profit doubled to EUR 113 (52) million, while Group net income amounted to EUR 66 (31) million, more than twice as high as in the same period of the previous year. The combined ratio dropped to 94.9 (99.0) percent.
In the second quarter of 2013, gross written premium rose by 60 percent year-on-year to EUR 1.1 (0.7) billion. The underwriting result was balanced, at EUR 0 (–5) million. Operating profit (EBIT) amounted to EUR 47 (17) million, while Group net income totalled EUR 28 (9) million. The combined ratio improved to 95.7 (97.8) percent, although the flood damage meant that there was less of an improvement between the first and second quarter of 2013.
Gross written premium in Non-Life Reinsurance rose slightly by 0.4 percent to EUR 4.1 billion. Currency adjusted, it grew by 1.3 percent. The 91 percent increase in the underwriting result to EUR 191 (100) million and other effects such as positive net exchange rate gains more than offset the drop in net investment income. The latter fell to EUR 378 (429) million as one-off effects on unrealised gains no longer applied. Operating profit (EBIT) grew by 26 percent to EUR 567 (449) million. A higher burden of major losses was offset by positive run-off results. Group net income grew by 17 percent to EUR 166 (143) million.
Gross written premium fell slightly by 3 percent to EUR 1.9 (2.0) billion in the second quarter of 2013. Operating profit grew by 74 percent to EUR 301 (173) million. Group net income rose by 45 percent to EUR 87 (60) million. The abovementioned effects were particularly noticeable here.
The Life/Health Reinsurance segment increased its gross written premium by 11 percent year-on-year to EUR 3.1 (2.8) billion in the first half of 2013. Currency adjusted, it grew by 13 percent. The underwriting result dropped to –EUR 194 (–121) million. Operating profit (EBIT) fell to EUR 108 (153) million and Group net income to EUR 40 (62) million. This negative effect on the underwriting result and consequently on EBIT and Group net income can be attributed principally to losses incurred in part of the book of US mortality business.
In the second quarter of 2013, gross written premium grew by 11 percent to EUR 1.6 (1.4) billion. Operating profit fell to EUR 21 (36) million and Group net income to EUR 8 (14) million.
Outlook
Talanx is cautiously optimistic that it will be able to achieve Group net income after taxes of around EUR 700 million for 2013. Despite a market environment that remains challenging, Talanx expects to achieve gross premium growth of at least 4 percent at constant exchange rates. Net return on investment is expected to be above 3.5 percent in 2013. The Group anticipates a return on equity in 2013 of around 10 percent, despite the inflow of equity from the IPO and ongoing low interest rates. This outlook assumes that any further major losses will be within the expected range and that there will be no turbulences to the currency and capital markets. The target of paying out 35 percent to 45 percent of IFRS Group net income as dividends has remained unchanged.
Key figures from the Talanx Group income statement for 6M 2013, consolidated (IFRS)
Figures in EUR million | 6M 2013 | 6M 2012 1 | change |
|---|---|---|---|
Gross written premium | 14,966 | 13,582 | 10% |
Net premium earned | 11,498 | 10,294 | 12% |
Combined ratio in property/casualty insurance and non-life reinsurance | 96.0% | 98.0% | -2% points |
Net investment income | 1,877 | 1,748 | 7% |
Operating profit (EBIT) | 1,018 | 853 | 19% |
Group net income (after non-controlling interests) | 407 | 353 | 15% |
Return on equity 2 | 11.7% | 12.5% | -0.8% points |
- 1) Adjusted on the basis of IAS 8
- 2) Annualised net profit for the period excluding non-controlling interests relative to average shareholders' equity excluding non-controlling interests before capital increase from the initial public offering
Key figures from the Talanx Group income statement for Q2 2013, consolidated (IFRS)
Figures in EUR million | Q2 2013 | Q2 2012 1 | +/- |
|---|---|---|---|
Gross written premium | 6,508 | 5,977 | 9% |
Net premium earned | 5,783 | 5,329 | 9% |
Combined ratio in property/casualty insurance and non-life reinsurance | 97.0% | 99.5% | -2.5% points |
Net investment income | 1,002 | 787 | 27% |
Operating profit (EBIT) | 502 | 315 | 60% |
Group net income (after non-controlling interests) | 204 | 147 | 39% |
- 1) Adjusted on the basis of IAS 8
Disclaimer
This news release contains forward-looking statements which are based on certain assumptions, expectations and opinions of the Talanx AG management. These statements are, therefore, subject to certain known or unknown risks and uncertainties. A variety of factors, many of which are beyond Talanx AG’s control, affect Talanx AG’s business activities, business strategy, results, performance and achievements. Should one or more of these factors or risks or uncertainties materialise, actual results, performance or achievements of Talanx AG may vary materially from those expressed or implied in the relevant forward-looking statement. Talanx AG does not guarantee that the assumptions underlying such forward-looking statements are free from errors nor does Talanx AG accept any responsibility for the actual occurrence of the forecasted developments. Talanx AG neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.
