We have paid out 1.5 billion euros in settlement of coronavirus claims made by our customers – this is a huge sum. The most visible evidence of this within the public domain in Germany was the payments made by our Retail Germany division: HDI has paid out 80 million euros to customers for payments arising from business closure insurance, primarily to restauranteurs, bakers, hoteliers and retailers which had to close following the imposition of government restrictions. The Talanx Group reached decisions rapidly – and in cases of doubt came down on the side of its customers.
Big solution necessary
However, we also believe that a pandemic cannot be insured by private companies alone. If, at a stroke, governments order hundreds of thousands of small, medium-sized and large businesses across many sectors to close throughout the world, a big solution is necessary: a private-public protective shield, along the lines of the option currently being discussed in Germany. We are confident that insurers and policymakers will be able to come together and work out a good solution so that lots of small and large businesses can be supported if a new pandemic strikes.
Naturally, insurance companies also have a role to play in this crisis. Aside from a public-private protective shield, they are still able to offer insurance cover if a company has to be closed because of an internal case of the coronavirus. Why? Because these are individual cases that can be taken care of by the insurance community and they are precisely not universal, far-reaching closures for an indefinite period of time. In Germany, HDI has adjusted its terms and conditions to take account of this and it also offers this cover.
Fundamentally, the Talanx Group is committed to numerous other risk covers during the coronavirus crisis. Our industrial insurer HDI Global and our reinsurer Hannover Re are having to step up for numerous cancelled events across the world. Hannover Re is also making payments on its life and health reinsurance to US clients because the coronavirus pandemic is leading to a very large number of deaths there. This excess mortality is impacting on life insurers who have purchased their reinsurance cover from us. Our insurer HDI Global Specialty focused on special risks even insured the shortfall in collection boxes due to the coronavirus in the Anglican Church.
Our payments are helping companies which have been severely affected by the coronavirus pandemic. Furthermore, we are offering insurance cover to those companies which are involved in battling the pandemic with vaccinations and drugs. Our industrial insurer HDI Global has insured a number of studies on the journey to vaccination approval with a clinical trial insurance for volunteers to provide financial security and we are also offering insurance cover for the production risks involved in manufacturing the current vaccinations. We are insuring vaccination centres and doctors administering vaccines, and we are also offering insurance cover to retired doctors who are helping out at vaccination centres. In all this, we are acting in accordance with our corporate principles, the Talanx Purpose: Together we take care of the unexpected and foester entrepreneurship. We are living up to our responsibility.
However, there’s one thing we can’t provide: We can’t insure the effectiveness of the vaccines or their potential side effects. We believe in the vaccines – I will willingly take the vaccine as soon as it’s my turn. The same also goes for my colleagues on the Board of Management. Nevertheless, for an individual insurer the risk is too high when it comes to indemnifying the efficacy and side effects of a vaccine that is being used to vaccinate billions of people across the world. Once again, government mechanisms need to kick in here in the middle of a pandemic when speed is of the essence.
Naturally, these high payments to our customers are exerting an impact on our company’s balance sheet. We failed to meet our projection for 2020. But nevertheless, Group net income of 673 million euros was still robust. This result also clearly highlights the resilience of the Talanx Group. None of the four divisions registered a loss as a result of the pandemic.
Cooperation working well
During the pandemic, the Talanx Group also showed itself to be resilient internally. We were accessible to our customers 24/7 – our employees ensured this through their highly motivated work ethic while they worked from home. Up to 95 % of all our colleagues across the world were not working in their offices but the cooperation still worked fantastically. Lots of them experienced a double burden, for example as a result of home schooling and childcare. Wherever possible, we provided support: by clear communication, empathy, close management in spite of the remoteness, through care time for children and relatives and also by allowing some employees to come and work in their offices with observance of strict hygiene rules, if they simply weren’t able to cope at home. Overall, we managed to maintain a high level of motivation among our employees by means of these measures.
We will undoubtedly succeed in continuing to achieve this in the ongoing acute phase of the pandemic. But what will be the long-term effects of the coronavirus pandemic? As an institutional investor geared to the long term, our conviction is that the phase of very low and negative interest rates will continue for even longer than it would have done without the coronavirus because the expansive monetary policy of the central banks around the world will create the framework for this. We call this “lower for longer”. Over the long term, this will restrict the returns on our investments, which are currently around 129 billion euros.
On the one hand, this situation is challenging for life insurers who invest the premiums paid by their customers. On the other hand, the low interest rates exert big pressure on profits from underwriting and on costs. 10 basis points less for return on investment impacts negatively on our Group net income to the tune of almost 40 million euros. In order to compensate for this, we are increasing investment in infrastructure and renewable energy – the target is to invest 5 billion euros in this asset class. Currently our investments here amount to 3.7 billion euros. In future, the Green Deal currently being promoted by the European Union might even provide greater opportunities in this asset class.
Hopefully, the coronavirus crisis will neither side-line nor weaken the targets for climate protection and sustainability. We are promoting the topic of sustainability at all levels – in our business, in underwriting, in investment and with our social engagement. By 2030, we want to have a carbon-neutral business throughout the world – in Germany, we have already succeeded in this objective. In underwriting, we are not insuring any planned new coal-fired power plants or coal mines. By 2038, we don’t want to have any more coal-related risks in our portfolio. The same principle applies to tar and oil sands. When it comes to investment, we are putting our investments through a sustainability screening and no longer investing in energy based on coal. Furthermore, we have made diversity another focus of our sustainability strategy.
In 2020, the Talanx Group proved to be robust and resilient. In the current business year, we will continue to grow with Group net income of 800 to 900 million euros. We have made a big stride forward on the trajectory of achieving our medium-term goals. By 2022, our target is for the earnings per share to have increased by 5% a year on average. Significant progress on the operational side in the divisions Retail Germany and Industrial Lines will play a big role here. The Talanx Group has proved to be robust and resilient during the pandemic and this will continue to be the case.
“We are promoting the topic of sustainability at all levels – in our business, in underwriting, in investment and with our social engagement.”
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.