Mr Wicke, Germany is in the middle of the decisive weeks of the pandemic. The Federal Government has once again tightened the lockdown. How risky is this for the German economy?
I have great faith in the decisions taken by the Federal Government. However, it’s important to be clear that the further tightening of the lockdown will naturally have economic consequences. Policymakers have therefore had to negotiate a difficult balancing act. We can only hope that the economy has the resilience to withstand a lockdown with even stricter rules. However, many firms will already have used up their reserves during the first lockdown. A lot of companies are going to have their backs to the wall.
The government is exerting increasing pressure on companies to make greater use of people working in their home offices. However, the Federation of German Industries (BDI) has rejected a regulation for working at home. Are you against a clear-cut provision?
Personally speaking, I believe it’s a mistake to adopt a top-down approach and lay down statutory regulations for everyone. Although I understand that the new strain of the virus means that extended countermeasures now need to be instituted, I believe that appealing to the companies is adequate in this case.
Small businesses, restaurant owners and retailers are particularly hard hit at the moment and they are battling for their existence. Is it the right move for the government to have set aside the deadline relating to filing for bankruptcy for the time being if companies are too heavily indebted?
In the initial phase, the decision was right for companies that are completely healthy in the absence of the coronavirus and can hope to receive government support. However, I don’t agree with the suspension of filing for bankruptcy again and again, and thereby rescuing companies that were already ailing before the coronavirus struck. After all – as much as I feel sympathy for the companies in this predicament – the problem will not be solved by action like this. The problem is only being kicked down the road and made worse. Generally speaking, it’s the case – and I say this with complete conviction – that when somebody is in financial difficulties, any problems should be put openly on the table as quickly as possible. When this has been done, all those players involved have many more opportunities to come up with solutions. Ultimately, there’s likely to be another wave of insolvencies after the deadline expires.
Is it at least understandable that Berlin wants to give more time to companies that have got into financial difficulties?
Yes, of course, but this is based on a misconception. It’s an incorrect assumption that lenders are currently not taking into account that there may be another coronavirus aid package in the pipeline. Anybody working professionally with borrowers will factor this into their analysis. My clear recommendation would be to reinstate the reporting requirements for bankruptcy in full. Otherwise, we’re only exacerbating the problems.
Many managers are covered by a Directors and Officers (D&O) policy. Do you anticipate an avalanche of litigation in 2021 owing to lack of clarity in relation to bankruptcy cases?
There’s no doubt that there will be many more claims. However, the areas hardest hit – small and mid-sized companies – tend not to have insurance with a D&O policy. The result will be that losses for insurers will increase but not as strongly as the rise in contentious bankruptcy cases.
The main concern besetting policymakers is the fact that the mutations of the coronavirus are significantly more infectious. Against this background, does Talanx need to rethink its forecasts? Up to now, the Group has projected a result of around 600 million euros for 2020…
Talanx remains extremely resilient and I continue to be very confident that we will achieve our goal of Group net income amounting to more than 600 million euros. Although the second lockdown before Christmas will cause rather greater financial losses than originally thought, this will not impact on the overall forecast. I don’t have any worries about our projection. Our forecast for 2021 continues to hold true as well. We are still projecting a result of between 800 and 900 million euros.
However, you aren’t willing to put a cap on the dividend in spite of the coronavirus. Are you anticipating extended discussions with the Federal Financial Supervisory Authority (BaFin)?
The discussions are already under way. All the insurers listed on the stock exchange have received a letter from BaFin in which the financial regulator probes critically whether they are in a position to pay the dividend. We fully understand that companies need to adopt a careful approach to conserving their financial resources during the crisis. However, we are very confident about our handling of the topic of this debate. Talanx is in a good position and we are extremely resilient – as in the previous year, we are able to afford to pay out a dividend of 1.50 euros per share, if the Annual General Meeting passes a resolution to this effect and BaFin raises no objections.
Nevertheless, the coronavirus cost Talanx around one billion euros in the first nine months of 2020 alone. Will lots of customers now have to get used to rising prices?
The answer to that is yes and no. The biggest impact on the business model of insurers comes as a result of the low interest rates. They essentially mean that we now need to charge higher premiums in order to generate the same buffer as in the past so as to be able to cover claims and our costs. In a number of lines, there is therefore substantial pressure on prices and underwriting. In lines like motor insurance, prices have in fact even become cheaper. The picture is therefore nuanced.
In September, your subsidiary company Hannover Re could move up to the Dax. What effect would this have on Talanx?
We would naturally be delighted for Hannover Re if this happened. A move up to the Dax would open up better refinancing possibilities for the reinsurer because this would enable it to access an even wider pool of investors. Of course, we would think this were a great fillip if it happened. At the same time, Talanx could also go into the MDAX. But the fact is that we don’t spend our time every day avidly watching share-price charts. And a lot of water has to flow under the bridge before we get to September. It’s much more important for us to implement our strategy and achieve our financial goals. The success of our Group doesn’t depend on whether we are in an index or which index we happen to be in.
Let’s look ahead to the future: What are you looking forward to most, once the lockdown measures have finally all been lifted?
What I’m really missing is the simple, uncomplicated communication with other people. I’m yearning for the moment when we can all laugh together once again without having to think about aerosols spreading through the air.
Mr Wicke, many thanks for the interview.
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.