Talanx is successfully executing Strategy 2022

"One year after presenting our Strategy 2022, we are well on track to deliver on the financial targets presented at the Capital Markets Day 2018, for the financial year 2019 as well as the following years. Our strategy is supported by a purpose-driven performance culture. I am confident that our Group will continue to create significant value for our clients and our shareholders,” said Torsten Leue, Chairman of the Board of Management of Talanx AG, in Frankfurt today.

During the months before the event, more than 4,000 employees in 16 countries have participated in surveys and workshops to develop the purpose for the Talanx Group: Together we take care of the unexpected and foster entrepreneurship. „We protect people and companies against risks. At the same time we make entrepreneurship possible, outside and inside of the Group, together with our clients and distribution partners“, said Torsten Leue. “Our purpose summarises what we at Talanx work for every day.”

Edgar Puls, Chief Executive Officer of Industrial Lines, the business division that is in the focus at the event, said: “The new management team of Industrial Lines is committed to push profitability. We will lever the insights and instruments of our very successful 20/20/20 initiative to make the overall business more profitable and work towards achieving the 8-10% return on equity target that we have set ourselves”.

Sustained high resilience, capital management enhanced, supporting growing cash pool

The Talanx Group continues to be operating with high resilience. This is reflected in strong capitalisation (196% Solvency 2 ratio), limited exposure to market risk (44% of Solvency Capital Requirement), and a high level of business diversification (57% of primary insurance premiums from outside of Germany, all figures for 9M 2019).

Management continue to work on increasing the capital upstreamed from the operational entities to Talanx Group with the goal to ultimately increase the payout ratio for Talanx shareholders. In that context, the remittance of ordinary local earnings is expected to increase from 67% in 2018 to approx. 70% in 2019, and two thirds of the EUR 350m capital upstream ambition has been effected. The available cash fund, defined as retained profits brought forward under German GAAP (Gewinnvortrag) divided by targeted dividend payment is expected to increase to approx. 0.8 times for 2019, with the mid-term ambition of approx. 1.5 to 2 times unchanged.

Focused divisional strategies: Retail Germany and Retail International fully on track to achieve mid-term ambitions

In 2019, Retail Germany expects to achieve more than 80% of its EUR 240m EBIT target for 2021, that is at least EUR 200m. The KuRS programme is well on track, whilst the initiative to profitably grow the business with small- and medium-sized enterprises (SMEs) has helped to grow gross written premiums more than twice as quickly as the German SME market.

Retail International continues to grow profitably, expecting an 8-9% return on equity for 2019, thus well on track for their mid-term RoE target of 10-11%. The strategic goal to achieve a top 5 position in our core markets has been achieved, in the motor business, in four out of five, and, in the non-life business overall, in two out of five core markets. We have improved our position in all our core markets.

Focused divisional strategies: Industrial Lines have turned challenging market into profit mode

Since the new management team of Industrial Lines under Edgar Puls took over in May 2019, they have been executing Strategy HDI 4.0 with a focused two-step approach. In the perform phase, the focus has been to deliver on the Fire initiative “20/20/20”, and will be to increase the overall portfolio profitability. The Fire programme has continued to over-deliver on its original plan to increase premiums and premium-equivalent measures in the Fire business by 20% as of 1 January 2020. Management expects this to result in a combined ratio for the Fire business of around 100% in 2020. Industrial Lines as a whole aims to be technically positive in 2020, that is, achieve a combined ratio below 100%.

The focus in Industrial Lines is now on applying similar discipline to other lines of business. In that context, the division is introducing a new steering model with a sharpened metric of key performance indicators (KPI). The focus is on return on equity (RoE), in order to achieve the division’s long-term ambition of a 10% RoE, supported by a combined ratio for 95%. On the way to these long-term targets, Industrial Lines is committed to achieve an 8% RoE in the medium term, based on a 97% combined ratio.

Achieving such profitability is the ultimate goal of the transform phase. The confidence of management to achieve their targets is supported by price increases currently observable in key markets of industrial insurance globally. Based on recent surveys, more than 90% of the division’s premiums are earned in hardening markets. In line with the drive for more profitability, in the transform phase management generally want to foster excellence in their teams and aim for selective growth.

HDI Global Specialty to become a meaningful profit contributor to the Talanx Group

One important area of profitable growth for both Talanx and Industrial Lines is the HDI Global Specialty unit that has begun to operate since 1 January 2019. By bringing together skills in underwriting and distribution from both Hannover Re and Industrial Lines in the new Specialty unit, a competitive player has been created in an attractive market niche. Management target a sustainable top quartile position among specialty insurers with the potential to generate a EUR 100m underwriting result in 2022, roughly three quarters of which contribute to Talanx Group.

Good progress on digital transformation

Industrial Lines is also executing its roadmap for digital transformation. In addition to modernising our platform (shutting down more than 60 applications in the division until year-end 2019), and accelerating data analytics, the division has developed a standardised global “Underwriting Workbench” as the new standard platform for all pricing activities. Based on excellent access to our clients, we are well positioned to capture new revenue opportunities from services around the Internet of Things (IoT), thus enhancing traditional insurance premiums. One example is the recently founded HDI TH!NX in Berlin, a platform to drive co-innovation in IoT together with our corporate clients. And in early October 2019, we signed an agreement with Schneider Electric on a first use case that focuses on fire prevention.