Business development

The Talanx Group recorded single- to double-digit percentage growth for a number of key indicators in 2010: specifically, gross written premium – especially in foreign markets –, new business and investment income. The increased premium and improved investment performance did not, however, offset the decline in the underwriting result, as a consequence of which the operating profit (EBIT) fell well short of the previous year. The reasons are varied in nature, but are associated in particular with considerably high risk provision at German life insurers and in international retail business, most notably with an eye to future capital market measures. Despite this, the Group’s financial strength – expressed in terms of its solvency ratio – was boosted.

Gross written premium
Columnchart: Gross written premium
Operating profit (EBIT)
Columnchart: Operating profit (EBIT)

First steps in the restructuring completed

As planned, the first steps in the restructuring of the Talanx Group’s primary insurance sector launched in September 2009 have been completed and agreed upon with the social partner. What is more, they are already bearing the first fruit: in Germany the Group was able to expand its new business in 2010 despite challenging market conditions. The fact that our measures are already working shows that we have reached our first milestone in the Group restructuring without losing sight of the market. Yet we have not yet accomplished our goal. The next steps in the Group restructuring for 2011 will focus on German retail lines. Intensive preparations are already being made in order to get this division fit for the future. The aim is to gear business processes and the organization to the needs of customers and sales partners and, with this in mind, to develop product, sales and service strategies that span the various lines of business.

Advances in international business

The Group can report unusually strong organic growth in foreign markets, most notably in Latin America – and here especially Brazil.

The agreement of a cooperation arrangement with the Japanese life insurer Meiji Yasuda marked another success for the Group. In this connection Talanx AG issued a Solvency II-compliant bond subject to mandatory conversion at the time of the planned initial public offering of Talanx AG. Meiji Yasuda Life took up this capital participation in a volume of EUR 300 million; at the same time the two companies entered into a strategic partnership. The pooling of both partners’ strengths increases the prospects for each of them to access new markets. Joint investments are envisaged in the focus markets of Poland and Turkey. What is more, by putting in place an institutional anchor shareholder even before going public Talanx enjoys greater security in its financial planning.

Business experience of the Group

Gross written premium including savings elements of premium under unit-linked life and annuity policies grew by 9% to EUR 22.9 (20.9) billion. The increase stemmed from reinsurance business as well as the Retail International segment. Growth was for the most part organic; movements in exchange rates accounted for 3 percentage points of the rise in premium. The number of policies in primary insurance business climbed by 5.4% to 23.6 (22.4) million, driven chiefly by the companies abroad.

Investment income surged by 20% to EUR 3.2 (2.7) billion. The increase was attributable to improvements in the primary insurance segments – especially Retail Germany – and in Non-Life Reinsurance. The operating profit (EBIT) came in at EUR 1.0 (1.5) billion, a contraction of 31%. This was due principally to a poorer performance in German life insurance – driven above all by increased risk provision – as well as the poorer experience of certain companies in the Retail International division. As a further factor, after an exceptionally low burden of losses in the previous year, the underwriting result in Industrial Lines and Non-Life Reinsurance declined. Overall, the underwriting result deteriorated – in part also due to the participation of policyholders in the increased investment income – by 98% to –EUR 2.0 (–1.0) billion. Owing to rising combined ratios – especially in the Industrial Lines and Retail Germany divisions – the overall combined ratio moved higher: it climbed 4.2 percentage points to 100.9 (96.7)%. The other income also fell short of the previous year’s level. Group net income after tax and minorities reached EUR 220 (485) million, corresponding to a return on equity of 4.6 (11.8)% on the considerably higher level of Group shareholders’ equity relative to the previous year.