Development of the Group segments

Retail Germany

 

2010

2009

Figures in EUR million

   

Gross written premium

6,823

6,614

Net premium earned

5,507

5,158

Underwriting result

–1,631

–945

Net investment income

1,577

1,207

Operating result (EBIT)

–44

209

Combined ratio (net) 1) in %

104.2

99.2


1) Including deposit interest result

The Retail Germany division, which brings together the German business transacted by HDI-Gerling with private and commercial customers as well as all German bancassurance activities, offers domestic retail customers insurance protection that is tailored to their needs. In the life insurance sector the division also operates internationally in Austria. The name of the new divisional company with effect from December 2010 is Talanx Deutschland AG. The product range extends from non-life insurances through all lines of retirement provision to complete solutions for small and mid-sized enterprises as well as freelance professions. In this context all distribution channels are available – both a tied agents’ network as well as sales through independent intermediaries and multiple agents, direct sales and bancassurance cooperations.

The functional organization ensures clear responsibilities and puts in place the foundation for operations spanning the previous line-based boundaries between property/casualty and life insurance products. This multi-line perspective is a vital prerequisite for improving processes and services to the benefit of customers.

Major companies in the Group segment
 

HDI-Gerling Lebensversicherung AG

HDI-Gerling Pensionskasse AG

HDI Direkt Versicherung AG

HDI-Gerling Firmen und Privat Versicherung AG

HDI-Gerling Rechtsschutz Versicherung AG

neue leben Lebensversicherung AG

PB Lebensversicherung AG

PBV Lebensversicherung AG

TARGO Lebensversicherung AG

TARGO Versicherung AG

Premium volume and new business slightly higher than in the previous year

Gross written premium in the Group segment of Retail Germany – including savings elements of premiums from unit-linked life insurance – increased by 3% in the 2010 financial year to EUR 6.8 (6.6) billion.

The gross written premium from our property/casualty insurance products decreased by 3% year-on-year to EUR 1.5 (1.5) billion. The decrease stood at just 1.5% after factoring out the effect of the transfer of the industrial portfolio of HDI-Gerling Rechtsschutz Versicherung AG to the new Industrial Lines segment, and the figure was a mere 0.3% in the most significant property/casualty line – namely motor business.

In life insurance sector, gross written premium including savings elements from premiums under unit-linked life insurance products was boosted by 5% in the year under review to EUR 5.4 (5.1) billion. This increase was driven in large measure by the particularly favorable development of single-premium business at TARGO Lebensversicherung AG, PBV Lebensversicherung AG and neue leben Lebensversicherung AG, which together improved their gross premiums by EUR 277 million. Gross premiums of altogether EUR 2.5 billion – as in the previous year – were generated by the companies HDI-Gerling Lebensversicherung AG and Aspecta Lebensversicherung AG, which were merged with effect from 1 October 2010. In this case premium erosion stemming primarily from the portfolio of policies with a regular premium payment held by the former Aspecta Lebensversicherung AG was offset by increased new business with a single premium payment. Looked at overall, then, the positive development of our life insurance products – reflecting the market trend – derived from sharply higher single-premium business despite declining regular premiums; it should be noted in this context that our Group does not market any capitalization products. PB Lebensversicherung AG, which now only writes new business in the area of credit life, recorded a premium decrease of EUR 11 million. Measured by the internationally recognized yardstick of the Annual Premium Equivalent (APE), the new business booked by the life insurers grew to EUR 515 (462) million and thus surpassed the previous year by 11%.

The level of retained premium in the segment as a whole climbed from 89.2% to 92.6%, primarily as a consequence of the increase in single premiums combined with the drop in ceded regular premiums.

Underwriting result retreats sharply

The underwriting result fell by a substantial 73% overall to –EUR 1.6 (–0.9) billion. It includes inter alia the compounding of the technical liabilities (allocation to the benefit reserve) and the participation of our policyholders in the investment income – which increased in the year under review owing to the development of capital markets (allocation to the provision for premium refunds). The income opposing these expenses is, however, recognized in the investment income, hence causing the underwriting result to close in negative territory.

More than 9/10 of the underwriting result in the segment was determined by life insurance products: in this respect it decreased by 65% relative to the previous year to –EUR 1.6 (–1.0) billion. The reasons were partly connected with the positive trend on capital markets in comparison with the previous year, but were also associated with various special charges. Thus, for example, in the context of the retroactive merger of Aspecta into HDI-Gerling Lebensversicherung AG reinsurance treaties were commuted, which – insofar as they were not offset by contributions from the controlling company – led to the bringing forward of a balance sheet strain in the reporting period. Strains were also incurred from the adjustment of values relating to various technical items in the balance sheet in connection with life business, especially as a consequence of capital market movements and changed cost structures as well as the associated lower contribution margins for in-force business. Not only that, the amortization of deferred acquisition costs and write-downs taken on in-force insurance portfolios also crucially impacted the performance of our life insurers. This was due principally to the capital market development in the year under review, which necessitated adjustments to the assumptions underlying the forecast of future profits. The underwriting result from property/casualty products fell from EUR 12 million to –EUR 56 million, first and foremost on account of the claims experience. Key factors here – along with the favorable claims experience in the previous year – were the growth in motor business against a backdrop of lower average premiums. The loss reserves also had to be strengthened. The combined ratio for the segment as a whole stood at 104.2 (99.2)%.

Investment income improves

Investment income surged by an appreciable EUR 370 million (+31%) to EUR 1.6 billion. This increase was made possible by extraordinary income that was considerably better than in the previous year. While the previous year’s result had still been overshadowed by impairments on investments and losses on disposals in connection with the financial crisis, gains on disposals from equity funds were the hallmark of the extraordinary profit in the year under review. Of the total investment income, an amount of EUR 1.5 (1.1) billion is to be credited in very large measure pro rata to the holders of life insurance policies.

Operating result falls short of the previous year

The operating result (EBIT) came in at –EUR 44 (+209) million. The stronger investment income did not suffice to offset the marked reduction in the underwriting result. The EBIT was heavily influenced by the decline at HDI-Gerling Lebensversicherung AG (incl. Aspecta Lebensversicherung AG), but above all by the amortization of deferred acquisition costs at PBV Lebensversicherung AG, claims-related expenditures at HDI-Gerling Firmen- und Privatversicherung AG and cost burdens associated with the reorganization of the sales companies.