Development of the Group segments

Retail International

 

2010

2009

Figures in EUR million

   

Gross written premium

2,233

1,827

Net premium earned

1,742

1,403

Underwriting result

–136

–99

Net investment income

151

121

Operating result (EBIT)

27

–42

Combined ratio (net) 1) in %

105.2

102.5


1) Including deposit interest result

The Group segment of Retail International brings together the activities of the companies transacting retail business in property/casualty insurance, life insurance and bancassurance in international markets; it serves more than 8 million customers in 12 countries. The segment is led by Talanx International AG (previously: HDI-Gerling International Holding AG).

In this division we offer private and commercial customers abroad comprehensive insurance protection tailored to their needs. The product range encompasses inter alia motor insurance, property and casualty insurance, marine and fire insurance as well as various offerings in the life insurance sector. Seasoned, expert management combined with the considerable underwriting expertise of local staff form the backbone of the Talanx International group. By drawing upon local, industry-specific know-how and our presence through an extended distribution network we are able to identify our customers’ particular requirements in foreign markets and provide customized solutions.

Foreign business is to a large extent written through brokers and agents. Many of our companies also use post offices and banks as a sales channel.

Major companies in the Group segment
   

HDI Seguros S. A.

Brazil

HDI Zastrahovane AD

Bulgaria

HDI Seguros S. A.

Chile

HDI Assicurazioni S. p. A.

Italy

InChiaro Assicurazioni S. p. A

Italy

HDI Seguros S. A.

Mexico

HDI-Gerling Zycie TU S. A.

Poland

HDI Asekuracja TU S. A.

Poland

OOO Strakhovaya Kompaniya “HDI Strakhovannie” 1)

Russia

OOO Strakhovaya Kompaniya “CiV Life”

Russia

CiV Hayat Sigorta A. Ş.

Turkey

HDI Sigorta A. Ş.

Turkey

HDI Strakhuvannya

Ukraine

Magyar Posta Biztosító Zrt.

Hungary

Magyar Posta Életbiztosító Zrt.

Hungary


1) Since the third quarter of 2010; business to be written from 2011 onwards.
The company will complement the product portfolio of CiV Life with property/casualty products.

Development of key markets

Along with the general statements already made regarding the international insurance markets, the following remarks may be added with respect to our highest-volume markets in this segment – Brazil, Italy and Poland: Brazil has recovered very quickly from the global economic and financial market crisis. Economic output had already moved back into positive growth rates by the second quarter of 2009. With a view to countering any overheating of the Brazilian economy, spending cuts were announced in the course of 2010 and the prime rate was raised. In this market we are particularly active in motor insurance, which promises further growth in keeping with the favorable economic trend. Poland’s economic output has already shown softer, but nevertheless positive growth since 2009 – despite the global economic and financial market crisis. These developments also promise further growth for the insurance market. In addition to motor insurance, we transact other lines in Poland such as casualty and general property insurance as well as life insurance. The year under review, especially the first half of the year, was heavily overshadowed by the flooding along the rivers Oder and Vistula. On the Italian market we conduct operations both in the life insurance market and in property/casualty insurance – predominantly motor insurance. The company noted the first indications of rate increases beginning to take hold in motor insurance in 2010 after several years of fierce competitive and pricing pressure.

Premium volume and new business sharply higher

Gross written premium in the segment climbed 22% year-on-year to EUR 2.2 (1.8) billion; adjusted for exchange rate effects, growth came in at 13%.

The growth in property/casualty products (+32%) derived partly from exchange rate effects. If these effects are factored out, premium growth of 19% was booked in the property/casualty sector relative to the previous year. Most notably, the exchange rates for the Brazilian, Polish, Turkish and Mexican currencies strengthened appreciably. While the Brazilian company HDI Seguros delivered premium growth of 21% in the local currency based on its robust market position in the country, growth surged to 45% after translation into euros. The situation was similar at the Polish company HDI Asekuracja, into which HDI-Gerling Polska was merged in the second quarter of 2010 with retroactive effect from 1. January 2010. Premium growth in the local currency stood at 5% compared to the previous year (taking into account the aggregate premium of what were then two companies), while the increase amounted to 13% after translation into euros. Similarly, the Turkish company HDI Sigorta boosted its premium volume by 28% in the local currency thanks to intensified marketing efforts and the opening of new agencies, whereas in euros the increase was as much as 38% owing to the favorable movement in exchange rates. The contribution delivered by HDI Seguros Mexico, which was added to the Group in the fourth quarter of 2009 and was thus only included pro rata in the comparable period, amounted to EUR 62 million.

New business in our international property/casualty insurance portfolio was boosted in the 2010 financial year – measured by policy numbers. The key driver here was the motor line, accounting for a portfolio around 4.3 (4.1) million of altogether roughly 7.8 (7.2) million policies.

In the financial year just-ended the Italian company HDI Assicurazioni generated premium volume in the life insurance sector of EUR 325 million, a decline of somewhat more than 9% relative to the previous year. The major factor in the previous financial year had been the implementation of a government tax amnesty, as a consequence of which considerable amounts were available for investment in single-premium products – a state of affairs from which life insurance policies also profited as an attractive investment alternative. This trend from 2009 was sustained in 2010, albeit not on the same scale. At the same time the company booked growth of around 9% from sales of property/casualty products (especially in the motor liability line) on the back of a higher average premium, as a result of which its total premium volume remained stable.

The companies abroad transferred from Proactiv Holding AG to Talanx International Holding AG as part of the Group restructuring also played their part in premium growth. Our Hungarian life insurer, for example, boosted its premium volume by 11% from EUR 92 to 103 million thanks to its successful sales and marketing activities. Similar growth was also recorded by the companies in Russia and Turkey. Although they are still of minor importance measured by the total volume, they rank among the fastest growing companies in their markets. Our Russian company CiV Life grew its premium income by around 56% year-on-year, while our Turkish operation CiV Hayat boosted its volume by around 102% with the aid of successful sales activities – including intensive coaching measures – as well as modified products. The Polish company HDI-Gerling Zycie also more than doubled its premium income year-on-year, most notably in the area of unit-linked life products, thanks to a new cooperative venture with the Polish BRE Bank launched in the middle of the year.

Measured in terms of the APE, new business in international life insurance contracted to EUR 128 million, a fall of 4% relative to the previous year. The APE is split in particular between endowment policies and unit-linked as well as non-unit-linked products.

The level of retained premium in the segment – at 90.0% – was 4.4 percentage points higher than at year-end 2009; as described in the following section, an influencing factor here was the cancellation of a quota share reinsurance treaty in the motor line at the Turkish company HDI Sigorta, which caused its retention to rise from 55.8% to 85.7%.

Underwriting result reduced

The combined ratio in international property/casualty insurance was 105.2 (102.5)%, a reflection in part of the above-average burden of losses incurred in the first half of the year under review. Particularly significant here were flood and winter-related damage, which took a heavy toll on the result of the Polish company HDI Asekuracja. As a consequence of changes in the reinsurance structure for the motor line at this company, the reinsurer’s share of the paid claims decreased – leading to higher net claims expenditure. The company’s underwriting result therefore fell to –EUR 28 (–3) million. Similarly, the earthquake in Chile at the end of February 2010 adversely impacted the burden of losses incurred by the Chilean company HDI Seguros. Changes in local supervisory law compelled the Turkish company HDI Sigorta to cancel a multi-year quota share reinsurance treaty in the motor line. The effect of cancelling this treaty is the primary reason why the company – despite growing its portfolio – closed the year under review with an underwriting deficit of –EUR 52 (–12) million. The deterioration in the underwriting result for the segment from –EUR 99 million to –EUR 136 million was therefore driven chiefly by the companies HDI Sigorta and HDI Asekuracja. In addition, the loss reserves at some Group companies were strengthened on the basis of an annually compiled external loss reserve assessment.

In the financial year just-ended the writing of new business at the companies Aspecta Liechtenstein and Aspecta Luxemburg was discontinued until further notice on the basis of the Group’s strategic reorientation and both companies went into run-off; consequently, the two companies produced an underwriting deficit of –EUR 21 million overall. Our Brazilian company, on the other hand, boosted its underwriting profit from EUR 1 million to EUR 13 million.

Substantially increased investment income

In the 2010 financial year investment income of EUR 150 million was generated in the Retail International segment, an improvement of 24% over the previous year – in which the investment income booked by companies was still heavily overshadowed by the after-effects of the financial crisis. The increased gains realized from the disposal of equities and fixed-income securities contrasted as at year-end 2010 with appreciably lower realized losses than in the previous year. In the case of the Italian company HDI Assicurazioni, for example, impairments of EUR 14 million had to be taken on investments at the end of 2009; at year-end 2010 they amounted to just EUR 8 million. In addition, ordinary investment income was favorably affected by a modest upturn in the interest rate level in a small number of countries. The Brazilian company HDI Seguros, for example, boosted its investment income by 55% year-on-year to EUR 39 (25) million.

Operating result returns to positive territory

The Retail International segment reported an operating result (EBIT) of EUR 26 (–42) million in the year under review. The amortization of goodwill for our Mexican subsidiary resulted in a charge to EBIT.