- Operating profit (EBIT) +13 % to € 1.45 billion
- Net income after tax rose to € 1 billion
- Return on equity 13.1 %
- Property/Casualty primary insurance biggest segment for the first time
- Integration of former Gerling companies well advanced
Hanover, 24 June 2008
The Talanx Group again closed the year with an excellent result for 2007. Operating profit (EBIT) rose by 13 % to € 1.45 (1.29) billion. The return on equity after taxes increased by 1.4 percentage points to 13.1 %. Group CEO Herbert K. Haas commented that the Group was able to achieve this result despite difficult market conditions in Germany and a large package of structural measures within the Group: "This performance reflects our sectoral and regional diversification. These results also provide an indication of our disciplined underwriting policy."
The fast growth rate of foreign business is becoming an increasingly important factor. The proportion of primary insurance premiums underwritten outside Germany has advanced more than threefold over the past five years to € 3.3 billion.
According to Haas, structural advances have also been a key element in the favourable development of results: "We will be concluding the organizational integration of Gerling this year, apart from some minor issues that will still have to be completed. This means that we are keeping to our timeframe. But something else is much more important: We have achieved our strategic goal of establishing a position in the European competitive environment with a perspective of extremely positive opportunities for the long term." Haas commented as follows on future acquisitions: "Acquisitions in Germany for us only make sense in a few cases." He continued by saying that Talanx wanted to grow abroad in personal lines business and in life/health reinsurance.
Talanx Group 2007
By comparison with the previous year, the following special factors need to be taken into account: In 2006, the Gerling companies were only consolidated in the Group financial statements for three quarters, while they were consolidated for the entire business year in the 2007 statements. The BHW companies (BHW Lebensversicherung and BHW Pensionskasse) and the 50 % stake acquired in PB Versicherungen were included in the consolidated financial statements from the fourth quarter. By contrast, the Hannover Re subsidiary Praetorian Financial Group was only consolidated in the business figures of the Group for five months as a result of the sale of the group on 31 May 2007.
Gross written premium income (including savings elements of premiums from unit-linked life and annuity insurance) fell back slightly by -1.2 % to € 19.1 (19.4) billion. If exchange parities had remained the same, gross premiums would have experienced growth of 1 %. Apart from the trend shown by exchange rate parities, the end of a banking cooperation in Italy and the selective underwriting policy in the segments property/casualty primary insurance and reinsurance business led to falls in premiums. Both segments are operating with a strict focus on income in times where markets are becoming weaker. They are therefore following a policy of giving up market shares.
Net premiums earned decreased slightly by € 0.8 % to 14.9 (15.0) billion in parallel with gross premiums.
By comparison with the previous year, an increase in the number of major claims impacted negatively on the consolidated result. Winter storm "Kyrill" caused net losses amounting to € 149 million in January 2007. The combined ratio rose to 99.2 (96.1) %.
The Group recorded the highest EBIT in its history with an increase of 13 % to € 1.45 (1.29) billion, despite integration costs amounting to € 124 (145) million impacting on earnings. Tax expense amounting to € 329 (438) million includes a one-off figure for deferred tax income in the amount of € 230 million (before minority interests), resulting from the Business Tax Reform Act 2008.
Net income for the year amounted to € 999 million. After deduction of minority interests of € 522 million, consolidated net income underwent an increase of 21 % to € 477 (394 million). The return on premium increased by 1.1 percentage points to 9.7 (8.6) %. The Group again outperformed the objective of achieving return on capital of 750 base points above the risk-free interest rate.
The number of policies written for primary insurance in the Group grew by 7 % to 21 million policies.
In addition to scheduled integration of the Gerling companies in 2007, the Talanx Group achieved another milestone in the Bancassurance division during the course of structural development: Acquisition of BHW Leben, BHW Pensionskasse, and the outstanding 50 % of the shares in PB Versicherungen from Postbank, as well as an extension of the sales cooperation with Postbank by an additional 15 years until 2022 strengthened the position of the Talanx Group in the fast-growing banking sales channel.
Group Segments 2007
Minor changes were undertaken in the profile of the segments. This is due to the "Management Approach" specified by the IFRS (International Financial Reporting Standards). This is intended to harmonize external and internal reporting as much as possible. The property insurers within the bancassurance brands who essentially sell personal accident insurance are now assigned to the segment life primary insurance. The Italian insurer HDI Assicurazioni, which sells property and casualty insurance, as well as life insurance, is now fully included in the segment property/casualty primary insurance. The figures for the previous year have been adjusted accordingly.
Following on from implementation of the intermediate holding structure for the life division in life primary insurance in 2006, this step was carried out in 2007 for the segment property/casualty primary insurance in the form of HDI-Gerling Sach Serviceholding AG. The same change was also implemented at the end of the reporting year in the bancassurance division by means of the intermediate holding company Proactiv positioned directly under Talanx AG. This structure is based on the principle that despite the high level of localization in the Group each sector should be set up efficiently and cost-effectively.
Property/Casualty Primary Insurance
Gross written premiums of the biggest Group segment rose by 7 % to € 6.0 (5.6) billion. The increase resulted from the first-time consolidation of Gerling companies for a full year in 2007. The business performance also reflects a number of one-off effects. Apart from discontinuation of a banking cooperation operated by HDI Italy and the sale of Gerling at Lloyd's Ltd., the underwriting policy geared to income acted to reduce premium growth. Expenses for integration of the Gerling property companies were the cause of the increase in the combined ratio to 99.8 (92.7) % and the decline in EBIT to € 240 (339) million.
Life Primary Insurance
Gross written premiums for the segment including savings elements of premiums from unit-linked life and annuity insurance at € 5.4 (4.6) billion broke through the € 5 billion barrier for the first time. Premiums were boosted by consolidation of the Gerling companies for the full year and the BHW companies and PB Versicherungen to be first-time fully consolidated pro rata in the fourth quarter of 2007. The segment EBIT increased by 15 % to € 128 (111) million.
Non-life Reinsurance
Non-life resinsurance was the second biggest Group segment after property/casualty primary insurance in 2007. The sale of Praetorian, lower premium income for structured products and reduced peak risks brought down gross written premiums by 22 % to € 5.6 (7.1) billion. If exchange rates had remained constant, in particular the rate of the euro with the US dollar, the decline would have been 18 %. The level of retained premiums remained almost constant at 82.2 (82.0) %. Net premiums earned fell in line with gross written premiums by 18 % to € 4.6 (5.6) billion. The combined ratio (net) underwent a slight increase to 98.9 (98.2) %. EBIT at € 886 (813) million includes extraordinary income amounting to € 179 million generated by the sale of the Praetorian Group.
Life/Health Reinsurance
The gross premium income of the segment rose by € 3.1 (2.8) billion in 2007, taking it through the € 3 billion barrier for the first time. Lower retrocessions increased the level of retained premiums to 90.8 (85.4) % and net premium earned even increased by 18 % to € 2.8 (2.4) billion. It should be taken into account that during the year under review, the weakness of the US dollar and other currencies against the euro balance-sheet currency depressed premium growth. If exchange rates had remained unchanged, the increase in premiums would have been 3 percentage points higher. The EBIT of the Group segment posted significant growth of 58 % to € 230 (146) million.
Assets under management form the basis for business in the financial services segment and the volume of these assets advanced by 4 % to € 65.7 billion in 2007. Assets under management managed within the Group increased by € 754 million, despite the sale of real estate and loss of the Praetorian mandate after the Group sold this company. The rise in assets under management and the increased placement volume of the Group's own reinsurance broker Protection Re led to an increase in EBIT of 10 % to € 60 (55) million.
Foreign personal lines business with stronger focus
The Group is consistently driving its foreign strategy forward with the latest acquisitions of the Ukrainian property/casualty insurer Alcona and ISE Chile Compañía de Seguros Generales S.A. Two new joint ventures with Citibank in Russia and Turkey were launched at the beginning of the year to continue expanding the long-standing cooperation with Citibank in Germany. This means that the Talanx bancassurance division acquires a stake in two other promising markets to complement five years of successful operation in Hungary.
The principle underpinning the foreign strategy is to acquire small or medium-sized companies with good sales structures in line with the market and generating above-average potential for growth at reasonable prices. A further aim is to expand this business organically by engaging in joint ventures or further acquisitions. A top priority is professional local management with expert knowledge of the market.
Haas referred to success stories involving developments specifically in Brazil, Austria and Poland. He explained that the Group started with small units in these markets and had now established a significant market position there. The Brazilian company was ranked number eleven among property/casualty insurers according to premium income and as a motor insurer was even positioned as seventh with a market share of 5.3 %. In Austria, the company had now achieved a ranking in tenth place on the basis of premium income with a market share of 2.5 % and the Polish property/casualty company was currently ranked in sixth place in the Polish market according to premiums with a market share of 5.7 %.
Premium income generated abroad has increased more than threefold during the past five years. In the segment property/casualty primary insurance, premium income increased by 7 percentage points to € 2.8 billion in 2007 over the same period. This means that 46 % of the premiums in this segment were generated abroad during the year under review. The foreign share of life primary insurance went up by 5 percentage points to € 513 million during the same period. The foreign share of premiums in this segment amounted to nearly 10 % for 2007.
The number of policies in foreign business amounted to 7.1 million policies in 2007, 6.4 million policies from property and casualty insurance and nearly 650,000 from life insurance. In 2002, some 2.6 million policies were generated by business abroad and since then the number of policies from abroad has increased by 173 %.
About Talanx: With premium income of roughly € 20 billion in 2007 the Talanx Group is Germany's third-largest insurance group. Talanx operates as a multi-brand provider. Its brands include HDI, HDI-Gerling, Hannover Re, one of the world's leading reinsurers, Aspecta, CiV, PB, Neue Leben and the financial services provider AmpegaGerling. The Hanover-based Group is active in 150 countries. The rating agency Standard & Poor's has given Talanx a financial strength rating of A+/stable (very good).
If you require additional information, please contact:
Thomas von Mallinckrodt: +49 (0) 511-37 47 20 20
Thomas von Mallinckrodt: +49 (0) 511-37 47 20 20
Key figures of the Talanx Group 2007
Key data from the overall Group income statement - IFRS -
|
€ m |
2007 |
2006 |
+/- previous year |
|
Gross written premiums |
19,130 |
19,368 |
- 1 % |
|
Net premiums earned |
14,895 |
15,019 |
- 1 % |
|
Combined ratio in property/casualty insurance and non-life reinsurance 1) |
99.2 % |
96.1 % |
+ 3.1 % points |
|
Net investment income |
2,702 |
2,516 |
+ 7 % |
|
Operating profit (EBIT) |
1,451 |
1,286 |
+ 13 % |
|
Net income after tax |
999 |
727 |
+ 37 % |
|
Consolidated net income after minorities |
477 |
394 |
+ 21 % |
|
Return on equity after tax 2) |
13.1 % |
11.7 % |
+ 1.4 % points |
|
|
|
|
|
|
Investments (excluding funds held by ceding companies) |
61,569 |
57,765 |
+ 7 % |
1) Including deposit interest received
2) Consolidated net income (after minority interests) as a function of average equity
