Talanx optimistic about German insurance restructuring
Talanx, which operates brands including HDI and Hannover Re, is restructuring its German retail division and has said it is optimistic that it can boost its profitability, at a capital markets day in Frankfurt.
"We are making good progress in all major projects in primary insurance - especially in the German retail business,” said Talanx chairman Herbert Haas. “We are therefore confident that we will generate about 50 percent of our EBIT (earnings before interest and taxes) in primary insurance and about 50 percent in reinsurance by 2021," he noted.
Talanx, which has premium income of €31.8 billion (2015), said it is restructuring its German retail division to raise efficiency and foster what it called selective growth in property/casualty. It also wants to automate and digitalise processes and reduce risks in its German life business.
The plan was launched in 2015 and aims to deliver a sustained annual contribution of at least €240 million a year to the group's EBIT from 2021. A positive effect from this programme is already expected for the 2017 divisional result.
In new business in the life segment, the retail Germany division is moving its portfolio to more capital-efficient products. By the year 2021, the share of capital-efficient products in the new business is expected to rise to more than 75 percent, in spite of the existence of conventional guarantee contracts with dynamic-linked increases.
Because of the current low interest rate environment, life products in Germany have become less profitable and rate guarantees limit the possibilities to pass on the lower yields to policy holders.
The average guaranteed rates in the life portfolios of HDI and the bancassurance carriers are likely to drop by 2021 to below the new investment returns of 1.43 percent achieved in the first nine months 2016.
In property/casualty, Talanx is focusing on raising efficiency and profitability by automating processes. The goal is to automate more than 70 percent in the motor segment by 2019 and more than 90 percent by 2020. Talanx is targeting a combined ratio of no more than 95 percent by 2021. Talanx is also reducing staff levels.
