Industrial lines trouble Talanx in H1
German re/insurer Talanx recorded an underwriting loss in industrial lines in the first half of 2018, driven by the German fire line and the firm is looking for price increases and restructuring the segment.
The underwriting result in industrial lines deteriorated to a loss of €28 million in the first six months of 2018 after a profit of €32 million in the same period a year ago.
The combined ratio in the segment deteriorated to 102.3 percent from 97.2 percent, primarily due to higher property claims in the current financial year, mainly in the German fire line.
“The sector expects that overall industrial property insurance in Germany will have a combined ratio of 115 percent for 2018,” said Christian Hinsch, board member of the Talanx responsible for the industrial lines division. “In the first half of 2018, unfortunately, we as well were unable to escape this," Hinsch said.
"Thanks to our 20/20/20 Programme, we will significantly reduce the combined ratio, especially for German fire insurance, over the next 18 months to return to a positive underwriting result. This includes the reduction in market share and giving up some business," Hinsch noted.
Torsten Leue, chairman of the Talanx AG board of management, added: “We are not satisfied with the results in the industrial lines' fire line in Germany.”
“During the second quarter, we made a start on our 20/20/20 Programme, with new management appointments to restructure fire insurance with the focus on Germany. We thereby want to reduce the combined ratio in the affected 20 percent of the industrial lines portfolio to well below 100 percent by 2020,” Leue noted.
“To achieve this, we are looking for premium increases of 20 percent on average. The adjustments to rates are already under way. Around one third of the necessary price increases had already been applied by the middle of 2018. We expect the vast majority of the restructuring measures in fire insurance to take effect in 2019," Leue explained.
Overall, the group’s combined ratio improved to 96.7 percent in the first half of 2018 from 97.0 percent in the same period a year ago. Gross written premiums grew by 6.9 percent year on year to €18.8 billion in the first half. Adjusted for currency effects, the increase was in double digits at 11.8 percent. The decisive factors here were property/casualty reinsurance, together with the growth in Retail International. Talanx unit Hannover Re grew gross written premium in property and casualty reinsurance by 19.2 percent year on year to €6.47 billion in the first half of 2018. Gross written premiums in Retail International rose by 4.8 percent to €3.0 billion.
In the first half of the year, the burden of natural disasters and large losses amounted to €241 million after 195 million in the first half of 2017, remaining within the proportional large-loss budget of €501 million. The unused budget will provide a robust shock-absorber for the second half of the year, the company said.
Group net income came in below the previous year at €437 million in the first half compared to €463 million in the same period a year ago. Based on the overall “good business trends” in the first six months, Talanx confirmed its outlook for group net income of around €850 million in 2018 as a whole.
"Given the course of business in the first half of 2018, we are very satisfied,” Leue said. “We have successfully continued growth in our core overseas markets as well as in the German property insurance business with retail customers, and are still overall on the right path to increase profitability in our home market. This result demonstrates the group's robust structure. This is also reflected in the double-digit return on equity of ten percent,” Leue added.
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