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Talanx falls to underwriting loss on €2.1bn of large losses

15th March 2021 - Author: Luke Gallin

Talanx, the parent of major European reinsurance company Hannover Re, has reported an underwriting loss of €2.8 billion for 2020 amid total large losses of a significant €2.1 billion, driven mostly by the coronavirus pandemic.

talanxThe company’s underwriting performance deteriorated further from the €1.8 billion loss reported in 2019, as the combined ratio weakened from 98.3% to 100.9% for 2020.

Talanx’s large loss bill exceeded both 2019’s total and the annual budget of €1.3 billion by roughly €800 million in 2020. The majority of the large loss bill, or €1.6 billion was attributable to reinsurance, with the primary insurance business accounting for the remaining €554 million.

Of the €2.1 billion large loss total reported by the re/insurer for 2020, a substantial €1.2 billion relates to the pandemic’s impact on the firm’s property and casualty operation, while €658 million relates to natural catastrophe losses for the period.

According to Talanx, losses from nat cats fell year-on-year as a result of the extremely moderate level of large losses booked in Q4. During 2020, the largest losses from nat cats were in the U.S. and were driven by Hurricane Laura at a cost of €145 million, the Derecho event at €111 million, and the Nashville tornado at a cost of €55 million.

RMS

Overall, Talanx reports that the COVID-19 pandemic resulted in claims expenses of roughly €1.5 billion in 2020 and negatively impacted net income by €486 million.

Additionally, the pandemic had a €174 million negative effect on investments for Talanx and also provisions for future premium decreases of €133 million. Although, the virus did also lead to improvements of €206 million at individual lines due to lower losses and other effects.

“We were there for our clients when it counted – the payments from our German commercial shutdown insurance also helped many restaurant owners, bakers, hotel operators, and many other firms, both large and small, to weather the crisis.

“This is very much in keeping with our Talanx Purpose: ‘Together we take care of the unexpected and foster entrepreneurship’. I would like to thank all our staff, who showed outstanding commitment to our clients and to the Company during the crisis,” said Torsten Leue, Chairman of Talanx AG’s Board of Management.”

Although pandemic losses were significant in the firm’s P/C reinsurance business, the segment reported gross written premiums growth of more than 13% to €16.7 billion for the year, although the operating profit did fall by 32% to €854 million.

The reinsurance segment’s large loss budget of €975 million was almost entirely exhausted by €950 million of losses related to the pandemic, of which 22% was due to business interruption, 26% due to commercial credit insurance, and 21% to event cancellation.

All in all, the reinsurance unit recorded an underwriting loss of €274 million in 2020, with the pandemic pushing up the segment’s combined ratio to an unprofitable 101.6%.

Despite the significant impacts of the pandemic, the Talanx Group has reported an operating profit of €1.7 billion and net income of €673 million for 2020, against €2.4 billion and €923 million for the same periods in 2019, respectively.

At the same time, gross written premiums increased by more than 4% to €41.1 billion in 2020, compared with €39.5 billion in 2019.

Year-on-year, net investment income fell from €4.3 billion to €4.2 billion, with Talanx reporting a net return on investments of 3.2% for the year.

“Robust and resilient – the Talanx Group has successfully held its ground during the ongoing coronavirus pandemic. We are growing profitably despite the global economic downturn in 2020. Given the adverse conditions caused by this deep crisis – which led to the highest level of large losses in the Company’s history – our very solid growth and Group net income are impressive demonstrations of our resilience. The same applies to our dividend payment. As regards 2021, we are putting our trust in the variety of vaccines with which the pandemic can be overcome.

“We are confident about the current financial year and are expecting Group net income to rise to between EUR 800 and 900 million. In addition, we are confirming our medium-term Group targets for the period up to 2022,” said Leue.

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