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Talanx lifts FY19 net income outlook after strong first-half result

12th August 2019 - Author: Luke Gallin

Reinsurance giant Hannover Re’s parent, The Talanx Group, has raised its outlook for Group net income in 2019 to above €900 million on the back of a strong first-half performance, supported by a greater contribution from its reinsurance division despite the impact of losses.

Talanx logoFor the first-half of 2019, the company’s net income increased by 9.4% to €477 million, while operating profit jumped 2.7% year-on-year, to €1.24 billion. Overall, gross premiums written increased by more than 11% in the period to €20.86 billion, and net premiums earned increased by over 10% to €15.9 billion, when compared with the first-half of 2018.

Somewhat offsetting the improvements, the firm’s net investment income fell slightly in H1 2019 to €1.98 billion, compared with €2 billion in H1 2018.

Overall, the firm produced a combined ratio of 97.5% in H1 2019, which is up on the 96.7% recorded a year earlier and which reflects late claim notifications related to typhoon Jebi and higher losses from natural disasters in the period.

Losses from natural disasters and other large losses for H1 2019 totalled €308 million compared with €241 million a year earlier, although this remains within the group level pro rata large loss budget of €527 million. The Talanx Group notes that reinsurance accounted for large losses of €141 million and that at €167 million, the pro rata large loss budget for primary insurance was slightly exceeded.

The Talanx Group’s underwriting result improved by 5.5% in H1 2019 to -€708 million, which the firm attributes to strong results in the Life Insurance segment in Germany which more than offset the increased costs of natural disasters and other large losses.

The firm highlights a greater contribution to Group net income from its reinsurance division, which increased from €281 million in H1 2018 to €329 million in H1 2019. The property and casualty reinsurance segment recorded gross written premium growth of 21.3% in the period to €7.8 billion.

Of the €141 million hit from natural disasters and other large losses within the segment, key losses included the explosion at a refinery in Philadelphia, the floods in Queensland, Australia, and the late claim notification for typhoon Jebi.

The reinsurance unit’s underwriting result fell from €206 million in H1 2018 to €174 million in H1 2019, and the division recorded a combined ratio of 96.7%, compared with 95.7% a year earlier.

Life and Health reinsurance also performed well in the period, with premium income up by 9.3% and investment income increasing to €364 million. However, the underwriting result declined here also to -€210 million, compared with -€108 million in H1 2018.

Outside of reinsurance operations, and all other divisions recorded an increase in premiums in H1 2019. Industrial Lines grew by over 20% and recorded a stable combined ratio of 102.3%; Retail Germany saw its premiums rise from €3.26 billion to €3.32 billion and contributed €72 million to Group net income, up from the €50 million posted in H1 2018; Retail International recorded premium growth of 6.5% and its contribution to Group net income was up by 2.6%.

Torsten Leue, Chairman of the Board of Management of Talanx AG, said: “We are pleased with the way our business has developed in the first half of 2019.

“We are seeing growth in all our divisions. Our ‘20/20/20’ programme to restructure the industrial fire insurance business is having the desired effect and will be reflected in a steady improvement of our results going forward. In addition to the Retail Germany and Retail International divisions, our Reinsurance operations also continued their successful development. I am confident that we will reach our new target for Group net income in full-year 2019 of more than EUR 900 million.”

The Talanx Group has said that the “extraordinary” income in Q2 2019 from its Life/Health reinsurance division was a result of the release of hidden reserves related to the restructuring of the shareholding in the Viridium Group. The Group notes that thanks to its shareholding in Hannover Re, the restructuring boosted Talanx’s net income by approximately €50 million in H1 2019, which has also contributed to the company’s higher net income forecast for the full-year 2019.

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