Quarterly Report • Nov 12, 2020
Quarterly Report
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Talanx Group Quarterly Statement as at 30 September 2020
| Unit | 6M 2020 | Q3 2020 | 9M 2020 | 6M 2019 | Q3 2019 | 9M 2019 | 9M 2020 vs 9M 2019 |
|
|---|---|---|---|---|---|---|---|---|
| Gross written premiums | EUR million | 22,006 | 9,901 | 31,907 | 20,864 | 9,461 | 30,325 | +5.2 % |
| by region | ||||||||
| Germany | % | 22 | 13 | 19 | 24 | 19 | 23 | –3.5 ppts |
| United Kingdom | % | 8 | 9 | 8 | 7 | 8 | 8 | +0.8 ppts |
| Central and Eastern Europe (CEE), including Turkey | % | 7 | 8 | 7 | 8 | 8 | 8 | –0.5 ppts |
| Rest of Europe | % | 16 | 16 | 16 | 16 | 16 | 16 | — ppts |
| USA | % | 21 | 21 | 21 | 20 | 22 | 21 | +0.1 ppts |
| Rest of North America | % | 3 | 4 | 3 | 2 | 3 | 2 | +0.7 ppts |
| Latin America | % | 6 | 8 | 7 | 7 | 8 | 7 | –0.3 ppts |
| Asia and Australia | % | 15 | 19 | 16 | 13 | 15 | 14 | +2.7 ppts |
| Africa | % | 1 | 2 | 1 | 1 | 2 | 2 | — ppts |
| Gross written premiums by type and class of insurance 1 | ||||||||
| Property/casualty primary insurance | EUR million | 6,680 | 2,527 | 9,207 | 6,516 | 2,648 | 9,164 | +0.5 % |
| Life primary insurance | EUR million | 2,999 | 1,405 | 4,404 | 3,383 | 1,519 | 4,902 | –10.2 % |
| Property/casualty reinsurance | EUR million | 8,343 | 3,802 | 12,145 | 7,189 | 3,436 | 10,625 | +14.3 % |
| Life/health reinsurance | EUR million | 3,906 | 1,943 | 5,849 | 3,777 | 1,858 | 5,634 | +3.8 % |
| Net premiums earned | EUR million | 16,746 | 8,555 | 25,301 | 15,917 | 8,269 | 24,186 | +4.6 % |
| Underwriting result | EUR million | –1,129 | –843 | –1,972 | –708 | –574 | –1,282 | +53.8 % |
| Net investment income | EUR million | 1,785 | 1,274 | 3,059 | 1,986 | 1,170 | 3,156 | –3.1 % |
| Net return on investment 2 | % | 2.7 | — | 3.1 | 3.3 | — | 3.4 | –0.3 ppts |
| Operating profit/loss (EBIT) | EUR million | 745 | 546 | 1,291 | 1,244 | 619 | 1,863 | –30.7 % |
| Net income (after financing costs and taxes) | EUR million | 549 | 360 | 910 | 858 | 456 | 1,313 | –30.8 % |
| of which attributable to shareholders of Talanx AG | EUR million | 325 | 194 | 520 | 477 | 265 | 742 | –30.0 % |
| Return on equity 3, 4 | % | 6.4 | 7.6 | 6.8 | 10.4 | 10.7 | 10.4 | –3.6 ppts |
| Earnings per share | ||||||||
| Basic earnings per share | EUR | 1.29 | 0.77 | 2.06 | 1.89 | 1.05 | 2.93 | –29.7 % |
| Diluted earnings per share | EUR | 1.29 | 0.77 | 2.06 | 1.89 | 1.05 | 2.93 | –29.7 % |
| Combined ratio in property/casualty primary insurance and property/casualty reinsurance 5 |
% | 101.3 | 99.7 | 100.7 | 97.5 | 100.4 | 98.5 | +2.2 ppts |
| Combined ratio of property/casualty primary insurers 1 | % | 98.8 | 99.2 | 98.9 | 98.4 | 97.4 | 98.1 | +0.8 ppts |
| Combined ratio of property/casualty reinsurance | % | 102.3 | 99.6 | 101.4 | 96.7 | 102.2 | 98.7 | +2.7 ppts |
| EBIT margin primary insurance and reinsurance | ||||||||
| EBIT margin primary insurance 1 | % | 4.3 | 4.7 | 4.4 | 5.2 | 6.4 | 5.6 | –1.2 ppts |
| EBIT margin property/casualty reinsurance | % | 4.4 | 8.4 | 5.8 | 11.1 | 6.8 | 9.6 | –3.8 ppts |
| EBIT margin life/health reinsurance | % | 6.0 | 5.7 | 5.9 | 8.3 | 11.1 | 9.2 | –3.4 ppts |
| 30.9.2020 | 31.12.2019 | +/– | ||
|---|---|---|---|---|
| Policyholders' surplus | EUR million | 20,306 | 20,089 | +1.1 % |
| Equity attributable to shareholders of Talanx AG | EUR million | 10,194 | 10,149 | +0.4 % |
| Non-controlling interests | EUR million | 6,626 | 6,461 | +2.5 % |
| Hybrid capital | EUR million | 3,486 | 3,479 | +0.2 % |
| Assets under own management | EUR million | 127,115 | 122,638 | +3.7 % |
| Total investments | EUR million | 138,482 | 134,104 | +3.3 % |
| Total assets | EUR million | 180,958 | 177,594 | +1.9 % |
| Carrying amount per share at end of period | EUR | 40.32 | 40.15 | +0.4 % |
| Share price at end of period | EUR | 27.52 | 44.18 | –37.7 % |
| Market capitalisation of Talanx AG at end of period | EUR million | 6,957 | 11,169 | –37.7 % |
| Employees | Full-time equivalents |
21,650 | 21,516 | +0.6 % |
1 Excluding figures from the Corporate Operations segment.
Ratio of annualised net investment income excluding interest income on funds withheld and contract deposits and profit on investment contracts to average assets under own management (30.9.2020 and 31.12.2019).
3 Ratio of annualised net income for the period excluding non-controlling interests to average equity excluding non-controlling interests.
Ratio of annualised net income for the quarter excluding non-controlling interests to average equity excluding non-controlling interests at the beginning and the end of the quarter.
5 Combined ratio taking into account interest income on funds withheld and contract deposits, before elimination of intragroup cross-segment transactions. +/–
| Business development | 2 |
|---|---|
| Investments and financial position | 11 |
| Outlook | 14 |
| PAGE | |
| Consolidated balance sheet | 18 |
| Consolidated statement of income | 20 |
| Consolidated statement of comprehensive income | 21 |
| Segment reporting | 22 |
| Consolidated cash flow statement | 30 |
PAGE
Guideline on Alternative Performance Measures – for further information on the calculation and definition of specific alternative performance measures please refer to: https://www.talanx.com/en/investor_relations/reporting/midterm_targets
Other disclosures 31
This document is a quarterly statement in accordance with section 51a of the Exchange Rules for the Frankfurter Wertpapierbörse.
Quarterly Statement
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 31,907 | 30,325 | +5.2 % |
| Net premiums earned | 25,301 | 24,186 | +4.6 % |
| Underwriting result | –1,972 | –1,282 | –53.8 % |
| Net investment income | 3,059 | 3,156 | –3.1 % |
| Operating profit/loss (EBIT) | 1,291 | 1,863 | –30.7 % |
| Combined ratio (net, property/casualty only) in % 1 |
100.7 | 98.5 | +2.2 ppts |
Taking into account interest income on funds withheld.
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
7.2 | 10.6 | –3.3 ppts |
| Group net income in EUR million |
520 | 742 | –30.0 % |
| Net return on investment 1 | 3.1 | 3.4 | –0.3 ppts |
| Return on equity 2 | 6.8 | 10.4 | –3.6 ppts |
Ratio of annualised net investment income excluding interest income on funds withheld and contract deposits and profit on investment contracts to average assets under own management.
Ratio of annualised net income for the period excluding non-controlling interests to average equity excluding non-controlling interests.
The Group's gross written premiums rose by 5.2% in the first nine months of 2020 to EUR 31.9 (30.3) billion (by 7.2% adjusted for currency effects). The Property/Casualty Reinsurance segment played a significant role in the growth in gross premiums thanks in part to successful treaty renewal rounds in June/July 2020; the upturn in gross premiums in the Industrial Lines Division stemmed largely from HDI Global Specialty SE. Premium growth waned in the Retail Germany and Retail International Divisions on account of the coronavirus pandemic. The Talanx Group's net premiums earned were 4.6% higher year-on-year at EUR 25.3 (24.2) billion. The retention ratio fell to 87.6% (88.5%).
The underwriting result dropped by over 50% to EUR –1,972 (–1,282) million on account of the coronavirus. Large losses in the first nine months of 2020 came to EUR 1,601 (782) million, of which reinsurance accounted for EUR 1,149 million and primary insurance for EUR 452 million. Large losses were well in excess of both the pro rata budget for the period of around EUR 1,020 (900) million and the whole-year budget of EUR 1,335 (1,190) million. On account of the coronavirus pandemic, these were largely incurred in the business interruption, event cancellations and credit insurance lines. Adjusted for coronavirus-related negative effects, the combined ratio came to 97.6%. This was a result chiefly of the rise in the loss ratio to 72.8% (69.9%) in connection with the coronavirus. The Group's combined ratio increased by 2.2 percentage points to 100.7% (98.5%).
Net investment income also declined slightly to EUR 3.1 (3.2) billion on account of sustained very low interest, down 3.1% year-on-year. This partly reflects impairment losses on equities and alternative investments in extraordinary net investment income totalling EUR 115 million due to the coronavirus. Considerably higher net investment income in the Life segment of the Retail Germany Division and a onetime effect in the Life/Health Reinsurance segment did not offset the lower investment income generated by the other segments. At 3.1%, the Group net return on investment for the first nine months of 2020 was down 0.3 percentage points on the previous year (3.4%).
Operating profit (EBIT) experienced a double-digit decline of 30.7% to EUR 1,291 (1,863) million. The Reinsurance Division accounted for the largest share of this. With the impact of the coronavirus pandemic, Group net income came to just EUR 520 million, down on EUR 742 million in the previous year. Without the negative effects caused by the coronavirus of EUR 356 million, Group net income would have come to EUR 876 million. The return on equity also fell by 3.6% to 6.8% (10.4%) as a result.
At a strategic level, Talanx divides its business into seven reportable segments: Industrial Lines, Retail Germany (divided into Property/ Casualty and Life Insurance), Retail International, Property/Casualty Reinsurance, Life/Health Reinsurance and Corporate Operations. Please refer to the "Segment reporting" section of the Notes to the consolidated financial statements of the Talanx Group's 2019 annual report for details of these segments' structure and scope of business.
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 5,220 | 4,883 | +6.9 % |
| Net premiums earned | 2,252 | 2,149 | +4.8 % |
| Underwriting result | –107 | –30 | –258.5 % |
| Net investment income | 171 | 215 | –20.5 % |
| Operating profit/loss (EBIT) | 28 | 133 | –79.0 % |
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
8.1 | 28.1 | –20.1 ppts |
| Combined ratio (net) 1 | 104.8 | 101.4 | +3.4 ppts |
| EBIT margin 2 | 1.2 | 6.2 | –5.0 ppts |
| Return on equity 3 | 0.6 | 4.6 | –3.9 ppts |
1 Taking into account interest income on funds withheld.
2 Operating profit/loss (EBIT)/net premiums earned. 3 Ratio of annualised net income for the period excluding non-controlling interests
to average equity excluding non-controlling interests.
The division pools global activities relating to industrial insurance within the Talanx Group and, as well as its presence on the German market, also operates in over 150 countries through its foreign branches, subsidiaries, affiliates and network partners.
Gross written premiums for the division amounted to EUR 5.2 (4.9) billion as at 30 September 2020, an increase of 6.9% (8.1% after adjustment for currency effects). The premium upturn was essentially a result of strong growth in speciality business.
At 4.8%, growth in net premiums earned was lower than that of gross written premiums, due in particular to comparatively low retention in the growing specialty portfolio. The coronavirus crisis will also affect premiums given that the premium for some insurance contracts depends on company's revenue. Accordingly, the fall in revenue among customers results in lower premium income. EUR 59 million was taken into account for this in the quarterly financial statements as a precautionary measure.
At EUR –107 (–30) million, the net underwriting result was down on the previous year. While ongoing profitability measures continued to have a very positive impact on the loss ratio, the underwriting result deteriorated by a total of EUR 146 million due to exceeding the pro rata large loss budget for the period on account of the coronavirus and because of the provision for expected declines in premiums described above. The third quarter was also shaped by large losses from US hurricanes. The loss ratio climbed to 84.9% (81.0%) as a result. The net cost ratio improved to 19.8% (20.4%) thanks to significant premium growth combined with high cost discipline. The combined ratio for the Industrial Lines Division rose to 104.8% (101.4%). Adjusted for the coronavirus impact, it declined to 98.3%. The successful restructuring of the fire insurance line as part of the "20/20/20" initiative is apparent in this line's combined ratio, adjusted for the impact of the coronavirus, of 99.9% with a fully replenished large loss budget. In this context, the adjusted loss ratio for fire insurance fell by a sizeable 34.8 percentage points in comparison to the beginning of the initiative in 2018 (118.1%) to 83.3%.
Current net investment income was lower than in the previous year, which was characterised mainly by high distributions from alternative investments. Extraordinary investment income, which reported a one-time effect in the previous year due to portfolio disposals, is also lower than in the prior year. The coronavirus pandemic depressed net investment income by a total of EUR 8 million.
Driven by the large losses related to the coronavirus and lower net investment income, the division's operating profit was down year on year at EUR 28 (133) million. All told, the impact of Covid-19 on EBIT came to EUR 155 million. Group net income reached EUR 10 (84) million.
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 1,270 | 1,337 | –5.1 % |
| Net premiums earned | 1,058 | 1,105 | –4.2 % |
| Underwriting result | 45 | 18 | +150.1 % |
| Net investment income | 64 | 85 | –24.6 % |
| Operating profit/loss (EBIT) | 96 | 78 | +23.2 % |
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross premium growth | –5.1 | 1.9 | –7.0 ppts |
| Combined ratio (net) 1 | 95.8 | 98.4 | –2.6 ppts |
| EBIT margin 2 | 9.1 | 7.1 | +2.0 ppts |
Taking into account interest income on funds withheld.
Operating profit/loss (EBIT)/net premiums earned.
2
There was a 5.1% decline in written premium income to EUR 1,270 (1,337) million in the Property/Casualty Insurance segment in the period to the end of September. In addition to discontinuation of two major accounts, this was driven by negative net year-end motor vehicle business and the slump in new business when measures were introduced to contain the coronavirus pandemic. Despite the unfavourable conditions, corporate customers/freelance professions business generated growth. All told, the negative effects of the coronavirus pandemic caused a EUR 63 million drop in premium income, especially in motor insurance and the biometric core business of bancassurance.
The underwriting result was EUR 45 (18) million in the current financial year, up 150.1% on the previous year. Significant negative effects resulting from multiple large loss events were comfortably offset by profitable growth in the third-party liability, accident and property lines, improved basic losses in motor insurance and lower expenses as part of our investment and modernisation programme. In addition, the negative impact caused by the coronavirus pandemic was limited to a total of around EUR 21 million thanks to existing reinsurance cover. The improvement was also helped by the fact that no more costs were incurred for a key migration project that was completed last year. These effects resulted in a considerable 2.6 percentage point decrease in the combined ratio (net), from 98.4% to 95.8%.
Net investment income fell to EUR 64 (85) million. This chiefly reflected higher depreciation and amortisation, lower net unrealised gains/losses, a decline in income from land and real estate and lower interest income on account of market conditions. The negative impact of the coronavirus pandemic is estimated at EUR 5 million.
EBIT was significantly higher than in the previous year at EUR 96 (78) million due to improved underwriting. With lower premium income, the EBIT margin therefore increased to 9.1% (7.1%).
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 3,189 | 3,395 | –6.1 % |
| Net premiums earned | 2,432 | 2,501 | –2.8 % |
| Underwriting result | –1,309 | –1,109 | –18.0 % |
| Net investment income | 1,404 | 1,242 | +13.1 % |
| Operating profit/loss (EBIT) | 72 | 107 | –32.7 % |
| New business measured in annual premium equivalent |
260 | 294 | –11.6 % |
| Single premiums | 939 | 1,111 | –15.4 % |
| Regular premiums | 166 | 183 | –9.3 % |
| New business by product measured in annual premium equivalent |
260 | 294 | –11.6 % |
| of which capital-efficient products |
118 | 125 | –5.4 % |
| of which biometric products |
84 | 101 | –16.8 % |
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross premium growth | –6.1 | 2.6 | –8.7 ppts |
| EBIT margin 1 | 2.9 | 4.3 | –1.3 ppts |
1 Operating profit/loss (EBIT)/net premiums earned.
In the period to the end of September, the Life Insurance segment saw premiums decrease by 6.1% to EUR 3.2 (3.4) billion, which includes the savings elements of premiums from unit-linked life insurance policies.
This was driven by the slump in new business when measures were introduced to contain the coronavirus pandemic. Branch closures in the banking sector and companies' reluctance to enter into contracts for occupational retirement provisions had a serious impact. The coronavirus pandemic is estimated to be responsible for a EUR 157 million decrease in premiums. In particular, the bancassurance biometric business saw a downturn of EUR 93 million and single premiums (excluding bancassurance biometric business) were down by EUR 71 million, with regular premiums (excluding bancassurance biometric business) falling by EUR 43 million.
Allowing for the savings elements of premiums from our unit-linked products and the change in the unearned premium reserve, net premiums earned in the Life Insurance segment fell by 2.8% to EUR 2.4 (2.5) billion.
Measured in APE, new business in life insurance products declined from EUR 294 million to EUR 260 million.
The underwriting result declined to EUR –1.3 (–1.1) billion in the current financial year. This was partly due to the unwinding of discounts on the technical provisions and policyholder participation in net investment income. These expenses are offset by investment income, which is not recognised in the underwriting result.
Net investment income improved by 13.1% to EUR 1.4 (1.2) billion. This growth was driven predominantly by higher disposal gains, which easily offset lower ordinary investment income due to interest rates and coronavirus-related write-downs on equities. The negative impact of the coronavirus pandemic is estimated at EUR 57 million.
Operating profit (EBIT) in the Life Insurance segment in the Retail Germany Division decreased by 32.7% year-on-year to EUR 72 (107) million, due chiefly to the regular adjustment of actuarial assumptions to take account of the again lower interest rates. The EBIT margin decreased to 2.9% (4.3%).
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Return on equity 1 | 5.3 | 5.8 | –0.5 ppts |
1 Ratio of annualised net income for the period excluding non-controlling interests to average equity excluding non-controlling interests.
After adjusting for taxes on income, financing costs and noncontrolling interests, the Group net income contribution fell to EUR 102 (110) million as a result of the decrease in earnings in Life Insurance. This depressed the return on equity by 0.5 percentage points to 5.3%.
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 4,040 | 4,537 | –11.0 % |
| Net premiums earned | 3,678 | 4,009 | –8.3 % |
| Underwriting result | 44 | 34 | +29.8 % |
| Net investment income | 245 | 286 | –14.3 % |
| Operating profit/loss (EBIT) | 220 | 227 | –3.0 % |
| 9M 2020 | 9M 2019 | +/– |
|---|---|---|
| –3.9 | 9.9 | –13.8 ppts |
| 94.8 | 95.1 | –0.3 ppts |
| 6.0 | 5.7 | +0.3 ppts |
| 8.3 | 8.7 | –0.4 ppts |
Taking into account interest income on funds withheld.
2
Operating profit/loss (EBIT)/net premiums earned.
3 Ratio of annualised net income for the period excluding non-controlling interests to average equity excluding non-controlling interests.
This division bundles the Talanx Group's international retail business activities and is active in both Europe and Latin America. The coronavirus pandemic that broke out across the world in the first half of 2020 initially had a positive impact in the Retail International segment thanks to less frequent motor vehicle claims as fewer vehicles were on the roads, boosting the underwriting result by of EUR 72 million, and has so far had only a minor negative impact of EUR –8 million on net investment income. Nonetheless, the decline in premium volume as a result of the coronavirus pandemic is expected to have a delayed adverse effect on the underwriting result in 2021. Provisions of EUR 35 million have been recognised for coronavirus effects in the current year, impacting the combined ratio by 1.4 percentage points.
The division's gross written premiums (including premiums from unit-linked life and annuity insurance) decreased by 11.0% year-onyear to EUR 4.0 (4.5) billion. Adjusted for currency effects, gross premiums were down 3.9% on the comparative period.
The Europe region reported a 7.9% decrease in gross written premiums to EUR 3.0 billion, driven primarily by lower single premiums in the life insurance line of the Italian HDI Assicurazioni S.p.A., whereas premiums at the Turkish HDI Sigorta A. Ş. rose by 45.6% adjusted for currency effects, largely in connection with motor and homeowners insurance. Ergo Sigorta A.Ş. which was acquired in the third quarter of 2019, was included for nine months in the 2020 figures. Adjusted for currency effects, the downturn in premium volume in Europe stood at 4.8%.
In the Latin America region, gross written premiums fell by 18.7% compared to the same period of the previous year to EUR 1.0 (1.3) billion, especially in Brazil, Mexico and Chile. Adjusted for currency effects, the downturn in gross written premiums stood at 1.5%. Premiums for the division's companies in the Latin America region are generated chiefly from motor vehicle contracts. Sales of these are declining as new vehicle sales have experienced a downturn on account of the economy and the repercussions of the coronavirus pandemic.
The combined ratio from property insurance companies decreased by 0.3 percentage points year-on-year to 94.8%. The loss ratio accounts for 1.1 percentage points of this improvement. Fewer vehicles on the roads as a result of lockdowns to contain the coronavirus pandemic temporarily resulted in less frequent motor vehicle claims and so loss ratios declined in the first nine months of 2020. The expense ratio for the division was 0.8 percentage points higher than the previous year (28.9%), at 29.7%. The rise in the expense ratio came chiefly on the back of a higher acquisition cost ratio on account of stiffer competition and more diversification.
Risk products from the Polish TUiR WARTA S.A. played a particularly key role in the EUR 9 million improvement in the underwriting result in life insurance.
Net investment income declined by 14.3% against the first nine months of 2019 to EUR 245 (286) million. This decrease stemmed from the 49.7% fall in extraordinary net investment income, which declined to EUR 25 (50) million chiefly on the back of write-downs of equity securities due to the coronavirus pandemic at the Italian HDI Assicurazioni S.p.A. and the Polish TUiR WARTA S.A., as well as realised losses. The division's ordinary net investment income fell by 5.9% year on year to EUR 238 (253) million, attributable mainly to lower interest rates on all markets, in particular in Poland and Turkey.
In the first nine months of 2020, operating profit (EBIT) in the Retail International Division shrank by 3.0% compared with the prior-year period to EUR 220 (227) million. Adjusted for currency effects, EBIT picked up by around 3%. The Europe region contributed to the operating profit of the segment with EBIT of EUR 232 (209) million, a yearon-year increase of 10.5%, whereby this growth was primarily due to the earnings contribution by the Polish TUiR WARTA S.A. and the Italian HDI Assicurazioni S.p.A. This upturn offset the EUR 15 million decline in operating profit (EBIT) in the Latin America region. Group net income after minority interests declined accordingly by 3.8% to EUR 127 (132) million. The return on equity declined by 0.4 percentage points to 8.3% compared to the same period in the previous year.
| EUR million | 9M 2020 | 9M 2019 | +/– | |
|---|---|---|---|---|
| Gross written premiums | 4,040 | 4,537 | –11.0 % | |
| Property/Casualty | 2,773 | 2,986 | –7.1 % | |
| Life | 1,267 | 1,551 | –18.3 % | |
| Net premiums earned | 3,678 | 4,009 | –8.3 % | |
| Property/Casualty | 2,463 | 2,566 | –4.0 % | |
| Life | 1,215 | 1,443 | –15.9 % | |
| Underwriting result | 44 | 34 | +29.8 % | |
| Property/Casualty | 129 | 128 | +0.9 % | |
| Life | –85 | –94 | +9.5 % | |
| Net investment income | 245 | 286 | –14.3 % | |
| Property/Casualty | 121 | 149 | –18.8 % | |
| Life | 130 | 143 | –8.8 % | |
| Others | –5 | –3 | +8.7 % | |
| New business by product | ||||
| measured in annual premium equivalent (life) |
154 | 188 | –18.2 % | |
| Single premiums | 1,042 | 1,342 | –22.4 % | |
| Regular premiums | 49 | 53 | –7.7 % | |
| New business by product | ||||
| measured in annual premium equivalent (life) |
154 | 188 | –18.2 % | |
| of which capital-efficient products |
83 | 105 | –21.0 % | |
| of which biometric products |
48 | 49 | –2.8 % | |
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 4,040 | 4,537 | –11.0 % |
| of which Europe | 2,993 | 3,250 | –7.9 % |
| of which Latin America | 1,047 | 1,287 | –18.7 % |
| Net premiums earned | 3,678 | 4,009 | –8.3 % |
| of which Europe | 2,722 | 2,878 | –5.4 % |
| of which Latin America | 956 | 1,131 | –15.5 % |
| Underwriting result | 44 | 34 | +29.8 % |
| of which Europe | 49 | 25 | +95.0 % |
| of which Latin America | 30 | 28 | +8.3 % |
| Net investment income | 245 | 286 | –14.3 % |
| of which Europe | 217 | 236 | –8.1 % |
| of which Latin America | 33 | 55 | –39.5 % |
| Operating profit/loss (EBIT) | 220 | 227 | –3.0 % |
| of which Europe | 232 | 209 | +10.5 % |
| of which Latin America | 34 | 49 | –30.1 % |
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 13,348 | 11,653 | +14.5 % |
| Net premiums earned | 10,512 | 9,282 | +13.2 % |
| Underwriting result | –187 | 89 | –309.1 % |
| Net investment income | 725 | 817 | –11.3 % |
| Operating profit/loss (EBIT) | 606 | 887 | –31.7 % |
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
15.9 | 17.5 | –1.6 ppts |
| Combined ratio (net) 1 | 101.4 | 98.7 | +2.7 ppts |
| EBIT margin 2 | 5.8 | 9.6 | –3.8 ppts |
Taking into account interest income on funds withheld.
2 Operating profit/loss (EBIT)/net premiums earned.
The far-reaching measures implemented to contain the coronavirus pandemic are particularly affecting the Property/Casualty Reinsurance segment, especially for the business interruption, commercial credit default insurance and event cancellation insurance lines. We increased our reserves in the Property/Casualty Reinsurance segment for coronavirus claims by another EUR 100 million to a total of EUR 700 million in the third quarter.
Prices and conditions across the board have improved considerably in both primary insurance and reinsurance in response to the current challenges. Our top priority remains ensuring underwriting results are profitable, even with interest rates remaining low.
Treaty renewal rounds throughout the year in the Property/Casualty Reinsurance segment went well for Hannover Re, in particular those on 1 June and 1 July. During this time, parts of the North America business, the area of natural disaster risks and parts of reinsurance coverage for risks from the credit and surety business were renewed. This was also the main renewal season for business in Australia and New Zealand. Prices rose substantially, in particular for programmes or regions that have been affected by losses but also for claims-free coverage.
Gross written premiums in the Property/Casualty Reinsurance segment thus increased significantly by 14.5% to EUR 13.3 (11.7) billion. At constant exchange rates, the growth would have amounted to 15.9%. Growth was spurred in particular by the performance in North America, Germany and Asia. Net premiums earned improved by 13.2% to EUR 10.5 (9.3) billion; growth would have amounted to 14.7% when adjusted for currency effects.
Large loss expenses were far higher than in the comparative period on account of the negative effects of the coronavirus. Including the negative impact of EUR 700 million for coronavirus claims, these totalled EUR 1.1 billion (546 million) as at 30 September. In addition to the pandemic, the largest claims in the third quarter included a storm that swept over the eastern United States (net EUR 84 million), the US hurricane "Laura" (EUR 64 million) and the explosion at the port of Beirut (EUR 67 million). We generally classify large losses as events for which we expect to pay out over EUR 10 million in gross claims and claims expenses.
The underwriting result came to EUR –187 (89) million. Given the risk provisions for coronavirus claims, the combined ratio deteriorated to 101.4% (98.7%). Adjusted for Covid-19-related loss reserves and taking into account a large loss within the planned budget, the combined ratio would have been 97.6%.
Net investment income from assets under own management in the Property/Casualty Reinsurance segment fell to EUR 684 (783) million.
Operating profit (EBIT) for the Property/Casualty Reinsurance segment decreased by 31.7% to EUR 606 (887) million.
| EUR million | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross written premiums | 5,947 | 5,740 | +3.6 % |
| Net premiums earned | 5,259 | 5,109 | +2.9 % |
| Underwriting result | –421 | –275 | –53.3 % |
| Net investment income | 473 | 527 | –10.3 % |
| Operating profit/loss (EBIT) | 309 | 472 | –34.4 % |
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
5.0 | 5.8 | –0.8 ppts |
| EBIT growth 1 | –34.4 | 226.3 | –260.7 ppts |
Change in operating profit/loss (EBIT) compared to the prior year in percent.
1
The Life/Health Reinsurance segment has also been affected by the coronavirus pandemic but negative impact here remains within the expected range. The negative impact at the half-year mark came to EUR 63 million, climbing to a total of EUR 160 million by the end of September. This figure comprises reported claims of EUR 96 million and IBNR claims related to the coronavirus. Most claims result from deseases and fatalities in the US, our largest single market.
The crisis has shown that the backlog of demand for corresponding risk cover is still relatively high in many countries. Given this, we are expanding our activities and services for customers, including in health care and wellness, for example in Canada. Financial solutions, where we offer our customers individual reinsurance solutions to improve their solvency, liquidity and capital, is still enjoying high global demand and good conditions, in particular in the US and China.
Demand for longevity risk hedging solutions was buoyant, especially in the UK, the Netherlands and Australia. Digital insurance solutions and automation are also increasingly playing a key role in all activities, in particular in collaboration with start-ups.
The gross premium volume in the Life/Health Reinsurance segment rose by 3.6% to EUR 5.9 (5.7) billion as at 30 September. Adjusted for currency effects, growth came to 5.0%. Growth was driven here primarily by Australia and Asia, in particular China. Net premiums earned rose to EUR 5.3 (5.1) billion. At constant exchange rates, the increase would have amounted to 4.4%.
Net investment income from assets under own management in the Life/Health Reinsurance segment came to EUR 350 (413) million. This decline is chiefly because the comparative period benefited from releasing hidden reserves through profit or loss as part of the restructuring of shares in an equity interest. At the same time, there was also a non-recurring one-time effect of EUR 55 million from measuring a single long-term equity investment using the equity method. The underwriting result amounted to EUR –421 (–275) million.
1
Operating profit (EBIT) declined by 34.4% to EUR 309 (472) million.
| % | 9M 2020 | 9M 2019 | +/– |
|---|---|---|---|
| Return on equity 1 | 8.7 | 13.7 | –5.0 ppts |
Ratio of annualised net income for the period excluding non-controlling interests to average equity excluding non-controlling interests.
Group net income in the Reinsurance Division as at 30 September 2020 contracted to EUR 334 (480) million, with the return on equity declining by 5.0 percentage points to 8.7% (13.7%).
■ Talanx pushes forward with sustainability strategy
The Talanx Group is continuing to expand its sustainable investment strategy, funding two Spanish 50 MW solar energy projects via a loanbacked EUR 250 million project bond. The facilities provide regenerative energy to 52,000 households in the Castilla-La Mancha region, cutting CO2 emissions by almost 63,000 tonnes each year.
The operating loss in the Corporate Operations segment increased slightly in the first nine months of 2020 to EUR –12 (–4) million. Group net income attributable to shareholders of Talanx AG for this segment amounted to EUR –62 (–67) million in the first nine months of 2020. While EBIT contracted by EUR 13 million due to Covid-19, Group net income includes a positive, EUR 8 million effect thanks to capitalising deferred tax assets.
The Covid-19 pandemic had a general impact on capital markets over the course of the year, affecting interest rate, lending, currency and stock markets. The Group's asset manager, Ampega, ensures needsbased crisis management through up-to-date monitoring and ad-hoc reporting and by proposing action to be taken.
Thanks to the excellent credit quality of securities, the monetary impact of the pandemic on the Talanx Group's investments has so far been rather moderate.
The total investment portfolio increased by 3.3% by the end of the third quarter of 2020 to EUR 138.5 (134.1) billion. Assets under own management rose by EUR 4.5 billion to EUR 127.1 billion. Growth in the portfolio of assets under own management was due to cash inflows from underwriting business, which were reinvested in accordance with the respective company guidelines.
BREAKDOWN OF ASSETS UNDER OWN MANAGEMENT BY ASSET CLASS
The portfolio changes are also a result of market development in the third quarter. This quarter saw a decline in risk premiums, especially for corporate bonds, and a further fall in interest rates, combined with "risk-off" trends in trade at the end of the quarter. Generally, it is clear that the recovery that began on financial and capital markets in the second quarter also continued in the third quarter.
The portfolio of investment contracts was unchanged against the start of the year (EUR 1.2 billion) at EUR 1.2 billion. The portfolio of funds withheld by ceding companies declined slightly to EUR 10.2 (10.3) billion compared to the beginning of the year.
Fixed-income investments were the most significant asset class as at the end of the third quarter of 2020. They contributed EUR 2.7 (2.4) billion to earnings, which was reinvested as far as possible in the year under review.
| EUR million | 30.9.2020 | 31.12.2019 | ||
|---|---|---|---|---|
| Investment property | 3,206 | 3% | 3,193 | 3% |
| Shares in affiliated companies and participating interests | 419 | 0% | 398 | 0% |
| Shares in associates and joint ventures | 424 | 0% | 337 | 0% |
| Loans and receivables | ||||
| Loans including mortgage loans | 413 | 0% | 413 | 0% |
| Loans and receivables due from government or quasi-governmental entities and fixed-income securities |
27,211 | 21% | 27,228 | 22% |
| Held-to-maturity financial instruments | 370 | 0% | 336 | 0% |
| Available-for-sale financial instruments | ||||
| Fixed-income securities | 85,308 | 67% | 81,483 | 66% |
| Variable-yield securities | 2,431 | 2% | 2,067 | 2% |
| Financial instruments at fair value through profit or loss | ||||
| Financial instruments classified at fair value through profit or loss | ||||
| Fixed-income securities | 879 | 1% | 1,128 | 1% |
| Variable-yield securities | 38 | 0% | 147 | 0% |
| Financial instruments held for trading | ||||
| Fixed-income securities | — | 0% | — | 0% |
| Variable-yield securities | 116 | 0% | 122 | 0% |
| Derivatives 1 | 296 | 0% | 321 | 0% |
| Other investments | 6,004 | 5% | 5,465 | 4% |
| Assets under own management | 127,115 | 100% | 122,638 | 100% |
1 Only derivatives with positive fair values.
The portfolio of fixed-income investments (excluding mortgage and policy loans) rose by EUR 3.6 billion to EUR 113.8 (110.2) billion as at the end of the reporting period. At 82% (82%) of total investments, this asset class continues to represent the most significant share of our investments by volume. Fixed-income investments were primarily divided into the investment categories "available-for-sale financial instruments" (75% [74%] of total investments in the fixed income portfolio) and "Loans and receivables" (24% [25%] of total holdings of fixed-income securities).
"Available for sale fixed-income securities" increased by EUR 3.8 billion to EUR 85.3 (81.5) billion. Some reinvestments were also made in short-term investments outside the asset class of fixed-income securities, taking the existing investment structure into account. Valuation reserves, i.e. the balance of unrealised gains and losses, have increased from EUR 5.6 billion to EUR 7.4 billion since the end of 2019. This is due to the decrease in interest rates and spreads as part of the recovery on financial and capital markets. The volatility of "available for sale fixed-income securities" is reflected in equity.
In the "Loans and receivables" category, investments are primarily held in government securities or securities with a similar level of security. German covered bonds (Pfandbriefe) continue to account for the majority of the portfolio. Total holdings in fixed-income securities within the "Loans and receivables" category amounted to EUR 27.6 (27.6) billion at the end of the quarter. Off-balance-sheet valuation reserves for "Loans and receivables" (including mortgage and policy loans) rose slightly to EUR 5.3 (5.1) billion.
The Talanx Group pursues a conservative investment policy. Investments made in fixed-income securities in 2020 continued to focus on highly rated government bonds or securities from issuers with a similar credit quality. Holdings of AAA-rated bonds amounted to EUR 48.9 (44.7) billion as at the reporting date. The rating structure of fixed-income securities changed only marginally in comparison to the end of the previous financial year. 77% (75%) of fixed-income securities have a minimum A rating.
As far as matching currency cover is concerned, US dollar-denominated investments continue to account for the largest share of the Talanx Group's foreign currency portfolio, at 18% (19%). Sizeable exposures – amounting to 8% (7%) of total investments – are also held in pound sterling, Polish zloty and Australian dollars. All in all, 33% (34%) of total assets under own management were denominated in foreign currencies as at the reporting date.
| EUR million | 9M 2020 | 9M 2019 |
|---|---|---|
| Ordinary investment income | 2,461 | 2,618 |
| of which current income from interest | 1,933 | 2,050 |
| of which attributable to profit/loss from shares in associates |
76 | 17 |
| Realised net gains on disposal of investments | 834 | 585 |
| Depreciation of and impairment losses/reversals of impairment losses on investments |
–224 | –117 |
| Unrealised net gains/losses on investments | 40 | 127 |
| Other investment expenses | 204 | 195 |
| Income from assets under own management | 2,907 | 3,018 |
| Net interest income from funds withheld and contract deposits |
151 | 136 |
| Net income from investment contracts | 1 | 2 |
| Total | 3,059 | 3,156 |
At EUR 3,059 (3,156) million, net investment income was down on the previous year's level on account of lower ordinary investment income and unrealised gains and losses in the reporting period and higher impairment. This was balanced out only partially by higher gains. This resulted in a drop in the annualised net return on investment to 3.1% (3.4%).
Driven chiefly by consistently low interest rates, ordinary investment income totalled EUR 2,461 million at the end of the quarter, a year-onyear decrease of EUR 157 million (EUR 2,618 million). One area this can be seen is in the EUR 117 million downturn in current income from interest to EUR 1,933 (2,050) million. The average coupon in the fixed-income securities portfolio declined to 2.6% (2.8%). Income from private equity was also weaker than in the previous year at EUR 166 (235) million. Earnings from real estate investments also declined (EUR –34 million). This was countered by a rise in profit from shares in associates to EUR 76 (17) million due to a one-time effect when measuring a single long-term equity investment in the Life/Health Reinsurance segment.
Rising by EUR 249 million to EUR 834 (585) million, realised net gains on the disposal of investments were significantly higher than in the previous year. This is particularly clear in the Retail Germany – Life segment, where gains were attributable mostly to measures to secure financing for the additional interest reserve.
Higher depreciation and amortisation were required overall compared to the prior year on account of market slumps in the first quarter caused by the pandemic. Net of reversals, this came to EUR 224 (117) million in total. In addition to depreciation on directly held property and infrastructure investments of EUR 74 (70) million, there were also impairment losses for equities of EUR 52 (7) million, for fixed-income securities of EUR 16 (2) million and for other investments of EUR 82 (40) million. Alternative investments accounted for EUR 63 million of the latter. Impairment losses on equities and alternative investments particularly reflect the economic turbulence already seen and still to be expected on account of the Covid-19 pandemic at companies in the area of private equity and among issuers of high-yield bonds, although this turbulence lost pace towards the end of the reporting period.
Unrealised net gains/losses fell significantly from EUR 127 million to EUR 40 million on account of market conditions. This development was driven by changes in the fair value of our assets held at fair value through profit or loss and is attributable in particular to fair value changes to futures, credit default swaps, interest rate and currency swaps and structured products, especially in special funds. We recognise a derivative for the credit risk of special life reinsurance contracts (ModCo), under which cedants' securities accounts are held in our name. In the reporting period, the performance of this derivative resulted in unrealised losses through profit or loss of EUR 9 (first nine months of 2019: gains of EUR 6) million.
| EUR million | 9M 2020 | 9M 2019 |
|---|---|---|
| Industrial Lines | 175 | 219 |
| Retail Germany – Property/Casualty | 64 | 85 |
| Retail Germany – Life | 1,437 | 1,274 |
| Retail International | 254 | 294 |
| Property/Casualty Reinsurance | 730 | 819 |
| Life/Health Reinsurance | 477 | 530 |
| Corporate Operations | –79 | –65 |
| Total | 3,059 | 3,156 |
After elimination of intragroup cross-segment transactions.
| 30.9.2020 | 31.12.2019 | Change | +/– % | |
|---|---|---|---|---|
| Subscribed capital | 316 | 316 | — | — |
| Capital reserves | 1,373 | 1,373 | — | — |
| Retained earnings | 7,935 | 7,795 | 141 | 1.8 |
| Accumulated other comprehensive income and other reserves |
569 | 665 | –96 | –14.5 |
| Group equity | 10,194 | 10,149 | 44 | 0.4 |
| Non-controlling interests in equity |
6,626 | 6,461 | 165 | 2.5 |
| Total | 16,819 | 16,610 | 209 | 1.3 |
| EUR million | 30.9.2020 | 31.12.2019 |
|---|---|---|
| Segment | ||
| Industrial Lines | 2,252 | 2,378 |
| of which non-controlling interests | 63 | 62 |
| Retail Germany | 2,738 | 2,572 |
| of which non-controlling interests | 84 | 76 |
| Retail International | 2,252 | 2,335 |
| of which non-controlling interests | 265 | 251 |
| Reinsurance | 11,457 | 11,166 |
| of which non-controlling interests | 6,773 | 6,654 |
| Corporate Operations | –1,935 | –1,889 |
| of which non-controlling interests | — | — |
| Consolidation | 55 | 47 |
| of which non-controlling interests | –559 | –582 |
| Total equity | 16,819 | 16,610 |
| Group equity | 10,194 | 10,149 |
| Non-controlling interests | 6,626 | 6,461 |
Equity for the divisions is defined as the difference between the assets and liabilities of the division concerned.
For the first time, the Talanx Group is publishing another annual outlook for 2020. The Group retracted its previous outlook, which expected Group net income to range from "more than EUR 900 million" up to EUR 950 million, on 21 April 2020 in light of the coronavirus pandemic and the considerable uncertainty this entailed with regard to the future development of the economy and capital markets. Now that the figures are available for the first nine months and the impact of the coronavirus crisis is better known, we believe the Group is again able, to a limited extent, to make accurate forecasts for the current financial year.
We are making the following assumptions:
For 2020 as a whole we expect gross written premiums (adjusted for currency effects) to grow by around 5% compared to 2019, while the IFRS return on investment, including realised gains, is likely to be in the region of 2.9%. We expect Group net income to come out clearly above EUR 600 million. This should correspond to a return on equity of approx. 6% and thus come close to the strategic target of at least 800 basis points above the risk-free interest rate, despite the corona burdens. The net income target is subject to the proviso that large losses in the fourth quarter develop in line with expectations and that there are no further distortions in the capital markets as a result of the corona pandemic. Subject to the approval of the supervisory authorities, we intend to pay a dividend of EUR 1.50 per share for 2020, that is, at the level of 2019. In principle, the Group intends to distribute 35% to 45% of the IFRS result as a dividend.
With the publication of its results for the first nine months of the current year Talanx is also for the first time issuing an earnings outlook for financial year 2021. We expect premium growth of around 5% compared to 2020, which is likely to be fuelled exclusively by premium increases in the Industrial Lines and Reinsurance Divisions. In the Retail Divisions, however, we anticipate a decline in premiums due to delayed corona effects and exchange rate effects in foreign business. The net return on investment under the IFRSs is forecast to be approximately 2.5%, with the even lower interest rate environment impacting Group net income by roughly EUR 25 million compared to 2020. We are expecting Group net income to be in the range of EUR 800 million to EUR 900 million. This should correspond to a return on equity of between 7.5% and 8.5%, which would be achieving or close to achieving our minimum strategic target.
As usual, the targets for the 2021 financial year are subject to the proviso that no turbulence occurs on the currency and capital markets and that large losses are in line with expectations.
The Group is standing by its medium-term targets for the 2022 financial year, in particular average annual growth in earnings per share of at least 5% against the original target of EUR 850 million for the 2018 financial year.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
~5 | ~4 | ||
| Net return on investment | ~2,9 | ~2,7 | ||
| Group net income in EUR million |
clearly above 600 |
Outlook for 2020 withdrawn in April 2020 |
||
| Return on equity | approx. 6 | "> 9.0" to 9.5 |
||
| Payout ratio | 35–45 | 35–45 | ||
In our outlook for 2020 in the 2019 Annual Report, we had expected gross premiums to rise by at least 2% in the Industrial Lines segment. Given current developments – especially in specialty business – we are now anticipating gross premium growth of over 5% in 2020 as a whole. In view of the negative effects of Covid-19, we expect to see a combined ratio (net) of around 104% for the 2020 financial year (≤ 99% adjusted for the effects of Covid-19). Given this negative impact, we now anticipate an EBIT margin of around 1% and return on equity of between 0% and 1%.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
>5 | Outlook for 2020 | ≥2 | |
| Combined ratio (net) | ~104 | withdrawn in April 2020 |
<100 | |
| EBIT margin | ~1 | ~5 | ||
| Return on equity | 0–1 | ~5 | ||
In our outlook for 2020 in the 2019 Annual Report, we had expected gross premiums to remain stable in the Property/Casualty Insurance segment in the Retail Germany Division. In light of the coronavirus pandemic, we now expect gross premiums to fall by around 5% in 2020 as a whole, especially in motor insurance and the biometric core business of bancassurance. In addition, we expect an EBIT margin of 7% to 8%, in particular due to the adverse impact of the coronavirus crisis on net investment income.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Gross premium growth | ~–5 | Outlook for 2020 | stable | |
| Combined ratio (net) | ~96 | withdrawn in April 2020 |
~96 | |
| EBIT margin | 7–8 | 8–9 |
In our outlook for 2020 in the 2019 Annual Report, we had expected gross premiums to remain stable in the Life Insurance segment in the Retail Germany Division. In light of the coronavirus pandemic, we now expect gross premiums to decrease by around 5% in 2020 as a whole, especially in bancassurance biometrics and single premium business. We expect another negative impact of Covid-19 regarding the amortisation of the PVFP associated with investment contracts and so we are assuming an EBIT margin of between 2% and 3%.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Gross premium growth | Outlook for 2020 withdrawn in April 2020 |
stable | ||
| EBIT margin | ~–5 2–3 |
~3 |
In our outlook for 2020 in the 2019 Annual Report, we had anticipated a return on equity of between 5% and 6% in the Retail Germany Division. In light of the coronavirus pandemic, we are now expecting a return on equity of between 4% and 5% in 2020 as a whole.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Return on equity | 4–5 | Outlook for 2020 withdrawn in April 2020 |
5–6 |
Our outlook for 2020 in the 2019 Annual Report anticipated moderate gross premium growth in the Retail International Division in 2020. We now expect gross premiums to decrease by more than 5% in 2020 as a whole. The decline in new vehicle sales, caused by the economic downturn stemming from the coronavirus pandemic, is hurting motor insurance sales. Lower demand for optional insurance policies is also causing a slump in life insurance premiums, which in turn also affects the value of new business (life), which we expect to come to around EUR 30 million for the year as a whole. The EBIT margin is expected to be around 5% and the return on equity about 7%.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
> –5 | moderate growth |
||
| Value of new business 1 (life) in EUR million |
~30 | Outlook for 2020 withdrawn |
~40 | |
| Combined ratio (net, property/casualty insurance) |
~95 | in April 2020 | ~95 | |
| EBIT margin | ~5 | 5–6 | ||
| Return on equity | ~7 | 8–9 | ||
Excluding non-controlling interests.
Taking account of the general large loss situation and the loss prevention measures for Covid-19 taken in the first nine months of 2020, we are expecting Group net income of over EUR 400 million for the year as a whole in the Reinsurance Division. Net return on investment should come to around 2.7%, with gross written premiums for the Reinsurance Division seeing high single digit gains adjusted for currency effects. As usual, all statements are subject to large losses remaining within expected ranges and to there being no unexpected, negative developments on capital markets. We expect return on equity to be above 7.5%.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
Outlook for Q3 at |
Outlook for 2020 | solid growth |
|
| Combined ratio (net) | division level only |
withdrawn in April 2020 |
≤97 | |
| EBIT margin | ≥10 |
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Gross premium growth (adjusted for currency effects) |
Outlook for | Outlook for 2020 | moderate growth |
|
| Value of new business 1 in EUR million |
Q3 at division level only |
withdrawn in April 2020 |
≥110 | |
| EBIT growth 2 | >5 |
Excluding non-controlling interests.
2 Average over a three-year period.
| % | Outlook for 2020 on the basis of Q3 2020 |
Outlook for 2020 on the basis of Q2 2020 |
Outlook for 2020 on the basis of Q1 2020 |
Forecast for 2020 from the 2019 Annual Report |
|---|---|---|---|---|
| Return on equity | >7.5 | Outlook for 2020 withdrawn in April 2020 |
12–13 |
18 Talanx Group Quarterly Statement as at 30 September 2020 Consolidated balance sheet
| EUR million | 30.9.2020 | 31.12.2019 | |
|---|---|---|---|
| A. Intangible assets | |||
| a. Goodwill |
1,028 | 1,105 | |
| b. Other intangible assets |
858 | 893 | |
| 1,886 | 1,998 | ||
| B. Investments |
|||
| a. Investment property |
3,206 | 3,193 | |
| b. Shares in affiliated companies and participating interests |
419 | 398 | |
| c. Shares in associates and joint ventures |
424 | 337 | |
| d. Loans and receivables |
27,624 | 27,641 | |
| e. Other financial instruments |
|||
| i. Held to maturity |
370 | 336 | |
| ii. Available for sale | 87,739 | 83,550 | |
| iii. At fair value through profit or loss | 1,328 | 1,718 | |
| f. Other investments |
6,004 | 5,465 | |
| Assets under own management | 127,115 | 122,638 | |
| g. Investments under investment contracts |
1,203 | 1,170 | |
| h. Funds withheld by ceding companies |
10,164 | 10,296 | |
| Investments | 138,482 | 134,104 | |
| C. Investments for the benefit of life insurance policyholders who bear the investment risk |
10,920 | 11,824 | |
| D. Reinsurance recoverables on technical provisions | 7,625 | 8,483 | |
| E. Accounts receivable on insurance business |
9,294 | 8,525 | |
| F. Deferred acquisition costs |
5,596 | 5,940 | |
| G. Cash at banks, cheques and cash-in-hand | 3,861 | 3,518 | |
| H. Deferred tax assets | 360 | 326 | |
| I. Other assets |
2,905 | 2,819 | |
| J. Non-current assets and assets of disposal groups classified as held for sale |
29 | 57 | |
| Total assets | 180,958 | 177,594 |
| EUR million | 30.9.2020 | 31.12.2019 | ||
|---|---|---|---|---|
| A. Equity | ||||
| a. Subscribed capital |
316 | 316 | ||
| Nominal amount: 316 (previous year: 316) Contingent capital: 158 (previous year: 158) |
||||
| b. Reserves |
9,878 | 9,833 | ||
| Equity excluding non-controlling interests | 10,194 | 10,149 | ||
| c. Non-controlling interests in equity |
6,626 | 6,461 | ||
| Total equity | 16,819 | 16,610 | ||
| Subordinated liabilities 1 B. |
3,486 | 3,479 | ||
| C. Technical provisions | ||||
| a. Unearned premium reserve |
11,780 | 9,837 | ||
| b. Benefit reserve |
57,271 | 56,859 | ||
| c. Loss and loss adjustment expense reserve |
50,848 | 49,651 | ||
| d. Provision for premium refunds |
8,846 | 8,511 | ||
| e. Other technical provisions |
777 | 755 | ||
| 129,523 | 125,614 | |||
| D. Technical provisions for life insurance policies where the investment risk is borne by the policyholders |
10,920 | 11,824 | ||
| E. Other provisions |
||||
| a. Provisions for pensions and other post-employment benefits |
2,313 | 2,284 | ||
| b. Provisions for taxes |
494 | 561 | ||
| c. Miscellaneous other provisions |
806 | 971 | ||
| 3,613 | 3,816 | |||
| F. Liabilities |
||||
| a. Notes payable and loans 2 |
2,286 | 2,308 | ||
| b. Funds withheld under reinsurance treaties |
3,839 | 4,550 | ||
| c. Other liabilities |
8,003 | 7,224 | ||
| 14,128 | 14,081 | |||
| G. Deferred tax liabilities | 2,460 | 2,160 | ||
| H. Liabilities included in disposal groups classified as held for sale | 9 | 9 | ||
| Total liabilities/provisions | 164,139 | 160,983 | ||
| Total equity and liabilities | 180,958 | 177,594 |
The nominal value of the subordinated liabilities came to EUR 3,506 (3,495) million. 2 The nominal value of the notes payable was EUR 1,815 (1,815) million.
20 Talanx Group Quarterly Statement as at 30 September 2020 Consolidated statement of income
| EUR million | 9M 2020 | 9M 2019 | Q3 2020 | Q3 2019 |
|---|---|---|---|---|
| 1. Gross written premiums including premiums from unit-linked life and annuity insurance |
31,907 | 30,325 | 9,901 | 9,461 |
| 2. Savings elements of premiums from unit-linked life and annuity insurance |
649 | 729 | 203 | 257 |
| 3. Ceded written premiums |
3,866 | 3,391 | 1,321 | 1,050 |
| 4. Change in gross unearned premiums |
–2,629 | –2,277 | 23 | 138 |
| 5. Change in ceded unearned premiums |
–538 | –258 | –155 | 23 |
| Net premiums earned | 25,301 | 24,186 | 8,555 | 8,269 |
| 6. Claims and claims expenses (gross) |
22,372 | 21,427 | 8,037 | 7,432 |
| Reinsurers' share | 1,807 | 2,011 | 870 | 694 |
| Claims and claims expenses (net) | 20,565 | 19,416 | 7,167 | 6,738 |
| 7. Acquisition costs and administrative expenses (gross) |
7,185 | 6,475 | 2,385 | 2,261 |
| Reinsurers' share | 535 | 484 | 186 | 175 |
| Acquisition costs and administrative expenses (net) | 6,650 | 5,991 | 2,199 | 2,086 |
| 8. Other technical income |
46 | 43 | 14 | 11 |
| Other technical expenses | 104 | 104 | 45 | 30 |
| Other technical result | –58 | –61 | –32 | –19 |
| Net technical result | –1,972 | –1,282 | –843 | –574 |
| 9. a. Investment income |
3,751 | 3,617 | 1,489 | 1,266 |
| b. Investment expenses | 844 | 599 | 239 | 146 |
| Net income from assets under own management | 2,907 | 3,018 | 1,250 | 1,120 |
| Net income from investment contracts | 1 | 2 | 1 | 1 |
| Net interest income from funds withheld and contract deposits | 151 | 136 | 24 | 49 |
| Net investment income | 3,059 | 3,156 | 1,274 | 1,170 |
| of which share of profit or loss of equity-accounted associates and joint ventures | 76 | 17 | 66 | 2 |
| 10. a. Other income | 1,087 | 857 | 334 | 277 |
| b. Other expenses | 883 | 868 | 220 | 254 |
| Other income/expenses | 204 | –11 | 114 | 23 |
| Profit before goodwill impairments | 1,291 | 1,863 | 546 | 619 |
| 11. Goodwill impairments | — | — | — | — |
| Operating profit/loss (EBIT) | 1,291 | 1,863 | 546 | 619 |
| 12. Financing costs | 154 | 142 | 51 | 48 |
| 13. Taxes on income | 228 | 408 | 135 | 115 |
| Net income | 910 | 1,313 | 360 | 456 |
| of which attributable to non-controlling interests | 390 | 572 | 166 | 191 |
| of which attributable to shareholders of Talanx AG | 520 | 742 | 194 | 265 |
| Earnings per share | ||||
| Basic earnings per share (EUR) | 2.06 | 2.93 | 0.77 | 1.05 |
| Diluted earnings per share (EUR) | 2.06 | 2.93 | 0.77 | 1.05 |
Consolidated statement of comprehensive income
| EUR million | 9M 2020 | 9M 2019 | Q3 2020 | Q3 2019 |
|---|---|---|---|---|
| Net income | 910 | 1,313 | 360 | 456 |
| Items that will not be reclassified to profit or loss | ||||
| Actuarial gains (losses) on pension provisions | ||||
| Gains (losses) recognised in other comprehensive income for the period | –71 | –349 | –104 | –122 |
| Tax income (expense) | 22 | 103 | 33 | 34 |
| –49 | –246 | –71 | –87 | |
| Changes in policyholder participation/shadow accounting | ||||
| Gains (losses) recognised in other comprehensive income for the period | 4 | 15 | 6 | 7 |
| Tax income (expense) | — | — | — | — |
| 4 | 15 | 6 | 7 | |
| Total items that will not be reclassified to profit or loss, net of tax | –46 | –231 | –66 | –80 |
| Items that may be reclassified subsequently to profit or loss | ||||
| Unrealised gains and losses on investments | ||||
| Gains (losses) recognised in other comprehensive income for the period | 2,254 | 5,986 | 934 | 2,146 |
| Reclassified to profit or loss | –345 | –212 | –145 | –110 |
| Tax income (expense) | –246 | –810 | –140 | –248 |
| 1,662 | 4,964 | 648 | 1,787 | |
| Exchange differences on translating foreign operations | ||||
| Gains (losses) recognised in other comprehensive income for the period | –774 | 360 | –445 | 256 |
| Reclassified to profit or loss | — | — | — | — |
| Tax income (expense) | 54 | –33 | 33 | –26 |
| –721 | 327 | –413 | 230 | |
| Changes in policyholder participation/shadow accounting | ||||
| Gains (losses) recognised in other comprehensive income for the period | –849 | –3,210 | –368 | –1,276 |
| Tax income (expense) | 4 | 137 | 33 | 64 |
| –845 | –3,073 | –335 | –1,212 | |
| Changes from cash flow hedges | ||||
| Gains (losses) recognised in other comprehensive income for the period | 27 | 42 | 7 | 11 |
| Reclassified to profit or loss | –14 | –20 | — | –7 |
| Tax income (expense) | 2 | –3 | — | — |
| 15 | 20 | 8 | 5 | |
| Changes from equity method measurement | ||||
| Gains (losses) recognised in other comprehensive income for the period | –11 | 9 | –9 | 9 |
| Reclassified to profit or loss | — | — | — | — |
| Tax income (expense) | — | — | — | — |
| –11 | 9 | –9 | 9 | |
| Total items that may be reclassified subsequently to profit or loss, net of tax | 101 | 2,247 | –100 | 820 |
| Other comprehensive income for the period, net of tax | 56 | 2,016 | –164 | 739 |
| Total comprehensive income for the period | 965 | 3,329 | 196 | 1,195 |
| of which attributable to non-controlling interests | 541 | 1,430 | 108 | 543 |
| of which attributable to shareholders of Talanx AG | 424 | 1,899 | 88 | 652 |
22 Talanx Group Quarterly Statement as at 30 September 2020 Segment reporting
EUR million
EUR million
| Assets | Industrial Lines | Retail Germany | |||
|---|---|---|---|---|---|
| 30.9.2020 | 31.12.2019 | 30.9.2020 | 31.12.2019 | ||
| A. Intangible Assets | 163 | 163 | 677 | 687 | |
| B. Investments |
9,715 | 9,292 | 57,101 | 54,665 | |
| C. Investments for the benefit of life insurance policyholders who bear the investment risk | — | — | 10,506 | 11,353 | |
| D. Reinsurance recoverables on technical provisions | 7,419 | 7,409 | 1,733 | 1,811 | |
| E. Accounts receivable on insurance business |
1,989 | 2,060 | 338 | 287 | |
| F. Deferred acquisition costs |
92 | 75 | 1,664 | 2,021 | |
| G. Cash at banks, cheques and cash-in-hand | 846 | 857 | 631 | 832 | |
| H. Deferred tax assets | 49 | 44 | 80 | 89 | |
| I. Other assets |
662 | 663 | 731 | 771 | |
| J. Non-current assets and assets of disposal groups classified as held for sale |
5 | — | 10 | — | |
| Total assets | 20,941 | 20,564 | 73,470 | 72,517 | |
| Equity and liabilities | Industrial Lines | Retail Germany | ||
|---|---|---|---|---|
| 30.9.2020 | 31.12.2019 | 30.9.2020 | 31.12.2019 | |
| B. Subordinated liabilities |
278 | 283 | 257 | 162 |
| C. Technical provisions | 15,245 | 14,561 | 56,246 | 54,169 |
| D. Technical provisions for life insurance policies where the investment risk is borne by the policyholders |
— | — | 10,506 | 11,353 |
| E. Other provisions |
816 | 803 | 579 | 622 |
| F. Liabilities |
2,144 | 2,330 | 2,873 | 3,386 |
| G. Deferred tax liabilities | 205 | 209 | 272 | 253 |
| H. Liabilities included in disposal groups classified as held for sale | — | — | — | — |
| Total liabilities/provisions | 18,689 | 18,186 | 70,732 | 69,945 |
| Consolidation | Corporate Operations | Reinsurance | Retail International | |||||
|---|---|---|---|---|---|---|---|---|
| 30.9.2020 | 31.12.2019 | 30.9.2020 | 31.12.2019 | 30.9.2020 | 31.12.2019 | 30.9.2020 | 31.12.2019 | 30.9.2020 |
| — 1,886 |
— | 106 | 102 | 204 | 193 | 838 | 751 | |
| 138,482 | –2,791 –2,731 |
896 | 1,346 | 58,346 | 59,214 | 13,636 | 13,896 | |
| — 10,920 |
— | — | — | — | — | 471 | 414 | |
| 7,625 | –5,112 –4,704 |
18 | 447 | 3,028 | 2,267 | 921 | 871 | |
| 9,294 | –595 –443 |
11 | 300 | 5,270 | 6,149 | 1,339 | 1,113 | |
| 238 5,596 |
258 | 2 | 19 | 2,932 | 2,991 | 671 | 572 | |
| — 3,861 |
— | 353 | 574 | 1,089 | 1,293 | 387 | 516 | |
| 360 | –215 –221 |
276 | 296 | 45 | 59 | 92 | 91 | |
| 2,905 | –1,989 –2,158 |
1,183 | 664 | 1,797 | 2,323 | 561 | 514 | |
| — 29 |
— | — | — | 36 | — | 21 | 14 | |
| 180,958 | –10,443 –10,017 |
2,845 | 3,749 | 72,748 | 74,488 | 18,936 | 18,752 |
| Consolidation | Corporate Operations | Reinsurance | Retail International | |||||
|---|---|---|---|---|---|---|---|---|
| 30.9.2020 31.12.2019 |
31.12.2019 | 30.9.2020 | 31.12.2019 | 30.9.2020 | 31.12.2019 | 30.9.2020 | 31.12.2019 | 30.9.2020 |
| 3,486 | –916 | –1,018 | 1,280 | 1,280 | 2,628 | 2,607 | 42 | 82 |
| 129,523 125,614 |
–3,792 | –4,291 | 108 | 810 | 47,089 | 48,210 | 13,478 | 13,303 |
| 10,920 | — | — | — | — | — | — | 471 | 414 |
| 3,613 | — | — | 1,485 | 1,483 | 592 | 468 | 315 | 268 |
| 14,128 | –5,158 | –5,001 | 1,861 | 2,112 | 9,481 | 9,674 | 2,182 | 2,326 |
| 2,460 | –198 | –189 | — | — | 1,792 | 2,072 | 104 | 99 |
| 9 | — | — | — | — | — | — | 9 | 9 |
| 164,139 | –10,064 | –10,499 | 4,734 | 5,685 | 61,582 | 63,031 | 16,601 | 16,500 |
| 16,819 | Equity 1 |
| Total liabilities | 180,958 | 177,594 |
|---|---|---|
Equity attributable to Group shareholders and non-controlling interests.
| Industrial Lines | Retail Germany | |||
|---|---|---|---|---|
| EUR million | 9M 2020 | 9M 2019 | 9M 2020 | 9M 2019 |
| 1. Gross written premiums including premiums from |
||||
| unit-linked life and annuity insurance | 5,220 | 4,883 | 4,458 | 4,733 |
| of which attributable to other divisions/segments | 54 | 42 | 52 | 45 |
| of which attributable to third parties | 5,166 | 4,841 | 4,406 | 4,688 |
| 2. Savings elements of premiums from unit-linked life and annuity insurance |
— | — | 602 | 650 |
| 3. Ceded written premiums |
2,666 | 2,404 | 248 | 242 |
| 4. Change in gross unearned premiums |
–637 | –599 | –121 | –236 |
| 5. Change in ceded unearned premiums |
–334 | –268 | –2 | –2 |
| Net premiums earned | 2,252 | 2,149 | 3,490 | 3,606 |
| 6. Claims and claims expenses (gross) |
3,199 | 3,278 | 3,728 | 3,961 |
| Reinsurers' share | 1,289 | 1,552 | 168 | 95 |
| Claims and claims expenses (net) | 1,911 | 1,726 | 3,561 | 3,865 |
| 7. Acquisition costs and administrative expenses (gross) |
981 | 906 | 1,273 | 917 |
| Reinsurers' share | 535 | 469 | 82 | 87 |
| Acquisition costs and administrative expenses (net) | 446 | 438 | 1,190 | 830 |
| 8. Other technical income |
2 | 3 | 18 | 13 |
| Other technical expenses | 4 | 18 | 21 | 14 |
| Other technical result | –1 | –15 | –3 | –1 |
| Net technical result | –107 | –30 | –1,264 | –1,091 |
| 9. a. Investment income |
325 | 322 | 1,749 | 1,576 |
| b. Investment expenses | 153 | 105 | 271 | 241 |
| Net income from assets under own management | 172 | 216 | 1,478 | 1,336 |
| Net income from investment contracts | — | — | — | — |
| Net interest income from funds withheld and contract deposits | –1 | –1 | –10 | –8 |
| Net investment income | 171 | 215 | 1,469 | 1,327 |
| of which share of profit or loss of equity-accounted associates and joint ventures |
13 | 10 | — | — |
| 10. a. Other income | 149 | 141 | 161 | 151 |
| b. Other expenses | 185 | 193 | 197 | 203 |
| Other income/expenses | –37 | –52 | –37 | –52 |
| Profit before goodwill impairments | 28 | 133 | 168 | 185 |
| 11. Goodwill impairments | — | — | — | — |
| Operating profit/loss (EBIT) | 28 | 133 | 168 | 185 |
| 12. Financing costs | 9 | 9 | 7 | 7 |
| 13. Taxes on income | 6 | 38 | 54 | 61 |
| Net income | 13 | 87 | 107 | 116 |
| of which attributable to non-controlling interests | 3 | 2 | 5 | 6 |
| of which attributable to shareholders of Talanx AG | 10 | 84 | 102 | 110 |
With the exception of the Retail Germany Division and the Reinsurance Division, the statements of income of the other divisions are the same as those of the reportable segments.
| Consolidation | Corporate Operations | Reinsurance | Retail International | |||||
|---|---|---|---|---|---|---|---|---|
| 9M 2020 | 9M 2019 | 9M 2020 | 9M 2019 | 9M 2020 | 9M 2019 | 9M 2020 | 9M 2019 | 9M 2020 |
| 31,907 | –1,278 | –1,784 | 55 | 678 | 17,393 | 19,295 | 4,537 | 4,040 |
| — | –1,278 | –1,784 | 56 | 376 | 1,134 | 1,301 | 1 | 1 |
| 31,907 | — | — | — | 302 | 16,259 | 17,994 | 4,537 | 4,039 |
| 649 | — | — | — | — | — | — | 78 | 47 |
| 3,866 | –1,277 | –1,777 | 19 | 465 | 1,653 | 1,914 | 350 | 349 |
| –2,629 | 139 | 224 | –10 | –353 | –1,453 | –1,769 | –117 | 27 |
| –538 | 139 | 221 | –5 | –255 | –103 | –160 | –18 | –8 |
| 25,301 | –1 | –5 | 31 | 115 | 14,391 | 15,771 | 4,009 | 3,678 |
| 22,372 1,807 |
–855 –880 |
–1,178 –1,189 |
45 14 |
325 194 |
11,675 990 |
13,311 1,090 |
3,323 240 |
2,986 256 |
| 20,565 | 25 | 11 | 31 | 132 | 10,685 | 12,221 | 3,082 | 2,730 |
| 7,185 | –353 | –422 | 10 | 54 | 4,059 | 4,358 | 936 | 940 |
| 535 6,650 |
–316 –37 |
–392 –30 |
1 9 |
34 20 |
172 3,887 |
204 4,154 |
72 864 |
71 869 |
| 46 | 1 | — | — | — | — | — | 26 | 25 |
| 104 –58 |
12 –11 |
15 –15 |
— — |
— — |
5 –4 |
5 –5 |
55 –29 |
59 –34 |
| –1,972 | — | — | –9 | –37 | –185 | –608 | 34 | 44 |
| 3,751 | –46 | –47 | 16 | 13 | 1,428 | 1,323 | 322 | 388 |
| 844 2,907 |
–87 41 |
–95 47 |
73 –58 |
83 –71 |
232 1,196 |
290 1,033 |
34 287 |
141 247 |
| 1 | — | — | — | — | — | — | 2 | 1 |
| 151 | — | — | — | — | 148 | 164 | –3 | –2 |
| 3,059 | 41 | 47 | –58 | –71 | 1,344 | 1,197 | 286 | 245 |
| 76 | — | — | — | — | 7 | 63 | — | — |
| 1,087 | –556 | –563 | 572 | 583 | 475 | 629 | 74 | 127 |
| 883 | –478 | –487 | 509 | 488 | 274 | 303 | 167 | 197 |
| 204 | –77 | –76 | 63 | 96 | 201 | 326 | –93 | –69 |
| 1,291 | –36 | –29 | –4 | –12 | 1,359 | 915 | 227 | 220 |
| — | — | — | — | — | — | — | — | — |
| 1,291 | –36 | –29 | –4 | –12 | 1,359 | 915 | 227 | 220 |
| 154 | –40 | –41 | 79 | 79 | 78 | 87 | 10 | 14 |
| 228 | 1 | 4 | –16 | –28 | 268 | 142 | 54 | 50 |
| 910 | 2 | 8 | –67 | –62 | 1,013 | 687 | 162 | 156 |
| 390 | — | — | — | — | 533 | 353 | 30 | 29 |
| 520 | 2 | 8 | –67 | –62 | 480 | 334 | 132 | 127 |
| Industrial Lines | Retail Germany | |||
|---|---|---|---|---|
| EUR million | Q3 2020 | Q3 2019 | Q3 2020 | Q3 2019 |
| 1. Gross written premiums including premiums from |
||||
| unit-linked life and annuity insurance | 1,368 | 1,401 | 1,311 | 1,405 |
| of which attributable to other divisions/segments | 15 | 10 | 15 | 12 |
| of which attributable to third parties | 1,354 | 1,391 | 1,297 | 1,393 |
| 2. Savings elements of premiums from unit-linked life and annuity insurance |
— | — | 188 | 221 |
| 3. Ceded written premiums |
730 | 752 | 72 | 74 |
| 4. Change in gross unearned premiums |
229 | 152 | 119 | 78 |
| 5. Change in ceded unearned premiums |
75 | 20 | 6 | 6 |
| Net premiums earned | 792 | 782 | 1,165 | 1,184 |
| 6. Claims and claims expenses (gross) |
1,244 | 1,210 | 1,440 | 1,394 |
| Reinsurers' share | 559 | 573 | 31 | 30 |
| Claims and claims expenses (net) | 686 | 637 | 1,408 | 1,364 |
| 7. Acquisition costs and administrative expenses (gross) |
324 | 327 | 434 | 283 |
| Reinsurers' share | 179 | 182 | 32 | 32 |
| Acquisition costs and administrative expenses (net) | 145 | 145 | 403 | 251 |
| 8. Other technical income |
— | 1 | 6 | 2 |
| Other technical expenses | 1 | — | 11 | 7 |
| Other technical result | — | 2 | –6 | –5 |
| Net technical result | –39 | 2 | –651 | –436 |
| 9. a. Investment income |
76 | 114 | 800 | 588 |
| b. Investment expenses | 11 | 31 | 54 | 65 |
| Net income from assets under own management | 65 | 83 | 747 | 523 |
| Net income from investment contracts | — | — | — | — |
| Net interest income from funds withheld and contract deposits Net investment income |
— 64 |
–1 82 |
–3 744 |
–3 520 |
| of which share of profit or loss of equity-accounted associates and joint ventures |
5 | — | — | — |
| 10. a. Other income | 8 | 29 | 53 | 55 |
| b. Other expenses | 23 | 49 | 72 | 78 |
| Other income/expenses | –15 | –20 | –19 | –24 |
| Profit before goodwill impairments | 10 | 64 | 74 | 60 |
| 11. Goodwill impairments | — | — | — | — |
| Operating profit/loss (EBIT) | 10 | 64 | 74 | 60 |
| 12. Financing costs | 3 | 3 | 2 | 2 |
| 13. Taxes on income | 4 | 18 | 29 | 17 |
| Net income | 3 | 44 | 42 | 40 |
| of which attributable to non-controlling interests | — | 1 | 4 | 2 |
| of which attributable to shareholders of Talanx AG | 3 | 43 | 39 | 38 |
With the exception of the Retail Germany Division and the Reinsurance Division, the statements of income of the other divisions are the same as those of the reportable segments.
| Corporate Operations | ||||||||
|---|---|---|---|---|---|---|---|---|
| Q3 2020 | Consolidation Q3 2019 |
Q3 2020 | Q3 2019 | Q3 2020 | Reinsurance Q3 2019 |
Q3 2020 | Retail International Q3 2019 |
Q3 2020 |
| 9,901 — |
–437 –437 |
–518 –518 |
9 9 |
308 84 |
5,699 406 |
6,149 404 |
1,383 — |
1,282 — |
| 9,901 | — | — | — | 224 | 5,294 | 5,744 | 1,383 | 1,282 |
| 203 | — | — | — | — | — | — | 36 | 15 |
| 1,321 | –439 | –501 | 2 | 221 | 557 | 700 | 105 | 99 |
| 23 | 33 | –31 | 6 | –172 | –152 | –141 | 21 | 18 |
| –155 | 32 | –35 | 4 | –131 | –46 | –86 | 7 | 16 |
| 8,555 | 2 | –13 | 9 | 47 | 5,036 | 5,394 | 1,257 | 1,170 |
| 8,037 | –351 | –375 | 16 | 104 | 4,154 | 4,690 | 1,009 | 934 |
| 870 | –366 | –359 | 10 | 49 | 379 | 522 | 69 | 67 |
| 7,167 | 15 | –15 | 7 | 54 | 3,776 | 4,168 | 940 | 867 |
| 2,385 | –135 | –147 | 3 | 22 | 1,465 | 1,438 | 318 | 315 |
| 186 | –122 | –137 | — | 16 | 60 | 76 | 22 | 22 |
| 2,199 | –13 | –10 | 3 | 6 | 1,405 | 1,362 | 295 | 293 |
| 14 | — | — | — | — | — | — | 7 | 8 |
| 45 | 1 | 13 | — | — | 5 | 1 | 19 | 19 |
| –32 | –1 | –13 | — | — | –4 | –1 | –12 | –11 |
| –843 | –1 | — | –1 | –14 | –149 | –138 | 10 | — |
| 1,489 | –16 | –16 | 9 | 4 | 463 | 448 | 108 | 177 |
| 239 | –30 | –31 | 24 | 30 | 47 | 78 | 10 | 98 |
| 1,250 | 15 | 15 | –15 | –26 | 417 | 370 | 98 | 79 |
| 1 | — | — | — | — | — | — | 1 | 1 |
| 24 | 1 | — | — | — | 54 | 28 | –1 | –1 |
| 1,274 | 15 | 15 | –15 | –26 | 471 | 398 | 97 | 79 |
| 66 | — | — | — | — | 2 | 60 | — | — |
| 334 | –198 | –186 | 193 | 201 | 174 | 217 | 25 | 40 |
| 220 | –176 | –164 | 171 | 164 | 80 | 71 | 52 | 54 |
| 114 | –23 | –21 | 22 | 38 | 94 | 146 | –27 | –15 |
| 546 | –8 | –6 | 6 | –2 | 415 | 406 | 81 | 64 |
| — | — | — | — | — | — | — | — | — |
| 546 | –8 | –6 | 6 | –2 | 415 | 406 | 81 | 64 |
| 51 | –13 | –14 | 26 | 26 | 26 | 29 | 4 | 4 |
| 135 | 2 | 2 | –3 | –3 | 62 | 90 | 19 | 12 |
| 360 | 4 | 5 | –17 | –25 | 327 | 286 | 58 | 49 |
| 166 | — | — | — | — | 176 | 152 | 12 | 11 |
| 194 | 4 | 5 | –17 | –25 | 151 | 134 | 47 | 38 |
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE RETAIL GERMANY (PROPERTY/CASUALTY AND LIFE), PROPERTY/CASUALTY REINSURANCE AND LIFE/HEALTH REINSURANCE REPORTABLE SEGMENTS FOR THE PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2020 AND 1 JULY TO 30 SEPTEMBER 2020
| Retail Germany – Property/Casualty | |||||
|---|---|---|---|---|---|
| EUR million | 9M 2020 | 9M 2019 | Q3 2020 | Q3 2019 | |
| 1. Gross written premiums including premiums from unit-linked life and annuity insurance |
1,270 | 1,337 | 265 | 295 | |
| of which attributable to other segments | — | — | — | — | |
| of which attributable to third parties | 1,270 | 1,337 | 265 | 295 | |
| 2. Savings elements of premiums from unit-linked life and annuity insurance |
— | — | — | — | |
| 3. Ceded written premiums |
81 | 67 | 15 | 14 | |
| 4. Change in gross unearned premiums |
–135 | –170 | 116 | 102 | |
| 5. Change in ceded unearned premiums |
–4 | –4 | 5 | 5 | |
| Net premiums earned | 1,058 | 1,105 | 361 | 378 | |
| 6. Claims and claims expenses (gross) |
706 | 690 | 206 | 234 | |
| Reinsurers' share | 86 | 14 | 9 | 3 | |
| Claims and claims expenses (net) | 619 | 675 | 198 | 231 | |
| 7. Acquisition costs and administrative expenses (gross) |
410 | 426 | 144 | 145 | |
| Reinsurers' share | 24 | 19 | 7 | 6 | |
| Acquisition costs and administrative expenses (net) | 386 | 407 | 136 | 138 | |
| 8. Other technical income |
1 | 2 | — | 1 | |
| Other technical expenses | 8 | 6 | 4 | 1 | |
| Other technical result | –7 | –4 | –4 | –1 | |
| Net technical result | 45 | 18 | 23 | 8 | |
| 9. a. Investment income |
89 | 99 | 29 | 35 | |
| b. Investment expenses | 24 | 13 | 4 | 5 | |
| Net income from assets under own management | 65 | 86 | 25 | 31 | |
| Gains or losses from investment contracts | — | — | — | — | |
| Net interest income from funds withheld and contract deposits | — | — | — | — | |
| Net investment income | 64 | 85 | 25 | 31 | |
| of which share of profit or loss of equity-accounted associates and joint ventures | — | — | — | — | |
| 10. a. Other income | 38 | 36 | 11 | 8 | |
| b. Other expenses | 51 | 61 | 17 | 23 | |
| Other income/expenses | –13 | –25 | –6 | –15 | |
| Profit before goodwill impairments | 96 | 78 | 42 | 24 | |
| 11. Goodwill impairments | — | — | — | — | |
| Operating profit/loss (EBIT) | 96 | 78 | 42 | 24 |
| 9M 2020 9M 2019 3,189 3,395 52 45 3,136 3,350 602 650 167 176 14 –66 2 2 2,432 2,501 3,023 3,271 81 81 2,941 3,190 |
|---|
| 862 491 |
| 58 68 |
| 804 423 |
| 17 11 |
| 13 8 |
| 4 3 |
| –1,309 –1,109 |
| 1,660 1,477 |
| 247 |
| 1,413 |
| — — |
| –9 –8 |
| 1,404 1,242 |
| — — |
| –24 |
| 72 107 |
| — — |
| 227 1,250 123 115 147 142 –27 |
30 Talanx Group Quarterly Statement as at 30 September 2020 Consolidated cash flow statement
| EUR million | 9M 2020 | 9M 2019 | |||||
|---|---|---|---|---|---|---|---|
| I. 1. Net income |
910 | 1,313 | |||||
| I. 2. Changes in technical provisions |
6,686 | 5,721 | |||||
| I. 3. Changes in deferred acquisition costs |
121 | –439 | |||||
| I. 4. Changes in funds withheld and in accounts receivable and payable |
–1,474 | –1,180 | |||||
| I. 5. Changes in other receivables and liabilities |
197 | 334 | |||||
| I. 6. Changes in investments and liabilities under investment contracts |
3 | 8 | |||||
| I. 7. Changes in financial instruments held for trading |
23 | 23 | |||||
| I. 8. Gains/losses on disposal of investments and property, plant and equipment |
–848 | –598 | |||||
| Changes in technical provisions for life insurance policies where the investment risk I. 9. is borne by the policyholders |
–885 | 1,443 | |||||
| I. 10. Other non-cash expenses and income (including income tax expense/income) |
164 | –32 | |||||
| I. Cash flows from operating activities 1, 2 |
4,897 | 6,594 | |||||
| II. 1. Cash inflow from the sale of consolidated companies |
— | 4 | |||||
| II. 2. Cash outflow from the purchase of consolidated companies |
— | –4 | |||||
| II. 3. Cash inflow from the sale of real estate |
188 | 232 | |||||
| II. 4. Cash outflow from the purchase of real estate |
–185 | –260 | |||||
| II. 5. Cash inflow from the sale and maturity of financial instruments |
21,950 | 23,554 | |||||
| II. 6. Cash outflow from the purchase of financial instruments |
–25,491 | –26,361 | |||||
| II. 7. Changes in investments for the benefit of life insurance policyholders who bear the investment risk |
885 | –1,443 | |||||
| II. 8. Changes in other investments |
–759 | –621 | |||||
| II. 9. Cash outflows from the acquisition of tangible and intangible assets |
–104 | –100 | |||||
| II. 10. Cash inflows from the sale of tangible and intangible assets II. Cash flows from investing activities |
9 –3,506 |
16 –4,983 |
|||||
| III. 1. Cash inflow from capital increases |
1 | — | |||||
| III. 2. Cash outflow from capital reductions |
— | — | |||||
| III. 3. Dividends paid |
–757 | –768 | |||||
| III. 4. Net changes attributable to other financing activities |
–213 | –174 | |||||
| III. Cash flows from financing activities 2 | –969 | –942 | |||||
| Net change in cash and cash equivalents (I. + II. + III.) | 423 | 669 | |||||
| Cash and cash equivalents at the beginning of the reporting period 3,519 |
|||||||
| Effect of exchange rate changes on cash and cash equivalents | –69 | 48 | |||||
| Effect of changes in the basis of consolidation on cash and cash equivalents 3 | –10 | — | |||||
| Cash and cash equivalents at the end of the reporting period 4 | 3,862 | 4,080 |
1 EUR 192 (218) million of "Income taxes paid", EUR 201 (282) million of "Dividends received" and EUR 2,655 (2,665) million of "Interest received" are allocated to "Cash flows from operating activities". Dividends received also include quasi-dividend profit-sharing payments from investment funds and private equity firms.
Of the "Interest paid" item of EUR 373 (410) million, EUR 164 (154) million is attributable to "Cash flows from financing activities" and EUR 209 (256) million to "Cash flows from operating activities".
3 This item relates primarily to changes in the basis of consolidation, excluding disposals and acquisitions.
The "Cash and cash equivalents at the end of the reporting period" item includes changes in the portfolio of disclosed disposal groups in the amount of EUR 1 (1) million as at the reporting date.
The consolidated balance sheet, the consolidated statement of income, the consolidated statement of comprehensive income and the consolidated cash flow statement were prepared in accordance with the International Financial Reporting Standards (IFRSs), as adopted by the European Union. The statement was prepared in compliance with the requirements of IAS 34 "Interim Financial Reporting".
The same accounting policies were applied as for the consolidated financial statements as at 31 December 2019. To the extent that there are new standards or amendments to standards effective from 1 January 2020, these have been applied accordingly.
Due to the coronavirus pandemic estimates are subject to higher levels of uncertainty and so increased use is made of scenario calculations. A total of around EUR 1,058 million was set aside for losses in the first nine months of the financial year (of which, EUR 700 million for Property/Casualty Reinsurance, EUR 160 million for Life/ Health Reinsurance and EUR 129 million for Industrial Lines). Impairment losses on investments totalled EUR 149 million and relate primarily to equities (EUR 52 million) and alternative investments (EUR 63 million). This partly reflects the economic turbulence expected in the wake of the coronavirus pandemic.
The interim financial statements were prepared in euro (EUR). The amounts shown have been rounded to millions of euros (EUR million). This may give rise to rounding differences in the tables presented in this report. As a rule, amounts in brackets refer to the prior year.
Talanx AG's reporting currency is the euro (EUR).
| Balance sheet (reporting date) | Statement of income (average) | ||||
|---|---|---|---|---|---|
| EUR 1 corresponds to | 30.9.2020 | 31.12.2019 | 9M 2020 | 9M 2019 | |
| AUD Australia | 1.6451 | 1.6000 | 1.6610 | 1.6080 | |
| BRL | Brazil | 6.5980 | 4.5128 | 5.6839 | 4.3869 |
| CAD Canada | 1.5675 | 1.4620 | 1.5248 | 1.4955 | |
| CNY China | 7.9746 | 7.8181 | 7.8841 | 7.7179 | |
| GBP | United Kingdom |
0.9126 | 0.8520 | 0.8825 | 0.8848 |
| JPY | Japan | 123.7700 | 122.1900 | 121.1080 | 122.6890 |
| MXN Mexico | 26.1536 | 21.0814 | 24.4703 | 21.7915 | |
| PLN Poland | 4.5463 | 4.2576 | 4.4211 | 4.3056 | |
| USD USA | 1.1708 | 1.1190 | 1.1287 | 1.1241 |
By way of purchase agreement dated 21 October 2020, HDI Assicurazioni, Rome, Italy, a wholly owned subsidiary of HDI International AG, Hannover, Germany (Retail International segment), acquired 100% of the shares in the property insurer Amissima Assicurazioni S.P.A., Milan, Italy. The purchase is due to be completed in the first quarter of 2021, subject to approval by the supervisory authorities responsible.
HDI-Platz 1 30659 Hannover Germany Telephone +49 511 3747-0 Telefax +49 511 3747-2525 www.talanx.com
Andreas Krosta Telephone +49 511 3747-2020 Telefax +49 511 3747-2025 [email protected]
Carsten Werle Telephone +49 511 3747-2231 Telefax +49 511 3747-2286 [email protected]
This is a translation of the original German text; the German version shall be authoritative in case of any discrepancies in the translation.
https://talanx.com/investor-relations
@talanx @talanx_en
15 March Results Press Conference 2020
6 May Annual General Meeting
6 May Quarterly Statement as at 31 March
11 August Interim Report as at 30 June
15 November Quarterly Statement as at 30 September
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