talanx group annual report 2011 en

Overall assessment of
the economic situation
Capital markets
Non-financial
performance indicators
Corporate Governance Remuneration report Events of special
significance
The ultimately unresolved debt problems, the depressed mood in
the banking sector and severely dampened expectations as regards
the global economy give reason to fear that interest rates are set to
remain low at least for the first half of 2012. After the rate reductions
in November and December 2011, we anticipate a further decline in
interest rates in the Eurozone in the first half year. The US has virtually
committed to leaving base rates at their current low level over
the next two years, unless their economy recovers considerably. The
general risk situation will presumably stabilise only if the world’s
politicians manage to push through widely accepted measures and
to establish a playing field that restores lasting confidence among
the market players.
We expect the stock markets to move sideways overall but with
high volatility in 2012. The urgent need to reduce debt on a global
scale is likely to be a burden on trading. This damper is likely to hit
financial-sector equities particularly hard, especially as the new
recapitalisation requirements take effect. A macro-economic cooldown
would also take its toll on corporate profits. However, thanks
to much lower debt levels and comparatively healthy balance
sheets, most companies appear to be well prepared for a cool-down.
The already historically low fundamental valuations may well mitigate
the risk of a further decline in stock prices.
Future state of the industry
The following remarks about the future state of the insurance
industry are based primarily on publications by the ifo Institut, the
German insurance association (GDV) and Swiss Re’s sigma.
The insurance industry in Germany
Against the background of ongoing macro-economic risk factors,
any forecasts are bound to involve uncertainties. However, despite
all imponderables, the insurance industry is looking forward to an
overall improvement in the premiums situation in 2012. According
to the GDV, demand for insurance remains stable. Current challenges
such as stiffening competition and changes to the regulatory
requirements are expected to lead to a further shift in the
relative positions of the various market players. At the same time,
trends such as increasing differentiation of client groups and the
demographic shift in Germany are opening up fundamentally new
business opportunities for insurers within the prevailing context
of a high market penetration. This is expected to be reflected in
further changes in the product landscape and increasing diversity
in sales structures.
Risk report Forecast and
opportunities report
Despite all uncertainties, we are looking forward to further positive
business development in property and casualty insurance in
general in the next two years, though possibly somewhat lower than
the growth level achieved in the past year, as – according to the ifo-
Institut – on the one hand the already high market penetration in
many lines of business is placing limits on further growth, and on
the other the growth of the economy in general is expected to slow
down. Nevertheless, we are counting on an economic environment
that is likely to have a stabilising effect on business in property and
casualty insurance in 2012.
The future development of business in the life insurance sector
is likely to be shaped by opposing factors: on the positive side,
according to GDV reports, the relatively sound economic situation
of the private households, the still good competitive advantage
of life insurance over other investment forms, and the recognised
need for more private provision for old age; on the down side the
persistent wait-and-see attitude of private households as regards
longterm investments. This caution is being reinforced by the
financial and economic crisis and the debate about the future of
the euro and runs contrary to the need to build up capital-funded
private provisions for old age. However, we see the crucial factor for
the future development of life insurance as being interest levels. In
the current, already long-persisting low-interest environment, it is
becoming more and more difficult to earn the minimum returns
guaranteed under the terms of long-running policies from earlier
years. The German life insurance industry is soundly capitalised
and has built up considerable reserves and a diversified, longterm
investment portfolio. These circumstances will enable it to cope
with the present low interest level for a few more years, if need be.
Talanx Group. Annual Report 2011
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