talanx group annual report 2011 en
talanx group annual report 2011 en
talanx group annual report 2011 en
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40<br />
The Talanx Group Strategy Enterprise<br />
managem<strong>en</strong>t<br />
International insurance markets<br />
Talanx Group. Annual Report <strong>2011</strong><br />
Research and<br />
developm<strong>en</strong>t<br />
The notes on the insurance industry are based mainly on Swiss Re’s<br />
sigma study, and on information provided by the ifo Institute for<br />
Economic Research and the German Insurance Association (GDV).<br />
<strong>2011</strong> was not an easy year for the international insurance markets.<br />
Aside from the severe losses resulting from the major natural<br />
disasters in what proved to be the most loss-prone insurance year<br />
of all time, the slump in the world economy in the second half of<br />
the year, the sovereign debt crisis in Europe and the USA, and the<br />
<strong>en</strong>during low interest rates conspired to chall<strong>en</strong>ge insurers around<br />
the globe. Despite this negative backdrop, the insurance sector<br />
actually performed very creditably in our opinion. Although the<br />
dynamic growth of the emerging countries slack<strong>en</strong>ed somewhat in<br />
the year under review, it remained well above anything witnessed<br />
in the developed nations. Developm<strong>en</strong>ts in the growth regions of<br />
Latin America and C<strong>en</strong>tral and Eastern Europe, in particular, are<br />
important for the Talanx Group, as we have defined these regions<br />
as targets for expanding our international business.<br />
Property and casualty insurance<br />
In the developed markets, premium growth in property and<br />
casualty insurance increased somewhat in <strong>2011</strong> on the back of<br />
robust demand for insurance products in the wake of the preceding<br />
recession. Growth rates in the emerging nations fell slightly, but<br />
they still exceeded by far the figures for the industrialised markets.<br />
In contrast to the previous year, all global growth regions contributed<br />
to the increase in g<strong>en</strong>eral demand for insurance covers. After<br />
set-backs in 2009 and 2010, C<strong>en</strong>tral and Eastern Europe recorded<br />
positive growth again thanks primarily to rising demand from<br />
Russia and higher prices in the Polish property insurance market.<br />
In Latin America, growth in premium income accelerated. In many<br />
of our new key markets, increasing auto sales gave rise to a rise in<br />
demand for motor insurance policies. Growth was also recorded in<br />
the field of health- and private accid<strong>en</strong>t insurance and – albeit on a<br />
relatively small scale – in agricultural insurance.<br />
Profitability in property and casualty insurance was less impressive<br />
due to both underwriting and investm<strong>en</strong>t results. The huge claims<br />
exp<strong>en</strong>ses g<strong>en</strong>erated by the major loss ev<strong>en</strong>ts in <strong>2011</strong> took a heavy<br />
toll on underwriting results. It was the insurers from the industrialised<br />
markets who bore the brunt of the erosion in profitability<br />
from the major loss ev<strong>en</strong>ts, while insurers in the emerging countries<br />
were hardly affected at all. In contrast, the impact of the flood<br />
disaster in Thailand was felt by local insurers, too. The total claims<br />
burd<strong>en</strong> from this loss ev<strong>en</strong>t has yet to be fully evaluated.<br />
Markets and<br />
g<strong>en</strong>eral conditions<br />
Business<br />
developm<strong>en</strong>t<br />
Assets and<br />
financial position<br />
According to Swiss Re’s Global Insurance Review (GIR), the investm<strong>en</strong>t<br />
climate for the insurance sector remained troubled in year<br />
four of the financial crisis, and pressure was brought to bear on<br />
investm<strong>en</strong>t income. Fears of a r<strong>en</strong>ewed recession together with the<br />
European debt crisis prompted poor performances in the capital<br />
markets. The ratio of investm<strong>en</strong>t income to overall profitability<br />
remained low in a historical context. Insurance industry estimates<br />
for <strong>2011</strong> put investm<strong>en</strong>t income at around 10% of net earned<br />
premiums, compared with 13.5% on average for the period 1999<br />
through 2007. All told, the sector is probably looking at a return on<br />
equity in property and casualty insurance of 4% (6% in the previous<br />
year), a figure that is not only below pre-crisis levels but also below<br />
the cost of capital. All in all, experts are predicting a better market<br />
situation in <strong>2011</strong> for Europe’s property and casualty insurers. The<br />
improvem<strong>en</strong>t in underwriting results compared with 2010 was felt<br />
especially in motor insurance. According to the GIR, initial premium<br />
adjustm<strong>en</strong>ts were pushed through for motor policies in the United<br />
Kingdom and Italy in 2010, and this tr<strong>en</strong>d may well continue in <strong>2011</strong><br />
in other markets, namely Germany and France.<br />
For the reinsurance sector in g<strong>en</strong>eral, <strong>2011</strong> was a year of extremely<br />
high catastrophe losses; according to experts’ predictions, therefore,<br />
reinsurers are looking at combined ratios of betwe<strong>en</strong> 108%<br />
and 110% for the year under review. Since the repercussions of the<br />
November flood disaster in Thailand cannot yet be fully evaluated,<br />
higher claims burd<strong>en</strong>s for global reinsurers cannot be ruled<br />
out. Coupled with unfavourable conditions in the capital markets,<br />
this will lead to a marked deterioration in profitability for most<br />
reinsurers. Return on equity for this sector is expected to slump to<br />
betwe<strong>en</strong> 3% and 4% for the year as a whole, whereas in the previous<br />
year it was 11%.<br />
Life insurance<br />
After a brief recovery in the previous year, global premium volumes<br />
in life insurance fell slightly in the year under review, the developed<br />
insurance markets feeling the pinch to a greater ext<strong>en</strong>t than<br />
the emerging countries. However, <strong>2011</strong> saw the latter experi<strong>en</strong>ce<br />
stagnating premium income for the first time. This is largely due to<br />
a major fall-off in premiums in China which, due to the sheer scale<br />
of its premium volume, dominates aggregate growth figures for<br />
the emerging markets. If China is omitted from the equation, the<br />
emerging markets actually recorded a marked increase in premium<br />
income in <strong>2011</strong> too. Of these markets, Latin America was the most<br />
conspicuous in terms of growth with an increase in premium income<br />
of almost 10%. League leaders in the growth stakes in C<strong>en</strong>tral<br />
and Eastern Europe were Poland and Russia. Russia shone out from<br />
the rest with a growth rate in excess of 50%, albeit from a very low<br />
starting point.