talanx group annual report 2011 en

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