TALANX announced ambitious targets for the upcoming years

24 October 2018 —
TALANX, the Germany's third-largest insurer, announced it planned ambitious targets for 2019 and beyond, targeting a combined positive effect on annual profit of around EUR 50 million.

In future, the German insurer "will aim for a return on equity (RoE) of at least 800 basis points above the risk-free interest rate. Earnings per share (EPS) are to be increased by an average of at least 5% per year until 2022. This is to be achieved by means of focused strategies for the divisions, various growth initiatives, the bundling of intragroup reinsurance at the holding company and more stringent capital management. 35% to 45% of IFRS earnings shall be distributed to the shareholders, with the absolute amount of the dividend coming to at least the previous year's level", as the company representatives mentioned in a statement.

TALANX said it has identified additional potential for optimizing capital management that the Group will systematically exploit over the coming years. To this end, excess capital of the Group subsidiaries will be transferred to the holding company. This will pave the way for increasing investments in profitable and high-growth areas and further secure TALANX's dividend continuity in the future. In addition, TALANX plans to bundle the non-life treaty reinsurance requirements for Primary Insurance at the holding company in order to take advantage of diversification effects throughout the Group. In conjunction with a higher retention, TALANX consequently also anticipates an increase in investment income. The bundling of intragroup reinsurance has already resulted in S&P setting the issuer rating of TALANX AG to "A-/CreditWatch Positive". Fully implemented, TALANX expects this to have a combined positive effect on annual profit of around EUR 50 million.

The Group added that mergers and acquisitions (M&A) activity will remain an important element of its growth strategy, but, "as before, the prerequisite for a transaction is that potential acquisitions must improve the Group's return on equity and result in an increase in earnings per share in the near future".

At the same time, the company mentioned it will focus on acceleration of the digital transformation by developing the TALANX system environment and advanced data analysis, including artificial intelligence and the development of digital ecosystems. "In addition, equity investments in innovative start-ups, such as the asset management platform Elinvar, will be a growing part of the strategy".

Meanwhile, a new company, HDI Global Specialty, was established just a few months ago and will start operations as at 1 January 2019. TALANX expects the combination of Inter Hannover's proven underwriting expertise and HDI Global's worldwide sales and loss adjustment network to result in significant growth synergies. "By 2022, gross written premiums are expected to increase to EUR 2.1 billion; the EBIT contribution for the division should rise by around EUR 35 million within this period".

In the Retail International Division, TALANX aims to continue its strong growth while also further advancing diversification. Its goal is to become one of the top 5 providers in all the five defined core markets in Latin America and in Central and Eastern Europe. "This is to be achieved by means of profitable organic and non-organic growth. In the medium term, the division wants to achieve return on equity of 10% to 11%".

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