Large losses in primary insurance and reinsurance rose from EUR 137 million in the same period of the previous year to EUR 435 million, substantially in excess of the EUR 278 million pro rata large loss budget for the period. All divisions were impacted by the consequences of the pandemic and the lockdown.
Overall, the coronavirus pandemic impacted Group net income by EUR 133 million after taxes. EUR 48 million of this figure related to net investment income, EUR 80 million to coronavirus-related losses in excess of the pro rata large loss budget for the first quarter and EUR 5 million to impairments of the present value of future profits (PVFP).
- Gross written premiums: EUR 12,467 million (+6%), of which:
- Industrial Lines: EUR 2.575 million (+12%)
- Retail Germany: EUR 1.848 million (-2%)
- Retail International: EUR 1.513 million (-6%)
- Reinsurance: EUR 6.975 million (+9%)
- Net premiums earned: EUR 8,354 million (+7%)
- Net underwriting result: EUR (425) million (-19%)
- Net investment income: EUR 903 million (-9%)
- Combined ratio: 99.8% (+3.0 pp.)
- Return on equity: 9.0% (-1.3 pp.)
- Return on investment: 2.7% (-0.5 pp.)
- Operating result (EBIT): EUR 559 million (-9%)
- Net income: EUR 223 million (-5%)
Talanx demonstrated its high level of resilience in a crisis when faced with the exceptional challenges caused by the coronavirus lockdown. Gross written premiums rose by 6.4 percent to EUR 12.5 billion (1Q2019: 11.7).
Large losses for the first quarter 2020 were up year-on-year at EUR 435 (137) million. EUR 313 million of this figure related to large loss expenses from the coronavirus pandemic before application of the pro rata large loss budget for the period. Reinsurance activities accounted for the largest part with approximately EUR 220 million, primary insurance being responsible for the remainder.
The pandemic and the lockdown most of all led to large numbers of business closures and cancelled events that are insured with our risk carriers. The situation was aggravated by the impact of numerous other large losses such as the bush fires and hailstorm in Australia, hurricanes "Ciara", "Elsa" and "Sabine" in Europe, and tornado "Nashville" in the USA.
As a result, the underwriting result amounted to EUR -425 million (1Q2019: -357). After making use of the otherwise unused pro rata large loss budget, the combined ratio rose by 3.0 percentage points to 99.8% (1Q2019: 96.8%) in the first quarter.
In addition, Talanx's net investment income declined year-on-year as a result of the coronavirus pandemic's impact on the capital markets; at EUR 903 million (1Q2019: 988), it was down 8.6%. The net return on investment amounted to 2.7% (1Q2019: 3.2%). The drop was primarily caused by unrealised losses on the holdings measured at fair value in extraordinary net investment income.
Operating profit fell by 9.3% to EUR 559 million (1Q2019: 616), also affected by coronavirus-related PVFP impairments. Nevertheless, at EUR 223 million (1Q2019: 235) group net income was roughly on a par with the previous year, despite the above-mentioned negative effects of the virus.
The Solvency II ratio before transitional measures on 31 March 2020 was within the upper half of the target range of 150 to 200 percent.
"The coronavirus pandemic has stretched people and enterprises in many countries of the world to their limits. We haven't seen a crisis like this since the Second World War. (...) As a major European insurance group, Talanx has also been impacted by this crisis, both in its underwriting activities and in its investments. (...)
We entered this crisis in a position of strength. Now we are focusing on maintaining this strength and resilience so as to be able to continue supporting our policyholders, business partners and employees and the people in the countries in which we do business, and to go on providing insurance, both now and in the future. This is in line with our Talanx Purpose: 'Together we take care of the unexpected and foster entrepreneurship'."
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