Talanx maintains 10% ROE FY 2014 target

Talanx maintains 10% ROE FY 2014 target

German insurance holding company Talanx has reported net income of €657m for the first six months of 2014, slightly down from the €672m reported in the same period last year. Gross written premium rose fractionally to €14.98bn, from €14.97bn.
For the second quarter, net income was €289m, down from €323m, on GWP of €6.56bn, up from €6.51bn.
Talanx said that it remained "well on track" to achieve its 2014 target of at least €700m group net income. Talanx chief executive Herbert Haas said that, at €250m, the net burden of large losses for the first half was lower than for the same period last year, which saw heavy losses of €419m. The improvement was primarily on the reinsurance side at Hannover Re, where cat losses fell to €105m, from €260m in H1 2013.
Net investment income fell 6.4% year on year to €0.9bn, mainly because H1 2013 benefited to the tune of €100m from the sale of Swiss Life shares.

Talanx writes 35% of its business in Germany, 16% in the rest of mainland western Europe, 11% in the US, 11% in Asia and Australia, 9% in the UK, 8% in CEE, 6% in Latin America, 2% in other North America, and 2% in Africa.
Segmentally, GWP in the Industrial Lines division was up 4.1% year on year to €2.5bn. The underwriting result swung to a profit of €6m, from a loss of €19m in H1 2013. Flooding in southern and eastern Germany affected most insurers in Germany last year. For Talanx, the combined ratio this half in Industrial Lines improved to 99.4%, from 102.1%. The 2014 target is between 96% and 98%. Operating profit in the division rose to €141m for the half, up from €70m in the corresponding period last year.
In Non-Life Reinsurance, there was flat premium income of €4.1bn in H1, "despite noticeably tougher competition". At constant exchange rates, premiums rose by 2% year on year. The combined ratio rose slightly, to 95.1% from 94.2%, on an underwriting result down to €156m, from €191m. Net investment income was up to €412m, from €378m in H1 2013, but operating income fell to €533m, from €567m. The segment's contribution to the group declined a fraction, to €165m, from €166m. 
In the Life & Health Reinsurance segment, GWP for the first half was off 4.6% year on year, down to €3.0bn from €3.1bn. The decline was 1.8% at constant exchange rates. The underwriting result improved to €147m, from a loss of €172m in H1 2013, while operating profit rose to €152m, from €130m. Net investment income fell slightly to €299m, from €315m. The contribution to the group from this segment rose to €36m, from €9m in H1 2013.
At Retail Germany, GWP was flat at €3.6bn, with operating profit rising by about 8% to €97m, from €90m in H1 2013. Talanx has a substantial life operation in its domestic market, and Annual Premium Equivalent (APE) income fell slightly to €208m, from €214m. Premium income in the property/casualty division was roughly flat at €1.0bn. The combined ratio rose to 101.2% from 99.9% as a result of the above-average catastrophe losses from storm Ela.
At Retail International, GWP was up 4.8% year on year to €2.3bn, equal to 10.7% growth when adjusted for currency effects. Italian premium growth benefited from the life side, with an 80.8% rise in single-premium contracts to €587m, compared with €325m in H1 2013. The deterioration of some local currencies affected the top line in euros. In Brazil, for example, HDI Brazil generated a 12.6% growth in local currency, but this translated into a decline to €404m, from €421m. Similarly, in Mexico a 2.4% rise in GWP when measured in pesos turned into a 5.1% fall when measured in euros. The underwriting result in Retail International deteriorated to €14m, from €17m in H1 2013, with the combined ratio rising to 95.3% from 94.9%. A 6.5% improvement in investment income to €156m helped the operating profit to €124m, from €113m. That in turn helped raise the contribution of the Retail International Division to €74m, from €66m in H1 2013.
Looking ahead to the remainder of the year, Talanx said that it was aiming to generate GWP growth of between 2% and 3% at constant exchange rates. It anticipates a return on equity of about 10% for 2014.

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