Talanx : fully on track to meet annual targets with strong quarterly results

"We have got off to a good start in the new financial year: our Group continued its growth. Our Group net income showed a very significant increase of 31 percent to EUR 423 million. Primary insurance made a strong contribution to this performance", said Torsten Leue, Chairman of Talanx AG's Board of Management. "This clearly shows that the optimisation programmes in the Primary Insurance segments are having a lasting effect. Our Group remains resilient and our strategy is continuing to prove extremely successful. Not only are we confirming our forecast for the current financial year, but this is also a strong start to our new strategy cycle for the period up to 2025."

The figures for the Group's assets, liabilities, financial position and financial performance for the first quarter of 2023 have been reported under the new IFRS 17 and IFRS 9 accounting standards for the first time. A comprehensive discussion of the key changes resulting from the new/modified accounting principles is given in the Annual Report 2022 (pages 151-157). This Quarterly Statement provides a condensed statement of income for the first quarters of 2023 and 2022, plus the key figures from the Group's opening balance as at 1 January 2022 and the balance sheets as at 31 December 2022 and 31 March 2023 in table form.

Compared to IAS 39 and IFRS 4, the standards that were required to be used until 2022, Talanx expects to see higher life insurance results as a consequence of initial application effects and a change in the distribution of profits. Unwinding and discount effects in the Property/Casualty Insurance segment are currently making a positive contribution to net income that somewhat overemphasises the quarterly result; this cannot be extrapolated in full to the year as a whole, as a result.

The insurance service result, which includes interest income on technical provisions, climbed to EUR 880 (633) million. This is due to the time value of money, an improved cost ratio and a normalised large loss budget: large loss payments in the first three months of the year declined year-on-year to EUR 419 (458) million, meaning that the proportionate large loss budget of EUR 466 million was not utilised in full. Man-made large losses amounted to EUR 65 million, while large losses from natural disasters were EUR 354 million. Total large losses in Primary Insurance were EUR 54 (121) million, while the figure for Reinsurance was EUR 334 (336) million. The largest single loss in the Group as a whole was the earthquake in Türkiye and Syria (EUR 249 million). The overall combined ratio for the Group improved to 93.5 (95.8) percent.

The net insurance financial and investment result before currency effects amounted to EUR 330 (388) million. Operating profit stood at EUR 1,043 (773) million, while Group net income rose to EUR 423 (322) million. The Solvency 2 ratio as at 31 March 2023 was 212 percent.

Industrial Lines: combined ratio of less than 95 percent

First-quarter insurance revenue in the Industrial Lines Division amounted to EUR 2.1 (1.8) billion. This positive trend was driven by liability, fire and engineering insurance. The specialty business also continued its successful performance, recording insurance revenue of EUR 681 (615) million. The insurance service result rose to EUR 141 (69) million because of lower total large losses and an improved frequency loss ratio: the largest single loss in Industrial Lines (EUR 15 million) was the earthquake in Türkiye and Syria. Large loss payments by the division declined significantly overall compared to the prior-year period to EUR 34 (91) million. As a result, and due to low total frequency losses and higher interest rates, the combined ratio fell clearly to 93.2 (96.2) percent. This success demonstrates the effectiveness of the optimisation programmes implemented in the period since 2019. The net insurance financial and investment result before currency effects stood at EUR 21 (54) million; this was due to lower income from assets under own management and a larger unwinding effect on technical provisions caused by higher interest rates. Operating profit (EBIT) for the division amounted to EUR 86 (60) million. Industrial Lines contributed EUR 69 (35) million to Group net income.

Retail Germany: insurance revenue on a par with prior-year quarter

First-quarter insurance revenue in the Retail Germany Division amounted to EUR 807 (808) million, while the insurance service result was EUR 76 (102) million, and the net insurance financial and investment result before currency effects amounted to EUR 38 (29) million. In light of these developments, operating profit was EUR 59 (94) million, while the division's contribution to Group net income stood at EUR 40 (86) million.

Property/Casualty Insurance segment: growth in corporate customers/liberal professions business and unemployment insurance

Insurance revenue in the Property/Casualty Insurance segment was EUR 421 (388) million in the first quarter. This growth is primarily due to the business with corporate customers and members of the liberal professions, and to unemployment insurance. Large loss events did not impact the segment in the first three months of 2023; by contrast, the prior-year quarter saw higher claims expenses following natural disasters (especially winter storms). However, the negative effect from larger frequency losses in the motor vehicles area led to the insurance service result decreasing to EUR 21 (39) million. As a result, the combined ratio rose to 95.1 (89.9) percent. The net insurance financial and investment result before currency effects amounted to EUR 19 (17) million, while the division's operating profit for the first three months was EUR 24 (44) million.

Life Insurance segment: new business roughly at prior-year level

Insurance revenue in the Life Insurance segment was EUR 386 (420) million in the first three months of the year. At EUR 78 (81) million, new business in the first quarter roughly matched the prior-year quarter. The insurance service result stood at EUR 56 (63) million, while the net insurance financial and investment result before currency effects was EUR 19 (12) million. Operating profit in the Life Insurance segment for the first three months amounted to EUR 36 (50) million.

Retail International: strong growth in insurance revenue and operating profit

Insurance revenue in the Retail International Division totalled EUR 1.5 (1.2) billion in the first three months. The figure for the Property/Casualty segment climbed 25.5 percent (or 29 percent adjusted for currency effects), largely driven by business in Türkiye and Latin America. Life Insurance saw a revenue increase of 25.9 percent (33 percent adjusted for currency effects), primarily due to the acquisition in January 2023 of Turkish company HDI Fiba Emeklilik ve Hayat A.Ş.

The improved combined ratio and lower negative effects in the Polish and Italian companies' life insurance business led to an insurance service result of EUR 119 (52) million. The combined ratio for the property insurance companies fell to 93.4 (96.3) percent. This was mainly the result of improvements in the Latin America region, and particularly Brazil. A balanced reinsurance structure meant that losses from the earthquake in Türkiye and the forest fires in Chile were a mere EUR 11 million overall. The net insurance financial and investment result before currency effects was EUR 72 (39) million, benefiting from higher yields and higher investment volumes.

Operating profit (EBIT) for the division stood at EUR 137 (29) million. The contribution to Group net income was EUR 75 (7) million.

Reinsurance: growth in Group net income

Insurance revenue in the Reinsurance Division totalled EUR 6,570 (6,612) million in first three months. The insurance service result was EUR 568 (421) million. The net insurance financial and investment result before currency effects amounted to EUR 222 (278) million. Operating profit amounted to EUR 772 (601) million. The contribution to Group net income in the first three months was EUR 247 (216) million.

Insurance revenue in the Property/Casualty Reinsurance segment totalled EUR 4,600 (4,589) million. Price increases in this area were offset by revenue-reducing policy conversions to non-proportional insurance.

At EUR 334 million, first-quarter large loss payments were within the budget of EUR 356 million; in the comparative period, this had been exceeded by EUR 52 million. The largest single losses were the earthquake in Türkiye and in Syria, which resulted in net losses of EUR 201 million, plus a cyclone (EUR 52 million) and severe floods (EUR 47 million), both in New Zealand. The improvement in the combined ratio to 93.2 (95.9) percent lifted the insurance service result to EUR 315 (189) million. Expressed in terms of net insurance revenue, the combined ratio improved to 92.3 (95.6) percent. The net insurance financial and investment result before currency effects amounted to EUR 176 (130) million. Operating profit was EUR 471 (306) million; the prior-year quarter had been impacted by negative one-time factors such as provisions for Russia's war of aggression against Ukraine.

Insurance revenue in the Life/Health Reinsurance segment was EUR 1,970 (2,023) million. The insurance service result totalled EUR 253 (232) million, since the effects of the COVID-19 pandemic decreased to EUR 11.5 million. Income from extreme mortality cover and non-recurring income from the remeasurement of a minority interest, which had positively influenced the comparative period, no longer featured in the first quarter of 2023. Consequently, the net insurance financial and investment result before currency effects was EUR 45 (148) million, bringing operating profit for the Life/Health Reinsurance segment to EUR 251 (295) million.

Outlook for 2022: Group net income of EUR 1.4 billion[1] confirmed

The Group is reaffirming both the outlook for 2023 that it published in December of last year and its medium-term targets. It aims to grow its insurance revenue compared to 2022 to roughly EUR 42 billion. The Talanx Group is expecting Group net income of roughly EUR 1,400 billion[1], while the return on equity will be clearly above 10 percent.

As usual, the targets for financial year 2023 are subject to the proviso that no turbulence occurs on the currency and capital markets, and that large losses remain in line with expectations. Russia's war in Ukraine remains a source of uncertainty.

[1] The earnings target assumes that large losses will not exceed the large loss budget, that the capital markets do not experience any upheavals and that no material currency fluctuations arise. In addition, the forecast for Group net income may be subject to particular fluctuations due to the use of the new IFRS 9 accounting standard to measure investments.

The Company's auditors are currently reviewing the financial statements prepared using the new accounting standards. This review has not yet been completed. This Quarterly Statement has also not been reviewed.

The figures for the comparative reporting dates of 1 January 2022 and 31 December 2022 were adjusted in accordance with IAS 8.

The comparative period for 2022 was adjusted in accordance with IAS 8.

The figures for the Group's net assets, financial position and results of operations were prepared in accordance with the International Financial Reporting Standards (IFRS). However, this quarterly statement does not represent an interim report as defined by IAS 34.