Development of the Group segments

Key figures: Life Primary Insurance ¹⁾

The Talanx Group segment of Life Primary Insurance is composed of the Life Insurance and Bancassurance Divisions.

The Life Insurance Division operates in its national and international target markets with the HDI-Gerling and Aspecta brands. In the areas of both individual and occupational retirement provision HDI-Gerling offers the complete product range of risk protection and old-age provision. Aspecta is a specialist for innovative and performance-oriented insurance solutions, most notably in the product segment of unit-linked provision.

We use the term “bancassurance” to refer to the sale of insurance products through a bank’s distribution channels. The Talanx Bancassurance Division, concentrated in the hands of the intermediate holding company Proactiv, cooperates in a highly specialized manner with numerous partner banks and savings institutions as well as with a postal service partner in Hungary. The hallmark of the division, which is active in several markets, is the seamless integration of the insurance offerings into the product worlds and production processes of the respective cooperation partners.

Business experience in the Group segment

The Life Primary Insurance segment was faced with adverse conditions in the year under review. In addition to the worldwide financial market crisis, the implementation of government regulatory requirements in Germany and a host of internal restructuring activities, new business growth at Aspecta was curtailed by a company-specific factor: a large portion of the growth in the German market, where the division generates the bulk of its premium volume, derived from the last step increase on the incentive scale for so-called Riester annuity policies. This involved graduated adjustments to the government-subsidized maximum contribution for such policies. Aspecta was unable to share in this “automatic” new business because it is not active in this product segment.

The Life Primary Insurance segment of the Talanx Group was therefore unable to divorce itself from the muted new business trend on the insurance market in the 2008 financial year. Measured by the Annual Premium Equivalent (APE), which is composed of regular premiums plus 10% of single premiums, new business contracted by 4% to 713 (742) million.

Gross written premiums – including premiums from unit-linked life and annuity insurance – in the Talanx Group’s highest-growth segment climbed by 6% to EUR 5.7 (5.4) billion. This can be attributed above all to the first-time recognition of the former BHW Leben for an entire financial year and the full consolidation of the PB insurers.

The Talanx Group segment thus took a step up in the ranks of German life insurance groups. According to rankings published by the trade journal Zeitschrift für Versicherungswesen, the Talanx life insurers have now moved up to the number four spot from fifth place in the previous year; it should be borne in mind that our analysis disregards the various Sparkasse insurers since they do not operate on the market as a group.

In terms of gross sum insured the in-force portfolio (not including riders) remained virtually unchanged at EUR 178.6 (178.5) billion. The number of in-force policies (excluding riders) in the Life Primary Insurance segment was on a par with the previous year, falling slightly by 0.4% to 8.4 (8.4) million. The number of policies in domestic business decreased by 2% to 7.6 (7.8) million, as against significant growth of 20% in foreign markets – where the portfolio grew to 772 (644) thousand policies.

The level of retained premium in the Life Primary Insurance segment stood at 87.9 (86.9)%. Net premiums earned climbed by 5% to EUR 4.0 (3.8) billion.

Ordinary investment income grew to EUR 1.4 (1.3) billion; in the wake of the financial market crisis net investment income fell by 10% to EUR 1.0 (1.1) billion on account of sharply higher write-downs on equities and fixed-income securities. Despite the repercussions of the financial crisis the operating profit (EBIT) in the segment was boosted by 17% to EUR 156 (143) million. Of this total amount, EUR 63 million stemmed from the Life Insurance Division and EUR 93 million from the Bancassurance Division. Two effects, above all, served to more than offset the profit-reducing impact on EBIT of the write-downs: in the first place, the first-time recognition of PBV Leben for an entire financial year and the full recognition of the PB insurers; secondly, the revaluation of the Neue Leben Group in the previous year in the context of its inclusion in Proactiv Holding AG, which had led to a goodwill adjustment in an amount of EUR 50 million in 2007.