The global financial market crisis and the associated slump on equity markets were the factors that decisively shaped the results of the Talanx Group in the 2008 financial year. Although the Group lost none of its financial strength, the repercussions of the crisis on international capital markets took a heavy toll on the net profit. This development left Talanx unable to accomplish all the goals that it had set itself for the year under review.

If we restrict our gaze purely to core business, however, 2008 was a gratifying year: underwriting business continued to fare well overall. The combined ratio improved markedly despite a heavier burden of catastrophe losses. The primary insurers, in particular, closed the year with very good results despite the financial crisis. The business written by the Property/Casualty Primary Insurance segment in foreign markets also progressed favorably with organic growth of 2.4%.

The Group’s gross written premium (including savings elements of premium under unit-linked life and annuity policies) contracted slightly by 1% to EUR 19.0 (19.1) billion. Several factors played into this decline: in Non-Life Reinsurance, the segment with the largest contraction (11%), the principal reasons were the withdrawal from specialty business and the weakness of foreign currencies, especially the US dollar against the euro. The fall of 1% in the Property/Casualty Primary Insurance segment was attributable to adverse market conditions, above all in motor insurance. Yet the profit-oriented underwriting policy pursued in such market phases – which includes a preparedness to temporarily accept losses of market share rather than deviate from our profit orientation – was also a factor in the contraction. Life Primary Insurance grew by 6% due, most notably, to the first-time recognition of the former BHW companies for an entire financial year and the full consolidation of the PB insurers. Life/Health Reinsurance boosted its gross premium income by 2%. Yet these increases in premium volume did not make up for the decline in the Non-Life Reinsurance segment. If special effects are factored out, the gross written premium booked by the Group increased by 3%.

Owing to the increased level of retained premium, deriving primarily from the Property/Casualty Primary Insurance and Non-Life Reinsurance segments, the net premium earned remained virtually unchanged at EUR 14.9 (14.9) billion.

The loss experience in both these segments was more favorable overall. As a result, the joint combined ratio of these segments improved appreciably to 95.2 (99.3)%.

While developments on the premium and claims sides were in line with our expectations overall, the investment income came in significantly below the planned level. The financial market crisis, which escalated in October, had a double impact on the Group: firstly, investment income was hampered by write-downs and disposal losses on equities – an amount of altogether EUR 1.5 billion (after allowance for all equity hedges the figure still stood at EUR 0.9 billion). Secondly, the investment income suffered under value adjustments on fixed-income securities, including most notably those taken on bonds issued by banks and corporations which had found themselves in difficulties as a consequence of the crisis. After netting with write-ups recognized in income they amounted to roughly EUR 174 million. Owing to the considerable volume of write-downs and impairments, net investment income slipped sharply by 40% to EUR 1.6 (2.7) billion.

The operating profit (EBIT) contracted to EUR 0.6 (1.5) billion. Group net income was heavily weighed down by the tax load, which climbed to almost 74% after 25% in the previous year. A negative factor here is that losses on equities cannot be treated as tax-deductible by composite insurers and reinsurers in Germany. Group net income fell to EUR 187 (477) million.