Life and health reinsurance
| Key figures for life and health reinsurance | |||||||
|---|---|---|---|---|---|---|---|
| in EUR million | 2017 | 2016 | |||||
| 1.1. – 31.3. | +/– previous year | 1.1. – 31.3. | |||||
| Gross written premium | 1,731.9 | -1.7% | 1,761.4 | ||||
| Net premium earned | 1,566.4 | -0.9% | 1,580.7 | ||||
| Investment income | 148.3 | -5.9% | 157.6 | ||||
| Operating result (EBIT) | 89.8 | -14.9% | 105.5 | ||||
| Net income after tax | 60.6 | -22.2% | 77.9 | ||||
| Earnings per share in EUR | 0.50 | -22.2% | 0.65 | ||||
| Retention | 91.3% | 90.5% | |||||
| EBIT margin1 | 5.7% | 6.7% | |||||
| 1 Operating result (EBIT) / net premium earned | |||||||
Life and health reinsurance developed in line with expectations in the first quarter of 2017. The challenging state of the German insurance market, both on the life and health side and with respect to longevity covers, remained unchanged: the guaranteed interest rate, which had last been adjusted in 2015, was reduced from 1.25% to 0.9% as at 1 January 2017, thereby further diminishing the appeal of traditional life insurance products. The new long-term care definition, which now differentiates between five grades of care, was adopted at the start of 2017. In the financial year just ended we had worked intensively on a new LTC table that we were then able to make available to our customers in time for implementation. Owing to the more demanding solvency requirements imposed by Solvency II, some primary insurers continue to need financing assistance for the supplementary reserves that have to be set aside for life products promising guaranteed returns in excess of the official reference rate (“Zinszusatzreserve”). In this respect we are engaged in a dialogue with our primary insurance clients with an eye to potential reinsurance solutions that can provide capital relief.
Results in our US mortality business again came under strain in the period under review from a higher-than-expected mortality in older Underwriting years. Financial Solutions business, on the other hand, developed exceptionally favourably as anticipated and delivered a clearly positive profit contribution.
In the United Kingdom the life insurance market continued to be dominated by pricing pressure, especially on the mortality side. Despite this, our longevity portfolio in the UK fared well. We were able to write new treaties and at the same time secured additional new business for the future with our existing customers. Demand from UK insurers and pension funds remains strong with an eye to fulfilment of exacting Solvency II capital requirements for Longevity risks. The market is, however, also extremely competitive and price-sensitive. In the international arena we are receiving numerous inquiries from life and pension insurers seeking capital relief. Particularly in Canada and Japan, the longevity market showed very vigorous growth. Furthermore, we registered a surge in interest in the Scandinavian markets, Germany, Israel, Korea and South Africa. Based on our long-standing expertise – especially with longevity risks – , we have already successfully transferred reinsurance solutions to international markets in the past and we expect global longevity business to develop favourably.
In Asia we observed an extremely dynamic development on the various markets. In Malaysia and Shanghai, for example, we noted strong demand with promising business opportunities in the morbidity sector. In Korea we were successful in writing life reinsurance business. What is more, our new branch in India commenced its operational activities.
Viewed from an overall perspective, life and health reinsurance in Australia, Africa as well as the Middle East and Scandinavian markets developed in line with our expectations. In addition, we received very positive feedback from our customers on our two underwriting tools hr | ReFlex and hr | Quirc.
Gross premium income of EUR 1.7 billion (EUR 1.8 billion) was generated in life and health reinsurance as at 31 March 2017, equivalent to a modest decline of 1.7%. The decrease would have similarly been 1.7% adjusted for exchange rate effects. The level of retained premium stood at 91.3% (90.5%). Net premium earned consequently fell slightly by 0.9% to EUR 1.6 billion (EUR 1.6 billion). At constant exchange rates, a contraction of 1.3% would have been booked.
The level of retained premium stood at 91.3% (90.5%). Net premium earned consequently fell slightly by 0.9% to EUR 1.6 billion (EUR 1.6 billion). At constant exchange rates, a contraction of 1.3% would have been booked.
Investment income from our assets under own management rose by 3.2% to EUR 80.6 million (EUR 78.1 million). Income from securities held for our account by ceding companies fell slightly short of the previous year’s level at EUR 67.7 million (EUR 79.5 million).
The operating result (EBIT) totalled EUR 89.8 million (EUR 105.5 million), a drop of 14.9% compared to the previous year’s strong performance. This decline can be attributed principally to the comparatively poorer result of the existing book of US mortality business. With an EBIT margin of 33.0% financial solutions business comfortably beat the 2% target. For longevity business, too, the 2% target was fulfilled with an EBIT margin of 2%. Mortality and morbidity business delivered an EBIT margin of 0.9%, thereby failing to reach the targeted 6% mark. Group net income contracted by 22.2% to EUR 60.6 million (EUR 77.9 million). Earnings per share amounted to EUR 0.50 (EUR 0.65).