|Key figures for life and health reinsurance|
|in EUR million||2017||2016|
|Gross written premium||1,731.9||1,838.2||-3.0 %||3,570.1||-2.4 %||1,895.0||3,656.4|
|Net premium earned||1,566.4||1,643.6||-5.9 %||3,209.9||-3.6 %||1,747.5||3,328.1|
|Investment income||148.3||153.4||-6.8 %||301.7||-6.3 %||164.6||322.2|
|Operating result (EBIT)||89.8||75.4||+2.5 %||165.2||-7.8 %||73.6||179.1|
|Net income after tax||60.6||53.6||+1.6 %||114.2||-12.6 %||52.7||130.6|
|Earnings per share in EUR||0.50||0.44||+1.6 %||0.95||-12.6 %||0.44||1.08|
|Retention||91.3 %||91.8 %||91.6 %||93.0 %||91.8 %|
|EBIT margin1||5.7 %||4.6 %||5.1 %||4.2 %||5.4 %|
|1 Operating result (EBIT) / net premium earned|
All in all, we are not entirely satisfied with the development of our life and health reinsurance business in the first six months of 2017. Following on from an adequate first quarter, the second quarter fell short of our expectations overall.
With effect from May of this year, life insurers in the German market have for the first time been required to publish a so-called SFCR (Solvency and Financial Condition Report) in accordance with Solvency II. According to these reports, as at the end of 2016 all life insurers – that fall under the supervision and monitoring of the Federal Financial Supervisory Authority (BaFin) – fulfilled the solvency requirements. Compared to the previous year, the capital adequacy ratio of German life insurers improved industry-wide by an average of 57 percentage points (from 283% to 340%). This general improvement notwithstanding, it was nevertheless also evident that the capital adequacy ratios of certain companies were not sufficient. Consequently, we observed greater interest in reinsurance solutions designed to optimise the solvency position. We also noted a similar rise in interest in solutions for funding the additional statutory reserve requirement for the interest rate risk (Zinszusatzreserve). The revised definition of the benefit trigger in long-term care insurance that was rolled out as part of the German social security scheme at the start of the year has hitherto failed to bring about the anticipated revival of new business in LTC insurance. Various developments can currently be observed in the market: providers are completely discontinuing the writing of new business in some cases or they are taking on the role of intermediary for other companies. The extent to which the business can be grown still remains to be seen. We are nevertheless optimistic that long-term care insurance will develop favourably and we see business potential for the second half of the year.
Looking towards Europe, demand for solvency-oriented reinsurance solutions in other European countries – besides Germany – was similarly strong, including for example in the Netherlands. All in all, business in Europe fared very much as we had expected. Developments in the ReTakaful sector, where we were able to successfully implement our automated underwriting system hr|ReFlex at a number of customers, were especially gratifying.
In the area of longevity risks, especially in the United Kingdom, the enhanced annuities market has largely become a monopoly. Numerous providers have pulled out of the market. This can be attributed firstly to a change in legislation partially eliminating the requirement to convert pension savings into an annual annuity and, secondly, to modified capital requirements as a consequence of Solvency II. From a global perspective the longevity sector continues to develop positively and demand is consistently rising. Increasing attention is also being focused on indexed longevity reinsurance solutions, prompting the emergence here of a market.
The dynamic pace of growth in Asia in the first quarter was sustained into the second quarter. Demand for (re)insurance solutions on the health insurance side is considerable among Asian populations, some of which do not yet have adequate coverage. We are supporting our customers in the development and implementation of online sales channels with a view to better reaching policyholders and improving processing efficiency. In addition, especially in Japan, we are seeing increasing demand for reinsurance arrangements in the area of financial solutions. In China interest in so-called lifestyle-oriented life insurance concepts is exceptionally strong. We engage in a close dialogue here with our customers so as to deliver individual solutions.
The result of our US business in the reporting period was impacted by higher-than-expected claims experiences in parts of our legacy mortality portfolio from older underwriting years. This development was nevertheless largely offset, particularly by the positive results recorded in financial solutions business.
The gross premium volume in life and health reinsurance amounted to EUR 3.6 billion (EUR 3.7 billion) as at 30 June 2017, a modest decline of 2.4%. At unchanged exchange rates the decrease would have been 1.5%. The retention was stable at 91.6% (91.8%). Net premium earned retreated by 3.6% to EUR 3.2 billion (EUR 3.3 billion). At constant exchange rates it would have fallen by 3.1%.
Despite the low interest rate environment we are highly satisfied with our investment income from assets under own management: it grew by 14.0% to EUR 180.2 million (EUR 158.1 million). Income from securities deposited with ceding companies fell sharply, on the other hand, to EUR 121.6 million (EUR 164.1 million). Against this backdrop the operating result (EBIT) as at 30 June 2017 contracted by 7.8% to EUR 165.2 million (EUR 179.1 million). The EBIT margin generated for financial solutions business stood at 29.9%, thereby comfortably exceeding the 2% target. Longevity business also beat the 2% target return with an EBIT margin of 2.3%. In mortality and morbidity business, however, the EBIT margin of 1.0% fell short of the targeted 6% mark. Group net income decreased by 12.6% to EUR 114.2 million (EUR 130.6 million). Earnings per share amounted to EUR 0.95 (EUR 1.08).