Life and health reinsurance

• Currency-adjusted gross premium beats strategic target
• Business development in line with our expectations
• Financial solutions business delivers another very good result

Life and health reinsurance developed in line with our expectations in the period under review. In Germany, in particular, run-off portfolios in respect of which no new business is written have come sharply into focus for primary insurance companies. As a consequence of the underlying high interest returns widely promised in past years under the insurance contracts and the associated requirements imposed by supervisory authorities, life and annuity insurance portfolios – some of which are very large in volume – are proving an increasing drag on the balance sheets of primary insurers. For some time now specialised run-off companies have become established on the market in response to this turn of events. The foundation of their business model involves consolidating a large number of insurance portfolios so as to structure their administration more efficiently than would be possible for the individual insurer.

The German market was also affected by the sustained decline in new business, with only disability insurance able to generate any growth. Demand for Solvency II-oriented covers was still overlaid by a need for financing assistance for the supplementary reserves that have to be set aside for life products offering guaranteed returns in excess of the official interest rate (“Zinszusatzreserve”). The high capital ratios required by the regulator in this connection continue to put a strain on the solvency position of primary insurers. We were successful in generating new business in this area.

Our US financial solutions business as well as our health and special risk portfolio fared well in the period under review, as we had anticipated. US mortality business performed somewhat better than recently expected. Owing to the poor experience of certain legacy portfolios relating principally to the underwriting years up until 2004, we had undertaken a re-evaluation of the expected mortality for these portfolios.

In Asia and Africa as well as in the Middle East and Scandinavian markets our life and health reinsurance business developed favourably overall.

Our clients attach increasing significance to advances in the field of automated underwriting. Demand remained strong in the quarter just ended and the feedback from already existing customers has been thoroughly positive. In Australia our subsidiary has embarked on a joint venture with a local pension fund. The goal of the cooperation is to create a holistic process that can seamlessly capture all the phases of the traditional application process, in unchangeable form and real time, from the initial underwriting to the settlement of potential claims. The use of blockchain technology is being evaluated for this purpose. This will mark an important step forward in the future of automated underwriting.

Gross premium of EUR 1.8 billion (EUR 1.7 billion) was generated in life and health reinsurance as at 31 March 2018, equivalent to an increase of 2.0%. The increase would have been 9.2% adjusted for exchange rate effects. The level of retained premium decreased marginally to 90.7% (91.3%). Net premium earned consequently remained on the level of the previous year at EUR 1.6 billion (EUR 1.6 billion). At constant exchange rates, growth of 7.4% would have been booked.

Investment income from our assets under own management fell by 10.7% to EUR 71.9 million (EUR 80.6 million). Income from securities held for our account by ceding companies fell short of the previous year’s level at EUR 50.8 million (EUR 67.7 million).

The operating result (EBIT) improved by 6.9% to EUR 95.9 million (EUR 89.8 million). Group net income as at 31 March 2018 contracted by 15.7% to EUR 51.1 million (EUR 60.6 million) owing to higher tax payments in connection with the tax reform in the United States. Earnings per share came in at EUR 0.42 (EUR 0.50).