Life and health reinsurance

• Significantly improved result
• Expansion of our global presence further reinforced with establishment of a branch in Canada
• Implementation of Chinese supervisory regime C-ROSS brings challenges and opportunities for the industry

The first quarter of 2015 passed off exceptionally favourably for our life and health reinsurance portfolio. The economic climate has changed only marginally compared to 2014. Most notably, low interest rates continue to influence European insurance and reinsurance markets. In Germany the low level of interest rates is stimulating debate around a number of issues, including the transfer of life insurance business to consolidated run-off platforms. In addition, primary insurers are taking an interest in attractive alternatives to traditional endowment insurance products. As a globally operating reinsurer we take on the challenge of offering appropriate solutions. The adoption in China of the new regulatory regime C-ROSS (China Risk Oriented Solvency System), which has considerable similarities to the European Solvency II Directive, opens up opportunities for products designed to provide solvency relief and will therefore generate rising demand among primary insurers. As an experienced and established international partner, we shall support our clients in this regard.

As we had anticipated, our US financial solutions portfolio as well as our health and special risk business fared well in the quarter just ended and contributed to a further improvement in profitability. In addition, we extended our presence on the North American continent by opening a branch in Toronto, Canada. We are very confident that the Canadian life insurance market offers fresh and promising potential.

Furthermore, our business activities in the mature insurance markets of France, the United Kingdom, Scandinavia and Japan as well as in emerging growth markets of South America, Asia and Africa fully lived up to our expectations.

Gross written premium consequently increased by 17.6% as at 31 March 2015 to reach EUR 1.8 billion (EUR 1.5 billion). Growth would have totalled 6.5% at constant exchange rates. Net premium earned climbed by a very pleasing 21.0% to EUR 1.5 billion (EUR 1.3 billion); adjusted for exchange rates, growth of 9.4% would have been generated. The retention rose to 88.1% (84.5%).

Investment income in life and health reinsurance totalled EUR 219.4 million (EUR 152.0 million) in the first quarter of 2015, a substantial increase of 44.4% driven by a special effect: a fee of EUR 38.7 million became payable owing to a customer-initiated withdrawal from a single US transaction in the area of financial solutions. Given that the arrangement constitutes a derivative financial instrument in accordance with IAS 39, the fee is also recognised within investment income and hence favourably affected the result. The performance of investments held for our account by US cedants, which is recognised in income, fell well short of the corresponding period of the previous year at EUR 19.1 thousand (EUR 5.9 million). Assuming that the experience develops as planned, these valuation gains and losses will fully offset in the period until maturity of the securities, which means that this position should close out with no effect on income over the entire duration.

Compared to the corresponding period of the previous year, the operating profit (EBIT) in life and health reinsurance as at 31 March 2015 was more than doubled to EUR 173.3 million (EUR 65.6 million), as a consequence of which the EBIT margins for all business categories surpassed their respective targets. For financial solutions business it stood at 32.4% owing to the positive special effect that was booked, while for longevity it amounted to 4.4% and for mortality and morbidity the figure was 8.1%. Group net income in life and health reinsurance came in at a very pleasing EUR 127.5 million (EUR 43.4 million). Earnings per share amounted to EUR 1.06 (EUR 0.36).