Life and health reinsurance

• Very pleasing gross premium growth
• Profitability improves on previous year
• Financial solutions business comfortably beats target EBIT margin

Current developments on international capital and financial markets did not have any significant implications for our life and health reinsurance portfolio in the reporting period just ended. We were able to act on promising business opportunities and this has been reflected in a good result.

In the United Kingdom the market for enhanced annuities has shrunk considerably following the pension reform announced last year. Contrary to this trend, however, we were able to maintain a stable business volume in the UK enhanced annuities market compared to the previous year’s period. What is more, we substantially expanded our longevity portfolio by writing blocks of annuity business. In addition, our new automated underwriting system for the sale of life insurance products through bank distribution channels was successfully rolled out on 1 June 2015 in cooperation with a primary insurance partner. Not only that, at the beginning of April we were the first reinsurer – working together with our partners – to successfully launch a comprehensive lifestyle insurance concept on the US market that offers life insurance coverage while at the same time actively promoting a healthy lifestyle.

In the second quarter we achieved another exceptionally strong performance in our US financial solutions portfolio. The health and special risk business written in this market also delivered a positive profit contribution as anticipated. Our US mortality portfolio, on the other hand, did not entirely live up to our expectations. Both in terms of the mortality risk and the lapse risk, results were in some cases well below what had been anticipated. In France results fell slightly short of our expectations. To some extent, however, this was offset by improved risk experiences in Eastern and Central Europe as well as Germany. Asian markets also played a positive part in the overall result, especially in the area of financial solutions.

Gross written premium as at 30 June 2015 amounted to EUR 3.6 billion (EUR 3.0 billion), equivalent to a very pleasing increase of 21.0%. Growth would have totalled 8.9% at constant exchange 80. Net premium earned climbed by 26.6% to EUR 3.1 billion (EUR 2.5 billion); adjusted for exchange rates, growth of 13.8% would have been generated. The retention rose to 86.5% (83.1%).

Investment income including interest on deposits totalled EUR 366.7 million (EUR 299.5 million) in the reporting period just ended. The good result was helped in part by a special effect from the first quarter. The performance of investments held for our account by US cedants declined in the first half of 2015 relative to the corresponding period of the previous year to stand at -EUR 6.4 million (EUR 4.6 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.

The improved profitability that we had been striving for in life and health reinsurance was achieved as at 30 June 2015: the operating profit (EBIT) fared better than expected. It climbed by 29.2% relative to the previous year’s period to reach EUR 200.0 million (EUR 154.8 million) and thus delivered a solid contribution to the overall result. In terms of the EBIT margins for the various business categories, financial solutions business generated a thoroughly gratifying return of 24.9% that clearly surpassed the 2% target. Longevity business similarly met its set target of 2%, coming in at 3.5%. Mortality and morbidity business, on the other hand, fell short of their target figure (6%) at 2.7% owing to the aforementioned effects. Group net income closed at a pleasing EUR 145.6 million (EUR 115.4 million), equivalent to an increase of 26.2%. Earnings per share amounted to EUR 1.21 (EUR 0.96).