Life and health reinsurance

• Solid profit contribution
• Rising demand for health insurance products and protection against the longevity risk

Life and health reinsurance enjoyed a favourable business development in the first quarter of 2016. The situation in the European insurance market has not changed significantly compared to the previous year. Particularly in Germany, the low interest rate environment continues to dominate developments at life and health insurers. The establishment of additional interest Rate reserves is especially noteworthy in this regard. This requirement influences the need for reinsurance and should create added business potential.

Developments in northern European markets were pleasingly positive in the first quarter. Particularly in the disability segment, we were able to enlarge existing accounts and generate new business. In eastern European markets we noted increased interest in our automated underwriting system. Health insurance products also experienced stronger demand. Most strikingly, a growing need for protection in the event of illness can be observed among the consistently expanding middle class of some key emerging markets. As a further factor, the implementation of Solvency II in European markets at the start of 2016 prompted interest in reinsurance solutions with an eye to the more rigorous capital requirements.

In longevity business we consider ourselves to be well positioned due to our long-standing customer relationships – especially in the United Kingdom, where the market remains fiercely competitive. On a global level it is increasingly noticeable that the need for protection against the longevity risk is becoming more keenly felt. Drawing on local expertise we have already successfully transferred reinsurance solutions to other markets in the past and hence we believe that we are well placed in this segment as well.

In Asia our efforts are focused on innovative (re)insurance products. Our primary goal is to offer as broad a target group as possible insurance protection that is appropriate to their needs, which includes among other things term life products or riders for individuals with pre-existing conditions. Additionally, initial impetus from the new supervisory regime C-ROSS, which was adopted in China at the beginning of the year, has already made itself felt in the market.

Even though the circumstances and requirements vary – sometimes widely – from market to market, our expectations were fulfilled overall both in the mature insurance markets and in emerging growth markets.

Gross written premium in life and health reinsurance retreated slightly by 1.2% as at 31 March 2016 to EUR 1.8 billion (EUR 1.8 billion). At constant exchange rates modest growth of 0.3% would have been recorded. The retention increased to 90.5% (88.1%). Against this backdrop Net premium earned climbed by 2.0% to EUR 1.6 billion (EUR 1.5 billion). Growth would have amounted to 3.6% at unchanged exchange rates.

Investment income from assets under own management contracted by 37.1% in the reporting period just ended to EUR 78.1 million (EUR 124.2 million). The elimination of a special affect amounting to around EUR 39 million in the corresponding period of the previous year was a key factor here. Income from securities deposited with ceding companies amounted to EUR 79.5 million (EUR 95.1 million).

Despite the fact that the operating result (EBIT) as at 31 March 2016 declined to EUR 105.5 million (EUR 173.3 million) in the absence of the corresponding period’s positive special effect, we are satisfied with the development of business in the first quarter. In the financial solutions reporting category the EBIT margin of 17.9% comfortably surpassed the 2% target. The EBIT margin of 3.2% in longevity business met the 2% target.

In the reporting categories of mortality and morbidity an EBIT margin of 5.3% was generated, hence falling slightly short of the targeted 6%. Group net income totalled EUR 77.9 million (EUR 127.5 million). Earnings per share amounted to EUR 0.65 (EUR 1.06).