Life and health reinsurance

Despite the generally tense state of the life (re)insurance market, business developed moderately in life and health reinsurance in the year under review. Gross premium volume increased by 1.4% to EUR 6.1 billion (EUR 6.1 billion). Adjusted for exchange rate effects, growth amounted to 5.1%; it thus came in within the forecast target corridor for 2013 of 5% to 7%.

Investment income in life and health reinsurance totalled EUR 611.5 million (EUR 685.1 million) in the year under review. Of this, EUR 269.1 million (EUR 343.4 million) was attributable to assets under own management and EUR 342.4 million (EUR 341.7 million) to securities deposited with ceding companies. The decline of 10.7% in investment income reflects the stubbornly low interest rate level and the difficult investment climate on capital markets. As a further factor, the performance of the Modified Coinsurance (ModCo) derivatives reverted to normal after the very positive result posted in the previous year.

The operating profit (EBIT) of EUR 150.5 million (EUR 279.0 million) lagged well behind the level of the previous year. It should be borne in mind here that the previous year’s result had been influenced by positive special effects that were not repeated in the year under review. In addition, we strengthened reserves for our Australian disability business in the reporting period. The fact that we nevertheless delivered a solid performance for 2013 shows that even in challenging conditions our written portfolio generates profitable results.

Our Financial Solutions and Longevity business fared exceptionally well, generating an EBIT margin of 5.2% and thus comfortably beating the 2% target. The EBIT margin for Mortality and Morbidity business fell well short of the targeted 6% mark at 1.2%. This was influenced by the unfavourable performance of Morbidity business; considered separately, Mortality business would have actually surpassed the target. The elevated risk experiences market-wide in Australian disability business and the deterioration in their run-off were the key factors in the unsatisfactory development of the EBIT margin. The Australian market has since initiated intensive efforts to positively counteract this trend.

These to some extent opposing developments resulted in reduced Group net income of EUR 164.2 million (EUR 222.5 million) for life and health reinsurance. Earnings per share amounted to EUR 1.36 (EUR 1.84).