HDI to expand abroad despite 2017 nat cat hit

HDI Global, the industrial insurer of the Talanx group, wants to expand outside its home base Germany despite a significant drop in profits in 2017 due to natural catastrophes.

The company reported a 62.2 percent drop in net income due to an “exceptionally high burden arising from natural catastrophes.”

The group’s net income fell to €91 million in 2017 from €241 million in 2016.

"By the middle of August, our figures were still looking very good," said Christian Hinsch, chairman of the HDI Global management board. "However, our customers and we were then hit by the full force of the three hurricanes "Harvey", "Irma" and "Maria". Then there were also losses following the earthquakes in Mexico and other natural events. We also had to absorb significantly higher expenses than budgeted in relation to man-made losses."

The underwriting result came down to a negative €207 million after a positive €73 million in 2016. The combined ratio deteriorated to 108.5 percent from 96.8 percent over the period.

The combined ratio in marine improved to 95.2 percent in 2017 from 124.5 percent in the previous year.

“In marine, we succeeded in reducing our combined ratio significantly with the help of our measures for portfolio optimisation," Hinsch said.

"At the same time, we were able to avoid premium erosion in spite of these measures. This meant we kept premium volume stable in the business. This is a significant success," Hinsch noted.

By contrast, the company is not satisfied with the premium risk ratio in fire insurance Although the strategy of the "Balanced Portfolio" brought some improvements in the last few years, particularly in the branch offices in Germany, significant additional steps are necessary - both inside and outside Germany, the company stated.

"Enhanced efforts are therefore required in order to bring fire insurance back to profitability," Hinsch said. "We are striving to achieve an improvement in the premium risk ratio by an average of 15 percent. We are also reviewing numerous customer relationships in order to bring the risks that we take into a reasonable relationship to premium. In future, where this is not possible, we will no longer be able to make our capacity available."

Overall, premium income rose by 4.4 percent to approx. €4.5 billion in 2017. After adjustment for exchange-rate effects, growth amounted to 5.2 percent. The main engine of premium growth for HDI Global was abroad, particularly in Australia, Brazil, the UK, France and Japan.

HDI Global also increased its presence in the USA in 2017 where the industrial insurer founded the excess & surplus lines subsidiary HDI Specialty Insurance Company. The unit serves customers in the segment of complex special risks. Measured by the gross premium volume, the US operation has become the biggest foreign subsidiary company of HDI Global. Over the past year, it generated gross written premiums amounting to more than $620 million.

While around 62 percent of HDI Global’s premium income was generated outside Germany in 2017, the firm wants to increase this foreign share of the premium volume to 65 percent by the end of the financial year 2019.

HDI Global is also planning to continue expansion in the small and medium-sized enterprise (SME) and mid-market business in the current business year, both in Germany and abroad. The company has introduced new insurance products for example in sports insurance and travel insurance. Moreover, new sales platforms were created to allow HDI customers to take out new policies online.

"We also opened up further new sales offices abroad in important industrial regions, most recently in Berne and Lille. Additional locations will continue to be added in the coming years," Hinsch said.

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