Talanx profit hit hard by COVID-19 pandemic in 'difficult' H1 and Q2 2020

German re/insurer Talanx Group, the parent company of Hannover Re and HDI, said the impact of COVID-19 claims and lockdown in Europe surpassed its loss budget in the "difficult" first half of 2020. However, the company saw positive developments in industrial lines, reinsurance and retail Germany division.

The group's net income was hard hit by coronavirus, particularly in the second quarter of 2020. In Q2, Talanx's overall profit plummeted more than half to €103 million, compared with €242 million the same period a year ago.

Gross written premiums rose by 4.3 percent to €9.5 billion, while the combined ratio jumped to 102.7 percent in the second quarter.

For the first half of the year, the group generated a net profit of €325 million despite a substantial impact from the COVID-19, although it was 32 percent lower than the profit of €477 million it made in H1 2019.

Talanx said excluding the effects of the coronavirus, the group net profit would have been up substantially year-on-year at €603 million.

Gross written premiums rose by 5.5 percent in the first half of 2020 to €22 billion, compared to €20.9 billion in H1 2019. The combined ratio was 101.3 percent in H1 2020, 3.8 percentage points up from 97.5 percent in the same period of 2019.

In total, losses from the pandemic in the first half of the year amounted to €824 million, partly absorbed by the budgeted loss reserve. The group noted other negative effects related to investments (€174 million) and provisions for future premium decreases (€104 million). Conversely, the coronavirus reduced losses at certain lines by €93 million.

Talanx said that HDI Global Specialty SE was the main growth driver in industrial lines, where the gross written premiums rose by 10.6 percent to €3.9 billion.

The group stated that due to the ongoing coronavirus pandemic and substantial uncertainty about future economic and capital market developments it is not possible to give a reliable earnings outlook for 2020. Originally the group was aiming for net profit in a range of “more than €900 million” up to €950 million.

“The coronavirus pandemic made the first half of 2020 difficult for us,” said Torsten Leue, chairman of Talanx AG’s board of management. “The impact in the second quarter in particular – the height of the lockdown in Europe – was enormous and clearly exceeded our loss budget. However, adjusted for the losses from the pandemic, our underwriting would have been stable.

"We saw considerable premium growth in primary insurance and our profitability enhancement programmes are having the desired effect. Nevertheless, we must also be prepared for a challenging second half of the year.

"The coronavirus pandemic is not over yet and the consequences for economic growth are still unknown. What is clear is that the low-interest rate environment has been further exacerbated and that the hurricane season is only just starting."

Leue added: "In other words, the situation remains extremely opaque and means we are still unable to provide an outlook for financial year 2020.”