Talanx Ag · XETR:TLX
Talanx — FY2020 Earnings Presentation
45 slides from Talanx's earnings presentation, Mar 15, 2021
Slide 1: FY 2020 Results
FY 2020 Results 15 March 2021 Torsten Leue, CEO Jan Wicke, CFO
Slide 2: Resilient Group net income clearly above EUR 600m
Resilient Group net income clearly above EUR 600m Results Growth trend intact: GWP up 4.1%1, driven by P/C Re and Industrial Lines Combined ratio of 100.9% incl. Corona; underlying ratio at 97.6%2 versus 98.3% in 2019 EUR 673m Group net income, whereof 42% coming from Primary Insurance3 Dividend Rel
Slide 3: Agenda
Agenda 1 Group Highlights 2 Segments 3 Investments / Capital 4 Outlook 5 Appendix 3 FY 2020 Results, 15 March 2021
Slide 4: FY 2020 results: Delivering on the Outlook published in November 2020
1 FY 2020 results: Delivering on the Outlook published in November 2020 Outlook 2020 Achievement (as of 12 Nov 2020) Z Dividend payout 35 - 45% 56% DPS at least stable y/y DPS stable at EUR 1.50 Return on equity approx. 6% 6.6% clearly above Group net income EUR 673m EUR 600m Net return on investmen
Slide 5: Strategy 2022 is paying off
1 Strategy 2022 is paying off Enhanced capital management Focused divisionalCapital strategies Management Industrial Lines Retail International Retail Germany Reinsurance ▪ Programme 20/20/20: ▪ Top 5 in core markets: ▪ Programme KuRS: ▪ Focus Reinsurance: Significantly improved Successful integrati
Slide 6: Strategy supported by consistent sustainability initiatives
1 Strategy supported by consistent sustainability initiatives Targets and achievements Diversity as board priority. Appointment CO2 neutrality in Germany. Target to (B-) B D- (worst) – A (best) of Diversity and become 100% CO2- Inclusion Manager neutral globally by 2030 Company EUR 3.7bn out of EUR
Slide 7: FY 2020 results: Growth continues in profitable underlying business
1 FY 2020 results: Growth continues in profitable underlying business EURm FY 2019 FY 2020 Delta Comments Gross written premiums (GWP) 39,494 41,105 +4% GWP growth driven by P/C Reinsurance (+EUR 1,963m) and Net premiums earned 33,054 34,185 +3% Industrial Lines (+EUR 444m), more than offsetting EUR
Slide 8: Robust underlying profitability in 2020
1 Robust underlying profitability in 2020 EBIT (before taxes and minorities) in FY 2020, in EURm Corona impact -133 381 62 206 402 2,386 -1.158 -174 1,671 -1.459 1,228 Adjusted Total Premiums Claims Absorbed by Offsetting Net EBIT after Realised Other one- Reported “operating” Corona impact related
Slide 9: Corona details FY 2020: Aggregate net income impact of EUR 486m
1 Corona details FY 2020: Aggregate net income impact of EUR 486m Total EBIT impact (before taxes and minorities) in FY 2020, in EURm Retail Retail Industrial Germany Retail ∑ Primary P/C Life / Health Corporate Talanx Germany Lines Life International Insurance Reinsurance Reinsurance Operations Gro
Slide 10: Corona-related claims concentrated on four main risk buckets
1 Corona-related claims concentrated on four main risk buckets EBIT impact of corona-related claims, FY 2020, in EURm Primary Risk bucket Reinsurance Group Insurance Comment / Outlook Business interruption / ▪ New business comes with tighter pandemic clauses closure -142 -208 -3601 ▪ Final court rul
Slide 11: 2020: Ex Corona lowest use of large loss budget ever
1 2020: Ex Corona lowest use of large loss budget ever Net large losses Talanx Group, in % of net premiums earned (P/C business only) NatCat Corona losses (P/C business only) Man-made Impact of large loss budget on Combined Ratio 10.0% 9.8% 2.4% 6.8% 6.1% 6.4% 6.8% 6.4% 5.4% 6.1% 5.1% 2.2% 2.8% 2.8%
Slide 12: Combined ratios: Good underlying performance
1 Combined ratios: Good underlying performance Talanx Group Industrial Lines Retail Germany P/C Retail International Reinsurance P/C 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 FY 98.3% 100.9% 101.4% 104.6% 99.0% 95.4% 95.5% 95.2% 98.2% 101.6% Ex Corona1 97.6% 98.7% 94.6% 97.4% 97.4% Q4 97.8%
Slide 13: Contribution from Talanx primary business above multi-year average
1 Contribution from Talanx primary business above multi-year average Net income attributable to shareholders in % of Talanx Group (ex Corporate Operations and Consolidations1) 58% 59% 61% 58% 69% 75% Ø 2015-20: 37% or EUR 323m 21% Retail International 42% 41% 39% 42% 31% 15% 25% Retail Germany 6% In
Slide 14: Dividend maintained at 2019 record level of EUR 1.50
1 Dividend maintained at 2019 record level of EUR 1.50 Dividend per share (EUR) Dividend yield CAGR 4.5% 2012-20 1.50 1.50 4.6% p.a. 1.45 1.40 1.35 1.30 1.25 1.20 1.05 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 proposal proposal Note: 2020 dividend proposal implies a pay-out ratio of 56% of I
Slide 15: Agenda
Agenda 1 Group Highlights 2 Segments 3 Investments / Capital 4 Outlook 5 Appendix 15 FY 2020 Results, 15 March 2021
Slide 16: Industrial Lines: Positive momentum continues, ex Corona we delivered as promised
2 Industrial Lines: Positive momentum continues, ex Corona we delivered as promised EURm, IFRS 2019 2020 Gross written premiums (GWP) Operating result (EBIT) Net income (after minorities) +7% -70% -54% 6.214 6.658 103 +8% 159 +102% -23% 47 36 1.330 1.438 48 26 18 20 FY Q4 FY Q4 FY Q4 Retention ratio
Slide 17: Industrial Lines: Continued rate increases and tangible improvement in Fire book
2 Industrial Lines: Continued rate increases and tangible improvement in Fire book Rate increases1, 1 Jan 2020 to 1 Jan 2021 (1 Jan 2019 to 1 Jan 2020) Fire: Significant improvement of combined ratio CR CR excl. COVID-19 - 42 pp. Fire Marine 141.2% +20% (+18%) +11% (+15%) 105.5% 108.0% 99.3% 2018 20
Slide 18: Specialty: Well on track to achieve EUR 2.1bn business volume target
2 Specialty: Well on track to achieve EUR 2.1bn business volume target much earlier Gross written premiums Portfolio structure Comments In EURbn GWP from managed portfolio, in EURbn ▪ Strong GWP growth makes it likely that 2022 2.1 2.0 Fronted target of EUR 2.1bn will be achieved much business 51% 4
Slide 19: Retail Germany in sum: Excluding Corona, 2021 EBIT target nearly achieved
2 Retail Germany in sum: Excluding Corona, 2021 EBIT target nearly achieved in 2020 EURm, IFRS 2019 2020 Gross written premiums (GWP) Operating result (EBIT) Net income (after minorities) -6% -12% -11% 6.201 5.853 230 203 133 -22% 119 -5% -27% 1.468 1.395 45 35 23 17 EUR -34m total FY Q4 FY Q4 FY Q4
Slide 20: Retail Germany P/C: Better operating results despite Corona
2 Retail Germany P/C: Better operating results despite Corona EURm, IFRS 2019 2020 Gross written premiums (GWP) Net investment income Operating result (EBIT) -5% -26% +36% 1.588 1.502 119 134 -7% 88 -28% 98 +84% 251 233 33 24 20 37 EUR -13m total FY Q4 FY Q4 FY Q4 technical impact Retention ratio in
Slide 21: Retail Germany Life: De-risking measures to continue
2 Retail Germany Life: De-risking measures to continue EURm, IFRS 2019 2020 Gross written premiums (GWP) Net investment income Operating result (EBIT) -6% +7% -47% 4.612 4.351 1.786 1.903 131 -8% -4% 70 n.a. 1.217 1.162 544 499 25 FY Q4 FY Q4 FY Q4 -2 Retention ratio in % Return on investment in % E
Slide 22: Retail Germany Life: Non-capital efficient new business now less than 25%
2 Retail Germany Life: Non-capital efficient new business now less than 25% (target) Structure of new business (total contracted premiums)1 Yields and investment spreads on own investments, 2020, in % German GAAP Own Average Investment Average Reinvestment investments quarantee rate spread running y
Slide 23: Retail International: Solid results despite FX and lower interest rates
2 Retail International: Solid results despite FX and lower interest rates EURm, IFRS 2019 2020 Gross written premiums (GWP) Operating result (EBIT) Net income (after minorities) -10% -6% -3% 6.111 5.527 283 -6% 266 -18% 164 160 +3% 1.573 1.487 56 46 32 33 EUR 72m total technical impact FY Q4 FY Q4 F
Slide 24: Retail International: Trends and positioning in core markets
2 Retail International: Trends and positioning in core markets Market Non-life entities in core growth markets of Retail International Economy Currency P/C market GWP 2020 GWP 2020 in EURm EBIT 2020 AB GDP 2020E Spot rate 2020 vs. 2019 (change vs. 2019 in EURm P/C market rank Motor market Country vs
Slide 25: Reinsurance: Favorable result in a year dominated by Corona
2 Reinsurance: Favorable result in a year dominated by Corona EURm, IFRS 2019 2020 Gross written premiums (GWP) Operating result (EBIT) Net income (after minorities) +10% -32% 24.765 1.818 -29% 22.598 1.230 -31% -23% +5% 619 442 5.204 5.471 459 315 139 107 EUR -845m total FY Q4 FY Q4 technical impac
Slide 26: Agenda
Agenda 1 Group Highlights 2 Segments 3 Investments / Capital 4 Outlook 5 Appendix 26 FY 2020 Results, 15 March 2021
Slide 27: Net investment income
3 Net investment income EURm, IFRS FY 2019 FY 2020 Change Q4 2019 Q4 2020 Change Comments Ordinary investment income 3,503 3,336 -5% 885 875 -1% Decrease in ordinary investment income in FY thereof current interest income 2,713 2,535 -7% 664 602 -9% 2020, across the board, due to deteriorated low in
Slide 28: Book value per share up 2% in 2020
3 Book value per share up 2% in 2020 Shareholders‘ equity in EURm 673 Comments ▪ Shareholders’ equity at EUR 10,392m, up 2% versus the level of Dec 2019 -379 -48 ▪ In other comprehensive income, increase in unrealised gains more than offset by decrease in currency translation 3.245,00 10,392 Book va
Slide 29: Capital: 2020 year-end CAR likely to be higher than 30 September level
3 Capital: 2020 year-end CAR likely to be higher than 30 September level Development of Solvency II capitalisation (Regulatory View, SII CAR, excl. transitional) SFCR 2020 to be published with Q1 2021 IFRS results on 6 May 2021 206% 209% 211% 196% 191% 187% Target range 150 – 200% Trend 31-Dec-17 31
Slide 30: Agenda
Agenda 1 Group Highlights 2 Segments 3 Investments / Capital 4 Outlook 5 Appendix 30 FY 2020 Results, 15 March 2021
Slide 31: Outlook 2021 for Talanx Group
4 Outlook 2021 for Talanx Group Outlook 2021 Z Dividend payout 35 – 45% DPS at least stable y/y between 7.5% Return on equity and 8.5% between EUR 800m 2021E corona-related Group net income net income impact of and EUR 900m EUR ~150m assumed Net return on investment ~2.5% Currency-adjusted GWP growt
Slide 32: Strategy 2022: Mid-term target matrix
4 Strategy 2022: Mid-term target matrix Return on equity EPS growth Dividend payout ratio 35% - 45% Targets of IFRS earnings ≥ 800bp ≥ 5% on average p.a.2 Sustainable High level of above risk-free rate1 Profitable DPS at least & attractive profitability growth stable y/y payout Constraints Strong ca
Slide 33: Agenda
Agenda 1 Group Highlights 2 Segments 3 Investments / Capital 4 Outlook 5 Appendix 33 FY 2020 Results, 15 March 2021
Slide 34: Q4 2020 results: Net income lower due to EUR 131m Corona impact
5 Q4 2020 results: Net income lower due to EUR 131m Corona impact EURm Q4 2019 Q4 2020 Delta Comments Gross written premiums (GWP) 9,169 9,198 +0% Net premiums earned 8,868 +0% Increases at P/C Reinsurance (+EUR 269m) and Industrial Lines 8,884 (+EUR 108m) offset by EUR 160m decline in Retail German
Slide 35: Significant underlying profits in Q4
5 Significant underlying profits in Q4 EBIT (before taxes and minorities) in Q4 2020, in EURm Corona impact -29 140 0 556 68 50 -316 380 -5 240 -401 Adjusted Total Premiums Claims Absorbed by Offsetting Net EBIT after Realised Other one- Reported “operating” Corona impact related otherwise effects i
Slide 36: Corona details Q4 2020: EUR 316m EBIT impact after EUR 184m in Q3
5 Corona details Q4 2020: EUR 316m EBIT impact after EUR 184m in Q3 Total EBIT impact (before taxes and minorities) in Q4 2020, in EURm Retail Retail Industrial Germany Retail ∑ Primary P/C Life / Health Corporate Talanx Germany Lines Life International Insurance Reinsurance Reinsurance Operations G
Slide 37: Large losses overview: Budget significantly exceeded due to Corona
5 Large losses overview: Budget significantly exceeded due to Corona Net losses Talanx Group Retail ∑ Primary in EURm, FY 2020 (FY 2019) Industrial Lines Retail Germany International Insurance + Reinsurance = Talanx Group Sum NatCat 147.8 (107.3) 9.0 (25.6) 17.0 (3.7) 173.9 (136.6) 484.2 (636.5) 658
Slide 38: Large losses Nat Cat: More events than previously, but on average less costly
5 Large losses Nat Cat: More events than previously, but on average less costly Net losses Talanx Group Retail ∑ Primary in EURm, FY 2020 (FY 2019) Industrial Lines Retail Germany International Insurance + Reinsurance = Talanx Group Hurricane Laura, USA (Aug.) 57.3 57.3 87.5 144.9 Hailstorm Derecho,
Slide 39: Talanx Primary Insurance and Reinsurance: contributions to net income
5 Talanx Primary Insurance and Reinsurance: contributions to net income Net income attributable to Talanx AG shareholders, in EURm Industrial Retail Retail ∑ Primary Corporate Consoli- Talanx Reinsurance Lines Germany International Insurance Operations dations Group 2014 121 -84 122 159 24% 508 76%
Slide 40: Additional Information – Retail International Europe: Key financials
5 Additional Information – Retail International Europe: Key financials EURm, IFRS 2019 2020 Gross written premiums Net investment income Operating result (EBIT) -9% -3% -6% 317 281 273 290 4.359 4.100 -0% -10% -43% 1.109 1.107 80 73 72 41 FY Q4 FY Q4 FY Q4 GWP split by carriers (P/C) GWP split by ca
Slide 41: Additional Information – Retail International LatAm: Key financials
5 Additional Information – Retail International LatAm: Key financials EURm, IFRS 2019 2020 Gross written premiums Net investment income Operating result (EBIT) -19% -39% 71 -12% 1.752 1.427 50 44 -18% 43 -37% n.m. 464 380 16 10 10 1 FY Q4 FY Q4 FY Q4 GWP split by carriers (P/C) GWP split by carriers
Slide 42: Additional Information – Breakdown of investment portfolio
5 Additional Information – Breakdown of investment portfolio Investment portfolio as of 31 Dec 2020 Fixed-income portfolio split Comments Total: EUR 128.5bn Total: EUR 114.7bn ▪ Assets under own management increased by 4.8% to EUR 128.5bn compared to 31 Dec Currency Asset 2019 (EUR 122.6bn) By type
Slide 43: Additional Information – Details on selected fixed-income country exposure
5 Additional Information – Details on selected fixed-income country exposure Investments into issuers from countries with a rating below A- (in EURm), as of 31 December 2020 Semi- Country Rating Sovereign Financial Corporate Covered Other Total Sovereign Italy BBB 3,406 - 790 563 363 - 5,122 Brazil
Slide 44: Contact us
5 Contact us Join us Carsten Werle, CFA, Head of IR Bernt Gade, Equity & Debt IR 16 March 2021 Phone: +49 511 3747-2231 Phone: +49 511 3747-2368 Morgan Stanley European Financials E-mail: carsten.werle@talanx.com E-mail: bernt.gade@talanx.com Conference 22 March 2021 CEO roadshow (virtual) 6 May 202
Slide 45: Disclaimer
Disclaimer This presentation contains forward-looking statements which are based on certain assumptions, expectations and opinions of the management of Talanx AG (the "Company") or cited from third-party sources. These statements are, therefore, subject to certain known or unknown risks and uncertai