DEVK makes a minus in motor insurance

15. June 2020, 11:05

DEVK closed the 2019 financial year successfully: According to statements by CEO Gottfried Rüßmann, it was the best in the almost 135-year history of the Cologne Insurance Association. However, the balance sheet is clouded by the motor insurance business: There the combined ratio rose from 98.3 to 103.5 percent.

DEVK’s new business developed extremely well in 2019 with a new business contribution of EUR 867 million (plus 7.3 percent). In terms of number of units, it was 1.9 million transactions, well above the previous year’s level (plus 6.8 percent). The number of insured risks and contracts rose to 15.1 million. As a result, the portfolio grew by 2.7 percent and DEVK has again gained market share. The DEVK Group’s gross premiums increased to over 3.6 billion euros (plus five percent).

The domestic primary insurance business in property and casualty insurance grew by 4.8 percent to a premium of 2.0 billion euros. Revenues in DEVK legal protection insurance developed more strongly than in the market: it increased its premiums by 6.1 percent (industry: 2.5 percent) and the number of its contracts by 4.4 percent (industry: 1.5 percent).

The new business of DEVK life insurers was significantly weaker than the industry: the premium income of life insurance (excluding pension funds) fell by 2.3 percent (industry: plus 1.3 percent) to 774 million euros.

In contrast, DEVK health insurance recorded a strong premium increase. It grew with gross premiums written of 99.9 million euros and improved its income from the previous year by 5.8 percent (industry: 2.9 percent).

DEVK reinsurance was again very successful. The number of customers increased from 357 to 409 and achieved an annual profit after taxes of 60 million euros (previous year: 39 million euros). The total income of DEVK reinsurance including Echo Re from non-DEVK business was 436 million euros – an increase of 24.4 percent compared to the previous year.

The volume of capital investments rose by 3.8 percent to 19.3 billion euros in the past financial year. This resulted in a net investment result of 722 million euros – that is 21.6 percent more than in 2018.

In the Group’s property and casualty insurance business, including reinsurance and international business, gross premium income was 7.1 percent above the previous year’s figure at EUR 2.6 billion. The gross premium income for motor insurance grew by 3.1 percent (industry: 2.4 percent) to around 1.1 billion euros.

The combined ratio in the division deteriorated from 93.3 to 94.2 percent. In motor vehicle insurance, the insurer, which is one of the top ten in Germany, made a clear minus: the combined ratio rose from 98.3 percent in the previous year to 103.5 percent (sector: 96 percent).

Due to the development of claims, the underwriting result before changes in the equalization reserve fell to 98 million euros (previous year: 132 million euros). After an addition to the equalization reserve in the amount of twelve million euros (previous year: 25 million euros), the underwriting result for property and casualty insurance came to 85 million euros (previous year: 107 million euros).

Together with the underwriting results for life and health insurance and pension fund business, this results in an amount of 95 million euros (previous year: 144 million euros). In 2018, however, there was a special income of around 60 million euros, which resulted from the termination of intra-group reinsurance contracts.

The investment result of the non-technical account in 2019 was significantly above the previous year’s level at 227 million euros (previous year 162 million euros), particularly due to high write-ups and lower depreciation on investments.

The other result deteriorated slightly from minus 114 million euros to minus 116 million euros due to higher pension costs. In contrast, the result from normal business activity was 207 million euros (previous year: 191 million euros). After taxes, the annual surplus rose to over 113 million euros (previous year: 82 million euros).

LV receives boost from fund policies

The basic ability insurance established in 2018 was particularly popular in life insurance. The new unit-linked pension insurance also had a positive impact on the business results.

The DEVK fund pension vario was introduced on July 1, 2019. Although it was only offered in the second half of the year, with around 4,400 contracts by the end of the year, it had so many contracts that its share in new business of unit-linked annuity insurance was already more than 38 percent over the whole year.

Overall, according to the company, new business for DEVK life insurers increased in 2019. However, it was unable to compensate for the departures, so that the gross premiums written by DEVK Lebensversicherungen in the narrower sense fell by 2.3 percent in 2019 compared to the previous year. The contributions of life insurance in the broader sense (including DEVK pension funds) fell by 0.6 percent (sector: plus 11.5 percent) to 928.7 million euros.

After income and expenditure, there was a total surplus of 154 million euros in life insurance for 2019 (previous year: 87 million euros). Of this, 90 percent or 139 million euros were allocated to the provision for premium refunds (RfB), the profit pot for the insured.

Contrary to the industry trend, DEVK life insurers increased their profit participation for endowment and pension insurance in 2019 – by up to 0.3 percent. In 2020 DEVK will keep this level stable for the more than 1.2 million contracts.

The current interest rate remains unchanged at up to 2.7 percent for contracts from DEVK Lebensversicherungsverein and 2.5 percent for policies from DEVK Allgemeine Leben AG. In addition, there are other surpluses that can increase the total return to over three percent. The cancellation rate of 4.41 percent is at the previous year’s level.

Outlook 2020

The current framework conditions – the low interest rate level and the economic effects – will continue to occupy the Cologne insurer in 2020. For 2020 the group expects a premium increase of almost five percent. According to estimates, the main growth drivers are likely to be active reinsurance and the domestic German property and casualty insurance business. DEVK has also recorded rising premium income in life insurance so far this year. (dr)

Photo: DEVK

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