Wiesbaden Despite a persistently difficult market environment, the cooperative R+V insurance company is satisfied with the start to 2023. In the German primary insurance business, premium income was EUR 5.8 billion in the first quarter and was therefore slightly below the previous year’s figure of EUR 5.9 billion.
In particular, the single-premium business in life insurance continued to decline. “In terms of regular contributions, however, we are still growing faster than the industry average – across all sectors,” R+V boss Norbert Rollinger told the Handelsblatt in the run-up to the balance sheet press conference. Total current premiums from property and casualty, health and life insurance business increased by 4.8 percent.
Rollinger is “cautiously optimistic” with regard to the pre-tax profit. On a Group basis, this should be between 400 and 500 million euros for the full year 2023. In the past year, the effects of the Ukraine war, the rise in interest rates and inflation left their mark on sales and earnings. R+V employs over 16,800 people in Germany.
The R+V Group’s pre-tax loss, which has fallen sharply to 258 million euros, is striking. In 2021, the pre-tax profit was 914 million euros. The reason for the big differences is that R+V, as a subsidiary of DZ Bank, has to prepare financial statements in accordance with international accounting regulations (IFRS).
Unlike other insurers, R+V recently had to apply the IFRS 9 accounting standard and value many of its investments at current market values. In 2023, the IFRS 17 accounting standard will also be introduced, which will also take greater account of market fluctuations in the obligations to policyholders. This should help stabilize the results. Most of the IFRS accountants among insurers are implementing both standards at the same time this year.
>> Read also: What the new accounting standard IFRS 17 means for insurers
Calculated according to the rules of German commercial law (HGB), the pre-tax result of the R+V Group fell by more than a quarter to 120 million euros in 2022. In the previous year it had amounted to 163 million euros.
It also contributed to the fact that the gross premiums written – i.e. all premiums paid by customers in the insurance year – by 3.1 percent to 19.5 billion euros. In the previous year they had exceeded the mark of 20 billion euros for the first time.
Single-premium business in life insurance is difficult
The decline in premiums was primarily due to the life insurance business. Rollinger says: “Our growth traditionally comes from sales via banks, which can once again offer their own products at more attractive conditions thanks to the rise in interest rates.” These policies were in high demand when interest rates were low, but now they have to compete with significantly improved overnight and fixed-term deposit offers.
In the first three months of 2023, life insurance premiums fell by a total of 18.8 percent to around two billion euros. However, business with insurance companies that customers regularly save increased by 2.4 percent.
R+V is confident that in the course of the year it will be able to convince more customers to do something for their old-age provision and take out insurance for it. “There is still a need for action on the part of politicians in order to offer people prospects for an adequate retirement,” emphasizes Rollinger.
Insurers are therefore watching closely how subsidized private old-age provision will continue. All previous attempts to reform the much-criticized Riester pension have failed. A focus group in the Federal Ministry of Finance is now to develop proposals. It consists of industry representatives, scientists and consumer advocates.
The DZ Bank subsidiary was able to keep premium income in the first quarter of 2023 at almost the same level as the previous year.
(Photo: dpa)
The insurance association GDV, of which Rollinger is president, presented the concept of the citizen’s pension there. Among other things, it provides for a simplified allowance system. Rollinger is “cautiously optimistic that the focus group will produce good results by the summer.”
Riester policies play a subordinate role in R+V’s business. According to Rollinger, in addition to subsidized private pensions, politicians should also continue to strengthen company pensions: “We see a lot of potential for our own business here.”
Due to the cooperation with the Volks- und Raiffeisenbanken, R+V is also affected by the debate about a possible commission ban in financial sales. EU Commissioner Mairead McGuinness could present such a plan in early May as part of her new retail investor strategy. The core of the considerations is to give investors access to inexpensive and independent advice.
Rollinger does not consider the ban under discussion to be necessary because “the commission model is already regulated in many respects”. He does not see it as the task of the insurer to specify the type of remuneration for the distributors. He votes to retain both commission sales and fee-based advice.
Motor vehicle division is expected to be in deficit in 2023
In property and casualty insurance, R+V was able to increase sales by 5.5 percent to EUR 3.5 billion in the first three months. At the same time, the people of Wiesbaden felt the effects of inflation. Damage and repair costs rose, particularly in motor vehicle insurance.
“We have made price adjustments in the past few months,” says Rollinger. Industry-wide, however, it will probably be difficult for many insurers to work profitably in this line of business this year.
Health insurance is a growth driver for R+V. The division achieved a significant increase of 6.6 percent in the first quarter. By 2026, the insurance company wants to increase premiums in the segment to one billion euros.
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