Marking the end of the road in Germany,
Dutch composite insurer Delta Lloyd is to cease writing new life
business in what it no longer views as a core market.
Though Delta Lloyd’s decision fits its
strategic focus on the Netherlands and Belgium, the rationale for
its decision presents a sobering view of Germany’s life market.
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The insurer stressed that, despite its large
size and “great potential”, Germany’s life market’s structure is a
“major impediment” to further progress of its wholly-owned unit
Delta Lloyd Germany (DLG).
Delta Lloyd explained that under the current
structure risk of low investment returns is placed virtually
entirely with the insurer, while the benefit of higher investment
returns accrues almost entirely to policyholders.
“The general expectation was, and is, that the
structure will eventually be changed,” noted Delta Lloyd. “However,
in view of the results, the outlook and the modest market position,
Delta Lloyd Group has decided to take action.”
In 2009, DLG reported €579m ($783m) in life
gross written premium (GWP), almost 16% of Delta Lloyd’s total Life
GWP of €3.642bn. At the end of 2009 DLG’s market-consistent
embedded value (MCEV) was €135m, 3% of its total life insurance
MCEV of €4.2bn.
Highlighting Germany as a not particularly
attractive market, Delta Lloyd revealed that its new business
margin in 2009 excluding Germany was 1.6% while including Germany
it was only 0.8%.
After terminating new business activity in
Germany future business will be limited to indexations on DLG’s
remaining portfolio. Delta Lloyd expects DLG’s GWP to decrease by
two thirds to some €200m within the next three years and the
present value of new business premiums to decline by over 90%, from
€385m in 2009 to an expected €28m over the same period.
Delta Lloyd’s major shareholder is UK insurer
Aviva which holds a stake of about 54%. Prior to Delta Lloyd’s
initial public offer in November 2009 Aviva’s stake was 92%.
