GuruFocus - Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Talanx (ETR:TLXGn) AG (WBO:TLX) reported a strong revenue growth of 12% for the first nine months of 2024, with a significant contribution from the acquisition of Liberty's Latin American business.
- The company's bottom line grew by 24%, demonstrating strong profitability and a return on equity of nearly 20%.
- Primary insurance was a key driver of growth, with a 20% increase in revenues, and reinsurance contributed an additional 6% to overall growth.
- The company increased its group net income guidance for 2024 from above 1.7 billion to above 1.9 billion, reflecting confidence in its financial performance.
- Talanx AG (WBO:TLX) has a strong solvency ratio of 220%, indicating a robust financial position and ability to manage future uncertainties.
- The company faced elevated large loss developments in 2024, with significant losses from flooding events totaling over 750 million EUR.
- Retail Germany is experiencing headwinds, particularly in the P&C segment, with claims ratios needing improvement.
- The German insurance market is currently soft, requiring significant price adjustments to return to profitability.
- The company anticipates further large losses in the fourth quarter, including impacts from Hurricane Milton and floods in Spain.
- Despite strong overall performance, the retail Germany segment's contribution to group net income is only 7%, indicating underperformance relative to other segments.
A: The assumptions for 2025 include a group combined ratio of around 90-91%, reflecting price increases in line with claims inflation and higher frequency and severity of claims due to climate change. For retail Germany, the market is currently soft, requiring significant price adjustments to return to profitability. We expect double-digit price increases to help achieve this, with profitability potentially returning by 2026. - CFO Jan Wicker
Q: How much prudency is built into your results, and what is the budget for large losses in 2025? Also, how is the Liberty acquisition performing compared to initial expectations?
A: We focus on maintaining a strong balance sheet to manage volatility and earnings growth. The large loss budget for 2025 is EUR 2.72 billion, an increase from 2024. The Liberty acquisition is ahead of schedule, with net income contributions exceeding initial expectations. More details will be shared on the Capital Markets Day. - CFO Jan Wicker
Q: Regarding retail international, did you book any runoffs, and what are the integration costs for Liberty? Also, what is the outlook for the specialty business?
A: Retail international's combined ratio is strong, driven by a hard market in South America. We booked EUR 67 million in integration costs this year, with total costs above EUR 80 million. Specialty business is growing profitably, with a combined ratio expected below 100%. - CFO Jan Wicker
Q: How does the cash outlook look for retail Germany, and why is it still part of your portfolio despite moderate numbers?
A: Retail Germany contributes significantly to capital upstream, delivering above its net income share due to high remittance ratios. This allows us to use capital elsewhere in the group for profitable growth. For 2024, retail Germany's cash contribution is expected to be 14%. - CFO Jan Wicker
Q: What are your thoughts on further M&A deals, particularly in Mexico and other regions?
A: We have an appetite for M&A but remain cautious, with a low hit rate for deals. We are interested in enhancing our business in corporate specialty and retail international, especially in Mexico and Eastern Europe. We are not pursuing acquisitions in reinsurance. - CFO Jan Wicker
For the complete transcript of the earnings call, please refer to the full earnings call transcript.