Insurance Europe (continued)
Financial developments
Insurance Europe's underlying result before tax fell 64.6% to EUR 651 million in 2008, as most European investment portfolios were negatively impacted by the financial market turmoil that intensified in the second half of the year. The EUR 1,189 million decline in underlying result before tax was primarily caused by lower income from real estate of EUR -278 million from EUR 371 million in 2007 and private equity income of EUR -296 million down EUR 456 million from 2007, due to impairments and revaluations. The lower investment income particularly affected the life insurance results, which declined EUR 1,066 million from EUR 1,412 million to EUR 346 million in 2008. The decline was concentrated in the Benelux, as the life result in Central and Rest of Europe was flat with ongoing growth in the first half of the year being offset by higher expenses. Underlying profit before tax from non-life insurance declined 28.7% to EUR 305 million, primarily due to a decline of EUR 120 million in investment income to EUR 193 million. Despite the sharply lower result before tax, corporate income tax fell only 36.9% to EUR 159 million as the fall in result mainly involved tax-exempt investment income.
Underlying premium income decreased by 0.6% to EUR 10,194 million, as both life and non-life premiums fell marginally in the deteriorating economic environment. Life premiums in the Netherlands were flat at EUR 5.0 billion notwithstanding unfavourable market conditions, as single premium immediate annuities were re-priced more frequently to reflect the current interest rate conditions. In Belgium, life premiums declined 8.3% to EUR 1,064 million as the outlook for single premium products with profit participation worsened and bank deposits offered increasingly attractive rates. Premium growth in Central and Rest of Europe clearly slowed down in the course of the year, as the effects of the credit crisis were increasingly felt in the emerging economies in the region. The successful introduction of a single premium investment product in Poland, which generated EUR 542 million in sales, is not reflected in gross premiums because of the IFRS accounting of deposits on investment contracts. Pension inflows in Central Europe, which continued their steady growth, totalled EUR 2.0 billion in 2008, up 29.1% from 2007.
Underlying operating expenses of Insurance Europe increased by 2.2% in 2008. In the Netherlands, underlying operating expenses decreased by 6% excluding the one-off release of employee benefits provision of EUR 89 million in the fourth quarter of 2007. Expenses in Central and Rest of Europe increased 9.1%, reflecting business growth and a EUR 16 million investment in a multi-year operational efficiency programme that started in 2008. This programme aims to integrate a substantial number of the insurance units' back-offices in the region.
In 2008, Insurance Europe received EUR 2.3 billion in (net) capital contributions from the Corporate Line Insurance. These capital contributions were needed to meet regulatory and/or internal solvency requirements, as available solvency was adversely affected by declining market values of the investment portfolios.
The value of new business was virtually flat at EUR 397 million although new sales (annual premium equivalent or APE) increased by 4.2% to EUR 1,010 million, due in particular to higher sales in the Netherlands after inclusion of group contract renewals in the definition of new sales. APE is the sum of regular annual premiums from new business plus 10% of single premiums on new business written during the year. The Romanian second-pillar pension fund, which was launched in September 2007, contributed EUR 73 million in value of new business and EUR 40 million in new sales in 2008.
Back to top