(March 25, 2014) — Talanx, one of Germany’s biggest insurers, has produced an investment return of 4%, despite the low rate environment and a portfolio which has more than 90% in fixed income.
The insurer published its annual results yesterday, revealing its portfolio of assets under own management grew to €86.3 billion despite the moderating effect of exchange rates. However, it predicted a lower rate of return for the year ahead, targeting 3.4%.
“Talanx continues to have a [relatively] conservative investment portfolio. This is a direct consequence of our core risk management target to allocate a maximum of 50% of our risk-based capital to market risks,” press officer Dr Gesa Panetta told aiCIO.
“Our share of fixed-income investments stands at 91% (the same as at the 2012 year end, and slightly up on September 2013’s figure of 90%). Our share of A-rated or better fixed-income securities stands at 81%, so, the quality of our bond portfolio remains very high.”
Panetta said Talanx’s equity exposure had remained low throughout 2013, amounting to just 1.1% of the overall portfolio when taking derivatives into account.
The small amount of alternative and real estate helped contribute to an overall diversification however, she added.
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Talanx’s fixed income ratio is relatively racy compared to other insurers in Germany. In December, aiCIO reported that German insurers typically had at least 95% allocation to fixed income assets.
“The biggest challenge for German institutional investors is to achieve their long-term return target of around 4% given the current yield levels and market outlook,” said Frank Witt, PIMCO’s head of institutional client service in Germany.
“At the moment, 10-year yields stand at 1.7% for German bunds… in recent years, investors have realised that traditional approaches may not be sufficient to meet their long term objectives.”
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