Our holistic management system Performance Excellence 2.0 ensures implementation our Group strategy across the various areas of business. Based on the Excellence Model of the European Foundation for Quality Management (EFQM), it enables each of our Group's organisational units to define and examine its own contribution to the Group strategy. In this way, we ensure that all initiatives and activities within our Group are rigorously linked to the Group strategy.
Our integrated system of enterprise management constitutes the basis for accomplishment of our strategic objectives. Located at its core are, first and foremost, our profit and growth targets, which are summarised for the Group and the individual business groups in the so-called target matrix. In addition to traditional performance indicators geared to the IFRS balance sheet, our system of strategic targets also includes economic targets derived from our certified internal capital model. These targets are analysed annually and adjusted in the context of the strategy review conducted at regular (three-year) intervals – which is ongoing at the present time. When it comes to adjusting the target parameters, our focus is on long-term strategic target attainment.
|Business group||Key data||Targets for 2016||Target attainment|
|2016||2015||2014||Ø 2014 - 20161|
|Group||Investment return2||≥ 2.9||3.0%||3.5%||3.3%||3.3%|
|Return on equity3||≥ 9.9%||13.7%||14.7%||14.7%||14.3%|
|Growth in earnings per share (year-on-year comparison)||≥ 6.5%||1.8%||16.7%||10.1%||9.4%|
|Value creation per share4||≥ 7.5%||18.6%||13.6%||34.4%||21.0%|
|Property & Casualty reinsurance||Gross premium growth||3 – 5%5||-0.2%||8.1%||1.2%||3.0%|
|Combined ratio||≤ 96%6||93.7%||94.4%||94.7%||94.3%|
|EBIT margin7||≥ 10%||16.8%||16.6%||17.0%||16.8%|
|Life & Health reinsurance||Gross premium growth||5 – 7%9||-4.3%||9.5%||4.9%||3.2%|
|Value of New Business (VNB)10||
|EBIT margin7 Financial Solutions / Longevity||≥ 2%||9.4%||11.0%||5.0%||8.6%|
|EBIT margin7 Mortality / Morbidity||≥ 6%||3.4%||3.6%||4.8%||3.9%|
|1 Average annual growth, otherwise weighted averages
2 Excluding effects from ModCo derivatives
3 After tax; target value: 900 basis points above the 5-year average return on 10-year German government bonds
4 Growth in book value per share including dividend paid
5 Average over the reinsurance cycle; at constant exchange rates
6 Including major loss budget of EUR 825 million
7 EBIT / net premium earned
8 Excess return on allocated economic capital
9 Organic growth only; annual average growth (5 years); at constant exchange rates
10 Since 2016 based on Solvency II principles and pre-tax reporting; until 2015 MCEV principles (cost of capital already increased
from 4.5% to 6% in 2015) and post-tax reporting
Especially in terms of its return on equity, our Group has performed very favourably in recent years despite the intensely competitive environment faced by reinsurers. Our return on equity target of 900 basis points above risk-free – which is enshrined in the Group strategy – already represents a substantial target value creation. Through our business operations on all continents and the diversification between our Property & Casualty and Life & Health reinsurance business groups we are able to effectively allocate our capital in light of opportunity and risk considerations which generates a higher-than-average return on equity.
The following chart shows that our annual return on equity in recent years comfortably surpassed the set minimum targets.
* After tax; target: 900 bps above 5-year rolling average of 10-year German government-bond rate ("risk free")