HANNOVER Re, FY2018: profit target achieved and rather optimistic expectations for the year-end results

7 March 2019 — Daniela GHETU
Hannover Re has generated Group net income of EUR 1,059.5 million (EUR 958.6 million) for the past financial year and thus achieved its profit target. The Group expects net income should reach an amount in the order of EUR 1.1 billion by the end of 2019.

"The 2018 financial year once again bears witness to the profitability of Hannover Re," Ulrich WALLIN, Chief Executive Officer of Hannover Re, said. "I am particularly pleased that we achieved a double-digit return on equity for the tenth consecutive year. Despite another significant burden of large losses and a substantial one-time charge in life and health reinsurance, we are again able to hold out the prospect of an attractive dividend for our shareholders."

The main 2018 results may be summarized as follows:

  • Group net income up by 10.5% to EUR 1.06 billion (previous year: EUR 0.96 billion)
  • Dividend proposal for 2018: EUR 5.25 (EUR 5.00) per share
  • Book value per share: EUR 72.78 (EUR 70.72)
  • Return on equity: 12.2% (10.9%)
  • Gross premium grows by 7.8% to EUR 19.2 billion; currency-adjusted: 11.6%
  • Combined ratio: 96.5% (99.8%)
  • Major loss expenditure of EUR 849.8 million slightly higher than budgeted level of EUR 825 million
In view of the good business development, the Executive Board and Supervisory Board will propose to the Annual General Meeting that the dividend should be raised for 2018. A total dividend of EUR 5.25 per share (EUR 5.00 per share) is envisaged. This consists of an increased ordinary dividend of EUR 3.75 (EUR 3.50) per share and an unchanged special dividend of EUR 1.50 per share. The payout ratio for 2018 will thus amount to 59.8% of IFRS Group net income.

In what was still a challenging market environment, attractive business opportunities opened up in the year under review, the Group's release says. Against this backdrop, the gross premium volume increased by 7.8% to EUR 19.2 billion (EUR 17.8 billion); adjusted for exchange rate effects, it would have grown by an even more appreciable 11.6%. The level of retained premium was slightly higher at 90.7% (90.5%). Net premium earned climbed 10.6% to EUR 17.3 billion (EUR 15.6 billion). Growth of 14.5% would have been booked at unchanged exchange rates.

The operating profit (EBIT) improved to EUR 1,596.6 million (EUR 1,364.4 million) after unusually high expenditure on natural catastrophes in the previous financial year. This result was supported by excellent investment income as well as the good underlying quality of the portfolio in both property and casualty and life and health reinsurance. Double-digit increases were recorded in Group net income as well as net premium earned. Hannover Re achieved its targeted year-end result of more than EUR 1 billion, posting a gain of 10.5% to reach EUR 1,059.5 million (EUR 958.6 million). Earnings per share amounted to EUR 8.79 (EUR 7.95).

Outlook for 2019: Group net income in the order of EUR 1.1 billion

"We enjoyed a very satisfactory round of treaty renewals as at 1 January 2019 in which we continued to focus on profitable growth," Ulrich WALLIN said. "In view of Hannover Re's good financial strength and our efficient capital management, I am optimistic that the targets set for the current financial year will be achieved and I have confidence in the company's sustained profitability."

Hannover Re expects gross premium for total business to grow in the current financial year by a single-digit percentage at constant exchange rates. Group net income should reach an amount in the order of EUR 1.1 billion. This is based on the premise that major loss expenditure does not significantly exceed the budgeted level of EUR 875 million and assumes that there are no exceptional distortions on capital markets.

The asset portfolios should grow - assuming constant exchange rates - in view of the anticipated positive cash flow. The return on investment should be at least 2.8%.

In terms of the dividend for the current financial year, Hannover Re envisages an unchanged payout ratio in the range of 35% to 45% of its IFRS Group net income. This ratio will increase further through payment of a special dividend subject to a continued comfortable level of capitalization and Group net income within the expected bounds.

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