Hannover Re, 1Q2020: Net income grew 2.5% exceeding EUR 300 million

6 May 2020 — press.release
For the first quarter of 2020, Hannover Re posted a net income attributable to the group of EUR 301 million, 2.5% higher than the same period of prior year. According to the reinsurer, the key drivers were double-digit increases in earnings from life and health reinsurance as well as from the investment portfolio.

"Hannover Re models pandemic risks as part of its risk management, which focuses on sustained preservation of the company's robust financial strength and is continuously reviewed using stress tests," the company stated.

According to preliminary estimates, Hannover Re capital adequacy ratio at the end of March 2020 remained between 220% and 230%, comfortably above the limit of 180% and the threshold of 200% imposed by their strategy. At year-end 2019 the ratio had stood at 251%.


Hannover Re 1Q2020 preliminary figures, y-o-y changes

  • Gross written premium: EUR 6,975 million (+9.4%), of which:
    • GWP P&C: EUR 4,986 million (+13.5%)
    • GWP L&H: EUR 1,989 million (+0.5%)
  • Net premium earned: EUR 5,091million (+10.4%)
  • Net underwriting result: EUR (45) million (1Q2019: 75)
  • Net investment income: EUR 472million (+18.2%)
  • P&C Combined ratio: 99.8% (+4.1 pp.)
  • Operating profit (EBIT): EUR 427million (-5.2%)
  • Group net income: EUR 301million (+2.5%)


Property & Casualty (P&C)

Hannover Re grew its portfolio in property and casualty reinsurance in the treaty renewals as at 1 January 2020, despite the unchanged intense competition prevailing in numerous markets and lines of business. On balance, growth was generated at slightly improved prices and conditions overall. Rates for catastrophe covers nevertheless remained on a low level, especially in Japan, Latin America and the Caribbean, and there is therefore still a need for improvements.

Gross written premium grew by 13.5% to EUR 5.0 billion (EUR 4.4 billion); the increase would have been 12.2% adjusted for exchange rate effects. Net premium earned was up 13.9% at EUR 3.3 billion (EUR 2.9 billion); it would have risen by 12.9% at constant exchange rates.

Net expenditure on major losses was considerably higher than in the previous year at EUR 283.6 million (EUR 59.0 million). This was due to an amount of roughly EUR 220 million reserved for anticipated losses related to the coronavirus. Other than this, the largest individual losses were - amongst others - the bushfires in Australia at EUR 22.4 million, storm Sabine (also known as Ciara) in Europe at EUR 17.6 million and a hailstorm in Australia costing EUR 15.1 million. The combined ratio consequently deteriorated to 99.8% (95.7%), exceeding the anticipated maximum level of 97%.

The underwriting result for property and casualty reinsurance including interest on funds withheld and contract deposits came in sharply lower than the previous year at EUR 7.2 million (EUR 124.8 million). The operating profit (EBIT) retreated to EUR 304.7 million (EUR 334.4 million). Net income in property and casualty reinsurance amounted to EUR 207.3 million (EUR 219.0 million).


Life & Health (L&H)

In life and health reinsurance, particularly in the area of financial solutions, strong demand at good conditions could be observed worldwide especially in Asia. Solutions for the coverage of longevity risks also enjoyed increased demand, most notably in the United Kingdom and Canada.

Gross written premium was stable at EUR 2.0 billion (EUR 2.0 billion). Adjusted for exchange rate effects, it would have increased by 0.4%. Net premium earned rose by 4.3% to EUR 1.8 billion (EUR 1.7 billion); growth would have reached 4.2% at constant exchange rates.

The operating result (EBIT) for life and health reinsurance improved by 6.8% to EUR 124.2 million (EUR 116.3 million). Net income in life and health reinsurance grew by 24.5% to EUR 110.2 million (EUR 88.5 million). Negative effects such as excess mortality due to the coronavirus have not been observed in the first quarter.


Investments

The portfolio of assets under own management grew slightly in the first quarter to EUR 47.9 billion (31 December 2019: EUR 47.6 billion). Ordinary investment income excluding interest on funds withheld and contract deposits was very much on a par with the previous year at EUR 326.3 million (EUR 323.2 million). Net gains on disposals were higher at EUR 101.9 million (EUR 22.3 million). This was due to regrouping moves as part of routine portfolio maintenance as well as the successful sale of a real estate investment.

Impairments totalled EUR 28.6 million (EUR 17.4 million). Altogether, income of EUR 386.1 million (EUR 328.3 million) was generated from assets under own management. The annualised return (including effects from ModCo) stood at 3.2%. In view of the volatile state of the market at the current point in time, however, the return generated at the end of March is not particularly meaningful for the remainder of the year.

Interest on funds withheld and contract deposits increased to EUR 85.6 million (EUR 70.6 million), boosting the net investment income including interest on funds withheld and contract deposits to EUR 471.7 million (EUR 398.9 million).


Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, said:

"In the first quarter we achieved a result that on the whole lived up to our expectations. Nevertheless, we too will not escape the effects of the coronavirus crisis unscathed. Even though it is currently impossible to quantify the concrete impacts on reinsurance and financial markets, our capital resources are geared to managing such extreme events.

Even though we are unable to provide specific guidance for our full-year net income in the present situation, we are well placed to stand by our customers' side in these difficult times. Among other things, as a financially robust partner, we are in a position to deliver reinsurance solutions that support the solvency, liquidity and capital position of our clients."



More financial information about Hannover Re can be found at www.hannover-re.com


Source: hannover-re.com

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