Gross written premium for the Group surged by 16.0% as at 30 September 2019 to EUR 17.4 billion (EUR 15.0 billion). The retention was virtually unchanged from the previous year at 90.5% (90.8%). Net premium earned rose by 12.7% to EUR 14.4 billion (EUR 12.8 billion), or 10.3% adjusted for exchange rate effects. The operating profit (EBIT) improved by 20.6% to EUR 1,395.4 million (EUR 1,157.1 million).
Hannover Re first nine months figures (vs. 9M2018)
- Gross written premium: EUR 17,394million (+16.0%), of which:
- P&C reinsurance: EUR 11,653 million (+20.7%)
- L&H reinsurance: EUR 5,740 million (+7.6%)
- Net premium earned: EUR 14,391 million (+12.7%)
- Net investment income: EUR 1,332 million (+15.3%)
- Operating profit (EBIT): EUR 1,395 million (+20.6%)
- P&C combined ratio: 98.6% (+1.9 pp.)
- Group net income: EUR 1,003 million (+38.3%), of which:
- P&C reinsurance: EUR 640 million (-4.8%)
- L&H reinsurance: EUR 403 million (9M2018: EUR 93 million)
Property and casualty reinsurance
The market for reinsurers continues to be marked by a number of considerable challenges. The long-standing excess of capacity for coverage of insurance risks remains a drag on prices for reinsurance protection. In addition, low interest rates are restricting investment income for the industry, necessitating rigorous discipline in technical underwriting.
Gross written premium in P&C reinsurance climbed by 20.7% to EUR 11.7 billion, most notably in North America, Asia, Germany and structured reinsurance business. Net premium earned rose by 15.8% to EUR 9.3 billion.
After a very moderate major loss experience in the first half of the year, large loss expenditure in the third quarter reached EUR 405 million and clearly surpassed the quarterly budget of EUR 295 million. The largest loss events in the third quarter included Hurricane Dorian with a net strain of EUR 187 million, Typhoon Faxai in Japan in an amount of EUR 76 million and the insolvency of UK tour operator Thomas Cook at a cost of EUR 112 million. Altogether, the net burden of large losses in the first nine months was higher than in the previous year at EUR 546 million (EUR 365 million), but within the budget of EUR 665 million set aside for this period.
The combined ratio deteriorated to 98.6% (9M2018: 96.8%) and thus failed to reach the targeted level of no more than 97% for the full year. This can be attributed to the heavy losses in the third quarter and an unchanged prudent reserving policy.
The operating profit (EBIT) in P&C reinsurance contracted by 8.4% to EUR 919 million (EUR 1,004 million). The EBIT margin amounted to 9.9% (9M2018: 12.5%) and was thus marginally below the minimum target of 10%. The contribution made by property and casualty reinsurance to Group net income fell by 4.8% to EUR 640.1 million.
Life and health reinsurance
Gross written premium in life and health reinsurance increased by 7.6% to EUR 5.7 billion. Net premium earned climbed to EUR 5.1 billion (9M2018: EUR 4.8 billion).
The investment income generated by the business group soared by a substantial 43.0% to EUR 527.8 million; the increase was crucially driven by a one-time effect associated with the release of hidden reserves in connection with a participating interest in the second quarter.
The operating result (EBIT) in life and health reinsurance consequently tripled to EUR 477.7 million (9M2018: EUR 155.2 million), supported among other things by sharply improved profitability in the United States. In the previous year this had still been overshadowed by a one-time charge due to treaty recaptures in mortality business. The contribution made by life and health reinsurance to Group net income therefore increased considerably to EUR 402.9 million (9M2018: EUR 93.0 million).
The portfolio of assets under own management grew to EUR 47.8 billion (31 December 2018: EUR 42.2 billion) thanks to a sustained very positive cash flow, higher valuations and exchange rate effects. Hannover Re generated total investment income including interest on funds withheld and contract deposits of EUR 1,331.9 million (9M2018: EUR 1,155.4 million).
Jean-Jacques HENCHOZ, Chief Executive Officer of Hannover Re, said:
"After nine months we are looking at an excellent result and a very good return on equity. In life and health reinsurance the good underlying profitability is becoming increasingly evident, while property and casualty reinsurance continues to deliver stable results on a high level despite persistent strains from large losses. A further factor is the very strong investment income, enabling us to raise our profit guidance for 2019 to more than EUR 1.25 billion."
More financial information about Hannover Re can be found at hannover-re.com/122688/investors.