Reinsurance giant Hannover Re has reported an increase in net income to €300.9 million for the first-quarter of 2020, as an improved performance within Life and Health (L&H) more than offset the impacts of COVID-19 on the reinsurer’s Property and Casualty (P&C) reinsurance unit.
Group net income improved by 2.5% in Q1 2020 when compared with the €293.7 million recorded a year earlier, while operating profit contracted by 5.2% to €426.6 million in the period.
Overall, gross written premiums jumped by more than 9% to €7 billion, as net earned premiums climbed by more than 10% to €5.1 billion.
During the quarter, Hannover Re’s P&C unit recorded an underwriting profit of €7.2 million, which is down significantly on the €124.8 million recorded in Q1 2019. The operating profit fell to €304.7 million from €334.4 million a year earlier, while net income reached €207.3 million in Q1 2020, against €219 million in Q1 2019.
The reason for the declines within the performance of P&C is largely attributable to the impacts of the COVID-19 pandemic, for which Hannover Re has reserved roughly €220 million for anticipated related losses. This pushed the company’s net expenditure on major losses to almost €287 million, which is up substantially on the €59 million recorded a year earlier.
As well as the impacts of the COVID-19 coronavirus, Hannover Re says that the largest individual losses include the bushfires in Australia (€22.4mn), storm Sabine (€17.6mn), and a hailstorm in Australia (€15.1mn).
In light of the above, Hannover Re’s P&C unit saw its combined ratio deteriorate to 99.8% from the 95.7% recorded in Q1 2019, which is above the anticipated maximum level of 97%.
Within P&C, gross written premiums increased by 13.5% to €5 billion, and net earned premiums jumped by almost 14% to €3.3 billion.
Hannover Re notes that during the January 1st, 2020 renewals it grew its P&C reinsurance portfolio at slightly improved prices and conditions overall. However, the company warns that rates for catastrophe covers remained low in numerous locations, supporting the need for further rate improvements.
Hannover Re’s Chief Executive Officer (CEO), Jean-Jacques Henchoz, commented: “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.”
More than offsetting the declines in P&C, Hannover Re’s L&H reinsurance segment recorded an improved result in the first-quarter of the year. The operating result for the unit improved by almost 7% to €124.2 million, while net income within L&H increased by a huge 24.5% to €110.2 million.
Hannover Re notes that during the first-quarter, it has witnessed no negative effects such as excess mortality due to the coronavirus within its L&H reinsurance unit.
The L&H reinsurance unit saw its gross written premiums remain stable at €2 billion, while net earned premiums increased by 4.3% to €1.8 billion.
Turning to investments, and Hannover Re has reported investment income of €326 million, which is line with last year. Net gains on disposals increased to €101.9 million, and overall, impairments totalled €28.6 million.
“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,” said Henchoz.
The reinsurance giant also discusses the April renewals in its results announcement, stating that the season passed off favourably for the firm. The total premium volume booked from the April renewals increased by 25.1%.
At the same time, Hannover Re has revealed that it has increased its net major loss budget to €975 million for 2020, against €875 million for 2019. Hannover Re says that this increase reflects growth in the underlying business.
