German reinsurance giant Hannover Re has issued a profit warning, as it believes that the aggregation of losses from recent natural catastrophe events will take it over its large loss budget for the year and hit profits.
“The insurance industry currently finds itself faced with a number of severe natural catastrophe events, the losses from which cannot as yet be precisely quantified,” the company explained.
Hannover Re said that for hurricanes Harvey and Irma, its large catastrophe loss budget (set at EUR 825 million for the year) should be able to absorb the impact, but that the more recent events of hurricane Maria and the Mexico magnitude 7.1 earthquake will take it over budget for the year.
The reinsurer said that the most recent events, which it says there are no detailed loss estimates available for to date, “will give rise to further substantial strains that will exceed the large loss budget.”
As a result, the company says that its large loss buffer is at risk and of course this protects the reinsurers profit targets, which it now sees as at risk.
The company said that its net income target of over EUR 1 billion may not be achieved now, although currently it does believe it can pay a dividend at the level seen last year.
Hannover Re’s parent company Talanx said that it expects to, “exceed the pro-rata large loss budget amounting EUR 818 million for the first nine months of the financial year in the Reinsurance and Industrial Lines divisions.”
As a result Talanx does not expect the Q4 large loss budget to be available in full, making it hard for its reinsurer Hannover Re and its Industrial lines division to reach profit targets.
We should expect that the aggregation of major catastrophe losses in recent weeks will hurt even the largest reinsurers ability to hit profit targets. For smaller reinsurers and Lloyd’s of London re/insurers we should expect some to report negative results, based on the impacts of these loss events.
