Reporting its results this morning, global reinsurance firm Hannover Re stressed that it is targeting profitability, not simply accumulating premiums, in the still challenging and soft reinsurance market environment.
Hannover Re reported its fifth consecutive record result this morning, with net income across the reinsurer rising by 1.8% to EUR 1.17 billion in 2016.
“Another strong underwriting result in property and casualty reinsurance combined with pleasing investment income laid the foundation,” Chief Executive Officer Ulrich Wallin explained.
But while income rises, signifying better profitability the premium volumes underwritten shrank by 4.2% during the last year, as Hannover Re sets its sights on maintaining a profitable book and navigating the softened reinsurance market.
The reinsurers said that its “overriding priority” is to generate a profit over premium, and one way that it is achieving that is through greater retention as well, with retained premium up by 2.3% in 2016.
Despite 2016 having seen the highest level of catastrophe losses in five years, Hannover Re still reports that large losses were below its budgeted level and also said that frequency losses were lower than budgeted as well.
This helped the company report an operating profit (EBIT) of EUR 1,689.3 million (vs EUR 1,755.2 million in 2015).
Hannover Re is pleased with its result in property and casualty reinsurance, saying that despite the “intensely competitive state of the market” the reinsurer delivered a strong result.
The reinsurer saw growing demand for cyber risk coverage in North America, helping to drive some premium growth.
“However, it was the rise in demand for reinsurance solutions offering solvency relief – both in Europe and in Asia – that had favourable implications for Hannover Re,” the company explained.
Although these positive areas of reinsurance growth could not offset the decline in premiums, as the reinsurer turned down business in other areas again, resulting in overall premium contraction of 1.4% in P&C Re.
P&C Re losses were slightly above the level seen in 2015, with total net losses of EUR 626.6 million in 2016 (compared to EUR 572.9 million in 2015). This is well below the budgeted EUR 825 million for large losses.
As a result the combined ratio was improved on the year before at 93.7%, which the company attributes not just to underwriting but also to positive reserves from prior years, something the majority of reinsurers have benefited from again this year.
Life and health reinsurance also contributed to the overall result, although the company is less pleased with its performance it would appear as premiums decreased and as a result the operating profit only came in at EUR 343.3 million (EUR 405.1 million).
Looking ahead, Hannover Re has increased its target for 2017, saying it expects total gross premium for business written will rise by 1% during the year and the profit is expected to be over EUR 1 billion, depending on the impact of large losses.