Global reinsurer Hannover Re has recorded a profit of €264 million for the first quarter of 2022, despite above budgeted catastrophe losses within its property and casualty (P&C) reinsurance business, and additional pandemic-related losses in life and health (L&H).
While positive, Group net income did fall by almost 14% from the €306 million posted a year earlier, as operating profit moved from €404 million in Q1 2021 to €396 million in Q1 2022.
All in all, gross written premiums (GWP) increased by roughly 20% to €9.3 billion in the opening quarter of the year, as net premiums earned (NPE) increased by 18% to €6.7 billion.
Within the firm’s P&C reinsurance business, natural catastrophes had a significant impact in Q1 2022, with expenditures for major losses reaching €336 million, which is above the budgeted amount of €284 million for the period. According to Hannover Re, the largest individual losses were the Australia floods at a cost of €186 million, windstorms Ylenia/Zeynep at a cost of €124 million, and the sinking of the Felicity Ace cargo ship at a cost of €14 million.
Regarding the ongoing war in Ukraine, Hannover Re says that it has established an additional general provision in the low triple-digit million euro range in the first-quarter for possible losses.
In a presentation today, Hannover Re explains that the Ukraine reserve is roughly 3% of net premium earned, which implies a provision somewhere just under, but close to, €150 million.
The P&C segment’s combined ratio ended the first-quarter of 2022 at 99.5% compared with 96.2% a year earlier, which means it exceeded the target level of no higher than 96%. The reinsurer explains that the P&C underwriting result including interest on funds withheld and contract deposits came in well below the level seen in Q1 2021 at just €26 million.
GWP within P&C increased by 26%, year-on-year, to €7.1 billion, as NPE jumped by 24% to €4.8 billion.
But despite losses coming in above plan, the P&C segment has still produced an operating profit of €284 million in Q1 2022 compared with €312 million in Q1 2021. Net income in P&C fell from €261 million last year to €177 million this year.
Commenting on the January 1st, 2022, reinsurance renewals, Hannover Re says it was satisfied overall with the renewal of its portfolio. 62% of the treaties in traditional P&C reinsurance were renegotiated on this date, with Hannover Re recording a risk-adjusted price increase of 4.1%, with the biggest gains seen in Europe.
Turning to the carrier’s L&H reinsurance division, and it’s clear that the pandemic remained the dominant issue, especially in relation to mortality covers. Hannover Re has booked an additional €123 million of pandemic-related losses in the first-quarter of 2022, although these diminished progressively through the period.
GWP in L&H reinsurance increased by 3.2% to €2.2 billion, as NPE rose by 5.4% to €1.9 million. The segment’s operating result increased by an impressive 23% to €113 million in the quarter, as net income spiked by 78% to €101 million in Q1 2022.
On the asset side of the balance sheet, Hannover Re has revealed that in total, investments under own management produced income of €429 million in Q1 2022, which produced an annualised return on investment of 3.1%.
Jean-Jacques Henchoz, Hannover Re’s Chief Executive Officer (CEO), commented: “While we are all appalled by the suffering that Russia has unleashed in its war on Ukraine, it is not yet possible to put a concrete figure on the economic impact at this point in time. Along with the potential implications of the war in Ukraine, we faced numerous natural catastrophes and further pandemic-related strains in life and health reinsurance in the first three months of the year. Against this backdrop, we again demonstrated the quality of our risk and capital management and stood shoulder-to-shoulder with our clients as a reliable partner.”
Looking to the future, the reinsurer notes that it remains too early to put a definitive figure on losses for re/insurance markets from the war in Ukraine. However, the firm has temporarily ceased writing new risks or renewal of treaties with clients in both Russia and Belarus until further notice.
“Even though it will take some time before the impact of the war on insurers and reinsurers can be precisely quantified, we have taken the precaution of establishing additional provisions in the first quarter,” said Henchoz. “Despite all the uncertainties, I remain confident that we can achieve the goals we have set ourselves for the full year thanks to our considerable resilience and robust profitability.”
Of course, the April 1st renewal season has not long passed, where Hannover Re renews business in the Asia-Pacific region, North America as well as parts of the specialty business. The firm says that the negotiations at the 1/4 renewals led to significant growth at improved prices. In fact, premiums volumes grew by 17.4%, as the risk-adjusted price increase for the renewed business hit 3.7%.
In L&H reinsurance, Hannover Re expects additional pandemic-related losses, although it expects these to fade sharply through the course of 2022.
Group-wide, the reinsurer expects net income of between €1.4 billion and €1.5 billion for 2022, assuming major loss costs do not materially exceed the budgeted level of €1.4 billion, COVID-19 does not have a significant unexpected impact on the result in L&H reinsurance, and no unforeseen developments occur on capital markets.
