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Hannover Re improves P&C results, confirms profit targets for 2021

5th May 2021 - Author: Matt Sheehan

Hannover Re, one of the major European reinsurers, has confirmed its profit targets for 2021 after posting double-digit growth in premium income in the first quarter, as well as modestly improved group net income.

Gross premiums were up by 11.9%, or 16.8% adjusted for exchange rate effects, while net income increased by 1.7% to €305.9 million.

Results benefitted from no new pandemic-related losses in property and casualty reinsurance. Life and health reinsuransurance still incurred a €151 million pandemic-related hit, but Munich Re expects these losses to “relax appreciably” from Q2 onwards.

The Group’s profit targets for the year include net income in the range of €1.15 billion to €1.25 billion, as well as return on investment of 2.4%, upper single-digit gross premium growth, and a major loss budget of €1.1 billion.

Hannover Re renewed roughly two-thirds of its P&C business at January 1st and reported average price increases of 5.5% at the time, reflecting further improvements in prices and conditions that varied in scope across all lines and regions.

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For P&C business, gross written premium grew by 14.2% as at the end of March to €5.7 billion, or 20.1% adjusted for exchange rate effects.

Net expenditure on major losses was lower than in the previous year at €193.2 million, versus €283.6 million), with the largest individual losses including €75.4 million due to extreme winter weather in Texas, a €34.8 million industrial loss in Germany, and €19.5 million due to flooding in Australia.

The combined ratio for this segment improved substantially from 99.8% to 96.2%, with operating profit climbing by 6.3% to €324.0 million, and net income similarly rising to €269.2 million, compared with 207.3 million previously.

Turning to life and health reinsurance, Hannover Re continued to see strong demand worldwide, with gross written premiums up 6.1% to €2.1 billion. However, the substantial COVID loss for the quarter meant the operating result for this segment contracted by 35.6% to €80.1 million, while net income fell sharply by 55.7% to €48.8 million.

In terms of investments, Hannover Re now has €52.5 billion of assets under management and reported total net investment income of €444.0 million for Q1, representing an increase of 5.0% over last year despite the continued low interest rate environment.

“We are off to a good start in the current financial year,” said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re. “Hannover Re is superbly placed to benefit from the sustained improvements in prices and conditions in our market. Even though the pandemic has now been with us for more than a year, our robust capital resources remain unchanged thanks to our outstanding risk management.”

“The first quarter puts in place a solid basis for achieving the goals that we have set ourselves for the full 2021 financial year,” Henchoz continued. “Hannover Re already dealt with the bulk of the expected pandemic-related strains in the 2020 financial year. With increasingly widespread vaccinations we will be able to progressively return to a more normal life.”

“For us, as a reinsurer, this means that we only need to anticipate further losses from the pandemic on a manageable scale. As an additional factor, prices and conditions in property and casualty reinsurance are continuing to improve. All this gives me confidence that we will achieve our full-year targets.”

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