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Hannover Re posts slim Q3 net income, as retro helps reinsurer pay losses

8th November 2017 - Author: Luke Gallin

Reinsurance giant Hannover Re saw its net income decline to €14 million in the third-quarter of 2017, as net catastrophe losses of €894.3 million exceeded its large loss budget for the first nine months of the year by roughly €270 million.

Hannover Re logoThe Germany-based reinsurer recorded gross catastrophe losses of €1.625 billion for the first nine months of the year, and net losses of €894.3 million, meaning that a substantial portion, or 45% of its losses were passed on to its retrocessionaires.

Hurricanes Harvey, Irma and Maria accounted for €1.33 billion of the firm’s gross catastrophe losses, falling to €650.7 million after retro players had taken their share, meaning Hannover Re ceded roughly 51% of its Q3 hurricane losses to the retro market.

Broken down by event, and hurricane Harvey resulted in a €229.7 million gross loss and a €100 million net loss, with roughly 56% of the losses being passed to the retro market. For Irma the gross loss reached €787.4 million, a figure that fell to €329.9 million after 58% of the losses flowed through to the retro marketplace. And with Maria slightly less was passed on to Hannover Re’s retrocessionaires, at 30%, after gross losses of €315.6 million and net losses of €220.8 million.

It’s likely that the capital markets will have taken a substantial share of the reinsurer’s losses, with third-party reinsurance players being very active in the retro market.

Hannover Re’s Chief Executive Officer (CEO), Ulrich Wallin, commented; “After years of moderate losses we saw an accumulation of severe natural disasters in the third quarter. Protecting against the consequences of such events is an absolutely central goal of reinsurance. For us, as a reinsurer, the top priority is efficiently settling the incurred losses and supporting our clients. In so doing, we hope that we can also play a part in alleviating the humanitarian and economic impacts of natural disasters.

“Even – and indeed especially – after the considerable losses that we have shouldered following the natural catastrophe events in the third quarter, we stand ready to partner with insurers by providing tailor-made reinsurance solutions going forward, as we have in the past.”

For the first nine months of the year Hannover Re envisaged a large loss budget of €623 million, which it actually exceeded by around €28 million on just the three hurricanes. Add to this the two Mexico earthquakes, which combined resulted in a gross loss of €73 million and a net loss of €71.5 million, and the impacts of catastrophe events earlier in the year, such as Cyclone Debbie, and the reinsurer exceeded its nine month large loss budget by approximately €270 million.

Assisting the reinsurance giant’s profitability in the third-quarter was the liquidation of listed equities in an amount of €953.2 million, which, resulted in the firm realising extraordinary income of €223.3 million.

Hannover Re said this was in part to offset its losses, but also so the capital can be released to act on emerging business opportunities, which the firm expects to see at the upcoming renewals with rates widely predicted to increase.

For the full financial year, Hannover Re anticipates Group net income of €800 million, although this is subject to major losses in the fourth-quarter not exceeding €200 million.

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