German reinsurance firm Hannover Re has begun 2018 with solid growth in premiums underwritten, as the firm took advantage of better market conditions to create a much larger portfolio for the year ahead.
Across the business, Hannover Re reported a 17.6% increased in premiums underwritten for the quarter, a figure which grows to 27.5% if adjusted for the effects of foreign exchange.
The reinsurer reported profitability across its business and a better investment return, helping it to record income of EUR 273.4 million, up from EUR 264.8 million in the prior year quarter.
Chief Executive Officer Ulrich Wallin commented, “We made the most of the available opportunities on the reinsurance markets and substantially expanded our portfolio. With Group net income of EUR 273.4 million we have taken the first step towards achieving our year-end target of more than EUR 1 billion.”
Hannover Re underwrote EUR 5.3 billion of premiums in Q1, reporting better market conditions in property and casualty reinsurance at renewals and writing more business in the United States.
The reinsurer also retained more premiums, with its rate of retention rising to 91.3%, up from 89.6%.
With a larger portfolio of risks underwritten, higher rates achieved at many renewals due to post-loss market conditions, and more of the premiums retained, Hannover Re should be on course for a more profitable year if major losses remain within expectation.
Overall, Hannover Re reported that its operating profit (EBIT) rose 8.5% to EUR 433.9 million, from EUR 399.9 million in the prior year period.
Property and casualty reinsurance underwriting growth drove the premium increase, the company said.
Hannover Re noted, “Considerable competition and an oversupply of coverage capacity can still be observed in certain markets and lines, although conditions as a whole improved. Most notably, the hurricane events in the second half of 2017 provided impetus for greater stability.”
The reinsurer increased its premiums written in key markets including Asia, Australia and the United Kingdom, as well as in structured reinsurance, cyber risks, and some expansion in North America as well.
Overall, the P&C reinsurance unit underwrote 27.1% more premiums, at EUR 3.6 billion up from EUR 2.8 billion in Q1 2017. Adjusted for foreign exchange that increase rises to a huge 38.8%, a significant growth in the book.
At the same time large losses came in below expectations, at EUR 73.4 million, with cyclone Friederike the main driver contributing EUR 31.5 million of Hannover Re’s catastrophe losses in the quarter.
The P&C reinsurance underwriting result was slightly improved, at EUR 91.8 million up from EUR 90.7 million, with a combined ratio of 95.9% for the quarter.
Operating profit (EBIT) in property and casualty reinsurance increased by 9.4% to EUR 338.9 million.
In life and health reinsurance, gross written premiums grew by 2% to EUR 1.8 billion, while premiums earned were flat at EUR 1.6 billion (EUR 1.6 billion), but the firm recorded an operating result (EBIT) for life and health reinsurance that increased 6.9% to EUR 95.9 million.
The investment portfolio fared well in the quarter, with an annualised return of 3.3%, above the minimum 2.7% target set for the full financial year. Net investment income came in as EUR 391.5 million, up from the prior year’s EUR 392.9 million.
Hannover Re continues to target a Group net income of more than EUR 1 billion for the financial year, as long as major losses are within budgeted expectations.
The firm expects to achieve its growth targets for the underwriting portfolio, with April and the first-quarter renewals having set it on a good footing to achieve this over the rest of the year.
The reinsurer noted that the April 1st renewals “passed off highly satisfactorily” while the North American contracts that were up for negotiation “renewed at adequate prices.”
As a result, Hannover Re has expanded its U.S. property book a little, “in light of advantageous conditions, especially under loss-impacted programmes.”
Overall, it has been a positive start to the year for the reinsurer, with the significant growth likely to drive positive income through the coming quarters, as premiums are earned.