Reinsurance News

Hannover Re’s 9M net income hits €856m despite above-budget major losses

4th November 2021 - Author: Luke Gallin

Global reinsurer Hannover Re has reported a 28% rise in net income for the first nine months of 2021 to €856 million, despite catastrophe losses in the third quarter pushing the firm’s major loss expenditure above budget.

hannover-re-logoAcross the business, gross written premium (GWP) increased by 12% in the first nine months of the year to €21.6 billion, as net premium earned (NPE) rose by 12% to €17.6 billion.

At a group level, the operating profit increased by more than 40% to €1.3 billion, as net income improved from €668 million in 9M 2020 to €856 million this year.

In property and casualty (P&C) reinsurance, Hannover Re has announced higher premium income as a result of robust demand. As a result, the reinsurer says that it was able to secure better prices and conditions across a broad front in the various rounds of renewals.

GWP in P&C rose by 14% for the nine month period to €15.3 billion, while NPE increased by 15% to €12.1 billion, when compared with the prior year period.

An elevated catastrophe experience in the third quarter of 2021, saw net major loss expenditure reach €1.07 billion for the nine month period, which is substantially higher than Hannover Re’s budgeted expectation of €849 million for 9M 2021.

Of the total loss burden from catastrophes, Hannover Re notes a cost of €306 million related to the impacts of Hurricane Ida in the U.S., a cost of €214 million for the flooding in Europe in July, losses of €94 million related to civil unrest in South Africa, and losses of €35 million for flooding in China.

For 9M 2021, Hannover Re’s P&C reinsurance unit has produced an underwriting gain of €253 million and a combined ratio of 97.9%, compared with an underwriting loss of €146 million and a combined ratio of 101.4% a year earlier.

The operating result in P&C increased by 80%, year-on-year, to €1.06 billion, as net income improved by 77% to €749 million for the first nine months of 2021.

In Life and Health (L&H) reinsurance, the COVID-19 pandemic had a negative impact of €404 million in 9M 2021, of which €140 million relates to the third quarter.

COVID-19-related pressures were opposed by a positive special effect from the longevity portfolio of €99 million in Q3, and by a positive one-time income in Q1 from a restructuring measure in U.S. mortality business amounting to €129 million.

Within L&H, the operating result fell by 30% to €220 million as a result of the pandemic losses. While the contribution to group net income fell by 50% to €150 million for the first nine months of the year.

GWP in L&H climbed by 7% to €6.4 billion for the first nine months of the year, while NPE increased by 6% to €5.6 billion.

On the asset side of the balance sheet, Hannover Re has reported that its portfolio of assets under own management increased to €55 billion as at the end of September, 2021. Total investment income improved by 15% to €1.4 billion.

Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re, said: “In recent months insurers and reinsurers were faced with unusually heavy losses from hurricanes, flooding and other catastrophic events. Our solid nine-month result again demonstrates Hannover Re’s resilience in a volatile environment.”

Looking forward, the reinsurer expects to report Group net income of between €1.15 billion and €1.25 billion for the full-year 2021. The company notes that achieving this target will depend on major losses not significantly exceeding its €251 million budget for the fourth quarter.

“The third quarter has shown us once again how quickly an unexpectedly benign loss experience during the year can completely turn around. Despite this, we believe we are in a position to achieve our guidance for 2021,” said Henchoz.

For next year, Hannover Re expects Group net income of between €1.4 billion and €1.5 billion, which reflects a €200 million increase in the net major loss budget to €1.3 billion for the year, which Hannover Re is commensurate with the growth in the underlying business.

“The profitable growth and our successful cycle management in recent years will lead to a sharp rise in earnings in the 2022 financial year. Not only that, in life and health reinsurance we anticipate that the strains from the Covid-19 pandemic will diminish appreciably as vaccination programmes make increasing progress and the underlying healthy profitability of the portfolio will once again be reflected in the result,” said Henchoz.

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