Global reinsurer Hannover Re has reported Group net income of €670.6 million for the first half of 2021, supported by a significant improvement in the performance of its property and casualty (P&C) business, somewhat offset by COVID-19 losses of €236.4 million in its life and health (L&H) operation.
For H1 2021, group net income improved by 67% year-on-year, while the reinsurer’s operating profit increased by almost 90% to €956.1 million.
Gross written premiums (GWP) for the group spiked by 10% from the prior year period to €14.5 billion, as net premium earned (NPE) jumped by 11% to €11.5 billion.
Within P&C, Hannover Re notes that it was again able to “significantly boost its premium income,” with profitable growth being driven by continued strong demand for covers from primarily highly capitalised reinsurance firms.
P&C reinsurance GWP increased by nearly 12% year-on-year to €10.3 billion, as NPE rose by more than 14% to €7.8 billion.
The P&C performance also benefitted from a lesser impact from natural catastrophe events during H1 2021, with Hannover Re reporting net major loss expenditure of €325.9 million for the period, which is down on the same period last year and also the budgeted amount of €476 million for H1.
This year, the largest individual losses were the Winter Storm Uri in the U.S. with a net cost of €136.4 million for Hannover Re in H1, an industrial loss in Germany amounting to €34.8 million, and a credit loss of €20.7 million.
At the same time, no additional reserves were required within P&C for the pandemic in H1 2021.
Although not booked in H1, the reinsurer has commented on the severe flooding which impacted parts of Europe in July, notably Germany, Belgium, the Netherlands, Switzerland, and Austria. The reinsurer says that after analysis, it expects to incur net losses of €200 million to €250 million from the event. Additionally, the firm is already seeing the emergence of losses from the riots in South Africa.
Hannover Re’s P&C unit has recorded underwriting income of €316.8 million for H1 2021, which is a huge improvement on the €160.7 million underwriting loss reported a year earlier. The combined ratio, at 96%, improved sharply from the 102.3% a year earlier.
Both the operating result and net income performance within P&C reinsurance improved, year-on-year, to €777.9 million and €592.1 million, respectively.
Somewhat offsetting the better result within P&C for Hannover Re, the company’s L&H reinsurance segment continued to be impacted by the COVID-19 pandemic.
During the period, pandemic-related costs in L&H amounted to €263.4 million, the bulk of which were attributable to mortality covers in the U.S., and also Latin America and South Africa. Hannover Re says that it expects that the “strains will diminish as vaccination rates increase.”
GWP in L&H increased by 5.7% to €4.2 billion, as net premium jumped by 4.5% to €3.7 billion. The firm says that attractive opportunities for growth were offered by covers for longevity risks and also in financial solutions.
As a result of the COVID-19 impact, the operating result in L&H reinsurance declined by 16.4% to €179.1 million, while net income fell by 44.4% to €104.8 million.
Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re, commented: “We achieved a thoroughly satisfactory half-year result that is broadly in line with our expectations and another testament to our robust market position and excellent risk management. As shown by our sustained strong growth, our risk covers are highly valued by our clients in times of crisis and beyond.”
On the asset side of its balance sheet, Hannover Re has reported the portfolio of assets under own management increased to €52.8 billion as at June 30th, 2021. Income from assets under own management spiked by almost 6% to €693.7 million, resulting in an annualised return of 2.7%, which is ahead of the full-year target of 2.4%.
Overall, total investment income increased from €793.1 million in H1 2020 to €865.8 million in H1 2021.
For full-year 2021, Hannover Re expects to report net income of between €1.15 billion and €1.25 billion, together with a return on investment of roughly 2.4% and GWP for the group in the upper single-digit percentages.
However, the carrier does stress that its earnings targets for the year is dependent on major loss expenditure not significantly exceeding the budgeted level of €1.1 billion.
“The catastrophic flood events in Germany and other European regions have once again shown that the climate is changing at a tremendous pace. We shall continue to progressively expand our sustainability measures and thereby play our part in addressing climate change and limiting its impacts.
“Despite all the challenges we are well on track to achieve our ambitious goals in the current financial year. Based on the figures for the first six months, I am optimistic for the development of Hannover Re’s business over the remainder of the year,” said Henchoz.