Reinsurance News

Hannover Re’s net income rises to €1.23bn despite heavy cat & COVID load

10th March 2022 - Author: Luke Gallin

Global reinsurer Hannover Re has today reported a 39% rise in net income to €1.23 billion for 2021, despite major losses in its property and casualty (P&C) arm coming in above expectations, and a sizeable COVID-19 impact in its life and health (L&H) reinsurance business.

hannover-re-logoAcross the Group, net income increased from the €883 million seen in 2020, as the operating profit swelled by almost 43%, year-on-year, to €1.73 billion.

During the year, the reinsurer grew its book by more than 12% with gross written premium (GWP) rising to €27.8 billion, while net premium earned jumped by 13% to €24.1 billion in 2021.

While premiums and income grew, Hannover Re’s underwriting performance was hit by major losses and the pandemic in 2021, leading to a Group underwriting loss of €211 million, compared with a loss of €691 million in 2020.

Within P&C reinsurance, Hannover Re has reported that major losses once again surpassed expectations, exceeding the budget by €200 million to reach €1.3 billion in 2021, against €1.6 billion in 2020. Hannover Re says that the largest single losses were hurricane Ida at a cost of €305 million; flooding in Europe at a cost of €208 million; winter storm Uri at a cost of €156 million; and the unrest in South Africa at a cost of €100 million.

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But despite the high nat cat burden, Hannover Re’s P&C arm has produced a combined ratio of 97.7% for 2021 compared with 101.6% in 2020, driven by lower large loss costs, year-on-year. Also, the underwriting result including interest on funds withheld and contract deposits of €384 million in P&C reinsurance.

The P&C reinsurance unit saw its operating profit jump by 84% to €1.5 billion, while the contribution made by the segment to Group net income improved by a substantial 76% to €1.1 billion.

Also in P&C reinsurance, Hannover Re has reported GWP growth of almost 15% to €19.2 billion, as net premium earned increased by 17% to €16.6 billion.

In its L&H reinsurance business, Hannover Re incurred losses of €582 million related directly to the COVID-19 pandemic, up from €261 million 2020, driven mostly by South Africa and the U.S. The reinsurer notes that this contrasted with positive one-time income of €132 million from a restructuring measure in the U.S. mortality book as well as a positive special effect of €122 million in business with longevity covers.

Additionally, the reinsurer booked positive income of €44 million in its extreme mortality cover in the investments associated with L&H reinsurance.

The L&H segment generated gross premium volume growth of more than 6% to €8.5 billion in 2021, while net earned premium increased by over 5% to €7.5 billion. However, the unit’s operating result contracted by 43% to €223 million, compared with €393 million in 2020.

Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re, commented: “In 2021 we once again demonstrated Hannover Re’s profitability and risk-carrying capacity. The above-average expenditure for natural catastrophe events in property and casualty reinsurance as well as considerable pandemic-related losses in life and health reinsurance were challenging. That said, thanks in part to our exceptionally good investment income we were able to significantly increase our Group net income and we are in a position to offer our shareholders the prospect of an attractive dividend.”

On the asset side of the balance sheet, Hannover Re has announced that its portfolio of assets under own management rose to €56.2 billion in 2021 from €49 billion in 2020.

Looking forward, Hannover Re expects to grow its GWP by at least 5% in 2022, and expects net income across the group to be in the range of €1.4 billion to €1.5 billion. However, this is based on major loss expenditure not significantly exceeding the budget of €1.4 billion, and the COVID-19 pandemic having no substantial effect on the L&H result.

“With our very solid capital base, our profitable growth and our successful risk and asset management, we are optimally placed to master the challenges of 2022. The sustained positive pricing momentum in property and casualty reinsurance and the improving state of the pandemic give me confidence that we will achieve our goals for the current financial year,” said Henchoz.

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