Global reinsurance giant Hannover Re has reported a 19.3% rise in net income for the first-half of the year, supported by an improved result in life and health (L&H) and significant expansion in property and casualty (P&C) reinsurance.
The reinsurer’s net income reached €662.5 million, while its operating profit for the first-half of the year increased by 3.8% to €942.1 million, when compared with the first-half of 2018.
Overall, gross written premiums (GWP) grew by more than 17% to €11.7 billion, compared with €10 billion a year earlier, and which was supported by expansion in P&C lines. Net earned premiums improved by more than 12% in the period, to €9.4 billion.
Hannover Re’s Chief Executive Officer (CEO), Jean-Jacques Henchoz, commented: “In the 1 June and 1 July treaty renewals in property and casualty reinsurance we were able to secure long overdue price increases.
“In view of the business development to date we are well on track to achieve Group net income in the order of EUR 1.1 billion for 2019. In addition, the result will be positively influenced by a one-off effect to the tune of EUR 100 million associated with our participation in Viridium Group.”
The reinsurer notes that it was able to substantially grow its portfolio in P&C reinsurance through 2019, and despite the ongoing competitive marketplace, Hannover Re highlights improved conditions overall.
In P&C reinsurance, GWP increased by a huge 21.3% to €7.8 billion in H1 2019, while net earned premiums increased by 15.2% to €6 billion.
Large losses impacted the P&C unit by €140.5 million in the six-month period, and while this is up on the first-half of 2018, it remained below the reinsurer’s budget of €370 million. The reinsurer says that the largest loss was the explosion at a refinery in Philadelphia in June, at €45.7 million. And also the heavy floods in Australia, which cost the firm €25.9 million.
Hannover Re adds that its P&C result was also hit by additional reserves for prior year events, including reserves for typhoon Jebi. Analysts from Morgan Stanley have said that in Q2, loss creep from Jebi totalled €58 million for Hannover Re, while the reinsurer notes that in H1 2019 loss creep from Jebi amounted to €106 million.
The P&C unit recorded an underwriting result of €195.9 million in H1 2019, which is slightly down on the €220.9 million recorded in the first-half of 2018. At 96.7%, Hannover Re’s P&C combined ratio weakened slightly from the 95.7% posted in the same period in 2018.
Overall, the P&C unit contributed €431.3 million to the Group net income, which is relatively stable when compared with the first-half of 2018.
The firm’s L&H reinsurance segment produced a strong operating result of €286 million in the first-half of the year, up 30.3% on H1 2018. The segment’s contribution to Group net income increased to €257.7 million from €146.8 million in H1 2018.
The L&H unit recorded GWP growth of 9.3% to €3.8 billion in H1 2019, while net earned premiums rose by 7% to €3.4 billion.
CEO Henchoz commented: “The stronger profitability of life and health reinsurance can be attributed in large measure to the one-off effect associated with our participation in Viridium Group.
“As a further factor, the termination of loss-making treaties in US mortality business in the previous year – which had given rise to exceptional strains – continues to have a favourable effect on the result.”
Hannover Re’s net investment income improved by 16.4% in H1 2019 to €865.6 million, compared with €743.6 million in H1 2018.
Across the business, Hannover Re fell to a technical underwriting loss in H1 2019 of €36 million, driven by L&H impacts and also some loss creep from Jebi. The reported net underwriting result including funds withheld, totalled €58 million.
Looking forward, and in light of a positive June and July renewals season, Hannover Re expects to experience further growth in P&C reinsurance in 2019, and targets a year-end combined ratio of 97%. The reinsurer also sees good opportunities to grow its L&H reinsurance unit in the coming months, and overall, expects GWP growth in single-digits.