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Nat cat losses stunt Hannover Re’s P&C performance

11th March 2020 - Author: Charlie Wood

Global reinsurer Hannover Re has posted a net income of €1.28 billion for 2019, a 21.2% increase from the previous year, despite significant property and casualty reinsurance losses.

The largest loss was hurricane Dorian at a net cost of €194.7 million. Typhoons Hagibis and Faxai caused further expenditure of €183.8 million and €83.8 million respectively.

An amount of €85.7 million was set aside for the insolvency of UK travel operator Thomas Cook.

Total net major loss expenditure in 2019 came to €956.1 million, exceeding the large loss budget of €875 million for the full year.

The gross premium volume in property and casualty reinsurance rose by 23.4% to €14.8 billion while net premium earned climbed by 18.5% to €12.8 billion.

Combined ratio deteriorated from 96.5% in 2018 to to 98.2% and was higher than the targeted level of no more than 97%.

The reinsurer says primary factors in this rise were the high losses incurred in the financial year and delayed claim notifications for prior-year losses, especially for Typhoon Jebi.

The net profit in property and casualty reinsurance contracted by 6.2% to €871.7 million.

“We have achieved a record result and thereby once again demonstrated our profitability, even though 2019 was another year of relatively high losses,” Hannover Re Chief Executive Officer Jean-Jacques Henchoz said.

“We are again able to offer our shareholders the prospect of an attractive dividend including a special distribution, but we are also retaining the necessary flexibility to invest further in our profitable growth.”

Gross premium volume increased sharply by 17.8% to €22.6 billion while the level of retained premium decreased slightly to 90.0%. Net premium earned grew by 14.1% to €19.7 billion.

The net profit in life and health reinsurance more than doubled to reach €471.6 million.

The gross premium volume in life and health reinsurance was 8.6% higher than in the previous year at €7.8 billion while net premium earned rose by 6.9% to €6.9 billion.

“We can look back on an excellent development in our life and health reinsurance portfolio. As announced, we generated a significantly improved result,” Henchoz said.

“At the same time we are benefiting from additional business opportunities available to financially strong reinsurers – including in the area of financial solutions, where we offer our clients tailor-made reinsurance solutions designed to improve their solvency, liquidity and capital position.”

For 2020 Hannover Re expects to grow its gross premium in total business by around 5% based on constant exchange rates.

Group net income should reach a level of around €1.2 billion. This is conditional on major loss expenditure not significantly exceeding the budgeted level of €975 million and assumes that there are no exceptional distortions on capital markets.

“The positive momentum from the 1 January treaty renewals should accelerate over the course of the year,” Henchoz added.

“This will be reflected in further improvement in prices and conditions for strongly capitalised reinsurers, which gives me confidence that we shall achieve our goals for the current financial year.”

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