Talanx, the parent of reinsurer Hannover Re, has reported that its underwriting result declined by more than 50% in the first nine months of the year to a loss of €1.97 billion, as the company exceeded its large losses budget as a result of substantial COVID-19-related claims.
Overall, 9M 2020 losses from the pandemic amounted to €1.058 billion, primarily related to business interruption, event cancellations, and credit insurance. Other negative effects of the virus relate to investments, at -€170 million, and provisions for future premium decreases of €104 million.
Large COVID-19 losses totalled €899 million and were far greater than losses from natural disasters during the period. Although, Talanx notes that nat cat losses were also higher than the prior year period at €507 million, driven by Hurricane Laura, the Derecho event in the Midwest and also tornado Nashville.
All in all, Talanx has reported large losses of €1.6 billion for the nine month period ended September 30th, 2020, which is twice as high as the same period in 2019. Of this total, some €1.149 billion was attributable to reinsurance and €452 million to primary insurance.
As a result of COVID-19 and other natural disaster events during the year, Talanx has reported that large losses exceeded the nine-month budget of roughly €1.020 billion and the full-year 2020 budget of roughly €1.335 billion.
Talanx states that net COVID-19 expenses of €842 million impacted operating profit during the period, which totalled €1.291 billion.
Owing to the losses, the firm has reported that the underwriting result declined by more than 50% to €1.972 billion, while net investment income dipped slightly to €3.1 billion, partly driven by low interest rates.
Overall, Talanx has reported a combined ratio of 100.7% for the first nine months of 2020 against 98.5% for the same period in 2019.
Gross written premiums jumped by over 5% in 9M 2020 to €31.9 billion, while net premiums earned increased by 4.6% to €25.3 billion, against €24.2 billion for the same period in 2019.
The insurer and reinsurer’s Group net income reached €520 million for 9M 2020, which represents a 30% decline from the €742 million reported for the same period in 2019.
Torsten Leue, Chairman of Talanx’s Board of Management, commented: “The coronavirus pandemic is and remains a challenge. Luckily we are seeing profitable growth and are in robust shape. Group net income is impressive given the pandemic and the high level of losses seen in the hurricane season. A better overview of pandemic-related expenses means we are now able to issue an earnings forecast: we are confident both for the coming months and for next year.
“We are expecting Group net income for 2020 to be clearly above EUR 600 million and for it to grow in 2021 to EUR 800–900 million. In addition, we are confirming our medium-term Group targets for the period up to 2022. We are maintaining our dividend strategy and are aiming to distribute the same amount as in the previous year.”
Looking at the firm’s reinsurance division, which experienced much of its COVID-19 hit, and Talanx reports that the virus impacted the large loss budget at P&C reinsurance by €700 million. However, in spite of the crisis, the reinsurance arm increased its growth in 9M 2020 with GWP jumping by almost 11% to €19.3 billion.
Although, COVID-19 claims did impact operating profit by more than 32% to €916 million, and the contribution made by reinsurance to Group net income fell, year-on-year, to €334 million.
