Despite heavy catastrophe losses in 2017 Hannover Re’s parent company Talanx’s financial results show the re/insurance giant remains well-placed to ride out the industry’s cyclical low points reporting an overall 6.3% gross written premiums increase, solid return on investment and continued dividends’ growth.
Group net income for 2017 was EUR 672 million, Talanx said a “satisfactory” achievement in a year where the net burden of large losses nearly doubled from EUR 883 million in 2016 to total EUR 1,620 million in 2017, far surpassing the firm’s large-loss budget of EUR 1,115 million.
Herbert Haas, Chairman of the Board of Management of Talanx AG, said; “the severe natural catastrophes in the third quarter had a huge impact on the 2017 financial year, leading to recorded losses market-wide of USD 134 billion.
“After a positive performance across all divisions in the first half of the year and a solid fourth quarter, ultimately we can report very satisfactory Group net income of EUR 672 million.
“Owing to the diversification of our business, the exceptional impact of large losses in Industrial Lines and Property/Casualty Reinsurance only cost us a little more than one quarterly result at year-end. This confirms that the Group is robust and extremely resilient.”
The primary insurance segment took the brunt of the large losses, hit with EUR 492 million losses, however, the firm’s reinsurance segment losses doubled 2016’s EUR 627 million at EUR 1,127 million.
Hurricane Irma in the USA/Caribbean was responsible for the biggest large loss, hitting the Group with EUR 387 million in losses.
Industrial lines and property/casualty reinsurance were particularly badly hit by very large losses from Central and North American natural catastrophes.
These losses caused Talanx’s combined ratio to deteriorate from 95.7% to 100.4% in 2017.
However, property/casualty reinsurance, industrial lines, and international retail segments’ growth contributed substantially to the Group’s overall EUR 33.1 billion, or 6.3% premium income growth.
Haas said; “both the German and international retail business developed nicely. We therefore achieved our aim of generating more than 50 percent of premiums in primary insurance abroad a year ahead of schedule, with around 52 (2016: around 49) percent. This indicates that our international diversification is progressing faster than planned.”
The group’s net return on investment rose to 4% in 2017, boosted by investment income increasing by 11.3% to EUR 4.5 billion.
Talanx said the rise is mostly down to higher realised gains to finance the Zinszusatzreserve (ZZR; additional interest reserve) in the Retail Germany Division and to the sale of shares in reinsurance.
The reinsurance segment made a solid contribution to group net income; the property/casualty reinsurance segment saw strong year on year premium growth by 16.4%, rising to EUR 10.7 billion.
The Board of Management and Supervisory Board have proposed a 5 cent dividend increase from EUR 1.35 to EUR 1.40 per share to maintain continuous investment growth for shareholders since the Group’s IPO.
The Talanx Group aims to continue to pay out 35 to 45% of Group net income as dividends as well as to keep the dividend at least stable.
Talanx maintains its outlook of around EUR 850 million group net income for the 2018 financial year, assuming large losses remain within the expected range.