Hannover Re and parent Talanx issue profit warnings on US nat cat losses

Hannover Re said on Sept. 21 that it expects nat cat events to exceed its large loss budget which is likely to result in the company missing its targeted €1 billion group net income in 2017.

Hannover Re expects that its defined large loss budget of €825 million will be able to absorb the losses associated with Hurricanes Harvey and Irma. However, the most recent natural disasters, namely Hurricane Maria and the earthquake in Mexico – for which no detailed loss advices are available to date –, will give rise to further substantial strains that will exceed the large loss budget, according to the press release.

Consequently, fulfilment of a major criterion for Hannover Re's profit guidance is at risk, which means that the targeted group net income of more than €1 billion may not be achieved.

Similarly, Hannover Re’s parent Talanx said on the same day that the group has been impacted by the latest natural catastrophes in Central and North America.

While the burden of losses resulting from Hurricanes Harvey and Irma is likely to be within pro-rata large loss budget, the additional losses arising from Hurricane Maria and the most recent earthquake in Mexico, which cannot as yet be exactly quantified, will exceed the pro-rata large loss budget amounting €818 million for the first nine months of the financial year in the reinsurance and industrial lines divisions. This means that the amount of the large loss budget of €267 million for the two divisions in the fourth quarter is unlikely to be available in full. The extent to which Talanx will be able to achieve its profit target of around €850 million for the financial year 2017 therefore depends on the development of the large loss burden up to the end of the year, according to the statement.

The Hannover-based Talanx group operates as a multi-brand provider with a focus on B2B insurance. Under the HDI brand Talanx operates both in Germany and abroad in industrial insurance as well as retail business. Further group brands include Hannover Re, Targo insurers, PB insurers and Neue Leben as well as the Polish insurer Warta.

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