Hannover Re can hit 2022 targets even as Ian submerges large loss budget

Hannover Re managed to increase third quarter and 9M profits despite further hit from natural catastrophe amid ongoing inflation problems, then reiterated that it remains on track to hit its FY2022 goals.

Q3 group operating profits were up 26% year on year leaving a 9M increase of 3.7%, financial statements out pre-session indicated.

“The group profit target of €1.4 to 1.5 billion has clearly become more ambitious, but remains achievable,” CEO Jean-Jacques Henchoz told his company's third quarter earnings call. Expect full-year results “in the lower end of our target range.”

Hurricane Ian delivered a net strain of €276 million, Hannover Re said of the third quarter large loss.

“Our modest market share in Florida has helped us avoid too much exposure,” Henchoz told investors. “We are clearly underweight versus our global market share.”

That helped put 9M large losses up to a net €1.48 billion, “clearly higher” than the €1.08 billion budgeted for the 9M period and above the 1.4 billion FY budget.

YTD losses also included €211 million for Australian floods, €115 million for winter storm Ylenia and reserves for the war in Ukraine. Asia-Pacific suffered on accident and health lines following covid regulations in key markets.

Gross written premium in P&C rose by 31.2% y/y in Q3 to bring the 9M annual gain to 27.6%. Revenues, as net earned premiums, rose at a faster annualised pace.

That revenue-loss mix put the combined ratio in P&C up to 99.2% for the first 9M and 99.6% in Q3 alone, above the group's mid-term goal for readings no higher than 96%.

For the group as a whole, gross written premium rose 24.5% in the third quarter to €8.91 billion to bring the YTD tally to €26.3 billion, a 21.4% gain.

Life and health more than doubled its Q3 operating profit contribution to nearly offset the decline in investment earnings. In the YTD, investment income is up fractionally year on year and the life & health contribution is double the prior year.

By the bottom line, the Hannover Re group sported a net profit of €221.9 million in Q3 and €870.6 million in the first nine months.

The group passed on its traditional deadline for presenting year-ahead financial guidance, citing the shift in accounting standards.

"I am quite optimistic for 2023," Henchoz said, citing continued high demand for P&C reinsurance and expectations of strong rate gains.

The company's CFO Clemens Jungsthöfel suggested that the rise in the premium base should translate into larger profits, adjusted by a still-imprecise effect from accounting rules.

"So I would not expect a significant increase in net income," Jungsthöfel said.

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