Hannover Re P&C volume jumps 19.2% in H1

Hannover Re grew gross written premium in property and casualty (P&C) reinsurance by 19.2 percent year on year to €6.47 billion in the first half of 2018.

The figure would have been as high as 27.6 percent adjusted for exchange rate effects, the company noted.

The main growth drivers were the continued rise in demand for structured reinsurance solutions in Europe and North America as well as rate increases in traditional reinsurance.

Hannover Re was able to push through higher reinsurance rates on average but rate movements in the industry failed to live up to the expectations of many market players, the company noted. US catastrophe business saw a continued abundant supply of additional capacity from alternative capital markets, which prevented a stronger response on the pricing side in traditional reinsurance.

Nevertheless, the underwriting result in P&C reinsurance soared by 37.4 percent year on year to €204.7 million in the first six months of 2018.

Expenditure on large losses was moderate. The burden of major losses in the first half-year was attributable principally to events such as winter storm Friederike and an earthquake in Papua New Guinea. Amounting to €93.3 million the figure came in €258 million below expectations.

The combined ratio stood at 95.7 percent in the first half compared to 96.5 percent in the same period a year ago. Net income in P&C reinsurance fell by 2.1 percent to €434.4 million owing to higher tax charges, the company said.

Hannover Re was able to improve its position in the June and July treaty renewals with a number of sizeable customer accounts, particularly in North America and Europe, according to the corporate statement. All in all, the premium volume booked for the portfolio up for renewal grew by 16 percent.

"When it came to the renewal of reinsurance treaties in Florida, some of which had suffered considerable losses in the previous year, we continued to pursue our profit-oriented underwriting policy", said CEO Ulrich Wallin.

"Our exposure to natural catastrophe risks therefore remains comfortably within our risk appetite, which is unchanged from the previous year," Wallin added.

Gross written premium in life and health reinsurance decline of 1.5 percent year on year to €3.5 billion in the first half of 2018. At the same time, net income for life and health reinsurance increased by 28.5 percent year on year to €146.8 million.

"Once again, both business groups, namely property and casualty as well as life and health reinsurance, plus a stable investment income shaped the positive result", Wallin said.

Overall, group net profit was up 3.8 percent year on year at €555.3 million in the first half of 2018. Gross written premium was up 11 percent at €9.99 billion over the period.

"Bearing in mind the business development to date, we confirm our net income target of more than €1 billion for 2018, although strains will be incurred in the second half of the year from portfolio management actions in connection with our US mortality business,” Wallin said. “This is something that we are willing to accept because we are thereby avoiding higher losses in subsequent years," he added.

With a view to improving the legacy portfolio from older underwriting years, Hannover Re has passed on price adjustments to customers. Some ceding companies have terminated treaties early in response to these price increases, as a consequence of which charges will be taken against earnings recognised under IFRS accounting in the second half of the year, the company warned. Since these treaty terminations will also result in the avoidance of higher losses in the future, this will have positive effects on income and on the solvency balance sheet over the long term, Hannover Re added.

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So far, recaptures have been announced that will result in pre-tax charges of $264 million in the second half of the year. It is to be expected that this amount will rise further by the end of the year.