Hannover Re slips to P&C Re underwriting loss on major claims & PYD

Hannover Re swung to a net underwriting loss of €96 million in the fourth quarter, yanking its full-year result into the red for a €25 million net underwriting loss.

Large loss and negative prior year reserve development overcame the benefits of hefty premium Savegrowth to bring about the full-year underwriting loss. Only investment gains and record results in life insurance brought the group to its promised €1.7 billion full-year net profit.

“The environment in which we are operating remains challenging,” CEO Jean-Jacques Henchoz said of the year. “Property and casualty reinsurance, in particular, saw heavy losses in 2022 from natural catastrophes, the war in Ukraine and the pandemic.”

The balance on rising premiums and rising claims and reserves tipped to the cost side: the segment combined ratio rose 2.1 percentage points for the year to 99.8%. APAC suffered terribly at 126.1%. Agriculture suffered a technical loss at 105.8%.

That left Hannover Re unable to tick the box on its combined ratio target for a result at or below the 96% mark. Hopes for EBIT growth at or above 5% were also dashed on the 10.6% erosion.

Net large losses loomed large. The 2022 tally of €1.71 billion, 7.9% of net earned premium, went well above a budgeted sum of €1.4 billion, the sixth straight year of overshoot. Gross large loss approached the $3 billion mark.

Mark Hurricane Ian at €322 million, Australian floods at €233 million, winter storm Ylenia in Central Europe at €107 million and the IBNR reserve of €331 million for possible losses from the war in Ukraine. Prior year reserve adjustments turned negative on account of Brazilian drought and Malaysian floods.

And Covid-19 left the segment with a €269 million charge for the year as "substantially higher than expected" claims in Asian accident and health more than offset positive run-off in the credit, surety and political risks lines.

That took some of the shine off of a top line defined by high growth. Gross written premium in P&C reinsurance increased by an eye-opening 26.1% for 2022 to €24.2 billion, a 17.9% gain at constant FX. GWP was up 20.3% year on year in the fourth quarter.

Record results in life & health plus investment income padded by inflation-linked bonds saved the day, allowing the group to close the year with the €1.4 billion in net profits it had promised to its investors in guidance revised in November.

For the group as a whole, gross premium grew 19.9% to €33.3 billion or 12.7% at constant FX rat3es. Net premium earned climbed by 22.9% to €29.7 billion, or 15.7% at constant FX.

Group operating profit of €2.1 billion was up 20.3% on the prior year and group net income by 14.2% to the €1.41 billion mark.

Hannover Re has previously indicated that it is now targeting a €1.7 billion net income for 2023 on reinsurance revenue growth at or above 5%.

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