Hannover Re takes 82% hit to Q1 P&C underwriting profit on large loss

Hannover Re suffered an 82% year on year decline in first quarter underwriting profits to €26.2 million after taking an above-budget hit from large losses and writing reserves against likely losses in the Ukraine.

Major loss spend of €335.8 million net (€391.7 million gross) was some €52 million above budget, with management calling out €124 million for European winter storms and €186 million on Australian floods.

Hannover Re additionally wrote its first reserves against  likely losses from the Ukrainian war at 3% of NPE, but limited its early estimates to lines with obvious (albeit yet unreported) losses while excluding lines with greater uncertainties, including aviation.

Those losses, incurred or pending, drove the combined ratio to 99.5%, above the 96% target ceiling and the 96.2% from the prior year period.

Losses and reserves obscured strong premium growth. Gross written premium in P&C reinsurance rose to €7.1 billion, up 25.6% year on year or 19.5% if adjusted for FX changes. Net premium earned rose by 23.8% to €4.8 billion, an 18% y/y gain on constant FX rates.

Structured and ILS drove the pace with combined premium growth at some 45% year on year, P&C chief Sven Althoff added during the Q1 investor call.

Underlying P&C reinsurance premium growth (ex-structured and ILS) would have been up 14% year on year, still “higher than anticipated” on account of “favourable insurance rating environment” and heightened run-off from prior years, Althoff said.

Hannover Re remains on track to hit the 2022 financial targets it laid out in November 2021. “As of today, we remain confident,” CEO Jean-Jacques Henchoz (pictured) told the Q1 investor call.  Hannover Re will draw on select buffers, possibly including eventual Covid19 reserve releases, officials indicated. Goals include GWP growth in excess of 5% and group net income at €1.4 to 1.5 billion.

For the larger group, Q1 net income of €263.6 million was down 13.8% year on year. Group gross written premium rose 19.5% to €9.33 billion. Net earned premium rose just under 18% to €6.7 billion. Investments padded earnings to the tune of €484 million, up nearly 10% from the Q1 2021 contribution.

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