Hannover Re raises profit estimates as pricing picks up

Hannover Re, the world’s third-biggest reinsurer, reported increased net income and raised its guidance for the full year and for 2020, as the pricing environment improved.

Gross Written Premiums for the third quarter rose to €5.7 billion, up 13.8 percent on the same period a year earlier. Net income doubled to €340.7 million. The combined ratio rose to 102.1 percent, from 98.7 percent. It said the biggest loss events in the quarter were Hurricane Dorian, with a net strain of €186.6 million, and Typhoon Faxai, at €75.9 million. The insolvency of travel agent Thomas Cook cost the company €112.4 million.

"After nine months we are looking at an excellent result and a very good return on equity", Jean-Jacques Henchoz, chief executive of Hannover Re, said. "In life and health reinsurance the good underlying profitability is becoming increasingly evident, while property and casualty reinsurance continues to deliver stable results on a high level despite persistent strains from large losses. A further factor is the very strong investment income, enabling us to raise our profit guidance for 2019 to more than €1.25 billion."

The market for reinsurers continues to be marked by a number of considerable challenges, the company said. The long-standing excess of capacity for coverage of insurance risks remains a drag on prices for reinsurance protection. In addition, low interest rates are restricting investment income for the industry, necessitating rigorous discipline in technical underwriting.

But it added: “Reflecting the market's response to these challenges, Hannover Re discerned a growing turn for the better in the development of prices and conditions in the various rounds of renewals during the year. These rebound effects are not adequate in all areas, however, with further price increases needed in some sub-markets.”

Henchoz said: "In the coming year we are looking for a relatively stable profit contribution from property and casualty reinsurance and sustained good contribution from life and health reinsurance. Investment income will likely contract slightly, however, owing to the elimination of the non-recurring effect. We therefore anticipate Group net income of around €1.2 billion in 2020."