Canadian Underwriter

Hannover Re posts Group net income of 786.0 million euros in 2015 Q3, up from 695.4 million euros in prior-year quarter

November 4, 2015   by Canadian Underwriter

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Hannover Re reports being well on track for solid year-end financial results, announcing Wednesday that Group net income was 786.0 million euros in 2015 Q3, a 13% increase over the 695.4 million euros in the prior-year quarter.

The already good Group net income in 2014 Q3 was further boosted for the quarter ending Sept. 30, 2015, notes a statement from the reinsurer. “This result is all the more pleasing for us given that the general climate in the reinsurance business and the low interest rate environment continue to prove challenging,” Hannover Re CEO Ulrich Wallin says in the statement.

Hannover Re reports Group net income of 786.0 million euros in 2015 Q3, up 13% from 2014 Q3

The net income increase was driven by what Hannover Re characterizes as a “remarkable growth in premium income,” pointing out that gross written premium (GWP) increased 20.9% to 12.9 billion euros in 2015 Q3 compared to 10.7 billion euros in 2014 Q3, while net premium earned (NPE) climbed 20.8% to 10.8 billion euros from 9.0 billion euros. (When currency adjusted, the increases for both in the third quarter of 2015 compared to the prior-year quarter were 10%.)

Hannover Re reports a solid performance for Property and Casualty Reinsurance in 2015 Q3. “Despite its disciplined underwriting practice,” the company notes that GWP climbed sharply by 20.8% to 7.3 billion euros in the third quarter of 2015 compared to 6.1 billion euros in the same quarter of 2014. “Growth of 9.8% would have been recorded at constant exchange rates.”

With regard to NPE, it rose by 16.9% to 6.0 billion euros compared to 5.1 billion euros (adjusted for exchange rate effects, growth would have been 6.7%).

Also for P&C Reinsurance, the underwriting result was 251.4 million euros in 2015 Q3 compared to 225.3 million euros in 2014 Q3, the operating profit was 936.3 million euros compared to 846.8 million euros, and Group net income was 651.0 million euros compared to 560.8 million euros.

Property & Casualty Reinsurance results for 2015 Q3

“Property and casualty reinsurance continues to be notable for an absence of market-changing major losses,” Hannover Re reports. “Nevertheless, an increased number of smaller natural disasters as well as, most significantly, fire and marine losses have been incurred in the current year.”

Although net expenditure on major losses for the quarter ending Sept. 30, 2015 increased to 436.4 million euros compared to 242.2 million euros in the prior-year quarter – the largest single loss, currently estimated at 95.9 million euros for net account, being the Tianjin explosions – “it was, however, still well within the budgeted amount for this period,” the statement notes. Hannover Re reports there is 253.6 million euros remaining in the major loss budget for 2015.

Related: Tianjin explosions set to become one of Asia’s largest insured man-made loss events, potential losses estimated at US$1.6 billion to US$3.3 billion: Guy Carpenter

Related: Tianjin explosion insured losses could exceed US$1.5 billion, undermine financial performance of some regional players: Fitch Ratings

Hannover Re reinsurer also witnessed gains with respect to investment income. The company’s portfolio of assets grew to 37.7 billion euros as of Sept. 30, 2015 compared to 36.2 billion euros as of Dec. 31, 2014.

“Despite the protracted low interest rate environment, ordinary investment income, excluding interest on funds withheld and contract deposits, came in significantly higher than the level of the comparable period, when it was 791.8 million euros, at 912.5 million euros. This was due, in part, to a special effect in life reinsurance business as well as to sharply increased earnings from fixed-income securities and real estate,” Hannover Re explains.

Ulrich Wallin

“We are confident of achieving our ambitious profit target of around 950 million euros for the full financial year,” reports Wallin (pictured left).

“Based on constant exchange rates, the company anticipates growth of 5% to 10% in gross premium volume,” the company notes. This is conditional upon major loss expenditure not significantly exceeding the anticipated level of 690 million euros and also assumes that there are no unforeseen adverse developments on capital markets, it adds.

For the upcoming round of treaty renewals in P&C Reinsurance on Jan. 1, 2016, “Hannover Re expects to see some easing in the pressure on prices and conditions. Rising demand for high-quality reinsurance protection in mature markets as a consequence of the economic upturn in the United States should have favourable implication for the market development,” the statement notes.

“Reinsurance prices are likely to stabilize in some areas and room for rate increases will probably open up in some lines and markets,” the company adds.

For the coming year, Hannover Re reports it expects a stable to slightly reduced gross premium adjusted for currency translation effect, while Group net income should be in the order of 950 million euros.