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Hannover Re’s Group net income up 20% in first half of 2015 over first half 2014


August 5, 2015   by Canadian Underwriter


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Hannover Re has comfortably surpassed half of its full-year profit target for 2015 during the first six months of the year, posting Group net income of 531.9 million euros compared with 444.4 million euros for the same period in 2014.

The Group net income of 531.9 million euros consisted of 418.4 million euros (up 20.3% from 347.9 million euros for the first half of 2014) for P&C reinsurance

The change represented a 19.7% year over year, notes a press release Wednesday from the world’s third largest reinsurer, prompting Hannover Re to raise its 2015 target for net income after tax from the original 875 million euros to a figure in the order of 950 million euros.

“Both business groups – namely Property & Casualty and Life & Health reinsurance – and also the investment portfolio played a successful part in this positive result,” Ulrich Wallin, CEO of Hannover Re, notes in the statement.

“The sustained strong profitability of property and casualty reinsurance shows that with our systematically pursued policy of selective underwriting we are well-placed to tackle the conditions associated with challenging market phases,” Wallin continues.

The Group net income of 531.9 million euros consisted of 418.4 million euros (up 20.3% from 347.9 million euros for the first half of 2014) for P&C reinsurance, and 145.6 million euros (up 26.2% from 115.4 million euros) for L&H reinsurance.

With regard to 2015 Q2 results compared to 2014 Q2, Group net income was 252.2 million euros, up 19.3% from 211.5 million euros. Broken down, the 252.2 million euros figure is made up of 247.0 million euros (up 64.6% from 150.1 million euros) for P&C reinsurance, and 18.1 million euros (down 74.9% from 72 million euros).

Looking at premiums for the first half of 2015, Hannover Re Group reports the gross written premium (GWP) was 8.6 billion euros, up 21.5% from 7.1 billion euros in the first half of 2014.

“This can be attributed, in part, to the strength of the U.S. dollar. At constant exchange rates, growth would still have come in at a pleasing 9.5%,” reports Hannover Re. The reinsurer also cites as key contributory factors the sizeable individual transaction in various regions and line, including Asia, North America, agricultural risks and in the specialty filed of insurance-linked securities.

In addition, net premium earned (NPE) was 7.0 billion euros, up 20.2% from 5.8 billion euros (at constant exchange rates, growth would have amounted to 8.3%); and net underwriting result was a loss of 39.9 million euros compared to 14.5 million euros.

For P&C reinsurance specifically, GWP was 5.0 billion euros for the first six months of 2015 compared to 4.1 billion euros in the first six months of 2014 (up 21.9%); NPE was 3.9 billion euros compared to 3.4 billion euros (an increase of 15.5%); and net underwriting result was 170.9 million euros compared to 158.3 million euros (up 7.9%). [click image below to enlarge]

The combined ratio for the first half of 2015 was 95.4% compared to 95.0%

The largest individual losses for Hannover Re were the Niklas storm in Europe, at 35.4 million euros, and the oil platform explosion in the Gulf of Mexico, at 32.9 million euros.

“While supply still outstripped demand in worldwide property and casualty reinsurance, the first signs of bottoming out began to emerge here on the rates side,” the company statement notes. “This was also true to some extent of the treaty renewals as at 1 April 2015,” Hannover Re adds.

Investment income also played a role in positive results. Group net investment income was 798.8 million euros for the first six months of 2015 compared to 707.5 million euros for the same period of 2014. Comparing Q2 for 2015 and 2014, net investment income was up 10.6% to 383.1 million euros from 346.4 million euros.

Related: Latest PERILS AG loss estimate for windstorm Mike-Niklas 895 million euros

Other half-year results include the following:

• operating profit (EBIT) for the first half of 2015 was 789.4 million euros compared to 683.7 million euros for the first half of 2014;

• operating profit (EBIT) for P&C reinsurance was 583.7 million euros compared to 521.0 million euros;

• the combined ratio was 95.4% compared to 95.0%.

The revised 950 million euros profit target for the year “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,” notes the statement. Hannover Re further reports that, based on constant exchange rates, the company is looking to grow gross premium volume by a figure in the range of 5% to 10%.

With regard to treaty renewals at June 1 and July 1, 2015, these once again demonstrated that the general environment in p&c reinsurance remains challenging, the press release states.

“In North America, the pressure on rates and conditions remains undiminished due to the very good results booked in both the primary and reinsurance sectors in the absence of large losses,” it notes. “The rate reductions were, however, smaller than anticipated and offer early hints of a bottom being reached. Stronger demand driven by the improved state of the economy is the key factor here.”

Hannover Re notes that casualty business in the United States “offered some attractive business prospects, including, for example, covers for cyber risks. In the Canadian market, too, the company was able to act on promising opportunities,” the statement adds.