Hannover Re has reported a 17.3% increase in property and casualty reinsurance gross written premiums (GWP) for the first half of the year to 5.4 billion euros from 4.6 billion euros in H1 2016.
“The main driver was once again the rise in demand for structured reinsurance solutions in Europe and North America, which more than made up for premium declines in other areas,” Hannover Re said in a statement on Thursday announcing its financial results. Market conditions in P&C reinsurance remain “intensely competitive,” the statement said, as an excess supply of reinsurance and additional providers from the insurance-linked securities market, along with the absence of large losses, combined to put prices and conditions under pressure.
P&C Re net premiums earned (NPE) climbed by 12.4% to 4.3 billion euros in the first half of the year ending June 30, up from 3.8 billion euros in the first half of 2016.
While major loss expenditure in the first quarter had come in slightly under budget, the second quarter also passed off entirely without large losses, the reinsurer reported. The total expenditure from large loss events as at June 30 amounted to just 122.9 million euros, well below the level of the comparable period (352.7 million euros).
Effects of the change in the discount rate for compensation payments associated with personal injury claims in the United Kingdom, known as the Ogden rate, “again made themselves felt in the second quarter of 2017,” Hannover Re said, adding that it has booked loss reserves of 291 million euros for the first half-year.
Against a backdrop of slightly above-average frequency losses, the underwriting result for P&C Re decreased by 10.5% to 149 million euros from 166.4 million euros in H1 2017. The segment’s combined ratio is still positive at 96.5% compared to 95.4% in H1 2016; “the modest increase can be attributed to the vigorous growth in structured reinsurance,” the statement said. Group net income increased by 17.4% to 444 million euros from 378.1 million euros in the first half of 2016.
In life & health reinsurance, GWP declined 2.4% as at June 30 to 3.6 billion euros from 3.7 billion euros, while NPE decreased by 3.6% to 3.2 billion euros from 3.3 billion euros. Group net income also contracted by 12.6% to 114.2 million euros from 130.6 million euros in H1 2016. “Market conditions in life and health reinsurance remain challenging, although attractive business opportunities opened up in some regions and new product segments,” the statement said.
“Once again, both of our business groups, namely property & casualty and life & health reinsurance, as well as exceptionally good investment income all contributed to our pleasing half-yearly result,” Hannover Re CEO Ulrich Wallin said. “We are nevertheless faced with a market situation that remains challenging going forward.”
For the Hannover Re Group, GWP increased by 8.6% as at June 30 to 9 billion euros from 8.3 billion euros in the first half of last year. NPE grew 5% to 7.5 billion euros from 7.2 billion euros. Group net income increased 9.6% to 535 million euros from 488 million euros in H1 2017.
“Despite the challenging environment in international (re)insurance business and on the capital market, Hannover Re expects to continue operating with sustained success going forward,” the statement said.
Looking forward, in P&C Re, the reinsurer “expects the underwriting result for the full 2017 financial year to come in on a level that will still be good despite the protracted soft market,” with a target of a combined ratio of less than 96%. In L&H Re, “Hannover Re anticipates further demand for reinsurance solutions providing solvency relief. Based on constant exchange rates, Hannover Re expects an increase of more than 5% in gross premium and Group net income in excess of 1 billion [euros] for the current financial year. This is conditional upon major loss expenditure not significantly exceeding the budgeted level of 825 million [euros] and assumes that there are no unforeseen distortions on the capital markets,” the statement concluded.