Hannover Re expects 2017 profit to match 2016 despite challenging market
Hannover Re will target the same profit level for 2017 as in 2016 despite continuing price pressure in property/casualty and a low interest rate environment, it said in a November 10, 2016, results presentation.
Its expectations for 2017 include stable premium volumes and a stable combined ratio in property/casualty reinsurance. While its investment yield is likely to shrink, higher investment volumes are likely to offset the impact, CFO Roland Vogel said while presenting its results. In life reinsurance Vogel sees potential for price increases.
In the upcoming January renewals, Vogel expects prices to remain under pressure in the absence of major loss events and negotiations to be tough as capacity in reinsurance continues to significantly outstrip demand.
However, prices have reached the bottom end of what is acceptable for reinsurers and Hannover Re is prepared to shed business to protect underwriting profitability, he said.
Its gross written premiums contracted by 3.8 percent to €12.5 billion in the first nine months of 2016.
In property/casualty reinsurance, its gross written premiums contracted by 2.7 percent and the combined ratio was 95 percent, a slight improvement from 95.5 percent in the same period a year ago.
While prices may overall have reached bottom, there are outliers such as aviation, where Vogel sees barely any opportunity to grow. There is, however, some potential to grow the business in the US and Asia, he noted.
In the life business, gross written premiums were down 5.2 percent year-on-year in the first nine months at €5.3 billion, but Hannover Re expects a boost for the segment from the implementation of Solvency II and associated demand for reinsurance solutions, including for example in the area of longevity business. Its group net income in the segment improved by 17.5 percent year-on-year to €208.9 million.
Hannover Re may well end 2016 with a net profit of €1.04 billion as predicted by analysts, Vogel said. Hurricane Matthew, which struck North America at the beginning of October, is likely to cost the reinsurer less than €100 million.
After adding costs from an earthquake in Italy and a large fire, Hannover Re would have around €300 million left in the loss budget for the rest of the year, Vogel explained.
In the first nine months of 2016, Hannover Re registered a net profit of €790 million compared with €786 million in the same period a year ago.
