Margin-oriented underwriting means GWP dip at Hannover Re
Hannover Re shrank its book slightly in the first nine months of 2016 as it pursued a “margin-oriented underwriting approach” but its profits increased and it said it is on track to achieve its full year profit target of at least €950 million for the full 2016 financial year.
The company made a net profit of €790.0 million in the first three quarters compared with €786.0 million in the same period a year earlier. Its combined ratio was 95 percent, within its target zone of below 96 percent.
But the competitive pressures of reinsurance at the moment could be seen in its gross written premiums, which contract by 3.8 percent to €12.5 billion in the period. It said this puts the company in line with its expectations for the full year.
Gross written premiums contracted by 2.7 percent in property/casualty reinsurance and 5.2 percent in life and health reinsurance but it noted that positive impetus can still be anticipated in this area from the implementation of Solvency II and associated demand for reinsurance solutions, including for example in the area of longevity business.
It stressed that the supply of reinsurance coverage continues to exceed demand, leaving prices and conditions under sustained pressure. It said this was again evident in the treaty negotiations as at 1 July 2016, the date on which parts of the North American portfolio, most agricultural risks and business from Latin America and Australia came up for renewal.
“Hannover Re was consistent here in pursuing its margin-oriented underwriting approach,” the company said in its results.
The company said that in the reminder of 2016 it expects its gross written premiums to be stable or slightly reduced. It also noted that its targeted figure of a profit of at least €950 million is conditional on major loss expenditure not significantly exceeding the budgeted level of €825 million and assumes that there are no unforeseen distortions on capital markets.
It also said it anticipates greater stability in prices and conditions than a year ago, even though the supply of reinsurance still clearly outstrips demand. “The company nevertheless anticipates further scope to write attractive business,” it said.
“The progressive trend towards digitisation, for example, is opening up new opportunities for the insurance industry. Furthermore, in view of the increasing exposure potential, products designed to protect against cyber risks are likely to grow in importance - also in markets outside the US.
“Hannover Re additionally sees growth possibilities in the area of credit and surety and in US property and casualty business. All in all, the company will maintain its focus on its existing business.”
