Hannover Re CEO says COVID-19 losses 'impossible to quantify' but reserves €220m

Hannover Re, the third-largest reinsurer in the world, boosted its result by 2.5 percent in the first quarter but its property and casualty underwriting results tumbled due to expected €220 million losses related to the COVID-19 pandemic.

Chief executive Jean-Jacques Henchoz said that the company could not "escape the effects of the coronavirus crisis unscathed" and has reserved roughly €220 million for anticipated losses.

The group posted a net income of €300.9 million in the first quarter, an increase of 2.5 percent from €293.7 million in the first quarter of 2019, driven by double-digit increases in earnings from life and health reinsurance as well as from the investment portfolio.

The gross written premium increased by 9.4 percent to €7.0 billion, compared with 6.4 billion in the prior year quarter.

Hannover Re grew its portfolio in property and casualty (P&C) reinsurance in the treaty renewals as at 1 January 2020, despite "intense competition" in numerous markets and lines of business. Gross written premium grew by 13.5 percent to €5.0 billion, compared with €4.4 billion in Q1 2019. Net income amounted to €207.3 million, versus €219.0 million in Q1 2019.

However, the P&C underwriting result came in sharply lower than the previous year at €7.2 million, compared with Q1 2019's €124.8 million.

The P&C combined ratio also exceeded the anticipated maximum and consequently deteriorated to 99.8 percent, compared with 95.7 in the first quarter of 2019.

In life and health reinsurance, Hannover Re's gross written premium was stable at €2.0 billion. Net income grew by 24.5 percent to €110.2 million (€88.5 million in Q1 2019). The company observed "negative effects such as excess mortality" due to the coronavirus in the first quarter.

Henchoz said: "In the first quarter we achieved a result that on the whole lived up to our expectations. Nevertheless, we too will not escape the effects of the coronavirus crisis unscathed. Even though it is currently impossible to quantify the concrete impacts on reinsurance and financial markets, our capital resources are geared to managing such extreme events."

The reinsurer has set a net major loss budget for 2020 at €975 million, up from €875 million in the previous year.

Commenting on the outlook for 2020, Henchoz said: "Even though we are unable to provide specific guidance for our full-year net income in the present situation, we are well placed to stand by our customers' side in these difficult times," Henchoz said. "Among other things, as a financially robust partner, we are in a position to deliver reinsurance solutions that support the solvency, liquidity and capital position of our clients."