Hannover Re exceeds profit targets despite high nat cat losses in 2019

Hannover Re, the third-largest reinsurer in the world, outperformed its growth and earnings targets despite "significant major losses" and "continued challenging market climate" in the 2019 financial year.

Hannover Re generated a group net income of €1.28 billion, a 21.2 percent increase from €1.06 billion it posted in 2018. The reinsurer had raised its guided group net income in the third quarter, from the originally anticipated level of around €1.1 billion to more than €1.25 billion.

The reinsurer's gross written premium volume for 2019 increased to €22.6 billion, up from €19.2 billion in 2018, which is equivalent to an increase of 15.2 percent adjusted for exchange rate effects.

However, the combined ratio deteriorated to 98.2 percent, compared with 96.5 percent in the previous year. The reinsurer blamed high losses incurred in the financial year and delayed claim notifications for prior-year losses, especially for Typhoon Jebi.

It said the biggest loss events in the year was Hurricane Dorian at a net cost of €194.7 million. Typhoons Hagibis and Faxai caused further expenditure of €183.8 million and €83.8 million respectively. Additionally, an amount of €85.7 million was set aside for the insolvency of UK travel operator Thomas Cook. Total net major loss expenditure in 2019 came to €956.1 million, compared to €849.8 million in 2018, and hence exceeded the large loss budget of €875 million for the full year.

Hannover Re said that it was again able to act on attractive business opportunities despite a continued challenging market climate. This was supported by further improvement in the investment income as well as the good underlying quality of the portfolio in both property & casualty and life & health reinsurance.

"We have achieved a record result and thereby once again demonstrated our profitability, even though 2019 was another year of relatively high losses," said Hannover Re chief executive officer Jean-Jacques Henchoz said. "We are again able to offer our shareholders the prospect of an attractive dividend including a special distribution, but we are also retaining the necessary flexibility to invest further in our profitable growth."

Henchoz added: "We can look back on an excellent development in our life and health reinsurance portfolio. As announced, we generated a significantly improved result. At the same time we are benefiting from additional business opportunities available to financially strong reinsurers - including in the area of financial solutions, where we offer our clients tailor-made reinsurance solutions designed to improve their solvency, liquidity and capital

For 2020 Hannover Re expects to grow its gross premium in total business by around 5 percent based on constant exchange rates. Group net income is estimated to reach a level of around €1.2 billion.