Hannover Re faces ‘unexpected’ sharp rise in major losses but remains ‘resilient’
Hannover Re, the third-largest reinsurer in the world, profitably grew its business in the first nine months of the financial year despite facing an “unexpectedly benign loss experience” from hurricanes, flooding and other catastrophic events in Q3. Its chief executive officer Jean-Jacques Henchoz (pictured) expressed an optimistic outlook for the remainder of the year and 2022, assuming there are “no unforeseen distortions” on capital markets and large loss expenditure remains within its expected bounds.
The Germany-based reinsurer increased its group net profit to €856 million in the nine month period, up 28 percent from the €668 million reported in the same period of 2020.
Its gross written premium rose by 12 percent to €21.6 billion, compared with €19.3 billion in 9M 2020.
The company revealed that its premium income in property and casualty reinsurance came in “substantially higher”, driven by unchanged strong demand for covers primarily from “robustly” capitalised reinsurers.
The GWP in P&C reinsurance climbed by 14 percent to €15.3 billion, while in life and health reinsurance it rose by 7 percent to €6.4 billion.
The P&C combined ratio was 97.9 percent, an improvement from 101.4 percent in the prior year period but still was “above the expected level of no more than 96 percent for the full year”.
Due to significant natural catastrophes in the third quarter, Hannover Re faced an increase in net major loss expenditure to €1.07 billion as at the end of September, which it said was “substantially higher” than the budgeted expectation of €849 million for the first nine months.
The largest individual loss event in the third quarter was Hurricane Ida, it claimed, followed by the extreme flooding in Germany and Europe in June and July, as well as the civil unrest in South Africa and flooding in China.
“In recent months insurers and reinsurers were faced with unusually heavy losses from hurricanes, flooding and other catastrophic events,” said Henchoz. “Our solid nine-month result again demonstrates Hannover Re's resilience in a volatile environment.”
Henchoz confirmed the group's profit guidance in the range of €1.15 billion to €1.25 billion for 2021 despite the sharp rise in major loss expenditure, noting that “the third quarter has shown us once again how quickly an unexpectedly benign loss experience during the year can completely turn around. Despite this, we believe we are in a position to achieve our guidance for 2021.”
Hannover Re anticipates group net profit of €1.4 billion to €1.5 billion for the 2022 financial year.
Commenting on the outlook, Henchoz said: “The profitable growth and our successful cycle management in recent years will lead to a sharp rise in earnings in the 2022 financial year. Not only that, in life and health reinsurance we anticipate that the strains from the Covid-19 pandemic will diminish appreciably as vaccination programmes make increasing progress and the underlying healthy profitability of the portfolio will once again be reflected in the result.”
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