Hannover Re grows 8.5% at 1/1 renewals; Henchoz affirms it is well placed for 2021
Reinsurer Hannover Re grew its premium volume in traditional property and casualty reinsurance by 8.5 percent adjusted for exchange rate effects in the treaty renewals as at January 1 2021. The price increase for the renewed business amounted to 5.5 percent.
According to the German reinsurer, the pricing trend that emerged at the renewals was driven mainly by lower interest rates and uncertainties surrounding the further course of the COVID-19 pandemic, in addition to the substantial burden of large and frequency losses in various regions.
"We can look back on a thoroughly satisfactory round of treaty renewals. The pricing momentum of the past year held up in the 1 January renewals. The sustained trend reversal in prices continues," said Jean-Jacques Henchoz, chief executive officer of Hannover Re.
"We secured further improvements in prices and conditions to a varying extent across all lines and regions. Particularly in times of crisis, robustly capitalised reinsurers such as ourselves are highly sought-after," he added.
67 percent of the business, or treaties with a volume of €7.753 billion, were up for renewal as at 1/1 2021 for Hannover Re. Of this figure, a premium volume of €7.018 billion was renewed, while treaties worth €735 million were either cancelled or renewed in modified form.
Overall, the total renewed premium volume came in at €8.414 billion, including increases of €1.396 billion from new treaties and from changes in prices and treaty shares.
Proportional reinsurance posted growth of 8.3 percent in the renewals, generating a renewed premium volume of €6.329 billion. Prices here were up by 4.4 percent, it said. The renewed premium volume in non-proportional reinsurance grew by 9.3 percent to €2.085 billion, with a price increase of 8.8 percent.
Hannover Re noted that business in North America, the United Kingdom and specialty lines delivered particularly significant growth.
In the Americas, which encompasses North and Latin America, the premium volume surged by 15.3 percent at January 1 renewals. Hannover Re anticipates rate increases in primary insurance across virtually all lines as well as improved reinsurance conditions to have positive implications for profitability in 2021.
In LatAm reinsurance conditions showed further hardening, especially in Brazil and Chile. For 2021 Hannover Re expects the trend towards improvements to be sustained.
The premium volume from business in the Asia-Pacific region increased slightly by 4.1 percent, and in Europe, Middle East and Africa it grew by 10.6 percent. In Continental Europe, Hannover Re scaled back its premium volume by focusing heavily on profitable business.
The company noted that better prices and conditions were obtained for business in the United Kingdom, Ireland and the London Market.
"The positive trend coming out of the 1 January renewals should be sustained in the subsequent rounds of renewals," Henchoz said. "The significant price increases that we are seeing in many lines on the primary insurance side will also gradually support rates in reinsurance business. We benefit from this directly through proportional covers."
Hannover Re expects group net income of around €1.15 billion to €1.25 billion for the 2021 financial year. Based on constant exchange rates, it said gross premium should be around 5 percent and the return on investment should reach around 2.4 percent.
As per the preliminary estimates for the 2020 financial year, the group net income generated by Hannover Re reached a level of €883 million. Gross premium increased by about 12 percent adjusted for exchange rate effects to €24.8 billion. Meanwhile, the return on investment booked from assets under own management amounted to 3 percent for the financial year, and the combined ratio deteriorated to 101.6 percent and is thus higher than the full-year target of no more than 97 percent.
Henchoz commented: "Our extremely robust result in the 2020 pandemic year shows that we can deal well with such extreme situations thanks to our diversified business model, our risk management and our capital strength. We are well placed to achieve our targets for the 2021 financial year."
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
