2 February 2017News

Hannover Re increases profit and GPW expectations after ‘pleasing’ renewals

Hannover Re has raised its expectations for its profits and premiums written in 2017 as it said it was satisfied with the outcome of the January 1 treaty renewals despite intense competition and an anticipated stabilisation in rates not yet becoming a reality across the board.

The German reinsurer said that thanks to gross premiums coming in above expectations, it said it has raised its premium target for 2017 and now expects an increase in the low single-digit percentage range.

Furthermore, having closed several financial solutions contracts in life and health reinsurance it said it is raising its guidance for group net income in 2017 from more than €950 million to more than €1 billion.

The company stressed that the markets continue to see significant competition and anticipated stabilisation in rates has not as yet set in across the board. But it said: “Although the treaty renewals were challenging, the company benefited from its customer intimacy and its ability to offer reinsurance solutions tailored to clients' requirements.

Ulrich Wallin, chief executive of Hannover Re, explained: “All in all, the situation on the worldwide property and casualty reinsurance market shows little change and remains challenging. The broadly good financial results still being reported by many companies combined with the excess supply of capacity were not conducive to a fundamental trend reversal on the rates side. The increased claims expenditure in 2016 had favourable effects on prices only on a local level.”

The company also noted that sharply high demand was observed among customers in relation to reinsurance solutions offering solvency relief.

“Attractive opportunities to grow the portfolio also opened up in North America, above all in Canada, as well as in credit and surety business and in the area of cyber covers. With an eye to its own profitability requirements, however, the company again did not renew all treaties in this round of renewals,” the company said.

Specifically, it said it was “highly satisfied” with the treaty renewals for North American business noting that the economic recovery in the US led to an increase in insurance premiums and hence to solid demand for reinsurance protection. “The pressure on rates has eased appreciably; signs that they have bottomed out can now be seen across the various lines of business,” it said. Its total premium volume for North America rose by a substantial 6.5 percent.

In some other areas, conditions were not so good, however. It said rates in marine reinsurance continued to deteriorate, albeit at a slower pace and it relinquished some business on grounds of inadequate pricing.

It also noted that outcome of the treaty renewals in credit and surety reinsurance was “pleasing”. It said that, especially in credit reinsurance, it proved possible to enlarge sizeable existing accounts and build new customer relationships, thereby boosting the premium volume in this line.

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9 February 2017   While Hannover Re has increased its growth and profit targets for 2017, Munich Re has suggested that it will earn less in 2017 than in 2016. However, the impression that Hannover Re is in better shape than its German competitor may be deceiving.
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