Hannover Re profits plunge 31% in 2020 as major losses top €1.5bn
Higher than expected large losses stemming from the COVID-19 pandemic and catastrophes dented profits at Hannover Re, the third-largest reinsurer in the world, in financial year 2020. However, its chief executive Jean-Jacques Henchoz is bullish on sustained improvement in prices and conditions as he pledges to maximise available business opportunities going forward.
The group's net profit contracted by 31.2 percent to €883 million in 2020, compared with €1.3 billion a year earlier.
Its overall gross written premium for the year increased by 9.6 percent to €24.8 billion, up from €22.6 billion in 2019.
For the property and casualty (P&C) reinsurance part of the group, the gross premium volume grew by 13.3 percent to €16.7 billion, from €14.8 billion in 2019. But the combined ratio rose to 101.6 percent in 2020, from 98.2 percent a year earlier.
Hannover Re said large losses in 2020 surpassed expectations for the fourth year in succession. For COVID-19-related losses, Hannover Re paid out or reserved an amount of €950.1 million for its customers in property and casualty reinsurance. Of this, €330.9 million was attributable to reported claims and €619.2 million to claims that have been incurred but not yet reported (IBNR).
Additionally, it noted the most severe major claims for the year included a storm that swept across eastern parts of the US at a net cost of €111.0 million, Hurricane Laura with expenditure of €87.5 million and the explosion at the Port of Beirut in an amount of €86.6 million.
Total net major loss expenditure in 2020 came to €1.59 billion, compared with €956.1 million in 2019, and was substantially above the large loss budget of €975 million for the full year.
In the life and health reinsurance business, the company's gross premium volume increased by 2.6 percent year-on-year to €8 billion from €7.8 billion in 2019. Hannover Re's paid losses and reserves relating to COVID-19 came to €261.1 million.
Henchoz said: "In the pandemic year 2020 Hannover Re achieved a very good result, thereby again demonstrating its superb risk-carrying capacity and its broad diversification. We are benefiting particularly strongly from the sustained improvement in prices and conditions on our market.
"With a view to maximising the available business opportunities, we have decided to omit payment of a special dividend for 2020 and instead to slightly raise the ordinary dividend."
The company has confirmed its guidance for 2021, predicting a group net income in the range of €1.15 billion to €1.25 billion.
Commenting on the outlook, Henchoz said: "Even though the pandemic remains an element of uncertainty, I am confident that we shall achieve all our targets for the 2021 financial year and return to the very good level of profitability recorded in 2019. This will be supported by the sustained improvement in prices and conditions seen in property and casualty reinsurance."
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