Hannover Re’s Henchoz says reinsurer ‘on track’ to hit €1.1bn income targets in Q2 and H1 2019 results

Hannover Re results for the second quarter and first half of 2019 show reinsurer is “well on track” to hit group net income targets of €1.1 billion for the full year, said chief executive Jean-Jacques Henchoz.

Gross written premium (GWP) for the first half of 2019 was up 17.1 percent to €11.69 billion from €9.98 billion in the first half of 2018.

Group net income rose 19.3 percent to €662.5 million from €555.3 million.

For the property and casualty (P&C) reinsurance part of the group, the GWP increased 21.3 percent to €7.84 billion in H1 2019 from €6.46 billion for the same six months the year before. Net income dropped slightly by 0.7 percent to €431.3 million from €434.4 million.

The combined ratio rose to 96.7 percent from 95.7 percent for the same six months a year earlier, which the reinsurer said was “still in line with the strategic target of a maximum 97 percent combined ratio for the full year”.

In the life and health part of the business, GWP grew by 9.3 percent to €3.84 billion from €3.51 billion. And net income climbed sharply by 75.5 percent to €257.7 million from €146.8 million.

For the second quarter of the year, total group GWP rose by 14.7 percent to €5.32 billion from €4.64 billion for the same three months in 2018. Group net income grew by 30.8 percent to €368.9 million from €281.9 million.

Second quarter 2019 results for the P&C reinsurance business showed a growth of 19.5 percent in GWP to €3.45 billion from €2.88 billion for the same period a year before. With net income up 6.4 percent to €212.3 million in the quarter from €199.6 million a year previously. The combined ratio for this part of the business had deteriorated slightly more on the quarter than it did for the half year with figures rising to 97.7 percent from 95.8 percent in Q2 2018.

Second quarter figures for life and health showed a 6.6 percent increase in GWP to €1.86 billion in 2019 up from €1.75 billion in the same period the year before. And net income was up 76.8 percent to €169.2 million from €95.7 million.

Henchoz said: "In the 1 June and 1 July treaty renewals in property and casualty reinsurance we were able to secure long overdue price increases.

"In view of the business development to date we are well on track to achieve group
net income in the order of €1.1 billion for 2019. In addition, the result will be positively influenced by a one-off effect to the tune of €100 million associated with our participation in Viridium Group."

CEO Henchoz emphasised the “stronger profitability” of life and health reinsurance, attributing it largely to “the one-off effect associated with our participation in Viridium Group".

He said: "As a further factor, the termination of loss-making treaties in US mortality business in the previous year – which had given rise to exceptional strains – continues to have a favourable effect on the result."

The reinsurer called its P&C reinsurance result “stable or slightly improved overall”, adding that the business had “substantially” expanded this portfolio while “competition remained fierce because many markets and lines continued to see surplus capacities”.

The company’s net expenditure on large losses was €140.5 million in H1 2019 up from €93.3 million in the first half of 2018. Hannover Re said: “The impact on the first half-year was higher than in the comparable period but still well below the budgeted level of €370 million. The largest single loss event was the explosion at a refinery in Philadelphia in June, with an estimated net share for Hannover Re of €45.7 million, followed by floods in the Australian state of Queensland in late January at a cost of €25.9 million.

“Additional reserves for prior-year losses also took a toll on the result for the second quarter, including those set aside for typhoon Jebi in Japan. These developments ran contrary to what was once again a positive run-off of our loss reserves overall.”

Looking ahead to the second half of the year, the reinsurer said it expects GWP for the whole business to grow by a single-digit percentage based on constant exchange rates.

The company predicted a return on investment of “at least 2.8 percent for 2019”, while the target for group net income of around €1.1 billion – excluding the positive one-off Viridium effect – was unchanged.

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