Hannover Re hikes GWP

Hannover Re announced 25% increase in GWP for its Q3 results and raised its end of year profit target.

Chief executive officer Ulrich Wallin said: “With our result for the third quarter we have secured a very good foundation and are in a position to raise our profit target for the full financial year. We now anticipate earnings of at least €5.75 a share and are looking to pay a dividend of at least €2 per share",

The operating profit (EBIT) as at 30 September 2009 improved substantially year-on-year to reach €844.8m. Group net income surged – in part due to various special effects in life and health reinsurance – by €721.2m to €578.4m.

The result for the corresponding period of the previous year had been negative (-€142.8m) owing to heavy write-downs taken on equities because of the turmoil prevailing on capital markets at the time. Earnings of €4.80 (-€1.18) a share were generated; the annualised return on equity stood at 24.2% (-6.4%).

GWP up by a quarter

Gross written premium in total business rose by 25.6% to €7.7bn (€6.1bn) as at 30 September 2009. This includes €606.4m from the acquisition of the ING life reinsurance portfolio. Exchange-rate effects did not play a significant role. With the level of retained premium increasing to 92.3% (88.8%), net premium earned climbed by an even stronger 30.3% to €6.7bn (€5.2bn).

Non-life reinsurance

Hannover Re was highly satisfied with the development of its non-life reinsurance. The situation on the international reinsurance markets remains positive. The effects of the financial market crisis have highlighted particularly forcefully the attraction of reinsurance as a capital management tool, especially in cash-intensive segments.

Demand for reinsurance protection has consequently risen in numerous segments. The industry summits in Monte Carlo, Baden-Baden and the United States underscored this trend.

Capacities contracted sharply in credit and surety insurance in response to higher loss ratios triggered by the financial market crisis. Hannover Re made the most of the associated significant price rises and selectively enlarged its portfolio.

Break-even in September

Even though the result only reached break-even as at 30 September 2009 owing to increased default rates and prudent reserving, the company sees the improving loss ratios as confirmation of its strategy and expects the written credit and surety business to return to profitability in 2010.

Business in Central and Eastern Europe, where the company enlarged its portfolio, is faring well. Stronger demand in the area of structured covers continues to open up highly attractive opportunities.

Gross premium in non-life reinsurance as at 30 September 2009 improved on the comparable period of the previous year by 16.2% to €4.4bn (€3.8bn). At constant exchange rates, especially against the US dollar, the increase would have been 13.0%. The retention climbed to 93.4% (88.4%) due to substantially reduced retrocessions. Net premium earned consequently rose by an impressive 21.3% to €3.8 billion (€3.1 billion).

Low hurricane losses

In light of an unremarkable hurricane season the burden of catastrophe losses in the third quarter was below average. Hail and flood damage in Central Europe, an industrial fire claim in Russia as well as a loss event in marine business led to expenditure in the order of €35m.

All in all, the total net burden of catastrophe losses and major claims in the period until 30 September 2009 stood at €198.2m (€444.9m). This is equivalent to 5.3% of net premium in non-life reinsurance and hence comfortably below the expected level. The combined ratio amounted to 96.8% (103.6%).

The net underwriting result in non-life reinsurance improved from -€131.2m in the comparable period of the previous year to €98.1m. The operating profit (EBIT) increased to €477.0m (-€86.0m). Group net income climbed to a very good €331.3m (-€178.0m), producing earnings of €2.75 (-€1.48) a share.