Corporate | 10 May 2017 07:15
Hannover Re makes good start to the 2017 financial year
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DGAP-News: Hannover Rück SE / Key word(s): Quarter Results
Press Release Hannover Re makes good start to the 2017 financial year
Hannover, 10 May 2017: Hannover Re expressed considerable satisfaction with the development of the first quarter. “At the beginning of the year we raised our guidance for 2017 Group net income from more than EUR 950 million to more than EUR 1 billion. With our pleasing quarterly result we have put in place a good basis for achieving our targets. Both business groups, namely Property & Casualty and Life & Health reinsurance, as well as highly satisfactory investment income played a part here”, Chief Executive Officer Ulrich Wallin noted.
Gross premium shows modest growth
Property and casualty reinsurance delivers positive profit contribution
The net burden of major losses incurred in the first quarter was clearly heavier than in the previous year’s period at EUR 133.7 million (EUR 55.5 million), although it still came in below the estimated quarterly budget. The largest single loss – at EUR 50 million – was Cyclone Debbie, which caused significant storm damage and flooding in Australia at the end of March. The insurance industry was also impacted by the UK government’s decision to reduce the discount rate for personal injury compensation payments (also known as the “Ogden rate”) from 2.5% to -0.75% effective March 2017. This means, for example, that severe personal injuries from a motor vehicle accident can result in higher payments under liability covers. Bearing in mind that the change affects not only future claims but also past claims that have still to be run off, insurers and reinsurers are compelled to substantially strengthen their reserves. In the first quarter Hannover Re booked additional loss reserves of EUR 126 million for this purpose. In view of the very adequate level of the IBNR reserves (for claims that have been incurred but not yet reported), however, this did not result in any run-off losses. It is to be anticipated that the change in the Ogden rate will require further additional reserves to be set aside in the course of the year. Nevertheless, these should also be absorbed by the IBNR reserves that have been constituted. The underwriting result for property and casualty reinsurance fell short of the previous year’s figure (EUR 100.3 million) at EUR 90.7 million. The combined ratio rose from 94.7% to 95.6%. The operating profit (EBIT) in property and casualty reinsurance increased by 3.4% on the back of very healthy investment income to reach EUR 309.8 million (EUR 299.7 million). Group net income went up by 5.4% to EUR 215.4 million (EUR 204.3 million). Earnings per share amounted to EUR 1.79 (EUR 1.69).
Life and health reinsurance in line with expectations
Investment income above return expectations
Income from assets under own management as at 31 March 2017 climbed by a pleasing 13.2% relative to the previous year’s quarter to reach EUR 320.0 million (EUR 282.7 million). The resulting annualised return of 3.1% (including ModCo derivatives) was appreciably higher than the full-year target of 2.7%. Net investment income including interest on funds withheld and contract deposits grew by 7.3% to EUR 392.9 million (EUR 366.2 million).
Shareholders’ equity continues to be very strong
Outlook for 2017
Based on constant exchange rates, the company anticipates growth in gross premium in the low single-digit percentage range as well as net income after tax of more than EUR 1 billion for the full financial year. This is conditional on major loss expenditure not significantly exceeding the budgeted level of EUR 825 million and assumes that there are no unforeseen distortions on capital markets. In property and casualty reinsurance Hannover Re expects to generate a good underwriting result for the current financial year that should be roughly on a par with 2016. The company is aiming for a combined ratio of less than 96%. The EBIT margin for property and casualty reinsurance should amount to at least 10%. The treaty renewals as at 1 April once again reflected the competitive market conditions prevailing in property and casualty reinsurance. Business in Japan is traditionally renewed at this time and treaties also come up for renegotiation – albeit on a lesser scale – in the markets of Australia, New Zealand, Korea and North America. Given the predominantly soft state of the market, Hannover Re largely concentrated on its existing business in order to safeguard the continued good quality of the property and casualty reinsurance portfolio. The premium volume booked from the treaty renewals as at 1 April 2017 contracted by 4.9%. Having successfully written several financial solutions treaties, the company expects the premium volume in life and health reinsurance to trend higher. Opportunities will likely open up in global longevity business, most notably in Canada and Japan but also in the Scandinavian markets, Germany, Israel, Korea and South Africa. Hannover Re anticipates that demand for reinsurance solutions designed to optimise the increased capital requirements associated with supervisory solvency regulations will bring further scope to enlarge the portfolio. Based on new business production with a value in excess of EUR 220 million, the company expects a broadly stable gross premium volume going forward. The targeted EBIT margins remain unchanged at 2% for financial solutions and longevity business and 6% for mortality and morbidity business. The expected positive cash flow generated from the technical account and the investments should – subject to stable exchange rates and yield levels – lead to further growth in the asset portfolios. The company is targeting a return on investment of 2.7% for 2017.
Hannover Re envisages a payout ratio for the
dividend
in the range of 35% to 40% of its IFRS Group net income. This figure will increase in light of capital management considerations if the company’s comfortable level of capitalisation remains unchanged.
Contact
Media Relations
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Investor Relations
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10.05.2017 Dissemination of a Corporate News, transmitted by DGAP – a service of EQS Group AG.
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| Language: | English |
| Company: | Hannover Rück SE |
| Karl-Wiechert-Allee 50 | |
| 30625 Hannover | |
| Germany | |
| Phone: | +49-(0)511-5604-1500 |
| Fax: | +49-(0)511-5604-1648 |
| E-mail: | info@hannover-re.com |
| Internet: | www.hannover-re.com |
| ISIN: | DE0008402215 |
| WKN: | 840 221 |
| Indices: | MDAX |
| Listed: | Regulated Market in Frankfurt (Prime Standard), Hanover; Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange; Luxemburg |
| End of News | DGAP News Service |