Hannover Re generated Group net income of EUR 1.06 billion in 2018 as compared to 0.96 billion for the past financial year and thus achieved its profit target.
"The 2018 financial year once again bears witness to the profitability of Hannover Re," Ulrich Wallin, Chief Executive Officer of Hannover Re, said.
"I am particularly pleased that we achieved a double-digit return on equity for the tenth consecutive year. Despite another significant burden of large losses and a substantial one-time charge in life and health reinsurance, we are again able to hold out the prospect of an attractive dividend for our shareholders."
Achieves growth and profit targets for 2018
In what was still a challenging market environment, attractive business opportunities opened up in the year under review. Against this backdrop, the gross premium volume increased by 7.8% to EUR 19.2 billion (EUR 17.8 billion); adjusted for exchange rate effects, it would have grown by an even more appreciable 11.6%. The level of retained premium was slightly higher at 90.7% (90.5%).
Net premium earned climbed 10.6% to EUR 17.3 billion (EUR 15.6 billion). Growth of 14.5% would have been booked at unchanged exchange rates.
Property and casualty reinsurance:
The combined ratio improved to 96.5% (99.8%) and was thus only marginally higher than the targeted level of 96% or better.
Property and casualty reinsurance was again fiercely competitive in the financial year just ended. Despite a high level of losses, both traditional reinsurers and alternative capital providers in the ILS market continued to make abundant capacities available. Prices and conditions in the property lines, in particular, consequently remained under pressure. Hannover Re was nevertheless able to act on profitable business opportunities in the various rounds of treaty renewals.
Demand in structured reinsurance was especially strong among customers seeking reinsurance solutions designed to deliver solvency relief. Business in this line was therefore substantially expanded. All in all, Hannover Re is thoroughly satisfied with the development of its property and casualty reinsurance portfolio.
The gross premium volume in property and casualty reinsurance rose by 11.8% to EUR 12.0 billion (EUR 10.7 billion). At constant exchange rates an increase of 16.2% would have been recorded. This growth comfortably beat expectations. The level of retained premium nudged slightly higher to 90.7% (89.7%). Net premium earned therefore climbed more sharply by 18.0% to EUR 10.8 billion (EUR 9.2 billion); adjusted for exchange rate effects, it would have grown by 22.5%.
Net expenditure on major losses in the 2018 financial year was lower than in the previous year, which had seen the heaviest burden of large losses in Hannover Re's history. After a very moderate loss experience in the first six months, the second half of the year was notable for a sharply higher volume of major losses.
The strain incurred in the third quarter had still been within the range of quarterly expectations: the largest loss event was Typhoon Jebi in Japan with a net cost of EUR 134.7 million. Major losses in the fourth quarter, however, went clearly over budget. This was due primarily to the Camp and Woolsey wildfires in California, for which an amount of roughly EUR 193 million was set aside. Total net major loss expenditure in 2018 came to EUR 849.8 million (EUR 1,127.3 million) and thus slightly exceeded the large loss budget of EUR 825 million. The underwriting result including interest on funds withheld and contract deposits surged appreciably to EUR 372.8 million (EUR 15.5 million).
Life and health reinsurance:
"Thanks to a good underlying business experience we were able to increase the profit in life and health reinsurance, despite having to absorb considerable one-time charges," Ulrich Wallin said. "Given that a comparable strain is not expected in the future, the result in this business group should improve significantly in the coming years."
The gross premium volume in life and health reinsurance was a modest 1.7% higher than in the previous year at EUR 7.2 billion (EUR 7.1 billion). Group net income in life and health reinsurance improved by 7.7% to reach EUR 185.9 million (EUR 172.6 million).