Hannover Re’s interim report for the first six months of 2012 shows gains in all of the reinsurer’s primary sectors. Highlights for the period were listed as follows:
– Gross premium: + 14.0 percent to €6.9 billion [$8.466 billion] – Considerable improvement in non-life and life/health reinsurance
– Net burden of major losses significantly lower than expected at €132.4 million [$162.455 million]
– Very good investment income of €709.5 million [$870.56 million] (previous year: €672.8 million [$825.53 million])
– Operating profit (EBIT): € 97.2 million [$119.265 million] (previous year €248.9 million [$305.40 million])
– Very good Group net income: +85.5 percent to €405.3 million [$497.30 million] (previous year €218.5 million [$268.10 million])
– Earnings per share: €3.36 [$4.12] (€1.81 [$2.22])
– Book value per share: + 10.1 percent to €45.37 [$55.67 ]
– Return on equity: 15.5 percent (9.9 percent)
CEO Ulrich Wallin commented: “Hannover Re expressed considerable satisfaction with its results as at 30 June 2012. The first half-year was a pleasing one for our company overall. Both the operating profit and Group net income are significantly higher than the comparable figures for the previous year.”
The report said: “Key drivers here were the markedly better results delivered by both business groups as well as investment income that was highly gratifying despite the challenging capital market climate.”
The level of retained premium retreated slightly to 89.8 percent, compared to 90.8 percent in the first six months of 2011. Net premium earned climbed 13.1 percent to €5.8 billion [$7.117 billion], compared to €5.1 billion [$6.258 billion]), equivalent to growth of 8.8 percent adjusted for exchange rate effects.
The operating profit (EBIT) as at 30 June 2012 came in at a very pleasing €597.2 million [$732.76 million]; in the corresponding period of the previous year EBIT had amounted to just €248.9 million [$305.40 million] owing to the heavy burden of major losses. Group net income improved by a substantial 85.5 percent to €405.3 million [$497.30 million] (€218.5 million [$268.10 million]). Earnings per share amounted to €3.36 [$4.12] (€1.81 [$2.22]).
The situation on the international reinsurance markets was broadly positive for non-life business. “In the treaty renewals as at 1 April in Japan, Korea and the United States we actually achieved an even better outcome in some cases than in the round of renewals at the beginning of the year,” Wallin stated. As anticipated, the rate increases for property catastrophe business were again appreciable owing to the natural disasters in 2011.
Gross premium in non-life reinsurance improved on the comparable period by 15.1 percent to reach €4.1 billion [$5.03 billion] (last year €3.5 billion [$4.295 billion]). The report said that at “constant exchange rates, especially against the US dollar, growth would have come in at 11.3 percent. The level of retained premium was virtually unchanged at 90.2 percent (90.0 percent).
Net premium earned climbed 16.0 percent to €3.3 billion [$4.05 billion] (€2.8 billion [$3.435 billion]); growth of 12.2 percent would have been recorded after adjustment for exchange rate effects.”
The report also described the major loss situation for Hannover Re as “again moderate in the second quarter.” The total net expenditure as at 30 June 2012 of €132.4 million [$162.455 million], compared to €625.2 million [$767.12 million] in 1st half 2011 – “well below the loss expectancy.
The largest single events in the second quarter were the severe earthquakes on 20 and 29 May affecting a number of Italian provinces in the region of Emilia-Romagna, resulting in net loss expenditure of altogether around €61 million [$75 million] for Hannover Re.
Looking to the future, the report said that there are “continuing attractive market opportunities in non-life and life/health reinsurance. Hannover Re anticipates a good result for the full 2012 financial year. At unchanged exchange rates the company expects gross premium to grow by 5 to 7 percent.
“Market conditions in non-life reinsurance continue to be highly promising. Following on from the favorable treaty renewals as at 1 April, it was for the most part possible to obtain further rate increases in the renewal round on 1 July.
Wallin noted: “In Australia and New Zealand we were again able to push through appreciable rate increases and improved conditions, as a consequence of which we slightly enlarged our overall premium volume here while reducing the exposure.”
However, the report also said that in “North America no consistent market hardening could be observed. While rate rises of 5 percent to 10 percent were obtained for property catastrophe business, particularly vigorous increases of 20 percent to 30 percent were attainable for loss-impacted programs in non-proportional property reinsurance. Rates and conditions for casualty business held stable.
For 2012 Hannover Re is looking to grow its gross premium income from total non-life reinsurance by 5 percent to 7 percent after adjustment for exchange rate effects.
The report concluded that “prospects for life and health reinsurance similarly remain bright. In view of the broad range of business opportunities, Hannover Re anticipates organic growth of 5 percent to 7 percent in its gross premium volume for 2012.
“Hannover Re stands by its targeted return on investment of 3.5 percent for the asset portfolio in 2012.
“Based on the good business prospects overall in non-life and life/health reinsurance as well as its strategic orientation, Hannover Re is looking forward to a pleasing 2012 financial year. This is conditional on the burden of major losses not significantly exceeding the expected level of €560 million [$687 million] for the full year and assumes that there are no drastic downturns on capital markets.”
Source: Hannover Re