Germany’s Hannover Re, the world’s third largest reinsurer, has been hit with a commensurately large share of the losses from Katrina, Rita et. al. The company’s 9 month report notes an “exceptional major loss burden in the amount of €893.7 million [$1.052 billion] as of 30 September 2005,” as well as a projected loss from Hurricane Wilma in the fourth quarter of €130 million ($153 million). Third quarter losses were €781.4 million ($920 million).
The bulletin said that Hannover’s “operating profit (EBIT) as at 30 September 2005 was reduced to €63.8 million [$75 million), a fall of 84.4 percent compared to the previous year (€408 million [$480 million]).” Group net income retreated by a less marked 67.6 percent to €61.9 million ($73 million).
Gross premium income increased slightly by 2.2 percent to €7.3 billion ($8.6 billion), compared to €7.2 billion ($8.47 billion) in the first 9 months of 2004. “Exchange-rate movements were no longer a significant factor,” said the announcement. “The level of retained premiums rose from 77.3 percent to 80.2 percent. Net premiums earned consequently grew by a somewhat more appreciable 2.9 percent to €5.6 billion [$6.6 billion],” compared to €5.4 billion ($6.35 billion) in 2004.
Commenting on its P/C results, Hannover Re said: “Looking past the enormous burden of catastrophe losses, the picture in property and casualty reinsurance was very much a bright one: Hannover Re continued to enjoy attractive opportunities to write profitable business. Stable rates and unchanged conditions were obtained in most segments. Bearing in mind the severe hurricanes in the United States, this trend will likely not only be sustained but should even show further improvement – especially in the affected lines.”
“We believe that the chances of quickly recouping our strains from the current year are good”, commented CEO Wilhelm Zeller. “The fact that we still achieved a combined ratio of 113.0 percent (96.7 percent) despite the enormous major loss burden in the first three quarters clearly bears out the quality of our property and casualty reinsurance portfolio,” he added.
Hannover’s Gross premium income grew by 10.8 percent to €3.6 billion [$4.24 billion), compared to €3.3 billion ($3.88 billion) in 2004. “The level of retained premiums increased from 80.4 percent to 84.3 percent as planned. Net premiums earned consequently rose by as much as 13.8 percent to €2.8 billion [$3.3 billion].”
Hannover’s bulletin notes that the P/C reinsurance market has “changed dramatically in the wake of the recent hurricanes. Demand for catastrophe and marine reinsurance is sharply higher, with the result that market prospects have brightened still further and sustained premium growth can be expected. Judging also by the general tone of the annual meetings of reinsurers held in Monte Carlo, Baden-Baden and the USA, the 2005/2006 round of treaty renewals should again leave scope for improved rates and conditions in virtually all lines of property and casualty reinsurance in the coming year. This is especially true of catastrophe and marine reinsurance, the two lines hardest hit by the natural disasters.”
Zeller added: “Hannover Re is optimally positioned to derive maximum opportunistic benefit from these advantageous market conditions.”
Commenting on the changes at Clarendon, Hannover Re’s U.S. subsidiary, Zeller stated: “As I reported to you in the context of our semi-annual results, in our specialty insurance business group we have taken the next logical step in the restructuring measures initiated at our US subsidiary Clarendon Insurance Group in 2002 by setting in motion the company’s transformation into a specialty insurer for profitable niche business. This transformation is moving forward as planned. Expenses associated with the run-off of non-renewed programs still constitute a burden, however. In common with other large American insurers Clarendon was impacted by the hurricanes in the USA, albeit only to a minimal extent.”
Despite weathering the storm, it’s still unclear whether Hannover Re will post a full year profit. In concluding the bulletin announcing its results, the company said: “Bearing in mind the enormous burden of catastrophe losses, Hannover Re currently expects Group net income to come in balanced at year-end. This forecast assumes that the fourth quarter is spared any further exceptional major losses and that there are no significant adverse movements on capital markets.”
The full report maybe obtained on the company’s Website at: www.hannover-re.com.
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