Hannover Re Posts 2010 Growth as Net Income Tops $1 Billion

March 9, 2011

Germany’s Hannover Re reported a “very pleasing year,” as after tax group net income rose to €748.9 million [$1.043 billion], from €733.7 million [$1.021 billion], despite the operational business being “impacted by a heavy major loss incidence. The reinsurer said the “resulting strains were more than offset by lower basic losses and very healthy investment income as well as a positive special effect associated with a decision of the Federal Fiscal Court.”

The earnings report summarized the year’s major financial highlights as follows:
– Overall premium growth +11.2 percent
– Combined ratio in non-life reinsurance: 98.2 percent (96.6 percent in 2009)
– Net expenditure on major claims: €661.9 million [$921.83 million], compared to €239.7 million [$333.84 million] in 2009.
– Investment income improved to €1.3 billion [$1.81 billion] from €1.1 billion [$1.53 billion] last year.
– Operating profit (EBIT): €1.2 billion [$1.67 billion], compared to €1.1 billion in 2009
– Earnings per share: €6.21 [$8.65] from €6.08 [$8.467] in 2009
– Return on equity: 18.2 percent
– Increased dividend proposal for 2010 to €2.30 [$3.203] from €2.10 [$2.924]

Hannover Re booked gross written premium of €11.4 billion [$15.8779 billion] in 2010, compared to €10.3 billion [$14.3458 billion] for 2009. The bulletin noted that at constant exchange rates the “premium volume would have risen by 6.8 percent. The level of retained premium retreated slightly to 90.1 percent (92.6 percent). Net premium earned climbed 7.9 percent to €10.0 billion [$13.928 billion] (€9.3 billion [$12.951 billion].”

Chief Executive Officer Ulrich Wallin noted that non-life reinsurance delivers very good profit contribution despite heavy major loss expenditure. “Even though the competitive pressure in non-life reinsurance intensified, we are still satisfied with the development of our operational business. Prices and conditions were for the most part preserved on a stable level thanks to the largely disciplined underwriting practice among reinsurers,” he stated.

Hannover Re also discussed the “three severe earthquakes,” which “dominated the year under review.” Its largest single event was the earthquake in Chile with a net loss burden of €181.9 million [$253.4 million]. The earthquake in New Zealand gave rise to net loss expenditure of €113.8 million [$158.5 million]. The earnings statement also indicated that “on account of lower insured values in Haiti the loss amount here was relatively moderate at €27.2 million [$37.88 million]. Also noteworthy were winter storm ‘Xynthia’ in Europe, numerous flood events in various parts of the world and the loss of the ‘Deepwater Horizon’ drilling rig in the Gulf of Mexico.”

The reinsurer said it is optimistic about “the prospects for the current financial year. The treaty renewals as at 1 January 2011 in non-life reinsurance passed off better than expected. The company anticipates premium growth of up to 3 percent and a good profit contribution for the current financial year.

“In 2011 Hannover Re will again concentrate – in keeping with its strategy of active cycle management – on segments in which adequate premiums can be obtained or prices are rising. The more exacting requirements for risk capital at insurance companies (Solvency II), for whom the transfer of risk to reinsurers with good ratings offers an economically attractive alternative, are expected to open up potential growth opportunities.”

Source: Hannover Re

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