Reinsurer saw its Q1 results boosted by a rise in net premium and increased investment income
Hannover Re expressed "considerable satisfaction" with its start to the new financial year, posting a net premium increase of 9.5% in the first quarter of 2010.
However, the reinsurer said the burden of major losses was higher than expected and that its combined ratio for non-life reinsurance for the quarter stood at 99.3%.
Group net income for the quarter was EUR 157.2m and chief executive officer Ulrich Wallin says the company remains on track for its target of 15% return on equity in 2010.
"Although the burden of major losses in this quarter was higher than our expected level, the achieved result puts in place a good platform for attaining our 2010 profit target - namely a return on equity of at least 15 percent after tax", Chief Executive Officer Ulrich Wallin affirmed.
Following the appreciable growth recorded in the corresponding quarter of the previous year, the gross written premium booked by the Hannover Re Group increased by a further 7.1% to EUR 2.9 billion (EUR 2.7 billion) as at 31 March 2010. The level of retained premium decreased to 90.8% (91.7%). Net premium earned climbed by 9.5% to EUR 2.3 billion (EUR 2.1 billion).
The operating profit (EBIT) as at 31 March 2010 stood at EUR 245.0 million, after EUR 307.0 million in the corresponding quarter of the previous year. Adjusted for the positive non-recurring effect of EUR 86.4 million recognised in the first quarter of the previous year in connection with the acquisition of the ING life reinsurance portfolio, EBIT would have grown by 11.1%. "With our Group net income of EUR 157.2 million we are right on track to achieve our targeted total result", Mr. Wallin emphasised. The previous year's figure of EUR 228.6 million included a special effect of EUR 86.4 million. Earnings per share came in at EUR 1.30 (EUR 1.90).
The treaty renewals at the beginning of the year passed off in line with Hannover Re's expectations. Overall, the rate level was still commensurate with the risks. Based on its very good ratings the company was able to further cement its market position.
Gross premium in non-life reinsurance increased by 4.0% as at 31 March 2010 relative to the corresponding period of the previous year to stand at EUR 1.7 billion (EUR 1.7 billion). The level of retained premium retreated slightly to 90.1% (92.4%). Net premium earned climbed 6.5% to EUR 1.3 billion (EUR 1.2 billion).
The incidence of major losses in the first quarter was considerably higher than in the comparable quarter of the previous year. The largest single loss for Hannover Re was the severe earthquake in Chile with a net strain of EUR 185.1 million. The devastating earthquake in Haiti produced loss expenditure in the order of EUR 25.5 million owing to lower insured values. Reserves of around EUR 40 million have been constituted for European winter storm "Xynthia". Altogether, the net burden of major losses for the first quarter totalled EUR 264.4 million (EUR 98.8 million) - a figure well in excess of the expected level. The combined ratio of 99.3% (95.0%) was assisted by run-off profits from reserves constituted for prior years with respect to major losses and in German business.
Against this backdrop the net underwriting result declined markedly from EUR 53.6 million in the corresponding quarter of the previous year to EUR 5.5 million. The operating profit (EBIT) in non-life reinsurance fell by 11.7% to EUR 165.6 million (EUR 187.6 million). Group net income contracted by 13.2% to EUR 109.4 million (EUR 126.1 million), producing earnings per share of EUR 0.91 (EUR 1.05).
Premium volume and profitability in life and health reinsurance showed 'appreciable growth', the company said.