In property and casualty reinsurance we continue to find ourselves facing an intensely competitive market. Even after the record losses of 2017, reinsurance capacity still clearly outstripped demand. Furthermore, additional capital originating from the ILS market left prices and conditions in the property lines under sustained pressure. We were nevertheless able to act on profitable growth opportunities as business came up for renewal. In the area of structured reinsurance we noted a sharp rise in demand on the customer side for reinsurance solutions offering solvency relief and we expanded our book of business accordingly.
Against this backdrop, gross premium rose by 11.8% to EUR 12.0 billion (EUR 10.7 billion). At constant exchange rates growth would have reached 16.2% and thus came in clearly better than we had anticipated.
The financial year just ended was once again dominated by major losses that exceeded market expectations. While 2017 went down as the year with the heaviest burden of large losses in Hannover Re’s history, the strains incurred on a net basis in the 2018 financial year came in only slightly higher than our large loss budget thanks to our traditionally prudent underwriting policy and the protective effect of our own reinsurance cessions. After the first half of 2018 passed off with a thoroughly moderate large loss experience, a significantly higher burden was incurred in the third and especially the fourth quarter. Altogether, Hannover Re’s net expenditure on large losses amounted to EUR 849.8 million (EUR 1,127.3 million). The combined ratio of 96.5% (99.8%) was slightly higher than our maximum full-year target of 96%.
Investment income from assets under own management in property and casualty reinsurance delivered a pleasing performance. Ordinary income increased, helped by very healthy earnings from real estate and private equity, by a modest 0.9% to EUR 1,024.3 million (EUR 1,014.7 million). Total investment income nevertheless contracted by 16.1% to EUR 999.3 million (EUR 1,191.5 million). The decline can be attributed to the elimination of the extraordinary income booked from the sale of our listed equities in 2017.
We are satisfied with the result in property and casualty reinsurance. After the considerable large loss expenditure of the previous year, the underwriting result including interest and expenses on funds withheld and contract deposits improved to EUR 372.8 million (EUR 15.5 million). The operating profit (EBIT) as at 31 December 2018 increased to EUR 1,322.6 million (EUR 1,120.2 million). The EBIT margin held stable and at 12.2% it was higher than the 10% minimum target. Group net income in property and casualty reinsurance rose by 11.0% to EUR 929.1 million (EUR 837.3 million).