Property and casualty reinsurance
| Key figures for property and casualty reinsurance | |||||||
|---|---|---|---|---|---|---|---|
| in EUR million | 2017 | 20161 | |||||
| 1.1.–30.6. | 1.7.–30.9. | +/– previous year |
1.1.–30.9. | +/– previous year |
1.7.–30.9. | 1.1.–30.9. | |
| Gross written premium | 5,427.5 | 2,771.9 | +11.2% | 8,199.3 | +15.2% | 2,493.1 | 7,120.5 |
| Net premium earned | 4,312.8 | 2,439.9 | +16.9% | 6,752.6 | +14.0% | 2,086.8 | 5,925.3 |
| Underwriting result | 149.0 | (458.1) | (309.1) | -212.2% | 109.1 | 275.5 | |
| Net investment income | 475.5 | 471.2 | +108.1% | 946.7 | +47.4% | 226.4 | 642.5 |
| Operating result (EBIT) | 634.3 | (32.6) | -109.8% | 601.7 | -32.8% | 332.0 | 894.9 |
| Group net income | 444.0 | 4.8 | -98.0% | 448.7 | -27.1% | 237.3 | 615.4 |
| Earnings per share in EUR | 3.68 | 0.04 | -98.0% | 3.72 | -27.1% | 1.97 | 5.10 |
| EBIT margin2 | 14.7% | -1.3% | 8.9% | 15.9% | 15.1% | ||
| Combined ratio3 | 96.5% | 118.3% | 104.4% | 94.4% | 95.0% | ||
| Retention | 89.4% | 88.8% | 89.2% | 88.5% | 88.3% | ||
| 1 Adjusted pursuant to IFRS 3 2 Operating result (EBIT) / net premium earned 3 Including funds withheld |
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The market environment in worldwide property and casualty reinsurance shows little change overall and remains challenging. Nevertheless, the recent natural disasters should bring about wide-ranging upward price momentum. Reinsurance capacity has hitherto far outstripped demand, with additional capacities from the ILS market putting sustained pressure on prices and conditions. Increased demand could, however, be observed in certain parts of Asia and North America as well as in lines such as cyber, some areas of specialty business and for covers designed to support capital management.
As had been anticipated, the treaty renewals in property and casualty reinsurance as at 1 June and 1 July 2017 were shaped by the sustained competitive climate. It was at this time of the year that parts of the North American portfolio, natural catastrophe risks and some areas of credit and surety business were renewed. This was also the main renewal season for business in Australia and New Zealand: while appreciable rate erosion was recorded here in some areas, significant price increases were also obtained under loss-impacted programmes. We are satisfied overall with the treaty renewals for the North American market; we enlarged our premium volume by around 15%. One of the key factors here was that we wrote larger shares in renewed business with selected customers. Natural catastrophe business saw premium erosion in most markets, although we were able to offset this through positive rate movements in Australia. In credit and surety business we grew our portfolio, both by writing new programmes and by increasing our shares in existing treaties. We generated healthy growth of 10% for the total book of property and casualty reinsurance business that was up for renewal.
The gross written premium for our total portfolio rose by 15.2% as at 30 September 2017 to EUR 8.2 billion (EUR 7.1 billion). At constant exchange rates growth would have reached 16.1%. The level of retained premium was higher than in the corresponding period of the previous year at 89.2% (88.3%). Net premium earned climbed by 14.0% to EUR 6.8 billion (EUR 5.9 billion); adjusted for exchange rate effects, the increase would have been 14.9%.
After we had recorded a very moderate large loss experience in the first half of the year, the third quarter was dominated by exceptionally high loss expenditure caused by three hurricanes and two earthquakes. Hurricane Harvey, which had a highly destructive impact on Texas and neighbouring US states, was followed by the devastation of Hurricane Irma in Florida and the Caribbean islands. Hurricane Maria subsequently inflicted particularly heavy damage on Puerto Rico. These three events alone gave rise to a net strain of EUR 650.6 million for our company. The two devastating earthquakes that struck Mexico in September resulted in a combined loss of EUR 71.5 million for our account. Altogether, our major loss expenditure as at 30 September 2017 added up to EUR 894.3 million (EUR 393.2 million), thereby exceeding the large loss budget that we had set aside for the first nine months of 2017 by around EUR 270 million.
It was already the case in the second quarter that exceptional losses from casualty business in the United Kingdom were offset by releases of IBNR reserves that had been constituted on a prudent basis. The underwriting result for total property and casualty reinsurance declined to EUR -309.1 million (EUR 275.5 million) owing to the considerable burden of large losses. The combined ratio consequently stood at 104.4% (95.0%) and thus failed to reach the targeted figure of 96%. Looked at in isolation for the third quarter, it amounted to 118.3% (94.4%).
The investment income booked in property and casualty reinsurance from assets under own management improved on the back of realised gains to EUR 933.3 million (EUR 623.8 million).
The operating profit (EBIT) for the Property & Casualty reinsurance business group totalled EUR 601.7 million (EUR 894.9 million) as at 30 September 2017, a decrease of 32.8%. The EBIT margin of 8.9% (15.1%) fell short of the minimum target set at 10%. Group net income for property and casualty reinsurance contracted by 27.1% to EUR 448.7 million (EUR 615.4 million). Earnings per share amounted to EUR 3.72 (EUR 5.10).