Property and casualty reinsurance

• Improved general environment in property and casualty reinsurance
• Very healthy growth in both traditional and structured reinsurance
• Moderate large loss expenditure in the first quarter

The treaty renewals in property and casualty reinsurance as at 1 January 2018 passed off successfully for Hannover Re. In an improved general environment the premium volume in traditional property and casualty reinsurance was boosted by 12.7%. Conditions in the 1 January 2018 renewals were crucially shaped by the very substantial natural catastrophe losses of 2017, which heavily impacted the results booked by reinsurers. The premium level was raised after several years of declining reinsurance prices. Under loss-affected programmes the rate increases reached double-digit percentages in some instances; overall, though, they remained on the moderate side owing to the continued excess supply of capacity. For reinsurance programmes that had not suffered losses – even those from less loss-impacted regions – it was generally possible to obtain a premium at least on the level of the previous year, and in some cases even modest premium increases were attainable.

In the course of the treaty negotiations Hannover Re was able to secure necessary price increases, expand strategic cooperations and increase its shares, hence leading to considerable growth. The increases were particularly marked in Asia as well as the United Kingdom and London Market. Attractive opportunities to expand the portfolio also opened up in North America, the Caribbean, Eastern Europe and in the area of cyber covers. We also enjoyed significant growth in Asia-Pacific markets. Large-volume transactions written in China and Australia enabled us to substantially enlarge the premium volume in these markets. Demand for reinsurance solutions offering solvency relief in the area of structured reinsurance was once again highly gratifying, as a consequence of which here too an appreciable premium increase was generated.

Reflecting these developments, gross premium for our Property & Casualty reinsurance business group rose by a pleasing 27.1% to EUR 3.6 billion (EUR 2.8 billion). Growth would have been as strong as 38.8% at constant exchange rates. The level of retained premium climbed to 91.6% (88.6%). Net premium earned increased by 12.0% to EUR 2.4 billion (EUR 2.2 billion); adjusted for exchange rate effects, it would have grown by 22.4%.

The major loss situation in the first quarter was moderate. The largest single loss for our company was Cyclone “Friederike”, which caused extensive damage in Germany and a number of other European countries. The resulting net strain for our account was in the order of EUR 31.5 million. Net expenditure on major losses in the first quarter totalled EUR 73.4 million (EUR 133.7 million), a figure well below our budgeted amount of EUR 167 million for the first quarter. The combined ratio stood at 95.9% (95.6%) and was thus within our expected target corridor of less than 96%. The underwriting result for total property and casualty reinsurance rose modestly to EUR 91.8 million (EUR 90.7 million).

The investment income booked for property and casualty reinsurance from assets under own management improved on what was already an exceptionally good performance in the comparable period by a further 9.2% to reach EUR 260.1 million (EUR 238.2 million).

The operating profit (EBIT) for property and casualty reinsurance as at 31 March 2018 increased by 9.4% to EUR 338.9 million (EUR 309.8 million). The EBIT margin reached 14.0% (14.3%), comfortably beating the minimum target of 10%. Group net income grew by 9.0% to EUR 234.8 million (EUR 215.4 million). Earnings per share came in at EUR 1.95 (EUR 1.79).