Business development
Hannover Re improved its nine-month Group net income as at 30 September 2018 by 32.1% compared to the previous year – which had been impacted by exceptionally heavy loss expenditure – to reach a level of EUR 725.3 million; the company also confirmed its full-year profit guidance.
In property and casualty reinsurance the picture in the third quarter was once again dominated by large losses, although they did not even come close to the scale of the previous year. Typhoons Jebi, Prapiroon and Trami in Japan and Hurricane Florence in the United States, among other natural catastrophe events, caused considerable devastation. These losses almost entirely used up our major loss budget for the third quarter, although the expenditure is still within the bounds of our expectations. This can be attributed not least to the protective effect of our own reinsurance cessions – especially for natural catastrophe losses –, through which we obtain coverage against our risks from other reinsurers or via the capital markets. In view of the fact that we are also seeing an increasing frequency of smaller and mid-sized losses – in addition to the aforementioned large losses –, the market environment in property and casualty reinsurance nevertheless remains challenging.
In life and health reinsurance the measures to improve our US mortality business took a toll on earnings. This is something that we are willing to accept and in so doing we are avoiding strains down the road. Overall, we continue to see promising opportunities for life and health reinsurance on the international markets, for example in the area of individual longevity products.
On the Group level gross written premium increased by 11.2% in the first nine months to EUR 15.0 billion (previous year: EUR 13.5 billion). Growth would have come in at 16.5% at constant exchange rates. We are thus ahead of our targeted currency-adjusted growth of more than 10%. Our retention rose to 90.8% (90.1%). Net premium earned climbed 10.7% to EUR 12.8 billion (EUR 11.5 billion), equivalent to growth of 15.9% adjusted for exchange-rate effects.
Bearing in mind the difficult general climate, we are thoroughly satisfied with the development of our investments in the first nine months. The portfolio of assets under own management grew to EUR 41.5 billion (31 December 2017: EUR 40.1 billion). Ordinary investment income came in slightly above the previous year’s level at EUR 991.4 million (EUR 942.6 million). This reflects, most notably, increased ordinary income from fixed-income securities as well as higher earnings booked from private equity and real estate. In view of the considerable positive effect associated with disposal of the portfolio of listedequities in the previous year, net investment income retreated as expected to EUR 1,155.4 million (EUR 1,382.5 million). Of this amount, EUR 992.1 million (EUR 1,202.4 million) was attributable to income from investments under own management. This produces a very pleasing annualised average return (excluding the effects of ModCo derivatives) of 3.3% – a figure well in excess of the minimum 2.7% mark targeted for the full financial year.
The operating profit (EBIT) for the Hannover Re Group as at 30 September 2018 surged by 43.5% to EUR 1,157.1 million (EUR 806.4 million). Group net income in the first nine months improved by an appreciable 32.1% to EUR 725.3 million (EUR 548.9 million). Earnings per share amounted to EUR 6.01 (EUR 4.55).
The shareholders’ equity of Hannover Re as at 30 September 2018 decreased slightly to EUR 8.4 billion (31 December 2017: EUR 8.5 billion). The book value per share thus stood at EUR 69.27 (31 December 2017: EUR 70.72). The annualised return on equity as at 30 September 2018 amounted to 11.5% (31 December 2017: 10.9%).
In the reporting period just ended we also finalised the succession arrangements at the helm of our company. The Supervisory Board of Hannover Rück SE has appointed Jean-Jacques Henchoz as a member of the Executive Board effective 1 April 2019. He has most recently been in charge of property and casualty as well as life and health reinsurance in the region Europe, Middle East and Africa at Swiss Reinsurance Company. Jean-Jacques Henchoz will succeed Ulrich Wallin as Chief Executive Officer of Hannover Re upon conclusion of the Annual General Meeting on 8 May 2019. At the same time, Ulrich Wallin is retiring in accordance with the company statutes following his extremely successful service to Hannover Re.