Hannover Re reveals ‘higher than expected’ losses in Q1

Hannover Re posted a quarterly profit of €264m in the first three months and confirms its full-year earnings guidance.

This was despite sizeable natural catastrophe claims, further pandemic-related losses in life and health reinsurance and additional strengthening of provisions for possible losses resulting from the war in Ukraine.

“While we are all appalled by the suffering that Russia has unleashed in its war on Ukraine, it is not yet possible to put a concrete figure on the economic impact at this point in time,” said Jean-Jacques Henchoz, chief executive officer of Hannover Re.

“Along with the potential implications of the war in Ukraine, we faced numerous natural catastrophes and further pandemic-related strains in life and health reinsurance in the first three months of the year.

Gross written premiums grew by 26% as of the end of March to €7.1 billion (up from €5.7 billion in the prior year quarter). 

The combined ratio in property and casualty reinsurance increased to 99.5% (up from 96.2% in Q1 2021), exceeding the target level of no more than 96%.

Rates stand firm at renewals

The reinsurer said it “was satisfied overall” with the renewal of its property and casualty reinsurance portfolio as of 1 January 2022. 62% of the treaties in traditional property and casualty reinsurance were renegotiated on this date.

The inflation- and risk-adjusted price increase amounted to 4.1%, with the biggest gains recorded in Europe.

Meanwhile, premium volume increased by 17.4% at 1 April. The inflation- and risk-adjusted price increase for the renewed business amounted to 3.7%.

At a Group level Hannover Re continues to expect that net income of €1.4 billion to €1.5 billion will be generated for the 2022 financial year.

Guidance for 2022 confirmed

It is still too soon to put a definitive figure on losses for global insurance and reinsurance markets resulting from the war in Ukraine. Hannover Re has temporarily stopped writing new risks or renewal of treaties with clients in Russia and Belarus until further notice.

“Even though it will take some time before the impact of the war on insurers and reinsurers can be precisely quantified, we have taken the precaution of establishing additional provisions in the first quarter,” Henchoz said.

“Despite all the uncertainties, I remain confident that we can achieve the goals we have set ourselves for the full year thanks to our considerable resilience and robust profitability.”

This assumes that major loss expenditure does not materially exceed the budgeted level of €1.4 billion, the COVID-19 pandemic does not have a significant unexpected impact on the result in life and health reinsurance and no unforeseen developments occur in capital markets. The return on investment should reach at least 2.3%.