DGAP-News: Hannover Re generates quarterly profit despite heavy burden of major losses
(firmenpresse) - DGAP-News: Hannover Rückversicherung AG / Key word(s): Quarter Results
Hannover Re generates quarterly profit despite heavy burden of major
losses
03.05.2011 / 07:30
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Hannover Re generates quarterly profit despite heavy burden of major losses
- Total premium growth: + 10.3%
- Combined ratio in non-life reinsurance: 123.8% (previous year: 99.3%)
- Investment income: EUR 392.0 million (EUR 279.5 million)
- Operating profit (EBIT): EUR 46.1 million (EUR 238.8 million)
- Quarterly net income: EUR 52.3 million (EUR 151.0 million)
- Earnings per share: EUR 0.43 (EUR 1.25)
- Net burden of major losses: EUR 572 million (EUR 264 million)
- Forecast for Group net income 2011: roughly EUR 500 million
Hannover, 3 May 2011: Hannover Re today presented its results for the first
quarter of 2011. 'The current financial year has been dominated so far by
severe natural catastrophe events, which have produced an exceptional major
loss burden of EUR 572 million for our company. This is around EUR 452
million higher than the loss expectancy for the first quarter - equivalent
to 41.6% of net premium in non-life reinsurance - and caused net income
after tax to fall well short of our expectations at EUR 52 million', Chief
Executive Officer Ulrich Wallin explained. 'On a positive note, though, I
would point out that even in this challenging quarter we still posted a net
profit.'
Premium growth in the first quarter of 2011
Gross written premium for the Hannover Re Group climbed sharply by 10.3% to
EUR 3.1 billion (EUR 2.9 billion) as at 31 March 2011. At constant exchange
rates growth would have come in at 8.7%. The level of retained premium
decreased slightly to 89.3% (90.8%). Net premium earned increased by 8.8%
to EUR 2.5 billion (EUR 2.3 billion).
Owing to the major loss situation, the operating profit (EBIT) of EUR 46.1
million as at 31 March 2011 was considerably lower than in the
corresponding quarter of the previous year (EUR 238.8 million). Group net
income amounted to EUR 52.3 million (EUR 151.0 million). 'The fact that we
were able to generate a quarterly profit despite the enormous catastrophe
loss burden was due to the following effects: run-off profits booked on
reserves constituted for losses in prior years, very healthy investment
income, the refund of taxes paid for the years 1993 to 2001 as well as the
satisfying performance of our life and health reinsurance business', Mr.
Wallin emphasised. Earnings per share amounted to EUR 0.43 (EUR 1.25).
Exceptional major loss events take a toll on the result in non-life
reinsurance
The treaty renewals in non-life reinsurance as at 1 January 2011 passed off
better than expected for Hannover Re. On the whole, the rate level was
still commensurate with the risks. Despite softer market conditions the
company was able to write profitable business and further consolidate its
market position.
Gross premium in non-life reinsurance increased by an appreciable 11.8%
relative to the corresponding period of the previous year to reach EUR 1.9
billion (EUR 1.7 billion). At constant exchange rates, especially against
the US dollar, growth would have come in at 10.7%. The level of retained
premium retreated marginally to 87.8% (90.1%). Net premium earned climbed
9.4% to EUR 1.4 billion (EUR 1.3 billion).
Even though the impact of the major losses on Hannover Re was, if anything,
disproportionately low - relative to its market shares -, the net burden of
major losses totalling EUR 572 million (EUR 264 million) not only far
exceeded the expected level for the first quarter, it even surpassed the
major loss budget for the entire year (EUR 530 million). The largest single
loss for Hannover Re was the devastating earthquake and subsequent tsunami
in Japan with a net strain of EUR 232 million. The severe earthquake in New
Zealand cost the company EUR 152 million. The flooding in
Brisbane/Australia resulted in loss expenditure of EUR 52 million for
Hannover Re. There were also a number of other mid-sized and smaller major
losses.
The combined ratio consequently stood at 123.8% (99.3%); the net
underwriting result declined to -EUR 330.9 million (EUR 5.5 million). The
operating result (EBIT) in non-life reinsurance contracted to -EUR 24.5
million (EUR 165.6 million). The Group net income of EUR 17.3 million (EUR
109.4 million) in non-life reinsurance was assisted, most notably, by
run-off profits on reserves constituted for losses in prior years, very
healthy investment income and the refund of excess taxes and interest paid
thereon in an amount of EUR 113.5 million. The tax refund was based on a
decision of the Federal Fiscal Court (BFH) in October 2010 regarding the
taxation of foreign-sourced income under the Foreign Transactions Tax Act.
Earnings per share amounted to EUR 0.14 (EUR 0.91).
Life and health reinsurance developing as planned
The general business environment in international life and health
reinsurance remains favourable. The ageing of the population in mature
markets such as the United Kingdom, United States and Germany is prompting
growing demand for annuity and health insurance products. Yet in key
emerging markets such as China, India and Brazil demand for retirement
provision solutions also continues to rise.
Gross written premium climbed 8.1% to EUR 1.2 billion (EUR 1.1 billion) as
at 31 March 2011. At constant exchange rates growth would have reached
5.7%. Net premium earned increased by 8.0% to EUR 1.1 billion (EUR 1.0
billion).
The operating profit (EBIT) totalled EUR 58.4 million (EUR 62.6 million).
Owing to negative exchange rate effects, the EBIT margin of 5.2% did not
quite match up to the targeted level of 6%. Group net income in life and
health reinsurance amounted to EUR 41.5 million as at 31 March 2011, a
figure slightly lower than the result of the corresponding quarter of the
previous year (EUR 45.8 million). Earnings per share came in at EUR 0.34
(EUR 0.38).
As in previous years, Hannover Re is reporting on the Market Consistent
Embedded Value (MCEV) in the context of its first interim report. This also
encompasses the expected future profits as well as the allocated capital,
and hence provides a good basis for assessing long-term profitability.
Bearing in mind the present state of capital markets, the MCEV developed
very well as at 31 December 2010. It amounted to EUR 2.6 billion (EUR 2.1
billion), equivalent to an increase of 24.3%. The value of new business
also recorded a strong increase to reach EUR 149.3 million (EUR 78.9
million).
Very pleasing investment income
Due to fair value and exchange rate effects the portfolio of assets under
own management contracted slightly to EUR 24.8 billion (EUR 25.4 billion).
Despite the low level of interest rates, ordinary income from assets under
own management actually improved somewhat on the corresponding period of
the previous year to reach EUR 222.7 million (EUR 214.2 million). Income on
funds withheld and contract deposits increased to EUR 75.9 million (EUR
74.0 million). The unrealised gains on assets recognised at fair value
through profit or loss amounted to EUR 69.0 million - as against unrealised
losses of EUR 12.9 million in the comparable quarter of the previous year.
This development was driven chiefly by the positive change in the fair
value of inflation swaps taken out last year. Net investment income surged
by a vigorous 40.3% to EUR 392.0 million (EUR 279.5 million).
In the first quarter of 2011 Hannover Re parted company with its portfolio
of listed equities. 'We decided to take this step because we found the
market climate in March to be excessively volatile - in part as a
consequence of events in Japan, the implications of which for the global
economy were difficult to foresee', Mr. Wallin emphasised. The equity
disposal reduced investment income by a modest EUR 7.2 million.
Shareholders' equity remains on a high level
Reflecting the fall in fair value reserves due to interest rate rises and
also on account of exchange rate effects, shareholders' equity showed a
modest decrease. It totalled EUR 4.3 billion at the end of the first
quarter (31.12.2010: EUR 4.5 billion). The book value per share amounted to
EUR 36.05 (EUR 37.39).
Outlook
Even though the 2011 financial year is already notable for an exceptionally
high incidence of major losses, the business prospects for a financially
strong reinsurer nevertheless remain very good. This is true of both
non-life and life/health reinsurance. Market opportunities are opening up,
inter alia with an eye to the preparations for Solvency II. With this in
mind, the net premium volume should - at constant exchange rates - grow by
7% to 8%.
After prices in non-life reinsurance had been flat of late or even declined
in some lines, substantial rate increases can be seen in the wake of the
recent major loss events. The outcome of the treaty renewals as at 1 April
2011 for Japan, Australia and New Zealand as well as in marine and aviation
business was correspondingly favourable.
For 2011 the company expects net premium in total non-life reinsurance to
grow by around 5% in the original currencies.
In life and health reinsurance, too, the business outlook is very bright.
Hannover Re expects to grow its net premium by roughly 10% to 12% for 2011.
The EBIT margin should be in excess of 6%.
The company anticipates a return on investment of 3.5% on its asset
portfolio for 2011.
In view of the attractive business opportunities that are opening up and
the advantageous situation on reinsurance markets, Hannover Re currently
expects to generate - despite the major loss expenditure incurred to date -
Group net income in the order of EUR 500 million. This is subject to the
premise that the burden of major losses in quarters 2 to 4 does not exceed
the expected level of EUR 410 million for the remainder of the financial
year and also assumes that investment income is not influenced by any
special adverse effects. Following the first quarter of 2011 the profit
target has consequently decreased from EUR 650 million to EUR 500 million.
As for the dividend, Hannover Re continues to aim for a payout ratio in the
range of 35% to 40% of its Group net income after tax.
For further information please contact:
Corporate Communications:
Karl Steinle (tel. +49 511 5604-1500,
e-mail: karl.steinle(at)hannover-re.com)
Media Relations:
Gabriele Handrick (tel. +49 511 5604-1502,
e-mail: gabriele.handrick(at)hannover-re.com)
Investor Relations:
Klaus Paesler (tel. +49 511 5604-1736,
e-mail: klaus.paesler(at)hannover-re.com)
Please visit: www.hannover-re.com
Hannover Re, with a gross premium of around EUR 11 billion, is the
third-largest reinsurer in the world. It transacts all lines of non-life
and life and health reinsurance. It maintains business relations with more
than 5,000 insurance companies in about 150 countries. Its worldwide
network consists of more than 100 subsidiaries, branch and representative
offices on all five continents with a total staff of roughly 2,200. The
rating agencies most relevant to the insurance industry have awarded
Hannover Re very strong insurer financial strength ratings (Standard&Poor's AA- 'Very Strong' and A.M. Best A 'Excellent').
Disclaimer:
Some of the statements in this press release may be forward-looking
statements or statements of future expectations based on currently
available information. Such statements are naturally subject to risks and
uncertainties. Factors such as the development of general economic
conditions, future market conditions, unusual catastrophic loss events,
changes in the capital markets and other circumstances may cause the actual
events or results to be materially different from those anticipated by such
statements. Hannover Re does not make any representation or warranty,
express or implied, as to the accuracy, completeness or updated status of
such statements. Therefore, in no case whatsoever will Hannover Re and its
affiliate companies be liable to anyone for any decision made or action
taken in conjunction with the information and/or statements in this press
release or for any related damages.
Key figures of the Hannover Re Group (IFRS basis)
in EUR million Q1/2011 Change in % Q1/20101) 2010
Gross written premium 3,143.1 10.3% 2,850.1
Net premium earned 2,490.7 8.8% 2,289.6
Net underwriting result (382.7) (49.1)
Net investment income2) 392.0 40.3% 279.5
Operating profit / loss
(EBIT) 46.1 (80.7%) 238.8
Group net income (loss) 52.3 (65.4%) 151.0
Earnings per share in EUR 0.43 (65.4%) 1.25
Retention 89.3% 90.8%
EBIT margin3) 1.9% 10.4%
Return on equity (after
tax)4) 4.7% 15.5%
in EUR million Q1/2011 Change in Q1/ 2010Non-life reinsurance
% 2010
Policyholders' surplus5) 6,670.6 (4.5%) - 6,987.0
Investments (excl. funds held by 24,823 25,411
ceding companies) .5 (2.3%) - .1
46,221 46,725
Total assets .8 (1.1%) - .3
Book value per share in EUR 36.05 (3.6%) - 37.39
in EUR million Q1/2011 Change in % Q1/2010 2010Life and health reinsurance
Gross written premium 1,924.3 11.8% 1,721.9
Net premium earned 1,376.3 9.4% 1,258.0
Net underwriting result (330.9) 5.5
Operating profit / loss (EBIT) (24.5) (114.8%) 165.6
Group net income (loss) 17.3 (84.2%) 109.4
Retention 87.8% 90.1%
Combined Ratio6) 123.8% 99.3%
EBIT margin3) (1.8%) 13.2%
in EUR million Q1/2011 Change in % Q1/20101) 20101) Adjusted on the basis of IAS 8
Gross written premium 1,219.4 8.1% 1,128.1
Net premium earned 1,114.5 8.0% 1031.6
Operating profit / loss
(EBIT) 58.4 (6.6%) 62.6
Group net income (loss) 41.5 (9.4%) 45.8
Retention 91.5% 91.8%
EBIT margin3) 5.2% 6.1%
2) Including expense on funds withheld and contract deposits
3) Operating profit / loss (EBIT) / net premium earned
4) Annualised
5) Total shareholders' equity + minority interests + hybrid capital
6) Including interest income on contract deposits and funds withheld
End of Corporate News
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Language: English
Company: Hannover Rückversicherung AG
Karl-Wiechert-Allee 50
30625 Hannover
Deutschland
Phone: +49-(0)511-5604-1500
Fax: +49-(0)511-5604-1648
E-mail: info(at)hannover-re.com
Internet: www.hannover-re.com
ISIN: DE0008402215
WKN: 840 221
Listed: Regulierter Markt in Frankfurt (Prime Standard), Hannover;
Freiverkehr in Berlin, Düsseldorf, Hamburg, München,
Stuttgart; Terminbörse EUREX
End of News DGAP News-Service
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Datum: 03.05.2011 - 07:30 Uhr
Sprache: Deutsch
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