Non-life reinsurance

Non-life reinsurance

Key figures for non-life reinsurance
in EUR million20142013
1.1. – 31.3.+/– previous year1.1. – 31.3.
Gross written premium2,107.8-4.1%2,197.6
Net premium earned1,631.7-3.6%1,691.9
Underwriting result87.6-10.7%98.1
Net investment income204.8+9.6%186.8
Operating result (EBIT)280.5+8.4%258.7
Group net income197.9+13.1%174.9
Earnings per share in EUR1.64+13.1%1.45
EBIT margin117.2%15.3%
Combined ratio294.4%94.0%

Non-life reinsurance is significantly more competitive even compared to 2013. This is being driven by a number of factors: along with the absence of market-changing major losses, healthy levels of capitalisation are enabling ceding companies to carry more risks in their retention. Not only that, the inflow of capital from the market for catastrophe bonds (ILS) – especially in US natural catastrophe business – is causing appreciable price erosion. Overall, supply currently exceeds demand in non-life reinsurance. Despite the more intense competition, we are satisfied with the outcome of the treaty renewals as at 1 January 2014. Although heavy rate erosion was evident in some areas, we achieved prices that were commensurate with the risks. In cases where risks were not adequately priced, we scaled back our shares – sometimes markedly so. Against this backdrop, the premium volume contracted slightly by 2%; growth of 1% had been booked in the previous year’s renewals. Satisfactory margins were, however, obtained thanks to our selective underwriting policy. It is our expectation that the profitability of the new business written will remain broadly stable relative to 2013.

Rate increases were booked under loss-impacted programmes; this was especially true of catastrophe covers in Germany and Canada. In marine business we recorded further increases owing to the adverse loss experiences of prior years.

All in all, Hannover Re again benefited in the treaty renewals from its solid client relationships and its position as one of the leading and most financially robust reinsurance groups.

The gross premium for our non-life reinsurance business group contracted slightly by 4.1% relative to the corresponding period of the previous year to stand at EUR 2.1 billion (EUR 2.2 billion). At constant exchange rates the decrease would have been just 1.7%. The level of retained premium rose to 91.2% (89.8%). Net premium earned fell by 3.6% to EUR 1.6 billion (EUR 1.7 billion), or by a mere 1.0% adjusted for exchange rate effects.

As in the previous year, major loss expenditure in the first quarter of 2014 was relatively low. The only major loss resulted from the crash of the Malaysian passenger jet, for which we set aside reserves of EUR 30.6 million. The major loss expenditure in the first quarter of 2014 contrasted with an amount of EUR 13.4 million in the previous year. Against this backdrop, the underwriting result for total non-life reinsurance closed at a thoroughly pleasing EUR 87.6 million (EUR 98.1 million). The combined ratio of 94.4% (94.0%) was again on a very good level and is thus in line with our goal of achieving a combined ratio under 96% for the full year.

Driven by higher net realised gains, the investment income for non-life reinsurance improved on the comparable period of the previous year by 9.6% to reach EUR 204.8 million (EUR 186.8 million).

The operating profit (EBIT) in non-life reinsurance increased by 8.4% to EUR 280.5 million (EUR 258.7 million) as at 31 March 2014. The EBIT margin of 17.2% (15.3%) comfortably surpassed the minimum target of 10%. Group net income improved again on the very good level of the corresponding quarter (EUR 174.9 million), rising by 13.1% to EUR 197.9 million. Earnings per share came in at EUR 1.64 (EUR 1.45).


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