Non-life reinsurance
Non-life reinsurance
| Key figures for non-life reinsurance | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| in EUR million | 2014 | 2013 | ||||||||
| 1.1. – 31.3. | 1.4. – 30.6. | +/– previous year | 1.1. – 30.6. | +/– previous year | 1.4. – 30.6. | 1.1. – 30.6. | ||||
| Gross written premium | 2,107.8 | 1,970.4 | +3.7% | 4,078.1 | -0.5% | 1,899.5 | 4,097.1 | |||
| Net premium earned | 1,631.7 | 1,738.6 | +1.6% | 3,370.2 | -1.0% | 1,712.0 | 3,403.9 | |||
| Underwriting result | 87.6 | 70.7 | -17.3% | 158.3 | -13.8% | 85.5 | 183.6 | |||
| Net investment income | 204.8 | 194.0 | +10.0% | 398.8 | +9.8% | 176.3 | 363.1 | |||
| Operating result (EBIT) | 280.5 | 240.5 | -17.2% | 521.0 | -5.1% | 290.4 | 549.1 | |||
| Group net income | 197.9 | 150.1 | -19.8% | 347.9 | -3.9% | 187.2 | 362.1 | |||
| Earnings per share in EUR | 1.64 | 1.24 | -19.8% | 2.89 | -3.9% | 1.55 | 3.00 | |||
| EBIT margin1 | 17.2% | 13.8% | 15.5% | 17.0% | 16.1% | |||||
| Combined ratio2 | 94.4% | 95.6% | 95.0% | 94.8% | 94.4% | |||||
| Retention | 91.2% | 91.1% | 91.1% | 90.8% | 90.2% | |||||
| 1 Operating result (EBIT)/net premium earned 2 Including funds withheld | ||||||||||
Competition in non-life reinsurance has intensified sharply even compared to 2013. Supply currently clearly exceeds demand. This can be attributed to the absence of market-changing major losses and to the fact that healthy levels of capitalisation are enabling ceding companies to carry more risks in their retention. Not only that, additional capacities from the insurance-liked securities (ILS) market, especially in US natural catastrophe business, are causing appreciable price erosion.
The oversupply of reinsurance capacity also left its mark on the treaty renewals in non-life reinsurance as at 1 April 2014, the date when business in Japan is traditionally renegotiated. Treaty renewals also took place on a smaller scale in Korea, Australia and New Zealand. After the sharp rate increases recorded in Japan in recent years as a consequence of the severe earthquake of 2011, rate erosion was now observed on catastrophe covers – albeit from a high level. In casualty business, on the other hand, modest price increases were achieved. Although our premium volume in Japan contracted slightly, we were able to maintain our market position thanks to our good long-term client relationships. A smaller portion of US property catastrophe business was also up for renewal. As expected, further heavy price erosion was seen here. Thanks to our selective underwriting policy, under which we focus exclusively on the profitability of the business, we were nevertheless able to obtain adequate margins overall.
Having booked average premium growth of 10% over the past five years, we do not see any incentive in the present soft market climate to expand our business. We are nevertheless highly satisfied with the premium development as at 30 June 2014 in non-life reinsurance: the gross premium of EUR 4.1 billion is just 0.5% lower than the previous year’s figure (EUR 4.1 billion). Indeed, at constant exchange rates an increase of 2.0% would even have been recorded. The level of retained premium rose slightly relative to the previous year to stand at 91.1% (90.2%). Net premium earned fell by 1.0% to EUR 3.4 billion (EUR 3.4 billion); adjusted for exchange rate effects, a gain of 1.6% would have been reported.
Following below-average major loss expenditure in the first quarter of 2014, the burden of major losses was again gratifyingly slight in the second quarter. The largest single loss was caused by a storm front which swept across western Germany from France in early June, bringing thunderstorms, strong winds and hail. The associated net loss for Hannover Re amounted to EUR 33.3 million. The total net burden of major losses for the first half of 2014 stood at EUR 104.7 million (EUR 259.5 million) and thus remained well below our expected level of EUR 276 million. The underwriting result for total non-life reinsurance was once again thoroughly pleasing at EUR 158.3 million (EUR 183.6 million). The combined ratio not only came in at a very favourable 95.0% (94.4%), it also stayed comfortably below our targeted level of 96%.
Income from assets under own management climbed to EUR 389.4 million (EUR 355.2 million) for non-life reinsurance. This was attributable in part to a normalised result from changes in the fair value of the inflation swaps, which had still been negative in the corresponding period of the previous year. Hannover Re uses inflation swaps to hedge inflation risks associated with part of the loss reserves in its technical account.
The operating profit (EBIT) for non-life reinsurance as at 30 June 2014 of EUR 521.0 million fell 5.1% short of the figure for the previous year’s period (EUR 549.1 million) owing in part to significantly lower foreign currency translation gains. The EBIT margin of 15.5% (16.1%) clearly surpassed the minimum target of 10%. Group net income stood at EUR 347.9 million (EUR 362.1 million). Earnings per share came in at EUR 2.89 (EUR 3.00).