| Key figures for property and casualty reinsurance | |||||||
|---|---|---|---|---|---|---|---|
| in EUR million | 2016 | 2015 | |||||
| 1.1. – 30.6. |
1.7. – 30.9. | +/– previous year | 1.1. – 30.9. | +/– previous year |
1.7. – 30.9. | 1.1. – 30.9. |
|
| Gross written premium | 4,627.4 | 2,493.1 | +6.2% | 7,120.5 | -2.7% | 2,347.1 | 7,319.4 |
| Net premium earned | 3,838.4 | 2,086.8 | +0.8% | 5,925.3 | -0.7% | 2,071.2 | 5,965.4 |
| Underwriting result | 166.4 | 109.1 | +35.6% | 275.5 | +9.6% | 80.5 | 251.4 |
| Net investment income | 416.1 | 226.4 | -8.6% | 642.5 | -4.5% | 247.7 | 672.8 |
| Operating result (EBIT) | 560.9 | 332.0 | -5.8% | 893.0 | -4.6% | 352.6 | 936.3 |
| Group net income | 376.2 | 237.3 | +2.0% | 613.5 | -5.8% | 232.6 | 651.0 |
| Earnings per share in EUR | 3.12 | 1.97 | +2.0% | 5.09 | -5.8% | 1.93 | 5.40 |
| EBIT margin1 | 14.6% | 15.9% | 15.1% | 17.0% | 15.7% | ||
| Combined ratio2 | 95.4% | 94.4% | 95.0% | 95.8% | 95.5% | ||
| Retention | 88.2% | 88.5% | 88.3% | 87.3% | 88.8% | ||
| 1 Operating result (EBIT) / net premium earned 2 Including funds withheld |
|||||||
In worldwide property and casualty reinsurance the market continues to be intensely competitive, with reinsurance capacity comfortably outstripping demand. Additional capacities originating from the ILS market are also putting prices and conditions under sustained pressure. While profitability for primary insurers and reinsurers is generally good despite the prevailing low interest rates, it has been supported by the fact that losses from natural catastrophes in recent years have been below the longer-term average. The difficult business conditions have therefore only impacted underwriting profits to a lesser degree so far, although they have also been reflected to some extent in the results posted by reinsurers.
In this challenging environment it is especially important for Hannover Re to continue systematically with its margin-oriented underwriting. This approach similarly shaped our strategy in the treaty renewals as at 1 July 2016, the outcome of which was broadly positive for our company. In North America the trend observed in preceding renewals was confirmed. The absence of large losses from natural disasters and individual risks continued to make itself felt in rate decreases. Nevertheless, the rate reductions were smaller than anticipated in some cases and there were further indications of a bottoming out in prices, both in the property and casualty lines. Even though most casualty lines are still fiercely competitive, we were able to act on new business opportunities – including for example in the coverage of cyber risks. In US property catastrophe business the pressure on prices eased in comparison with the previous year’s renewals. We rigorously maintained our pricing discipline and focused on target customers. Hannover Re further underweighted its share of US catastrophe business. On the whole, the treaty renewals in Latin America and the Caribbean as at 1 July 2016 typically saw price reductions. The losses from the earthquake in Ecuador brought about rate improvements, albeit only in the impacted region. We responded to the rate erosion in agricultural risks by scaling back our share of the business.
Gross written premium for our total portfolio contracted by 2.7% as at30 September 2016 to EUR 7.1 billion (EUR 7.3 billion). At constant exchange rates the decrease would have been 1.5%. The level of retained premium was slightly lower than in the previous year’s period at 88.3% (88.8%). Net premium earned fell by a modest 0.7% to EUR 5.9 billion (EUR 6.0 billion); adjusted for exchange rate effects, it would have grown by 0.9%.
Following the heavier-than-anticipated burden of large losses incurred in the second quarter of 2016, the situation in the third quarter was thoroughly moderate. Expenditure on major losses came in at EUR 40.5 million, well under our budget of EUR 265 million for the third quarter. In keeping with our prudent reserving policy, we allocated the bulk of the unused large loss budget to the loss reserves. Aside from the usual positive run-off, no other reserves were written back in the third quarter. Total net expenditure on large losses for the first three quarters amounted to EUR 393.2 million (EUR 436.4 million). The underwriting result for total property and casualty reinsurance increased sharply by 9.6% to EUR 275.5 million (EUR 251.4 million). The combined ratio remains positive at 95.0% (95.5%) and is in line with our goal of staying below 96% for the full year. Looking at the third quarter in isolation, it was even as low as 94.4%.
The investment income booked for property and casualty reinsurance from assets under own management retreated slightly as expected to EUR 623.8 million (EUR 656.5 million).
The operating profit (EBIT) for the Property & Casualty reinsurance business group totalled EUR 893.0 million as at 30 September 2016; this figure is 4.6% lower than in the comparable period (EUR 936.3 million). The EBIT margin of 15.1% (15.7%) was again comfortably in excess of our minimum target of 10%. Group net income in property and casualty reinsurance contracted by 5.8% to EUR 613.5 million (EUR 651.0 million). Earnings per share amounted to EUR 5.09 (EUR 5.40).
