Hannover raises full-year targets for bumper 2009
Hannover Re has upped its top and bottom line targets for the full year after a strong quarter driven by the benign claims environment, resurgent investment income and continued growth in its life and health business.
The German reinsurer booked net profits of EUR159.4mn for the quarter compared to a loss of EUR395.0mn in the prior-year period - which was hit by losses from hurricanes Gustav and Ike and heavy writedowns on equities.
The result boosted net profit for the year to 30 September to EUR578.4mn - or EUR4.80 a share - against a EUR142.8mn loss at the same stage last year.
Meanwhile, gross written premium was up 23.4 percent to EUR2.4bn for the quarter and 25.6 percent to EUR7.7bn for the first nine months of the year. The company attributed this to stronger demand as well as a EUR606.4mn uplift following its acquisition of the ING life reinsurance portfolio.
Shareholders' equity also surged, with the EUR3.5bn recorded at 30 September 24.9 percent up on the year-end 2008 level.
The stellar performance led new CEO Ulrich Wallin to announce that Hannover Re's full-year profit target had been raised from EUR5 a share to "at least EUR5.75 a share", with return on equity greater than 20 percent and a dividend payout of at least EUR2 a share.
At the same time, the company raised its target for gross written premium growth for the full year from 25 percent to 30 percent up on 2008.
In its non-life reinsurance business, Hannover Re highlighted a significant rise in its credit and surety insurance portfolio, as it looked to take advantage of rising rates in the recession-hit business while rivals cut capacity in response to higher loss ratios.
Despite only breaking even on the business for the first nine months of the year "owing to increased default rates and prudent reserving", the reinsurer said the now-improving loss ratios provide affirmation of its strategy. It added that it expects its portfolio to return to profitability next year.
Overall gross written premium in Hannover Re's non-life business was up 16.2 percent to EUR4.4bn for the first nine months of the year, with its retention climbing from 88.4 percent to 93.4 percent as it bought less retro cover.
Hannover generated a combined ratio of 96.8 percent, compared to 103.6 percent at the same stage last year, as the cat loss burden came in well below expected levels, helping the division contribute EUR331.3mn to net profits for the year-to-date.
But it was the life and health reinsurance arm that demonstrated the most significant growth in the first nine months of 2009.
In line with other major Continental European reinsurers - most notably Munich Re - Hannover Re saw significant expansion as a result of the "visibly weaker solvency position" among insurers. The trend was particularly evident in the US, where demand increased for "both risk- and financial-oriented products".
"Block assumption transactions, i.e. the assumption of defined in-force portfolios, also currently offer favourable opportunities, which we again used in the third quarter to expand our business," Wallin explained.
Including the impact of its ING acquisition, gross written premium surged 41.1 percent to EUR3.3bn as at 30 September.
Meanwhile, net investment income in life and health reinsurance more than doubled from EUR206.3mn to EUR433.5mn. Reversing unrealised losses on deposits with US clients helped net profits in the segment rise from EUR61.4mn at the same stage last year to EUR261.7mn.
Overall net investment income across the group - aided by significantly lower writedowns - climbed strongly from EUR379.4mn to EUR850.5mn.