DGAP-News: Hannover Rück SE / Key word(s): Quarter Results
Hannover Re makes a good start to the 2014 financial year
07.05.2014 / 07:00
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Press release
Hannover Re makes a good start to the 2014 financial year
- Return on equity: 15.3%
- Combined ratio: 94.4% (94.0%)
- Net major loss expenditure at a moderate EUR 30.6 million
- Investment income +1.8%: EUR 361.2 million (EUR 354.7 million)
- Group net income +0.7%: EUR 233.0 million (EUR 231.2 million)
- Gross premium income: -0.7% adjusted for exchange rate effects
Hannover, 7 May 2014: Hannover Re is satisfied with the development of its
business in the first three months of 2014. "The quarterly profit of EUR
233 million was driven by a very pleasing underwriting result in non-life
reinsurance and good investment income. This shows that we have adjusted
well to the challenging business environment", Chief Executive Officer
Ulrich Wallin commented. On the basis of this successful start to 2014,
Hannover Re reaffirms its net income guidance in the order of EUR 850
million for the full financial year.
Slight decline in gross premium
Gross written premium for the Hannover Re Group contracted by 3.6% as at 31
March 2014 to EUR 3.6 billion (EUR 3.8 billion). At constant exchange rates
the decrease would have been just 0.7%. The level of retained premium fell
slightly to 88.4% (89.9%). Net premium earned consequently declined by a
somewhat more marked 5.5% to EUR 2.9 billion (EUR 3.1 billion). The
decrease amounted to 2.6% after adjustment for exchange rate effects.
Pleasing Group net income
The operating profit (EBIT) of EUR 349.6 million as at 31 March 2014 was on
a similarly high level to the previous year (EUR 366.5 million). Group net
income improved further on the comparable period of the previous year by a
modest 0.7% to EUR 233.0 million (EUR 231.2 million). Earnings per share
amounted to EUR 1.93 (EUR 1.92).
Non-life reinsurance delivers very satisfactory profit contribution
Non-life reinsurance continues to be fiercely competitive; this was also
evident in the treaty renewals as at 1 January 2014. Hannover Re showed
discipline in maintaining its profit-oriented underwriting policy and in so
doing accepted modest declines in premium volume.
Total gross premium for non-life reinsurance contracted by
4.1% as at 31 March 2014 relative to the comparable period to stand at EUR
2.1 billion (EUR 2.2 billion). At constant exchange rates the decrease
would have been just 1.7%. The retention increased to 91.2% (89.8%), as a
consequence of which net premium earned fell less sharply by 3.6% - or 1.0%
adjusted for exchange rate effects - to EUR 1.6 billion (EUR 1.7 billion).
Major loss expenditure was below average in the first three months of 2014,
just as it had been in the corresponding quarter of the previous year. The
only major loss resulted from the crash of the Malaysian passenger plane,
wreckage of which had still to be located at time of going to press.
Hannover Re has set aside reserves of EUR 30.6 million for this event; net
major loss expenditure in the comparable quarter had amounted to EUR 13.4
million. "As in the past, the unused portion of the major loss budget was
not released to income, but was allocated to the corresponding loss
reserves - leaving us very well equipped to cope with any major losses in
the remaining quarters of 2014", Mr. Wallin emphasised. The underwriting
result again closed at a thoroughly pleasing EUR 87.6 million (EUR 98.1
million). Another very good combined ratio of 94.4% (94.0%) was recorded.
In view of the very healthy underwriting result and a good contribution
from the investment side, the operating profit (EBIT) in non-life
reinsurance moved substantially higher by 8.4% to EUR 280.5 million (EUR
258.7 million). Group net income climbed a further 13.1% to EUR 197.9
million, building on the very good figure of EUR 174.9 million reported in
the comparable period. Earnings per share stood at EUR 1.64 (EUR 1.45).
Life and health reinsurance in line with expectations
Life and health reinsurance is also the scene of increasingly intense
competition. Although the targeted growth consequently failed to
materialise in the first quarter, Hannover Re sees promising growth
impulses for the rest of the year. This continues to be the case with
emerging markets such as China, Brazil and India. Developments in
Sharia-compliant retakaful business were particularly pleasing in the
quarter just ended. In this segment Hannover Re focuses on Middle and Far
Eastern markets and now ranks among the largest providers in the world.
Gross premium for life and health reinsurance fell by 2.8% as at 31 March
2014 to EUR 1.5 billion (EUR 1.6 billion). At constant exchange rates, on
the other hand, growth of 0.7% would have been booked. Reflecting a reduced
level of retained premium, net premium earned retreated by 7.8% to EUR 1.3
billion (EUR 1.4 million); this is equivalent to a reduction of 4.5% after
adjustment for exchange rate effects.
In terms of profitability, life and health reinsurance fell short of the
aperiodic high comparable figure of the previous year but still posted a
satisfactory result. The operating profit (EBIT) in life and health
reinsurance as at 31 March 2014 totalled EUR 65.6 million (EUR 102.4
million). Group net income came in at EUR 43.4 million (EUR 75.1 million);
earnings per share amounted to EUR 0.36 (EUR 0.62).
Thoroughly satisfactory investment income
The investment environment remained challenging in the period under review.
Although the portfolio of investments under own management declined
slightly to EUR 31.7 billion (31 December 2013: EUR 31.9 million), this
reflected the repurchase of the EUR 750 million bond issued in 2004 as well
as exchange rate effects. Had it not been for these factors, assets under
own management would have increased on the back of the continued clearly
positive operating cash flow and rising valuation reserves. Despite the
sustained low level of interest rates, ordinary investment income excluding
interest on funds withheld and contract deposits was on a par with the
previous year at EUR 241.4 million (EUR 246.1 million). Interest on funds
withheld and contract deposits retreated slightly to EUR 88.6 million (EUR
93.8 million).
The realised gains of EUR 54.1 million came in higher than in the
comparable period (EUR 34.8 million). This increase can be attributed to
the bond repurchase as well as to portfolio regrouping measures connected
with the changeover in reporting currency from EUR to USD at the subsidiary
in Bermuda. Changes in the fair values of financial instruments measured at
profit or loss - the so-called ModCo derivatives and the inflation swaps
are included here - totalled EUR 7.4 million (EUR 3.3 million) in the first
quarter. Only very minimal write-downs had to be taken in the period under
review. Income from assets under own management climbed by a very pleasing
4.5% as at 31 March 2014 to EUR 272.5 million (EUR 260.9 million). The
resulting annualised return on investment came in above expectations at
3.4% (3.2%). Net investment income including interest on funds withheld and
contract deposits closed higher than in the comparable quarter at EUR 361.2
million (EUR 354.7 million).
Shareholders' equity remains robust
Hannover Re's shareholders' equity grew by 7.0% to EUR 6.3 billion (31
December 2013: EUR 5.9 billion). The annualised return on equity increased
to 15.3% (15.0%) despite the higher shareholders' equity and thus
comfortably surpassed the minimum target of 750 basis points above the
risk-free interest rate. The book value per share reached a new all-time
high of EUR 52.26 (EUR 48.83).
Outlook 2014
With the results reported as at 31 March 2014 Hannover Re has put in place
a good initial foundation for attainment of its 2014 annual targets. Based
on constant exchange rates, the company continues to expect stable to
slightly higher gross premium and net income after tax in the order of EUR
850 million for the full 2014 financial year. This is conditional on major
loss expenditure not significantly exceeding the anticipated level of EUR
670 million and assumes that there are no unforeseen adverse developments
on capital markets.
The continued challenging state of the general business environment was
further evidenced by the renewals as at 1 April 2014, the traditional date
for treaty renewals in Japan along with smaller markets in Korea,
Australia, New Zealand as well as parts of US property catastrophe
business. After the appreciable rate increases of recent years in Japan
following the severe earthquake of 2011, initial rate erosion - albeit from
a high level - was observed for catastrophe covers. Prices also declined in
personal accident insurance. Rates for per-risk property covers, on the
other hand, remained stable; in casualty business it was even possible to
obtain modest increases. Overall, the premium volume in Japan contracted
slightly, although Hannover Re was able to hold its market position thank
to its long-standing client relationships. The company was similarly
broadly satisfied with the outcome of its renewals in Australia and New
Zealand. Treaties in Korea are shifting from a 1 April to a 1 January
renewal date, as a consequence of which only a small part of the business
was renewed. Faced with difficult market conditions Hannover Re
consolidated its portfolio here.
Broadly speaking, Hannover Re will continue to focus on preserving the
profitability of its business in non-life reinsurance, even if this means a
modest decrease in premium volume. "We take the view that this is the only
way to ensure a profitable non-life reinsurance portfolio in the prevailing
soft market", Mr. Wallin emphasised. Nevertheless, Hannover Re also sees
growth opportunities in non-life reinsurance. Particularly noteworthy here
are the Asia-Pacific markets, the countries of Central and Eastern Europe,
marine lines as well as facultative business and structured reinsurance
products. Adjusted for exchange rate effects, the premium volume for 2014
in non-life reinsurance should remain largely stable.
Hannover Re expects to see an improved business development in life and
health reinsurance. Growth prospects are especially evident in the emerging
economies of Eastern Europe, Asia and Latin America, where stronger demand
for protection products is being driven by a consistently expanding middle
class. Gross premium for the full 2014 financial year is expected to show
currency-adjusted growth in the low- to mid-single-digit percentage range.
Hannover Re's targeted full-year return on investment remains unchanged at
3.2%. The company is not currently planning to make any significant
adjustments to the allocation of its investments to individual asset
classes.
As for the dividend, the company continues to aim for a payout ratio in the
range of 35% to 40% of its IFRS Group net income after tax.
For further information please contact:
Corporate Communications:
Karl Steinle (tel. +49 511 5604-1500,
e-mail: karl.steinle@hannover-re.com)
Media Relations:
Gabriele Handrick (tel. +49 511 5604-1502,
e-mail: gabriele.handrick@hannover-re.com)
Investor Relations:
Julia Hartmann (tel. +49 511 5604-1529,
e-mail: julia.hartmann@hannover-re.com)
Please visit: www.hannover-re.com
Hannover Re, with a gross premium of EUR 14.0 billion, is the third-largest
reinsurer in the world. It transacts all lines of non-life and life and
health reinsurance and is present on all continents with around 2,400
staff. 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+ "Superior").
Please note the disclaimer:
www.hannover-re.com/misc/disclaimer-pr-050811
Key figures of the Hannover Re Group (IFRS basis)
<pre>
+/- previous
in EUR million Q1/2014 year Q1/2013(1) 2013
Hannover Re Group
Gross written premium 3,624.4 (3.6%) 3,757.9
Net premium earned 2,912.7 (5.5%) 3,080.9
Net underwriting result 02. Mai (92.0%) 31.4
Net investment income 361.2 +1.8% 354.7
Operating profit (EBIT) 349.6 (4.6%) 366.5
Group net income 233.0 +0.7% 231.2
Earnings per share in EUR Jan 93 +0.7% Jan 92
Retention 88.4% 89.9%
Tax ratio 19.4% 25.8%
EBIT margin(2) 12.0% 11.9%
Return on equity 15.3% 15.0%
+/- previous
in EUR million Q1/2014 year Q1/2013 2013
Policyholders' surplus 8,431.2 (3.8%) 8,767.9
Investments (excl. funds held
by ceding companies) 31,738.6 (0.4%) 31,875.2
Total assets 54,328.8 +0.8% 53,915.5
Book value per share in EUR 52.26 +7.0% 48.83
Non-life reinsurance
+/- previous
in EUR million Q1/2014 year Q1/2013 2013
Gross written premium 2,107.8 (4.1%) 2,197.6
Net premium earned 1,631.7 (3.6%) 1,691.9
Net underwriting result 87.6 (10.7%) 98.1
Operating profit (EBIT) 280.5 +8.4% 258.7
Group net income 197.9 +13.1% 174.9
Retention 91.2% 89.8%
Combined Ratio(3) 94.4% 94.0%
EBIT margin(2) 17.2% 15.3%
Life and health reinsurance
+/- previous
in EUR million Q1/2014 year Q1/2013(1) 2013
Gross written premium 1,516.7 (2.8%) 1,560.3
Net premium earned 1,281.0 (7.8%) 1,388.9
Operating profit (EBIT) 65.6 (36.0%) 102.4
Group net income 43.4 (42.2%) 75.1
Retention 84.5% 90.0%
EBIT margin(2) 5.1% 7.4%
</pre>
(1) Adjusted on the basis of IAS 8
(2) Operating result (EBIT)/net premium earned
(3) Including funds withheld
End of Corporate News
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07.05.2014 Dissemination of a Corporate News, transmitted by DGAP - a
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Language: English
Company: Hannover Rück SE
Karl-Wiechert-Allee 50
30625 Hannover
Germany
Phone: +49-(0)511-5604-1500
Fax: +49-(0)511-5604-1648
E-mail: info@hannover-re.com
Internet: www.hannover-re.com
ISIN: DE0008402215
WKN: 840 221
Indices: MDAX
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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266741 07.05.2014
DGAP-News: Hannover Re makes a good start to the 2014 financial year
| Source: EQS Group AG