13.03.2018
Hannover Rück SE DE0008402215
DGAP-News: Hannover Rück SE: Hannover Re generates highly satisfactory Group net income for 2017 despite large losses
DGAP-News: Hannover Rück SE / Key word(s): Final Results
Hannover Rück SE: Hannover Re generates highly satisfactory Group net income
for 2017 despite large losses
13.03.2018 / 07:45
The issuer is solely responsible for the content of this announcement.
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Press Release
Hannover Re generates highly satisfactory Group net income for 2017 despite
large losses
* Group net income of EUR 958.6 million (previous year: EUR 1.17 billion)
beats EUR 800 million guidance
* Dividend proposal for 2017: EUR 5.00 per share (EUR 5.00 per share)
* Book value per share: EUR 70.72 (EUR 74.61)
* Return on equity: 10.9% (13.7%)
* Gross premium rises by 8.8% to EUR 17.8 billion; currency-adjusted:
11.2%
* Combined ratio: 99.8% (93.7%)
* Major loss expenditure of EUR 1,127.3 million substantially higher than
budgeted level
* Expectation of Group net income in excess of EUR 1 billion for 2018
confirmed
Hannover, 13 March 2018: The 2017 financial year for the (re)insurance
industry was dominated by an exceptionally large volume of natural
catastrophe losses. Hurricanes Harvey, Irma and Maria as well as numerous
other natural disasters led to a historically high level of insured losses
well in excess of USD 100 billion, with corresponding strains for Hannover
Re. "The 2017 financial year was a challenging one; it was the year with the
heaviest burden of large losses in our company's history. While the
generated Group profit fell short of the previous year's good result, it is
still pleasing at EUR 959 million", Chief Executive Officer Ulrich Wallin
stated. "Protecting our clients against catastrophic events is the core of
our business model. The fact that we achieved such a good performance
despite the large number of losses shows that we have adequately mapped our
exposures in our risk management system and the losses fit with the expected
values calculated for our risk appetite."
In view of the good business development, the Executive Board and
Supervisory Board will propose to the Annual General Meeting that a dividend
on the level of the previous year should be paid. This amounts to altogether
EUR 5.00 per share (EUR 5.00 per share) and - as in 2016 - takes the form of
an ordinary dividend of EUR 3.50 per share plus a special dividend of EUR
1.50 per share. The payout ratio for 2017 will then amount to 62.9% of IFRS
Group net income.
Hannover Re with good business opportunities in 2017
In what was still a challenging market environment, the company enjoyed good
business opportunities in the year under review. Against this backdrop, the
gross premium volume increased by 8.8% to EUR 17.8 billion (EUR 16.4
billion); adjusted for exchange rate effects, it has grown by an even more
appreciable 11.2%. The level of retained premium rose slightly to 90.5%
(89.3%). Net premium earned climbed 8.5% to EUR 15.6 billion (EUR 14.4
billion). At unchanged exchange rates growth of 10.8% would have been
booked.
The operating profit (EBIT) contracted to EUR 1,364.4 million (EUR 1,689.3
million). In view of unusually high expenditure from natural catastrophes,
which was well above the calculated large loss budget, this is a pleasing
performance. The result was helped by exceptionally good investment income
and the release of reserves constituted for loss events of prior years that
were no longer required. Group net income came in at EUR 958.6 million (EUR
1,171.2 million) and thus comfortably surpassed the guidance, which had been
revised to around EUR 800 million in the third quarter of 2017. Earnings per
share amounted to EUR 7.95 (EUR 9.71).
Property and casualty reinsurance posts good result despite large losses
The situation in property and casualty reinsurance initially showed little
change in the 2017 financial year. The state of the market remained
intensely competitive; what is more, the market for catastrophe bonds
continued to make capacity available. Hannover Re was nevertheless able to
act on profitable business opportunities in the treaty renewals. All in all,
the company is satisfied with the development of its property and casualty
reinsurance portfolio, especially because early tendencies towards an
increase in prices could be discerned in the second half of the year
following the major loss events.
The gross premium volume in property and casualty reinsurance rose by 16.4%
to EUR 10.7 billion (EUR 9.2 billion). At constant exchange rates the
increase would have been 18.7%. This growth is significantly above
expectations. The level of retained premium moved slightly higher to 89.7%
(88.5%). Net premium earned climbed 14.7% to EUR 9.2 billion (EUR 8.0
billion); at constant exchange rates growth would have reached 17.0%.
Unlike in the previous years, multiple serious natural disasters caused the
large loss budget to be clearly exceeded. After a benign major loss
experience in the first six months of 2017, the second half of the year was
dominated by severe natural catastrophe events. Hurricanes Harvey, Irma and
Maria alone resulted in net catastrophe loss expenditure of EUR 749.4
million for Hannover Re in the third quarter. The wildfires in California
caused considerable losses of EUR 101.1 million in the fourth quarter. These
and other events added up to total major loss expenditure of EUR 1,127.3
million, thereby clearly exceeding the large loss budget of EUR 825 million.
The underwriting result (including interest on funds withheld and contract
deposits) consequently declined from EUR 503.1 million to EUR 15.5 million.
The combined ratio for the year under review deteriorated from 93.7% to
99.8% and was thus higher than the targeted level of 96%. The operating
profit (EBIT) fell to EUR 1,120.2 million (EUR 1,340.3 million) owing to the
heavy burden of large losses. Group net income decreased by 11.8% to EUR
837.3 million (EUR 949.9 million). Earnings per share amounted to EUR 6.94
(EUR 7.88).
Life and health reinsurance falls short of expectations
The gross premium volume in life and health reinsurance remained roughly on
a par with the previous year at EUR 7.1 billion (EUR 7.1 billion). This
reflects a modest decline of 1.0%, or growth of 1.4% adjusted for exchange
rate effects. The retention stood at
91.7% (90.4%). Net premium earned nudged higher by 0.7% to EUR 6.5 billion
(EUR 6.4 billion); at constant exchange rates growth reached 3.0%.
The profit contribution in life and health reinsurance was less
satisfactory. The operating profit (EBIT) reached EUR 245.2 million (EUR
343.3 million), declining by 28.6% to fall well short of the previous year's
figure. While financial solutions business continued to perform favourably,
the result came under strain from some blocks of business in older
underwriting years of the US mortality portfolio owing to a
higher-than-expected mortality. In addition, Hannover Re took one-time
charges of around EUR 45 million from the commutation of loss-making
treaties in the context of its portfolio management activities. Group net
income in life and health reinsurance declined accordingly to EUR 172.6
million (EUR 252.9 million). Earnings per share stood at EUR 1.43 (EUR
2.10).
Exceptionally good investment income
Even though the portfolio of assets under own management contracted to EUR
40.1 billion (EU 41.8 billion), Hannover Re is very satisfied with the
performance of its investments in light of the continued low level of
interest rates. Key drivers were negative exchange rate effects - primarily
due to a weaker US dollar - as well as slightly lower hidden reserves and
the dividend distribution.
Ordinary investment income excluding interest on funds withheld and contract
deposits increased by a very pleasing 10.9% to EUR 1,289.0 million (EUR
1,162.0 million) on the back of stronger income from real estate and private
equity.
Net realised gains on disposals rose to EUR 377.1 million (EUR 206.3
million) as at 31 December 2017. This was due in large measure to the sale
of the equity portfolio in the third quarter. The impairments taken in the
year under review were merely minimal. Income from investments under own
management increased by a substantial 26.3% to reach EUR 1,539.0 million
(EUR 1,218.3 million) as at 31 December 2017. The resulting return on
investment amounted to 3.8% (3.0%), clearly in excess of the forecast level
of more than 3.0%. Investment income including interest on funds withheld
and contract deposits closed at EUR 1,773.9 million (EUR 1,550.4 million).
Equity position remains good
The shareholders' equity of Hannover Rück SE was slightly lower than in the
previous year. It amounted to EUR 8.5 billion as at 31 December 2017 (EUR
9.0 billion). This decrease can be attributed principally to exchange rate
movements and thus has no influence whatsoever on the company's
risk-carrying capacity. The book value per share reached EUR 70.72 (EUR
74.61). The return on equity was positive at 10.9% (13.7%) and hence beat
the stated minimum target. The total policyholders' surplus (including
non-controlling interests and hybrid capital) amounted to EUR 10.8 billion
(EUR 11.2 billion).
Outlook for 2018
Hannover Re expects gross premium for total business to grow in the current
financial year by a single-digit percentage at constant exchange rates. The
company anticipates Group net income of more than EUR 1 billion. This is
based on the premise that major loss expenditure does not significantly
exceed the budgeted level of EUR 825 million and that there are no
exceptional distortions on capital markets.
The asset portfolios should grow - assuming constant exchange rates - in
view of the anticipated positive cash flow. The company is aiming for a
return on investment of 2.7%.
In terms of the dividend for the current financial year, Hannover Re
envisages a payout ratio in the range of 35% to 40% of its IFRS Group net
income. This ratio may increase in light of capital management
considerations if the present comfortable level of capitalisation remains
unchanged.
Hannover Re, with gross premium of EUR 17.8 billion, is the third-largest
reinsurer in the world. It transacts all lines of property & casualty and
life & health reinsurance and is present on all continents with around 3,300
staff. Established in 1966, the Hannover Re Group today has a network of
more than 140 subsidiaries, branches and representative offices worldwide.
The Group's German business is written by the subsidiary E+S Rück. The
rating agencies most relevant to the insurance industry have awarded both
Hannover Re and E+S Rück outstanding financial strength ratings: Standard &
Poor's AA- "Very Strong" and A.M. Best A+ "Superior".
Please note the disclaimer: https://www.hannover-re.com/535917
Key figures of the Hannover Re Group (IFRS basis)
in EUR million 2017 +/- previous 20161)
year
Hannover Re Group
Gross written premium 17,790.5 +8.8% 16,353.6
Net premium earned 15,631.7 +8.5% 14,410.3
Net underwriting result2) (253.6) 448.1
Net investment income 1,773.9 +14.4% 1,550.4
Operating profit (EBIT) 1,364.4 -19.2% 1,689.3
Group net income 958.6 -18.2% 1,171.2
Earnings per share in EUR 7.95 -18.2% 9.71
Retention 90.5% 89.3%
Tax ratio 19.2% 24.2%
EBIT margin3) 8.7% 11.7%
Return on equity 10.9% 13.7%
in EUR million 2017 +/- previous 20161)
year
Policyholders' surplus 10,778.5 -4.0% 11,231.4
Investments (excl. funds held by 40,057.5 -4.2% 41,793.5
ceding companies)
Total assets 61,196.8 -3.8% 63,594.5
Book value per share in EUR 70.72 -5.2% 74.61
Dividend4) 603.0 - 603.0
Dividend per share in EUR4) 5.00 - 5.00
Property & Casualty reinsurance
in EUR million 2017 +/- previous 2016
year
Gross written premium 10,710.9 +16.4% 9,204.6
Net premium earned 9,158.7 +14.7% 7,985.0
Net underwriting result2) 15.5 -96.9% 503.1
Operating profit (EBIT) 1,120.2 -16.4% 1,340.3
Group net income 837.3 -11.8% 949.9
Retention 89.7% 88.5%
Combined Ratio2) 99.8% 93.7%
EBIT margin3) 12.2% 16.8%
Life & Health reinsurance
in EUR million 2017 +/- previous 20161)
year
Gross written premium 7,079.6 -1.0% 7,149.0
Net premium earned 6,472.8 +0.7% 6,425.0
Operating profit (EBIT) 245.2 -28.6% 343.3
Group net income 172.6 -31.7% 252.9
Retention 91.7% 90.4%
EBIT margin3) 3.8% 5.3%
1) Adjusted pursuant to IAS 8
2) Including funds withheld
3) Operating result (EBIT)/net premium earned
4) Dividend proposal for 2017 (dividend plus special dividend)
Key figures of the Hannover Re Group (IFRS basis)
in EUR million Q4/2017 +/- previous year Q4/20161)
Hannover Re Group
Gross written premium 4,306.9 +10.4% 3,899.6
Net premium earned 4,090.2 +12.1% 3,648.5
Net underwriting result2) 234.9 +52.8% 153.7
Net investment income 391.4 -3.1% 404.0
Operating profit (EBIT) 558.0 +12.0% 498.3
Group net income 409.7 +8.0% 379.3
Earnings per share in EUR 3.40 +8.0% 3.15
Retention 91.6% 88.2%
Tax ratio 19.5% 17.6%
EBIT margin3) 13.6% 13.7%
Return on equity 19.6% 17.1%
Property & Casualty reinsurance
in EUR million Q4/2017 +/- previous year Q4/20161)
Gross written premium 2,511.6 +20.5% 2,084.0
Net premium earned 2,406.1 +16.8% 2,059.8
Net underwriting result2) 311.2 +48.9% 208.9
Operating profit (EBIT) 518.5 +16.4% 445.4
Group net income 388.6 +16.2% 334.4
Retention 91.1% 89.1%
Combined Ratio2) 87.1% 89.9%
EBIT margin3) 21.5% 21.6%
Life & Health reinsurance
in EUR million Q4/2017 +/- previous year Q4/20161)
Gross written premium 1,795.3 -1.1% 1,815.6
Net premium earned 1,684.1 +6.0% 1,588.7
Operating profit (EBIT) 39.3 -25.7% 52.9
Group net income 36.9 -16.2% 44.0
Retention 92.3% 87.2%
EBIT margin3) 2.3% 3.3%
1) Adjusted pursuant to IAS 8 respectively IFRS 3
2) Including funds withheld
3) Operating result (EBIT)/net premium earned
Contact
Corporate Communications:
Karl Steinle
tel. +49 511 5604-1500
[email protected]
Media Relations:
Gabriele Handrick
tel. +49 511 5604-1502
[email protected]
Investor Relations:
Julia Hartmann
tel. +49 511 5604-1529
[email protected]
www.hannover-re.com
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13.03.2018 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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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: [email protected]
Internet: www.hannover-re.com
ISIN: DE0008402215
WKN: 840 221
Indices: MDAX
Listed: Regulated Market in Frankfurt (Prime Standard), Hanover;
Regulated Unofficial Market in Berlin, Dusseldorf,
Hamburg, Munich, Stuttgart, Tradegate Exchange; Luxemburg
End of News DGAP News Service
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