Non-life reinsurance
| Key figures for non-life reinsuranceFigures in EUR million | ||||||
|---|---|---|---|---|---|---|
| 2009 | +/- previous year |
2008 | 2007 | 2006 | 20051 | |
| 1 Including financial reinsurance and specialty insurance | ||||||
| 2 Including expenses on funds withheld and contract deposits | ||||||
| Gross written premium | 5,746.6 | +15.2% | 4,987.8 | 5,189.5 | 6,495.7 | 4,639.3 |
| Net premium earned | 5,229.5 | +22.3% | 4,276.7 | 4,497.6 | 4,718.7 | 3,922.9 |
| Underwriting result | 143.5 | –22.3% | 184.7 | (26.7) | (71.0) | (500.5) |
| Net investment income | 563.2 | 11.1 | 783.3 | 831.7 | 544.8 | |
| Operating result (EBIT) | 731.4 | 2.3 | 656.7 | 670.1 | (28.3) | |
| Group net income | 472.6 | (160.9) | 549.5 | 478.5 | 4.3 | |
| Earnings per share in EUR | 3.92 | (1.33) | 4.56 | 3.97 | 0.04 | |
| Retention | 94.1% | 88.9% | 82.5% | 72.4% | 85.9% | |
| Combined ratio2 | 96.6% | 95.4% | 99.7% | 100.8% | 112.8% | |
Non-life reinsurance is our largest and most important business group. We do not pursue any growth targets here, but are instead guided by active cycle management according to which we expand our business if the rate situation is favourable and scale back our portfolio if prices are inadequate. In view of the positive state of the market we extended our involvement in various regions and segments in the year under review. While rates in the previous year had still been notable for softening tendencies, we were able to obtain stable prices – and in some cases even increases – in the treaty renewals as at 1 January 2009, the time of year when roughly two-thirds of our portfolio is renegotiated. In some markets and lines the increases even ran into double-digit percentages. This was especially true of catastrophe business, which had suffered losses in 2008, as well as worldwide credit and surety reinsurance. German business continued to be attractive.
Even though we were not able to realise all the price rises that we had envisioned, the capital squeeze in the global insurance industry triggered by the financial market crisis stimulated demand for reinsurance. The treaty renewals as at 1 June and 1 July also passed off well for our company overall: prices were broadly commensurate with the risks, although the rate increases in some segments – such as US casualty business – were still not adequate. In accordance with our profit-oriented underwriting policy, we therefore further reduced our exposures in these areas.
In aviation reinsurance we were able to push through higher prices for both loss-impacted and loss-free programmes in the autumn 2009 treaty renewals owing to an above-average claims experience. We therefore stepped up our involvement. Capacities in credit and surety insurance shrank appreciably in the year under review against the backdrop of higher loss ratios prompted by the financial market crisis. We used the associated sharp price rises to selectively enlarge our portfolio. Premium increases were also recorded for structured products and in facultative reinsurance.
The already existing licence to transact life and health reinsurance in China was extended in 2009 to include non-life reinsurance. Going forward, both business groups will be operated directly out of our Shanghai office. This strengthened presence enables our clients to access all services from a concentrated source. At the same time, it gives us an optimal platform to further expand our position in China.
In the year under review eleven leading reinsurers came together to form the “Global Reinsurance Forum”. Hannover Re, too, is a member of this interest group, which will focus on supervisory issues, legal concerns, tax matters and accounting questions.
As far as new business developments are concerned, we are now also participating in the area of micro-insurance. In Pakistan an initial project has been launched in cooperation with a locally based insurer: low-income individuals are now able to obtain insurance protection. Hannover Re is active in this sector as a reinsurance partner and also provides support, especially with its know-how. It is our expectation that micro-insurance products will continue to grow in importance going forward, and hence further cooperative ventures will follow.
Within the scope of our extended activities in the field of Insurance-Linked Securities we transferred for the first time in the year under review a portfolio of facultative reinsurance risks – i.e. individual risks worldwide – to the capital market. As with our previous transaction of this type, what is at stake here is not the protection of our own portfolio, but rather the direct transfer of our clients' business. The “Fac Pool Re” transaction consists of a quota share cession and two non-proportional reinsurance cessions. The amount of capital made available totals altogether USD 60 million, of which Hannover Re keeps a share of around USD 5 million in addition to carrying losses that exceed the capacity of “Fac Pool Re”. The transaction has a term of two and a half years.
After several years of premium declines, the gross premium volume for our non-life reinsurance business group climbed by 15.2% to EUR 5.7 billion (EUR 5.0 billion) in the year under review. At constant exchange rates, especially relative to the US dollar, growth would have come in at 13.4%. The level of retained premium rose from 88.9% to 94.1% as a consequence of lower retrocessions. Net premium earned grew by 22.3% to EUR 5.2 billion (EUR 4.3 billion).
The burden of catastrophe losses remained below average in the year under review, in part thanks to a rather unremarkable hurricane season. Despite a series of devastating natural disasters, the repercussions on the reinsurance industry were mostly slight. The largest single event in 2009 for our company was the severe bush fires in Australia at a cost of EUR 34.7 million, followed by winter storm “Klaus” with a strain of EUR 33.8 million. The crash of the Air France Airbus resulted in a loss of EUR 33.8 million for Hannover Re.
Total net expenditure on catastrophe losses and major claims in 2009 amounted to EUR 239.7 million (EUR 457.8 million), a figure less than the expected level. The combined ratio stood at 96.6% (95.4%) in the year under review.
The underwriting result slipped to EUR 143.5 million (EUR 184.7 million). Net investment income improved markedly to EUR 563.2 million (EUR 11.1 million), having been impacted by the need to take heavy write-downs on equities in the previous year. The operating profit (EBIT) in non-life reinsurance surged exceptionally strongly to EUR 731.4 million (EUR 2.3 million). Group net income grew to EUR 472.6 million (–EUR 160.9 million). Earnings per share amounted to EUR 3.92 (–EUR 1.33).
The modified responsibilities associated with the changes on the Executive Board presented an opportunity to restructure our non-life reinsurance business group. We now split our portfolio into three sections: target markets, specialty lines and global reinsurance. The following remarks reflect this revised breakdown.