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Outlook for the full 2017 financial year
In the current financial year, despite the challenging environment in reinsurance business and on the capital market, we anticipate a very good overall result for the Hannover Re Group. Bearing in mind developments both in property and casualty and in life and health reinsurance, we expect to post low single-digit percentage growth in gross premium – based on constant exchange rates – for our total portfolio in the current financial year.
In property and casualty reinsurance we expect to modestly increase the premium volume based on unchanged exchange rates. The primary driver here is the strong demand in structured reinsurance business. Yet opportunities to expand the portfolio also opened up in North America and in credit and surety business in the context of the treaty renewals as at 1 January 2017. We shall nevertheless stand by our selective underwriting policy, under which in large part we write only business that satisfies our margin requirements. Thanks to our good ratings and long-standing stable customer relationships, we expect another solid outcome from the treaty renewals during the year.
Even though market conditions in property and casualty reinsurance will likely remain soft, we anticipate a good underwriting result. This is conditional upon major loss expenditure coming in within the bounds of our expectations. In terms of our targeted combined ratio, we continue to aim for a figure under 96%. The EBIT margin for property and casualty reinsurance should amount to at least 10%.
In our worldwide life and health reinsurance business we expect to book moderate organic gross premium growth for the current year after adjustment for exchange rate effects. The forecast EBIT margins for the individual reporting categories remain unchanged at the following target levels: for financial solutions and longevity business an EBIT margin of at least 2% is expected. The planning for mortality and morbidity business envisages an unchanged EBIT margin of at least 6%. We also continue to aim for a Value of New Business in excess of EUR 220 million.
With regard to the IVC targets that we use to map economic value creation, we anticipate a minimum 2% xRoCA for property and casualty reinsurance and at least 3% xRoCA for life and health reinsurance.
In view of the expected positive cash flow that we generate from the technical account and our investments, our asset portfolios should – based on stable exchange rates – continue to grow. We are looking to deliver a return on investment of 2.7%.
For 2017 we anticipate Group net income of more than EUR 1 billion. This is subject to the proviso that the burden of major losses does not significantly exceed the budgeted level of EUR 825 million and that there are no exceptional distortions on capital markets.