1 January 2021 Property & Casualty Treaty Renewals 4 February 2021
Jean-Jacques Henchoz, Chief Executive Officer Sven Althoff, Member of the Executive Board – Property & Casualty
Important note (1)
- Unless otherwise stated, the renewals part of the presentation is based on Underwriting-Year (U/Y) figures This basis is only remotely comparable with Financial-Year (FY) figures, which are the basis of quarterly and annual accounts
- The situation shown in this presentation mainly reflects the developments in Hannover Re's Property & Casualty reinsurance portfolio, which may not be indicative of the market development
- Pricing includes changes in risk-adjusted exposure, claims inflation and interest rates, based on internal pricing models
- Portfolio developments are measured at constant foreign exchange rates as at 31 December 2020
Important note (2)
Time lag in premium distribution between underwriting year and financial year
Reinsurance markets
Fourth consecutive year of improving reinsurance markets Key market highlights of 1 January 2021 renewals
- Positive primary insurance pricing momentum
- Positive trend from previous renewals continued in the reinsurance market and complements pricing effect from the primary side
- Drivers for price increases: challenging interest rate environment, loss experience in previous years and Covid-19 losses
- General tightening of market conditions, in particular through introduction of pandemic and silent cyber exclusions
- Level of pricing effects as well as tightening of terms and conditions vary notably by region and line of business
- Overall stable to slightly increased demand for well-capitalised reinsurance groups (flight to quality)
- Disciplined behaviour of most market participants
Reinsurance market has proven to be resilient, demonstrating its efficiency and relevance
Favourable renewal season outcome
1 January 2021 renewal: increased premium at improved pricing
- Successful renewal supported by our superior financial strength, favourable market positioning and long-standing customer relationships
- We expanded our portfolio while maintaining our disciplined underwriting
- Flight to quality allowed us to manage portfolios according to our risk appetite and with clear focus on profitability
- Several factors contributed to overall improved portfolio quality:
- Rate increases in primary business, particularly beneficial for proportional and facultative business
- Increasing reinsurance rates
- Overall reduced commission levels
- Improved terms and conditions (e.g. exclusion of pandemic and silent cyber risks)
- Successful renewal of retro programmes supported by long-term relationships; risk-adjusted pricing changes well in line with R/I pricing
- Our low admin expense ratio remains a key competitive advantage, supporting the continued growth of our P&C book
| 1 | 2 | 3 Our portfolio | 4 | 5 | 6 |
67% of traditional treaty reinsurance up for renewal at 1 January 2021 Equates to 49% of the total P&C inforce premium
Estimated premium income U/Y by reporting lines
We grew our book by 8.5% on the back of improved pricing development in the insurance and reinsurance markets
Price increases across all lines and regions, with most dynamic development in US, UK and Specialty lines
|
Traditional treaty reinsurance |
|
|
|
|
| Reporting lines |
Premium
1/1/2020 |
Premium
1/1/2021 |
Premium changes |
Price changes |
|
| EMEA1) |
3,506 |
3,878 |
+10.6% |
+3.0% |
|
| Americas1) |
1,566 |
1,806 |
+15.3% |
+8.3% |
|
| APAC1) |
1,364 |
1,420 |
+4.1% |
+6.1% |
|
| Credit, Surety and Political risks |
533 |
561 |
+5.3% |
+9.9% |
|
| Aviation and Marine |
347 |
375 |
+8.2% |
+11.1% |
|
| Agricultural Risks |
437 |
374 |
-14.5% |
+3.4% |
|
| Total 1 January renewals |
7,753 |
8,414 |
+8.5% |
+5.5% |
|
Premium estimates in m. EUR 1) All lines of business except those stated separately (excl. Structured R/I and ILS as well as Facultative R/I); EMEA incl. CIS
Proportional business benefited from improved primary insurance markets 8.8% rate increase in non-proportional business
|
Proportional |
|
Non-proportional |
|
|
|
| Reporting lines |
Premium
1/1/2021 |
Premium
changes |
Price changes |
Premium
1/1/2021 |
Premium
changes |
Price changes |
| EMEA1) |
3,072 |
+12.1% |
+2.0% |
806 |
+5.3% |
+6.4% |
| Americas1) |
874 |
+19.6% |
+6.5% |
932 |
+11.6% |
+9.9% |
| APAC1) |
1,338 |
+3.5% |
+6.3% |
8
2 |
+16.1% |
+2.9% |
| Credit, Surety and Political risks |
456 |
+2.2% |
+9.0% |
105 |
+20.8% |
+14.7% |
| Aviation and Marine |
245 |
+7.4% |
+8.9% |
130 |
+9.8% |
+15.2% |
| Agricultural Risks |
344 |
-15.5% |
+2.9% |
2
9 |
-1.9% |
+9.8% |
| Total 1 January renewals |
6,329 |
+8.3% |
+4.4% |
2,085 |
+9.3% |
+8.8% |
Premium estimates in m. EUR 1) All lines of business except those stated separately (excl. Structured R/I and ILS as well as Facultative R/I); EMEA incl. CIS
Fourth consecutive year with price increases in non-proportional (XL) business
XL price changes at 1 January renewals
Strong growth in regional markets mainly from North America and UK
- Firming primary rates both in property and casualty (increases most prominent in UK)
- Notable growth and improving reinsurance rates across all geographies
- Lloyd's: increased shares in hardening market environment
- Germany: further strengthening of market position with overall improved profitability
New/cancelled/restructured Changes
Americas
North America:
- Trend of improving primary rates accelerated in both property and casualty
- Improving profitability driven by increased rates and improved terms and conditions
- Premium growth characterised by balanced expansion of property and casualty business Latin/South America:
- Increased shares and new business at improved terms and conditions
APAC
- Increased profitability in a heterogeneous market environment
- Mainland China: in contrast to strong growth in previous years active portfolio management resulted in stable premium development
- Attractive growth opportunities in South East Asia and Korea supported by strategic initiative
Worldwide markets: significant price development across most Specialty lines
Credit, Surety and Political Risks
- First steps of hardening as a result of uncertainties linked to Covid-19
- Selective premium growth in Credit, Surety and Political Risk on the base of a slightly reduced inforce book
- Share increase or new business only on clearly improved pricing
- Share reductions on a few relationships partly compensated by increases in other accounts
Aviation and Marine
- Both lines of business: improvements on reinsurance structures as well as terms and conditions
- Aviation: significant increases on prices for nonproportional treaties and satisfactory improvements on commission structure of proportional reinsurances
- Marine: satisfactory price increases throughout the book with an emphasis on London Market non-proportional; active portfolio management
Agricultural Risks
- Premium growth and increased shares in a number of regions
- Entry of state-owned reinsurer in China masked premium growth in other regions
- Favourable business development in the Americas, CEE and Turkey
Exceptional reporting on Structured R/I, Facultative R/I and cat business2)
Structured R/I 1)
- High demand for solvency-relief transactions worldwide (driven by Solvency II and BCAR), commercial shorttail lines and UK motor
- High number of new transactions closed against a very small number of cancelled contracts
- Successful contribution to APAC growth initiative
- Increased volume in Latin America / Caribbean, UK and US
Expected premium development for U/Y 2021: +10%
Facultative R/I 1)
- Positive market dynamics seen in the primary insurance market favourably affected our portfolio
- Positive effect from flight to quality
- Successful renewal: almost all major accounts renewed, new business written and line sizes increased
- Rate increases and improvements in terms and conditions in almost all regions and all lines of business
- Average rate increases of 8% and up to 20% in North American business and energy
Cat business 2)
- Overall quality of the portfolio improved markedly, particularly tighter terms and conditions
- Most regions have seen rate increases but levels varied appreciably
- Positive non-proportional price effects: US most pronounced with about 10% risk-adjusted increase, Europe and Rest of World range from 2.5% to 5%
- Premium growth rate in APAC and EMEA more pronounced than in US
- Loss-affected programmes have experienced significant corrections
Expected premium development for U/Y 2020 and 1 Jan 2021: +13.5%
Diversified premium growth of almost 10%
1) Renewal activity in Structured R/I and Facultative R/I is not characterised by peak renewal dates such as 1/1 or 1/7 but rather year-round renewal activity 2) Additional reporting on cat-exposed business which is incrementally included in regional and worldwide markets
Successful renewal of retro programmes supported by long-term relationships Risk-adjusted pricing changes well in line with R/I pricing
Net risk appetite at targeted level as retro capacity was available at reasonable prices
- Increase in Agg. XL coverage from EUR 200 m.
- Whole Account: limit increased from EUR 325 m.
- K-Cession: paid-in capital reduced from USD 680 m.
Guidance 2021
Reporting categories Volume1 ) Profitability2 ) Overall profitability above margin requirements in Property & Casualty Financial year 2021
Regional
markets |
EMEA3
) |
+ |
|
Americas3
) |
+ |
|
APAC3
) |
+/- |
Worldwide
markets |
Structured Reinsurance and ILS |
++ |
|
Credit, Surety and Political Risks |
+/- |
|
Facultative Reinsurance |
+ |
|
Aviation and Marine |
+ |
|
Agricultural Risks |
+ |
1) In EUR, development in original currencies can be different
2) ++ = well above CoC; + = above CoC; +/- = CoC earned; - = below Cost of Capital (CoC)
3) All lines of business except those stated separately; EMEA incl. CIS
Guidance for 2021
Hannover Re Group
| • |
Gross written premium1) |
~ 5% growth |
| • |
Return on investment2) 3) |
~ 2.4% |
| • |
Group net income2) |
EUR 1.15 -
1.25 bn. |
| • |
Ordinary dividend pay-out ratio4) |
35% -
45% |
• Special dividend additional pay-out if profit target is reached and capitalisation is comfortable
1) At unchanged f/x rates
2) Subject to no major distortions in capital markets and/or major losses in 2021 not exceeding the large loss budget of EUR 1.1 bn. and no material Covid-19 impact in L&H
3) Excluding effects from ModCo derivatives
4) Relative to group net income according to IFRS
Preliminary figures
| 1 | 2 | 3 | 4 | 5 Preliminary figures | 6 |
Strong net income fully meets expectations Preliminary key figures for 2020
| Preliminary key figures for 2020 |
|
|
|
| Hannover Re Group |
Previous guidance |
Preliminary figures |
|
| Gross written premium |
growth in the upper single-digit
percentage range1
) |
EUR 24.8 bn. (~ +12%1
)) |
|
| Return on investment from AuM |
~ 2.7% |
3.0% |
|
| Group net income |
> EUR 800 m. |
~ EUR 883 m. |
|
| Combined ratio P&C |
- |
101.6% |
|
| Covid-19 net loss estimates as at 31 Dec 2020 |
|
|
|
| Property & Casualty reinsurance |
|
EUR 950 m. |
|
| Life & Health reinsurance |
|
EUR 261 m. |
|
| 1) At unchanged f/x rates |
|
|
|
Above-average growth in proportional business stemming from solid underlying primary markets and new business acquired
Strong rate movement (+8.8%) in non-proportional business leading to a pleasing growth of 9.3%
33% of traditional treaty reinsurance comes up for renewal later in a favourable market environment
Estimated premium income U/Y by regions
Disclaimer
This presentation does not address the investment objectives or financial situation of any particular person or legal entity. Investors should seek independent professional advice and perform their own analysis regarding the appropriateness of investing in any of our securities.
While Hannover Re has endeavoured to include in this presentation information it believes to be reliable, complete and up-to-date, the company does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such information.
Some of the statements in this presentation may be forward-looking statements or statements of future expectations based on currently available information. Such statements naturally are subject to risks and uncertainties. Factors such as the development of general economic conditions, future market conditions, unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the actual events or results to be materially different from those anticipated by such statements.
This presentation serves information purposes only and does not constitute or form part of an offer or solicitation to acquire, subscribe to or dispose of, any of the securities of Hannover Re.
© Hannover Rück SE. All rights reserved. Hannover Re is the registered service mark of Hannover Rück SE.
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