Quarterly Report • May 9, 2019
Quarterly Report
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Quarterly Statement as at 31 March 2019
| 2019 | 2018 | |||
|---|---|---|---|---|
| in EUR million | 1.1. – 31.3. | + / – previous year |
1.1. – 31.3. | 31.12. |
| Results | ||||
| Gross written premium | 6,373.3 | +19.2% | 5,345.0 | |
| Net premium earned | 4,610.8 | +15.3% | 3,999.3 | |
| Net underwriting result 1 | 75.1 | -21.6% | 95.8 | |
| Net investment income | 398.9 | +1.9% | 391.5 | |
| Operating profit (EBIT) | 450.0 | +3.7% | 433.9 | |
| Group net income | 293.7 | +7.4% | 273.4 | |
| Balance sheet | ||||
| Policyholders´ surplus | 12,099.6 | +9.6% | 11,035.1 | |
| Equity attributable to shareholders of Hannover Rück SE | 9,851.3 | +12.2% | 8,776.8 | |
| Non-controlling interests | 754.8 | -1.4% | 765.2 | |
| Hybrid capital | 1,493.4 | +0.0% | 1,493.1 | |
| Investments (excl. funds withheld by ceding companies) | 44,782.7 | +6.1% | 42,197.3 | |
| Total assets | 67,785.2 | +5.1% | 64,508.6 | |
| Share | ||||
| Earnings per share (basic and diluted) in EUR | 2.43 | +7.4% | 2.27 | |
| Book value per share in EUR | 81.69 | +12.2% | 69.27 | 72.78 |
| Share price at the end of the period in EUR | 128.00 | +8.8% | 110.90 | 117.70 |
| Market capitalisation at the end of the period | 15,436.4 | +8.8% | 13,374.2 | 14,194.3 |
| Ratios | ||||
| Combined ratio (property and casualty reinsurance) 2 | 95.7% | 95.9% | ||
| Large losses as percentage of net premium earned (property and casualty reinsurance) 3 |
2.0% | 3.0% | ||
| Retention | 90.4% | 91.3% | ||
| Return on investment (excl. funds withheld by ceding companies) 4 |
3.0% | 3.4% | ||
| EBIT margin 5 | 9.8% | 10.8% | ||
| Return on equity (after tax) | 12.6% | 13.0% | ||
1 Including funds withheld
2 Hannover Re Group´s net share for natural catastrophes and other major losses in excess of EUR 10 million gross as a percentage of net premium earned
3 Excluding effects from ModCo derivatives
4 Operating result (EBIT)/ net premium earned
| Quarterly Statement | 2 |
|---|---|
| Business development | 2 |
| Results of operations, financial position and net assets Property and casualty reinsurance Life and health reinsurance Investments |
3 3 4 6 |
| Outlook | 8 |
| Consolidated balance sheet as at 31 March 2019 | 10 |
| Consolidated statement of income as at 31 March 2019 | 12 |
| Consolidated statement of comprehensive income as at 31 March 2019 | 13 |
| Consolidated segment report as at 31 March 2019 | 14 |
| Consolidated cash flow statement as at 31 March 2019 | 18 |
| Other information | 19 |
| Contact information | 20 |
The present document is a quarterly statement pursuant to Section 51a of the Exchange Rules for the Frankfurter Wertpapierbörse. For further information please see the section "Other information" on page 19 of this document.
The first quarter of the 2019 financial year passed off successfully for Hannover Re. On the Group level, shareholders' equity grew by more than EUR 1 billion, while at the same time the return on equity remained clearly above our minimum target. In property and casualty reinsurance, the 1 January treaty renewals started the year off on a positive note, both in terms of premium income and on the earnings side. In life and health reinsurance, the early months of the year showed a good development thanks to improved results in US mortality business and pleasing demand from Asia. Investment income also played a part in the successful start to the new financial year.
All in all, we increased our Group net income by 7.4% to EUR 293.7 million (previous year: EUR 273.4 million). Based on the numbers for the first quarter, we are confirming our targets for the full 2019 financial year.
The renewals as at 1 January 2019 in property and casualty reinsurance put us in optimistic mood for the year as a whole. We appreciably boosted our premium volume in property and casualty reinsurance by 22.8% in the first three months. The quarterly result for the business group fell by 6.7% to EUR 219.0 million (EUR 234.8 million). In life and health reinsurance we enjoyed healthy profitability, assisted in part by last year's recaptures of unprofitable treaties in the legacy US mortality portfolio. The quarterly result for the business group improved sharply by 73.2% to EUR 88.5 million (EUR 51.1 million).
Gross written premium on the Group level climbed by 19.2% as at 31 March 2019 to EUR 6.4 billion (EUR 5.3 billion); growth would have reached 16.1% at constant exchange rates. The level of retained premium was slightly lower than in the previous year's comparable period at 90.4% (91.3%). Net premium earned rose by 15.3% to EUR 4.6 billion (EUR 4.0 billion); adjusted for exchange rate effects, growth of 12.7% would have been booked.
Bearing in mind the protracted challenging climate, we are satisfied with the development of our investments. The portfolio of assets under own management recorded further growth to reach EUR 44.8 billion (31 December 2018: EUR 42.2 billion). Based on slightly higher ordinary income from fixed-income securities, good earnings on real estate and private equity as well as increased income from funds withheld and contract deposits, we generated investment income of EUR 398.9 million that came in slightly above the comparable period (EUR 391.5 million); in view of the diminished return on our fixed-income holdings and lower net realised gains, this performance can be considered broadly satisfactory. Investment income from assets under own management decreased marginally to EUR 328.3 million (EUR 332.8 million). The resulting annualised average return (excluding effects from ModCo derivatives) thus stood at a very pleasing 3.0%. This is above the minimum target of 2.8% that we have set for the full twelve months.
The operating profit (EBIT) for the Hannover Re Group grew by 3.7% to EUR 450.0 million (EUR 433.9 million). Group net income in the first three months of the year improved by 7.4% to EUR 293.7 million (EUR 273.4 million). Earnings per share amounted to EUR 2.43 (EUR 2.27).
Shareholders' equity increased by 12.2% or EUR 1.1 billion as at 31 March 2019 to EUR 9.9 billion (31 December 2018: EUR 8.8 billion). The annualised return on equity amounted to 12.6% (31 December 2018: 12.2%) and continues to exceed our minimum target of 900 basis points above the riskfree interest rate, which we have defined as the five-year average return on ten-year German government bonds. The book value per share stood at EUR 81.69 (31 December 2018: EUR 72.78).
Property and casualty reinsurance markets around the world continue to be dominated by an excess supply of capacity for the coverage of risks. The considerable windstorm and fire losses of the past year did little to change this situation. At the same time, capacities from the ILS (insurance-linked securities) market again put prices and conditions under sustained pressure in the early months of the year. The market environment in which Hannover Re is operating thus remains challenging.
As an opposing effect, we are seeing stronger demand in some parts of Asia and North America as well as for the reinsurance of cyber risks, in some specialty lines and for structured reinsurance covers.
We are looking ahead with optimism to the full financial year in property and casualty reinsurance based on the treaty renewals as at 1 January 2019: we boosted our premium volume in traditional property and casualty reinsurance by 15.4% – adjusted for exchange rate effects – to EUR 6,406 million (EUR 5,551 million). Roughly two-thirds of the traditional property and casualty reinsurance portfolio (excluding facultative reinsurance, ILS activities and structured reinsurance) was up for renewal.
In contrast to the situation just one year ago, alternative capital providers for the transfer of insurance risks to the capital market took a somewhat more restrained approach in the 1 January 2019 renewal season. Reinsurance prices were on the whole commensurate with the risks in the year's opening round of treaty renegotiations, and we secured modestly improved conditions. As one of the world's leading reinsurers, we continued to benefit from our very good financial strength and higher demand overall. Particularly attractive opportunities to grow the portfolio opened up in Asia, North America and Germany.
The gross written premium in property and casualty reinsurance surged by 22.8% to EUR 4.4 billion (EUR 3.6 billion). The increase thus comfortably exceeded our growth target of 3% to 5%. At constant exchange rates, growth would have come in at 19.4%. The level of retained premium climbed to 91.9% (91.6%). Net premium earned rose by 20.8% to EUR 2.9 billion (EUR 2.4 billion); adjusted for exchange rate effects, it would have grown by 18.0%.
Major losses in the first quarter were moderate. The largest individual losses for our company were the flooding in Australia and winter storm Eberhard in Germany. In total, the net strain from large losses in the first quarter amounted to EUR 59.0 million (EUR 73.4 million). This figure is significantly lower than our large loss expectation for the first quarter of EUR 175 million. In the course of the first quarter we received additional loss advices from our customers for Typhoon Jebi in Japan from the past year; this effect somewhat mitigated what was again a very positive run-off overall of the loss reserves from prior years. The combined ratio improved slightly to 95.7% (95.9%) and is thus within our expected target corridor of 97% or lower. The underwriting result for total property and casualty reinsurance including interest on funds withheld and contract deposits increased by 25.3% to EUR 124.8 million (EUR 99.6 million).
The investment income booked for property and casualty reinsurance from assets under own management reached EUR 223.4 million (EUR 260.1 million).
The operating profit (EBIT) for property and casualty reinsurance was almost on a par with the previous year at EUR 334.4 million (EUR 338.9 million). The EBIT margin thus amounted to 11.4% (14.0%) and surpassed the minimum target of 10%. Net income for the business group contracted by 6.7% to EUR 219.0 million (EUR 234.8 million).
| in EUR million | 2019 | 2018 | |
|---|---|---|---|
| 1.1. – 31.3. | +/– previous year | 1.1. – 31.3. | |
| Gross written premium | 4,394.5 | +22.8% | 3,578.7 |
| Net premium earned | 2,930.2 | +20.8% | 2,424.9 |
| Underwriting result 1 | 124.8 | +25.3% | 99.6 |
| Net investment income | 235.6 | -12.1% | 268.0 |
| Operating result (EBIT) | 334.4 | -1.3% | 338.9 |
| Group net income | 219.0 | -6.7% | 234.8 |
| Earnings per share in EUR | 1.82 | -6.7% | 1.95 |
| EBIT margin2 | 11.4% | 14.0% | |
| Combined ratio 1 | 95.7% | 95.9% | |
| Retention | 91.9% | 91.6% |
1 Including funds withheld
2 Operating result (EBIT)/ net premium earned
After the exceptional strains associated with the termination of loss-making treaties in the previous year, the result in property and casualty reinsurance improved substantially thanks to lower losses.
In the United States our mortality solutions business played a major part in the favourable performance with a better-than-expected operating profit. Treaty recaptures in the legacy US mortality portfolio were higher than anticipated, however, as a consequence of which the premium income fell slightly short of our expectations. US financial solutions business also contributed to profitability, as anticipated.
In Latin America we got off to a good start in the current year with the renewal of all treaties.
The first quarter in Asia was shaped by growth in markets such as China and Hong Kong that exceeded our expectations. In China and Korea we are seeing sustained brisk demand in the growing market for critical illness reinsurance, while particularly in China customers are also increasingly calling for structured reinsurance solutions designed to deliver solvency relief. Furthermore, promising demand for financial solutions covers has begun to emerge in India. In Australia, on the other hand, an elevated claims experience in disability business took a toll on the underwriting result.
Encouraging demand in business involving protection against longevity risks was evident as the year got underway in markets such as the United Kingdom, Germany, Canada and Ireland. Over the course of the financial year this is likely to be reflected concretely in the formation of treaty relationships.
In addition, we have observed growing interest worldwide in protection for the longevity components of products that can be categorised as "immediate needs" and "equity release". What is involved here, on the one hand, is the reinsurance of biometric risks resulting from products that – put simply – cover an immediate insurance need, while equity release enables older homeowners to release cash from the value of their property to pay a single or regular premium. As a further factor, new solvency regulations are on the verge of being rolled out in some Asian markets – a move that we also expect will spur demand for coverage concepts to protect against longevity risks.
In February we successfully launched our online platform "hr | equarium", an exclusive marketplace intended primarily to enable insurtechs to offer their innovative solutions to our customers. Many of our clients and insurtechs all around the world have already registered on the platform. It is our hope that this systematic networking between digital innovators and established insurance players on a global scale will foster sustainable and profitable partnerships and enhance the perception of Hannover Re as a driver of innovation in the insurance market.
Gross premium income in life and health reinsurance increased by 12.0% as at 31 March 2019 to EUR 2.0 billion (EUR 1.8 billion). Adjusted for exchange rate effects, growth of 9.6% would have been booked. Net premium earned climbed by 6.7% to EUR 1.7 billion (EUR 1.6 billion). The increase would have been 4.6% at constant exchange rates. Our retention of 87.0% was slightly below the previous year's level (90.7%).
Investment income from our assets under own management improved by 44.6% to EUR 104.1 million (EUR 71.9 million).
The operating result (EBIT) rose by 21.3% to EUR 116.3 million (EUR 95.9 million). The profit contribution made by life and health reinsurance to Group net income grew by a pleasing 73.2% to EUR 88.5 million (EUR 51.1 million).
| in EUR million | 2019 | 2018 | |
|---|---|---|---|
| 1.1. – 31.3. | +/– previous year | 1.1. – 31.3. | |
| Gross written premium | 1,978.8 | +12.0% | 1,766.2 |
| Net premium earned | 1,680.6 | +6.7% | 1,574.4 |
| Investment income | 162.5 | +32.4% | 122.8 |
| Operating result (EBIT) | 116.3 | +21.3% | 95.9 |
| Net income after tax | 88.5 | +73.2% | 51.1 |
| Earnings per share in EUR | 0.73 | +73.2% | 0.42 |
| Retention | 87.0% | 90.7% | |
| EBIT margin1 | 6.9% | 6.1% |
1 Operating result (EBIT)/ net premium earned
Faced with numerous geopolitical and economic policy issues, the investment climate in the reporting period remained turbulent and lacking in any clear direction. Particularly on what are for our company the important fixed-income markets, credit spreads for corporate bonds saw very marked declines in some instances on what was still a thoroughly low level overall. Interest rate declines were also recorded on euro bonds in longer maturities – and indeed in the area of US dollar and sterling bonds. Negative returns can be observed again on the euro side to a broader extent as far as the ten-year maturity point.
The signs of uncertainty among policymakers as well as indications of softening fundamentals were reflected in increased volatility overall on markets. The more cautious approach adopted by central banks similarly highlighted the fact that markets still lack stability. The prevailing sense of uncertainty was exacerbated by the surprising disarray which still surrounds the United Kingdom's withdrawal from the European Union despite what was already a lengthy preparatory phase. Private equity markets nevertheless enjoyed very positive sentiment in the period under review and played an appreciable part in the attainment of our goals.
Owing to the decline in interest rates and risk premiums, the net unrealised gains in our fixed-income portfolio as at 31 March 2019 rose sharply to EUR 1,043.4 million (31 December 2018: EUR 318.1 million). Our portfolio of assets under own management grew to EUR 44.8 billion (31 December 2018: EUR 42.2 billion). We scarcely changed the allocation of our assets to the individual classes of securities in the first quarter. The modified duration of our portfolio of fixed-income securities was left virtually unchanged year-on-year at 4.9 (4.8).
Ordinary investment income excluding interest on funds withheld and contract deposits amounted to EUR 323.2 million as at 31 March 2019, a level modestly higher than in the comparable period (EUR 315.8 million). Particularly bearing in mind the continued low interest rates, it is highly gratifying that we were able to slightly increase the ordinary income from fixed-income securities year-on-year and again supplement it with strong earnings from private equity and real estate. Interest on funds withheld and contract deposits climbed to EUR 70.6 million (EUR 58.7 million).
Impairments of altogether just EUR 17.4 million (EUR 11.0 million) were taken. Of this amount, EUR 6.7 million (EUR 2.8 million) was attributable to alternative investments. The depreciation taken on directly held real estate was slightly higher at EUR 9.4 million (EUR 8.2 million), a reflection of our ongoing growing involvement in this area. The net balance of gains realised on disposals stood at EUR 22.3 million (EUR 48.8 million) and can be attributed primarily to regrouping moves as part of regular portfolio maintenance and to the sale of a real estate investment.
We recognise a derivative for the credit risk associated with special life reinsurance treaties (ModCo) under which securities deposits are held by cedants for our account; the performance of this derivative in the period under review gave rise to unrealised gains of EUR 5.3 million (losses of EUR 4.8 million) recognised in investment income. In economic terms we assume a neutral development for this item over time, and hence the volatility that can occur in specific quarters provides no insight into the actual business development. Altogether, the unrealised gains in our assets recognised at fair value through profit or loss amounted to EUR 27.4 million. This contrasted with unrealised gains of EUR 6.1 million in the corresponding period of the previous year.
Overall, we generated net investment income of EUR 398.9 million that was marginally higher than in the comparable period (EUR 391.5 million) and entirely within our range of expectations. Income from assets under own management accounted for EUR 328.3 million (EUR 332.8 million), producing an annualised average return (excluding effects from ModCo derivatives) of 3.0%. This also puts us well on track to achieve our expected target of at least 2.8% for the full year.
| in EUR million | 2019 | 2018 | |
|---|---|---|---|
| 1.1. – 31.3. | +/– previous year | 1.1. – 31.3. | |
| Ordinary investment income 1 | 323.2 | +2.3% | 315.8 |
| Result from participations in associated companies | 3.1 | +143.7% | 1.3 |
| Realised gains /losses | 22.3 | -54.4% | 48.8 |
| Depreciation, amortisation, impairments 2 | 17.4 | +57.9% | 11.0 |
| Change in fair value of financial instruments 3 | 27.4 | 6.1 | |
| Investment expenses | 30.3 | +7.4% | 28.2 |
| Net investment income from assets under own management | 328.3 | -1.3% | 332.8 |
| Net investment income from funds withheld | 70.6 | +20.3% | 58.7 |
| Total investment income | 398.9 | +1.9% | 391.5 |
1 Excluding expenses on funds withheld and contract deposits
2 Including depreciation /impairments on real estate
3 Portfolio at fair value through profit or loss and trading
| Rating classes | Government bonds | Securities issued by semi-governmental entities 2 |
Corporate bonds | Covered bonds / asset backed securities |
|||||
|---|---|---|---|---|---|---|---|---|---|
| in % | in EUR million |
in % | in EUR million |
in % | in EUR million |
in % | in EUR million |
||
| AAA | 78.1 | 12,278.5 | 58.0 | 4,121.0 | 1.2 | 147.9 | 61.5 | 1,973.3 | |
| AA | 12.6 | 1,971.6 | 26.1 | 1,859.2 | 13.9 | 1,707.5 | 23.7 | 760.3 | |
| A | 4.9 | 764.2 | 7.7 | 545.9 | 30.9 | 3,801.8 | 10.6 | 339.8 | |
| BBB | 2.8 | 442.2 | 1.3 | 93.9 | 45.6 | 5,619.2 | 3.3 | 104.4 | |
| < BBB | 1.6 | 245.6 | 6.9 | 493.6 | 8.4 | 1,037.1 | 0.9 | 27.7 | |
| Total | 100.0 | 15,702.1 | 100.0 | 7,113.6 | 100.0 | 12,313.5 | 100.0 | 3,205.5 |
1 Securities held through investment funds are recognised pro rata with their corresponding individual ratings.
2 Including government-guaranteed corporate bonds
The intensely competitive climate shaping global reinsurance markets remains undiminished. For the current 2019 financial year we nevertheless anticipate a good overall result and expect to achieve our targets. In view of developments both in property and casualty and in life and health reinsurance, we are looking to book single-digit percentage growth in gross premium for our total business – based on constant exchange rates.
In view of the outcome of the treaty renewals in property and casualty reinsurance as at 1 January 2019, we anticipate significant currency-adjusted growth at largely stable conditions. We shall continue to adhere to our selective underwriting policy, under which for the most part we only write business that meets our margin requirements.
Following the successful treaty renewals in property and casualty reinsurance as at 1 January 2019, the 1 April treaty renewals similarily passed off very favourably. It is at this time of the year that business in Japan is traditionally renewed and treaties are also renegotiated – albeit on a lesser scale – for Australia and New Zealand, Asian markets and North America. In Japan rates improved markedly in the wake of previous natural catastrophe losses. This led to sometimes considerable increases in reinsurance prices for non-proportional catastrophe business. Hannover Re substantially boosted its premium volume in this area while maintaining broadly stable exposures. In the Indian market, too, premium income increased appreciably. The renewal of part of our North American business proved highly gratifying for our company, a continuation of the trend seen in the 1 January renewals. Prices and conditions in catastrophe business gave grounds for satisfaction: rates here generally firmed up, with increases running into double-digit percentages attainable under loss-impacted programmes. The total premium volume booked from the round of treaty renewals as at 1 April 2019 increased by 6.6%.
In 2019, as already announced in November of last year, we raised our net major loss budget for the first time in three years; it now stands at EUR 875 million after EUR 825 million in the prior years. This adjustment reflects the growth in the underlying business. The targeted EBIT margin for property and casualty reinsurance is at least 10%. We are aiming for a combined ratio here of no more than 97%.
In life and health reinsurance we expect to generate moderate premium growth in the financial year on a currencyadjusted basis. On the earnings side, the steps taken to optimise our US mortality portfolio should continue to have favourable effects on profitability in the current year. Due to the elimination of the previous year's strain resulting from treaty recaptures, EBIT in life and health reinsurance should grow substantially in the 2019 financial year and comfortably beat the minimum 5% EBIT growth defined as our strategic target. We continue to aim for a value of new business of at least EUR 220 million per year.
The expected positive cash flow that we generate from the technical account and our investments should – subject to stable exchange rates and yield levels – lead to further growth in our asset portfolio. In the area of fixed-income securities we continue to emphasise the high quality and diversification of our portfolio. Overall, the primary focus will remain on stability while maintaining an adequate risk/return ratio that will enable us to respond flexibly to general developments and emerging opportunities. For the current financial year we are targeting a return on investment of at least 2.8%.
For the second quarter we anticipate positive income of almost EUR 100 million from the release of hidden reserves. This is due to a reorganisation of the shareholder structure of Viridium Group – under which the interest held by Hannover Rück SE remained largely unchanged – that became necessary in connection with the acquisition of Generali Lebensversicherung AG by Viridium.
Group net income for the current financial year is expected to be in the order of EUR 1.1 billion. This is subject to the premise that the burden of major losses does not significantly exceed the budgeted level of EUR 875 million (2018: EUR 825 million) and that there are no exceptional distortions on capital markets.
Hannover Re envisages an unchanged payout ratio for the ordinary dividend in the range of 35% to 45% of its IFRS Group net income. If the comfortable level of capitalisation remains unchanged and Group net income is in the range of expectations, the ordinary dividend will be supplemented by payment of a special dividend.
As already reported, the Supervisory Board of Hannover Rück SE appointed Jean-Jacques Henchoz as a member of the Executive Board with effect from 1 April 2019. He was most recently responsible for both life and non-life reinsurance business in the region Europe, Middle East and Africa at a major reinsurer. At the end of the Annual General Meeting on 8 May 2019 Jean-Jacques Henchoz will succeed Ulrich Wallin as Chief Executive Officer of Hannover Re. At the same time, Ulrich Wallin will retire in accordance with the company's statutes after his extremely successful service to Hannover Re.
| Assets in EUR thousand |
31.3.2019 | 31.12.2018 |
|---|---|---|
| Fixed-income securities – held to maturity | 250,101 | 249,943 |
| Fixed-income securities – loans and receivables | 2,436,374 | 2,398,950 |
| Fixed-income securities – available for sale | 35,089,567 | 33,239,685 |
| Fixed-income securities – at fair value through profit or loss | 558,683 | 559,750 |
| Equity securities – available for sale | 30,995 | 28,729 |
| Other financial assets – at fair value through profit or loss | 200,264 | 190,759 |
| Investment property | 1,737,475 | 1,684,932 |
| Real estate funds | 473,116 | 433,899 |
| Investments in associated companies | 219,875 | 110,545 |
| Other invested assets | 2,024,219 | 1,805,281 |
| Short-term investments | 510,688 | 421,950 |
| Cash and cash equivalents | 1,251,376 | 1,072,915 |
| Total investments and cash under own management | 44,782,733 | 42,197,338 |
| Funds withheld | 11,067,639 | 10,691,768 |
| Contract deposits | 199,507 | 172,873 |
| Total investments | 56,049,879 | 53,061,979 |
| Reinsurance recoverables on unpaid claims | 2,108,255 | 2,084,630 |
| Reinsurance recoverables on benefit reserve | 827,168 | 909,056 |
| Prepaid reinsurance premium | 164,583 | 93,678 |
| Reinsurance recoverables on other technical reserves | 10,080 | 7,170 |
| Deferred acquisition costs | 2,602,732 | 2,155,820 |
| Accounts receivable | 4,850,865 | 3,975,778 |
| Goodwill | 87,765 | 85,588 |
| Deferred tax assets | 434,075 | 454,608 |
| Other assets | 636,912 | 629,420 |
| Accrued interest and rent | 12,882 | 11,726 |
| Assets held for sale | – | 1,039,184 |
| Total assets | 67,785,196 | 64,508,637 |
| Liabilities | ||
|---|---|---|
| in EUR thousand | 31.3.2019 | 31.12.2018 |
| Loss and loss adjustment expense reserve | 31,104,607 | 28,758,575 |
| Benefit reserve | 9,084,616 | 9,184,356 |
| Unearned premium reserve | 4,969,174 | 3,166,964 |
| Other technical provisions | 605,690 | 575,996 |
| Funds withheld | 925,872 | 969,261 |
| Contract deposits | 3,519,442 | 3,611,654 |
| Reinsurance payable | 1,286,202 | 1,156,231 |
| Provisions for pensions | 191,825 | 182,291 |
| Taxes | 260,646 | 244,093 |
| Deferred tax liabilities | 1,905,142 | 1,700,082 |
| Other liabilities | 758,423 | 612,093 |
| Long-term debt and notes payable | 2,567,388 | 2,558,884 |
| Liabilities related to assets held for sale | – | 2,246,129 |
| Total liabilities | 57,179,027 | 54,966,609 |
| Shareholders' equity | ||
| Common shares | 120,597 | 120,597 |
| Nominal value: 120,597 Conditional capital: 60,299 |
||
| Additional paid-in capital | 724,562 | 724,562 |
| Common shares and additional paid-in capital | 845,159 | 845,159 |
| Cumulative other comprehensive income | ||
| Unrealised gains and losses on investments | 946,669 | 346,509 |
| Cumulative foreign currency translation adjustment | 384,739 | 201,369 |
| Changes from hedging instruments | (2,118) | (3,160) |
| Other changes in cumulative other comprehensive income | (58,707) | (53,364) |
| Total other comprehensive income | 1,270,583 | 491,354 |
| Retained earnings | 7,735,593 | 7,440,278 |
| Equity attributable to shareholders of Hannover Rück SE | 9,851,335 | 8,776,791 |
| Non-controlling interests | 754,834 | 765,237 |
| Total shareholders' equity | 10,606,169 | 9,542,028 |
| Total liabilities | 67,785,196 | 64,508,637 |
| Gross written premium 6,373,297 Ceded written premium 611,883 Change in gross unearned premium (1,218,962) Change in ceded unearned premium 68,325 Net premium earned 4,610,777 Ordinary investment income 323,222 Profit/loss from investments in associated companies 3,079 Realised gains and losses on investments 22,280 Change in fair value of financial instruments 27,391 Total depreciation, impairments and appreciation of investments 17,398 Other investment expenses 30,293 Net income from investments under own management 328,281 Income / expense on funds withheld and contract deposits 70,623 Net investment income 398,904 Other technical income 150 Total revenues 5,009,831 Claims and claims expenses 3,356,305 Change in benefit reserves (16,740) Commission and brokerage, change in deferred acquisition costs 1,153,517 Other acquisition costs 1,392 Other technical expenses – Administrative expenses 111,945 Total technical expenses 4,606,419 Other income 301,047 Other expenses 254,414 Other income / expenses 46,633 Operating profit/loss (EBIT) 450,045 Financing costs 20,948 Net income before taxes 429,097 Taxes 114,237 Net income 314,860 thereof Non-controlling interest in profit and loss 21,207 Group net income 293,653 Earnings per share (in EUR) Basic earnings per share 2.43 Diluted earnings per share 2.43 |
in EUR thousand | 1.1. – 31.3.2019 | 1.1. – 31.3.2018 |
|---|---|---|---|
| 5,344,961 | |||
| 466,256 | |||
| (940,509) | |||
| 61,082 | |||
| 3,999,278 | |||
| 315,802 | |||
| 1,263 | |||
| 48,844 | |||
| 6,062 | |||
| 11,019 | |||
| 28,193 | |||
| 332,759 | |||
| 58,705 | |||
| 391,464 | |||
| 21 | |||
| 4,390,763 | |||
| 2,954,221 | |||
| (24,193) | |||
| 917,434 | |||
| 5,841 | |||
| 1,081 | |||
| 107,798 | |||
| 3,962,182 | |||
| 205,730 | |||
| 200,414 | |||
| 5,316 | |||
| 433,897 | |||
| 17,721 | |||
| 416,176 | |||
| 116,805 | |||
| 299,371 | |||
| 25,961 | |||
| 273,410 | |||
| 2.27 | |||
| 2.27 |
| in EUR thousand | 1.1. – 31.3.2019 | 1.1. – 31.3.2018 |
|---|---|---|
| Net income | 314,860 | 299,371 |
| Not reclassifiable to the consolidated statement of income | ||
| Actuarial gains and losses | ||
| Gains (losses) recognised directly in equity | (9,485) | 221 |
| Tax income (expense) | 3,089 | (65) |
| (6,396) | 156 | |
| Changes from the measurement of associated companies | ||
| Gains (losses) recognised directly in equity | (50) | – |
| (50) | – | |
| Income and expense recognised directly in equity that cannot be reclassified | ||
| Gains (losses) recognised directly in equity | (9,535) | 221 |
| Tax income (expense) | 3,089 | (65) |
| (6,446) | 156 | |
| Reclassifiable to the consolidated statement of income | ||
| Unrealised gains and losses on investments | ||
| Gains (losses) recognised directly in equity | 789,166 | (366,489) |
| Transferred to the consolidated statement of income | 12,097 | (44,319) |
| Tax income (expense) | (182,481) | 96,669 |
| 618,782 | (314,139) | |
| Currency translation | ||
| Gains (losses) recognised directly in equity | 197,423 | (167,591) |
| Transferred to the consolidated statement of income | 4,645 | – |
| Tax income (expense) | (17,076) | 15,165 |
| 184,992 | (152,426) | |
| Changes from the measurement of associated companies | ||
| Gains (losses) recognised directly in equity | 1,547 | 1 |
| 1,547 | 1 | |
| Changes from hedging instruments | ||
| Gains (losses) recognised directly in equity | 1,917 | 1,922 |
| Tax income (expense) | (840) | (268) |
| 1,077 | 1,654 | |
| Reclassifiable income and expense recognised directly in equity | ||
| Gains (losses) recognised directly in equity | 990,053 | (532,157) |
| Transferred to the consolidated statement of income | 16,742 | (44,319) |
| Tax income (expense) | (200,397) | 111,566 |
| 806,398 | (464,910) | |
| Total income and expense recognised directly in equity | ||
| Gains (losses) recognised directly in equity | 980,518 | (531,936) |
| Transferred to the consolidated statement of income | 16,742 | (44,319) |
| Tax income (expense) | (197,308) | 111,501 |
| 799,952 | (464,754) | |
| Total recognised income and expense | 1,114,812 | (165,383) |
| thereof | ||
| Attributable to non-controlling interests | 42,396 | 9,504 |
| Attributable to shareholders of Hannover Rück SE | 1,072,416 | (174,887) |
| Segmentation of assets | Property and casualty reinsurance | |
|---|---|---|
| in EUR thousand | 31.3.2019 | 31.12.2018 |
| Assets | ||
| Fixed-income securities – held to maturity | 198,737 | 198,596 |
| Fixed-income securities – loans and receivables | 2,385,520 | 2,349,266 |
| Fixed-income securities – available for sale | 26,037,940 | 24,689,122 |
| Equity securities – available for sale | 30,995 | 28,729 |
| Financial assets at fair value through profit or loss | 70,185 | 94,333 |
| Other invested assets | 4,052,639 | 3,735,054 |
| Short-term investments | 277,893 | 262,068 |
| Cash and cash equivalents | 927,737 | 734,942 |
| Total investments and cash under own management | 33,981,646 | 32,092,110 |
| Funds withheld | 2,466,631 | 1,931,254 |
| Contract deposits | 2,430 | 2,180 |
| Total investments | 36,450,707 | 34,025,544 |
| Reinsurance recoverables on unpaid claims | 1,906,225 | 1,903,289 |
| Reinsurance recoverables on benefit reserve | – | – |
| Prepaid reinsurance premium | 164,243 | 93,614 |
| Reinsurance recoverables on other reserves | 511 | 543 |
| Deferred acquisition costs | 1,190,827 | 774,751 |
| Accounts receivable | 3,498,372 | 2,689,084 |
| Other assets in the segment | 1,748,044 | 1,781,317 |
| Assets held for sale | – | 1,041,043 |
| Total assets | 44,958,929 | 42,309,185 |
| in EUR thousand | ||
|---|---|---|
| Liabilities | ||
| Loss and loss adjustment expense reserve | 26,670,547 | 24,542,826 |
| Benefit reserve | – | – |
| Unearned premium reserve | 4,667,894 | 2,915,904 |
| Provisions for contingent commissions | 305,984 | 300,093 |
| Funds withheld | 337,331 | 389,754 |
| Contract deposits | 73,944 | 71,607 |
| Reinsurance payable | 920,328 | 772,313 |
| Long-term debt and notes payable | 331,219 | 323,235 |
| Other liabilities in the segment | 1,982,530 | 1,718,949 |
| Liabilities related to assets held for sale | – | 2,246,129 |
| Total liabilities | 35,289,777 | 33,280,810 |
| Total | |||||
|---|---|---|---|---|---|
| 31.3.2019 | 31.12.2018 | 31.3.2019 | 31.12.2018 | 31.3.2019 | 31.12.2018 |
| 51,364 | 51,347 | – | – | 250,101 | 249,943 |
| 35,583 | 34,635 | 15,271 | 15,049 | 2,436,374 | 2,398,950 |
| 9,040,857 | 8,531,051 | 10,770 | 19,512 | 35,089,567 | 33,239,685 |
| – | – | – | – | 30,995 | 28,729 |
| 688,762 | 656,176 | – | – | 758,947 | 750,509 |
| 368,941 | 263,917 | 33,105 | 35,686 | 4,454,685 | 4,034,657 |
| 231,810 | 159,867 | 985 | 15 | 510,688 | 421,950 |
| 318,336 | 333,031 | 5,303 | 4,942 | 1,251,376 | 1,072,915 |
| 10,735,653 | 10,030,024 | 65,434 | 75,204 | 44,782,733 | 42,197,338 |
| 8,601,008 | 8,760,514 | – | – | 11,067,639 | 10,691,768 |
| 197,077 | 170,693 | – | – | 199,507 | 172,873 |
| 19,533,738 | 18,961,231 | 65,434 | 75,204 | 56,049,879 | 53,061,979 |
| 202,030 | 181,341 | – | – | 2,108,255 | 2,084,630 |
| 827,168 | 909,056 | – | – | 827,168 | 909,056 |
| 340 | 64 | – | – | 164,583 | 93,678 |
| 9,569 | 6,627 | – | – | 10,080 | |
| 1,411,905 | 1,381,069 | – | – | 2,602,732 | 2,155,820 |
| 1,352,835 | 1,287,072 | (342) | (378) | 4,850,865 | 3,975,778 |
| 1,181,342 | |||||
| 1,039,184 | |||||
| 531,499 – |
Life and health reinsurance 565,346 – |
(1,107,909) – |
Consolidation (1,165,321) (1,859) |
1,171,634 – |
| 28,758,575 | 31,104,607 | – | – | 4,215,749 | 4,434,060 |
|---|---|---|---|---|---|
| 9,184,356 | 9,084,616 | – | – | 9,184,356 | 9,084,616 |
| 3,166,964 | 4,969,174 | – | – | 251,060 | 301,280 |
| 575,996 | 605,690 | – | – | 275,903 | 299,706 |
| 969,261 | 925,872 | – | – | 579,507 | 588,541 |
| 3,611,654 | 3,519,442 | – | – | 3,540,047 | 3,445,498 |
| 1,156,231 | 1,286,202 | – | – | 383,918 | 365,874 |
| 2,558,884 | 2,567,388 | 2,235,649 | 2,236,169 | – | – |
| 2,738,559 | 3,116,036 | (1,173,150) | (1,071,919) | 2,192,760 | 2,205,425 |
| 2,246,129 | – | – | – | – | – |
| 54,966,609 | 57,179,027 | 1,062,499 | 1,164,250 | 20,623,300 | 20,725,000 |
Consolidated segment report as at 31 March 2019
Segmentation of liabilities
in EUR thousand Liabilities
| Segment statement of income | Property and casualty reinsurance | |
|---|---|---|
| in EUR thousand | 1.1. – 31.3.2019 | 1.1. – 31.3.2018 |
| Gross written premium | 4,394,464 | 3,578,731 |
| Net premium earned | 2,930,210 | 2,424,861 |
| Net investment income | 235,596 | 267,994 |
| thereof | ||
| Change in fair value of financial instruments | (1,194) | (69) |
| Total depreciation, impairments and appreciation of investments | 17,259 | 11,011 |
| Income / expense on funds withheld and contract deposits | 12,153 | 7,874 |
| Claims and claims expenses | 1,940,671 | 1,655,542 |
| Change in benefit reserve | – | – |
| Commission and brokerage, change in deferred acquisition costs and other technical income / expenses |
826,466 | 622,814 |
| Administrative expenses | 50,399 | 54,749 |
| Other income / expenses | (13,863) | (20,861) |
| Operating profit/loss (EBIT) | 334,407 | 338,889 |
| Financing costs | 542 | – |
| Net income before taxes | 333,865 | 338,889 |
| Taxes | 94,625 | 78,853 |
| Net income | 239,240 | 260,036 |
| thereof | ||
| Non-controlling interest in profit or loss | 20,205 | 25,210 |
| Group net income | 219,035 | 234,826 |
| Life and health reinsurance | Consolidation | Total | |||
|---|---|---|---|---|---|
| 1.1. – 31.3.2019 | 1.1. – 31.3.2018 | 1.1. – 31.3.2019 | 1.1. – 31.3.2018 | 1.1. – 31.3.2019 | 1.1. – 31.3.2018 |
| 1,978,833 | 1,766,230 | – | – | 6,373,297 | 5,344,961 |
| 1,680,567 | 1,574,380 | – | 37 | 4,610,777 | 3,999,278 |
| 162,529 | 122,774 | 779 | 696 | 398,904 | 391,464 |
| 28,585 | 6,246 | – | (115) | 27,391 | 6,062 |
| 139 | 8 | – | – | 17,398 | 11,019 |
| 58,470 | 50,831 | – | – | 70,623 | 58,705 |
| 1,415,634 | 1,298,679 | – | – | 3,356,305 | 2,954,221 |
| (16,740) | (24,193) | – | – | (16,740) | (24,193) |
| 328,293 | 301,521 | – | – | 1,154,759 | 924,335 |
| 61,420 | 52,976 | 126 | 73 | 111,945 | 107,798 |
| 61,838 | 27,753 | (1,342) | (1,576) | 46,633 | 5,316 |
| 116,327 | 95,924 | (689) | (916) | 450,045 | 433,897 |
| 391 | – | 20,015 | 17,721 | 20,948 | 17,721 |
| 115,936 | 95,924 | (20,704) | (18,637) | 429,097 | 416,176 |
| 26,431 | 44,075 | (6,819) | (6,123) | 114,237 | 116,805 |
| 89,505 | 51,849 | (13,885) | (12,514) | 314,860 | 299,371 |
| 1,002 | 751 | – | – | 21,207 | 25,961 |
| 88,503 | 51,098 | (13,885) | (12,514) | 293,653 | 273,410 |
| in EUR thousand | 1.1. – 31.3.2019 | 1.1. – 31.3.2018 |
|---|---|---|
| I. Cash flow from operating activities |
||
| Net income | 314,860 | 299,371 |
| Appreciation / depreciation | 15,490 | 13,768 |
| Net realised gains and losses on investments | (22,280) | (48,844) |
| Change in fair value of financial instruments (through profit or loss) | (27,391) | (6,062) |
| Realised gains and losses on deconsolidation | (6,298) | (2,575) |
| Amortisation of investments | 3,421 | (136) |
| Changes in funds withheld | (126,373) | (394,216) |
| Net changes in contract deposits | (163,633) | (13,630) |
| Changes in prepaid reinsurance premium (net) | 1,150,637 | 879,426 |
| Changes in tax assets / provisions for taxes | 58,390 | 46,774 |
| Changes in benefit reserve (net) | (298,215) | 9,030 |
| Changes in claims reserves (net) | 407,559 | 275,846 |
| Changes in deferred acquisition costs | (243,600) | (213,681) |
| Changes in other technical provisions | 16,976 | 12,341 |
| Changes in clearing balances | (436,211) | (424,881) |
| Changes in other assets and liabilities (net) | 65,388 | 194,903 |
| Cash flow from operating activities | 708,720 | 627,434 |
| II. Cash flow from investing activities |
(585,008) | (1,143,050) |
| III. Cash flow from financing activities | (50,898) | 742,044 |
| IV. Exchange rate differences on cash | 27,053 | (13,873) |
| Cash and cash equivalents at the beginning of the period | 1,151,509 | 835,706 |
| thereof cash and cash equivalents of the disposal group: 78,594 | ||
| Change in cash and cash equivalents (I. + II. + III. + IV.) | 99,867 | 212,555 |
| Cash and cash equivalents at the end of the period | 1,251,376 | 1,048,261 |
| Supplementary information on the cash flow statement1 | ||
| Income taxes paid (on balance) | (59,715) | (65,335) |
| Dividend receipts 2 | 45,491 | 47,690 |
| Interest received | 388,647 | 380,913 |
| Interest paid | (75,733) | (59,082) |
1 The income taxes paid, dividend receipts as well as interest received and paid are included entirely in the cash flow from operating activities.
2 Including dividend-like profit participations from investment funds
The present document is a quarterly statement pursuant to Section 51a of the Exchange Rules for the Frankfurter Wertpapierbörse (BörsO FWB). It was drawn up according to International Financial Reporting Standards (IFRS), but does not constitute an interim financial report as defined by IAS 34 "Interim Financial Reporting" or a financial statement as defined by IAS 1 "Presentation of Financial Statements".
The accounting policies are essentially the same as those applied in the consolidated annual financial statement as at 31 December 2018. New accounting standards or amendments to existing standards that were applied for the first time in the 2019 financial year are discussed below:
IFRS 16 "Leases" establishes new principles for, in particular, accounting by lessees. As a general rule, a lease liability is to be recognised for all leases. At the same time the lessee shall recognise a right to use the underlying asset. Accounting by lessors remains virtually unchanged in comparison with existing practice, according to which each lease is classified either as a finance lease or as an operating lease. Hannover Re is applying the standard using a modified retrospective approach and recognising the cumulative effect of application of the standard in retained earnings as at 1 January 2019. The figures for the previous year are therefore not restated. As at 1 January 2019 rights of use and lease liabilities were recognised in an amount of EUR 91.1 million. After allowance for deferred taxes on income, application of the standard led to an increase in retained earnings of EUR 2.1 million.
Furthermore, a number of other amendments to existing standards and interpretations were issued with no significant implications for the consolidated financial statement:
Hannover Re is exercising the temporary exemption from applying IFRS 9 "Financial Instruments" that is available to companies whose activities are predominantly connected with insurance.
With economic effect from 1 January 2019 HDI Global SE acquired 50.2% of the shares in HDI Global Specialty SE (formerly: International Insurance Company of Hannover SE) for a purchase price of EUR 107.2 million. All shares in International Insurance Company of Hannover SE were held by Hannover Rück SE. Deconsolidation of the company gave rise to income of EUR 6.3 million in the first quarter of 2019. The remaining shares are included at equity in the consolidated financial statement.
The financial statement was released for publication by a resolution of the Executive Board on 3 May 2019.
Karl Steinle Tel. + 49 511 5604-1500 Fax + 49 511 5604-1648 [email protected]
Oliver Süß Tel. + 49 511 5604-1502 Fax + 49 511 5604-1648 [email protected]
Julia Hartmann Tel. + 49 511 5604-1529 Fax + 49 511 5604-1648 [email protected]
Hannover Rück SE Karl-Wiechert-Allee 50 30625 Hannover, Germany Tel. +49 511 5604-0 Fax +49 511 5604-1188
www.hannover-re.com
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