Hannover Re grew strongly again in the 2020 financial year and generated a solid Group profit despite considerable Covid-19-related losses. An increased ordinary dividend of EUR 4.50 per share is proposed for the 2020 financial year.
“The coronavirus has had an enormous impact on all our lives and I would like to express our sympathies to those who have endured personal suffering as a result of the virus,” Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, said. “We are playing our part in overcoming the consequences of this pandemic and are contributing our expertise to the development of coverage concepts for future extreme events. As one of the largest and most financially robust reinsurers, we continue to be a reliable partner at our customers’ side. In the pandemic year 2020 Hannover Re achieved a very good result, thereby again demonstrating its superb risk-carrying capacity and its broad diversification. We are benefiting particularly strongly from the sustained improvement in prices and conditions on our market. With a view to maximising the available business opportunities, we have decided to omit payment of a special dividend for 2020 and instead to slightly raise the ordinary dividend.”
In view of the good business development in the financial year just ended, the Executive Board and Supervisory Board will propose to the Annual General Meeting that an ordinary dividend of EUR 4.50 (EUR 4.00) per share should be paid for 2020. The resulting payout ratio – at 61% of Group net income – is clearly above the target range of 35% to 45% that Hannover Re normally aims for. Based on the share’s year-end closing price, this produces a dividend yield of 3.5%.
Gross premium sharply higher in the 2020 financial year
Hannover Re’s gross premium rose by 9.6% in the 2020 financial year to EUR 24.8 billion (EUR 22.6 billion); growth would have reached 12.0% adjusted for exchange rate effects. Net premium earned increased by 8.2% to EUR 21.4 billion (EUR 19.7 billion). Growth would have come in at 10.6% at constant exchange rates.
The operating profit (EBIT) contracted by 34.5% to EUR 1,214.1 million (EUR 1,853.2 million). Group net income was down 31.2% on the previous year at EUR 883.1 million (EUR 1,284.2 million). Hannover Re thus outperformed the Group profit guidance of more than EUR 800 million issued in November. Earnings per share amounted to EUR 7.32 (EUR 10.65).
The capital adequacy ratio, which measures Hannover Re’s risk-carrying capacity, stood at 235.2% as at 31 December 2020. This figure is comfortably above the limit of 180% and the internal threshold of 200%.
Property and Casualty
The gross premium volume in property and casualty reinsurance grew by 13.3% to EUR 16.7 billion (EUR 14.8 billion). At constant exchange rates the increase would have reached 15.8%. Net premium earned climbed by 11.0% to EUR 14.2 billion (EUR 12.8 billion). Growth would have been 13.5% at unchanged exchange rates.
Large losses in 2020 surpassed expectations for the fourth year in succession. Purely for Covid-19-related losses, Hannover Re paid out or reserved an amount of EUR 950.1 million for its customers in property and casualty reinsurance. Of this, EUR 330.9 million was attributable to reported claims and EUR 619.2 million to claims that have been incurred but not yet reported (IBNR).
Life and Health
The gross premium volume in life and health reinsurance increased by 2.6% year-on-year to EUR 8.0 billion (EUR 7.8 billion). Growth would have reached 4.7% at constant exchange rates. Net premium earned rose by 3.2% to EUR 7.2 billion (EUR 6.9 billion); the growth would have been 5.3% adjusted for exchange rate effects. The operating result (EBIT) declined to EUR 384.8 million (EUR 569.9 million).
For 2021 Hannover Re expects to grow its gross premium in total business by around 5% based on constant exchange rates. Group net income should be in the range of EUR 1.15 billion to EUR 1.25 billion. This is conditional on major loss expenditure not significantly exceeding the budgeted level of EUR 1.1 billion and assumes that there are no exceptional distortions on capital markets.
The asset portfolios should continue to grow – assuming constant exchange and interest rates – in view of the anticipated positive cash flow. The return on investment should reach a level of around 2.4%.