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Property & Casualty reinsurance
The situation in property and casualty reinsurance was little changed in the year under review. The fiercely competitive state of the market initially continued unabated; reinsurance capacity was still substantially in excess of demand. Additional capacities from the insurance-linked securities (ILS) market added to the sustained pressure on prices and conditions. Nevertheless, profitable business opportunities also opened up in the various rounds of treaty renewals.
Against this backdrop gross premium rose by 16.4% to EUR 10.7 billion (previous year: EUR 9.2 billion). At constant exchange rates growth would have reached 18.7%. It thus clearly surpassed our expectations.
After a moderate loss experience in the first half of the year, the third quarter was dominated by three severe hurricanes as well as other natural catastrophe events. Altogether, the net expenditure on large losses incurred by Hannover Re stood at EUR 1,127.3 million, compared to EUR 626.6 million in the comparable period. As anticipated, the combined ratio of 99.8% (93.7%) was higher than our targeted maximum figure of 96%.
Investment income from assets under own management in property and casualty reinsurance delivered a gratifying performance. It increased by 35.9% to EUR 1,191.5 million (EUR 876.9 million), a reflection of – among other things – the positive effect from the disposal of our equity portfolio. Nevertheless, ordinary income also rose by 12.8% to EUR 1,014.7 million (EUR 899.3 million).
In the aftermath of a challenging year we are thoroughly satisfied with the result in property and casualty reinsurance, even though the underwriting result of EUR -2.3 million fell well short of the previous year (EUR 479.1 million) owing to the heavy burden of catastrophe losses. The operating profit (EBIT) as at 31 December 2017 reached a level of EUR 1,120.2 million (EUR 1,340.3 million) thanks to the positive investment income. The EBIT margin of 12.2% was higher than the minimum target of 10%. Group net income contracted by 11.8% to EUR 837.3 million (EUR 949.9 million).