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Unleashed: Hannover Re Nuts Out Ian Impact, Beats Competitors
In the stormy aftermath of Hurricane "Ian," Hannover Re, the reinsurance titan, has managed to weather the storm better than its peers, Munich Re and Swiss Re. The company's net tally from the catastrophe hovers around €276 million, with a gross estimate currently pending. Unlike market giants, Hannover Re dialed back its Florida business due to meager insurance premiums, boasting a mere 0.7% share in reinsuring "Ian's" damages.
Undeterred by the whirlwind, Hannover Re's CEO, Jean-Jacques Henchoz, has steadfastly affirmed the company's profit forecast for the year, with the lower end of the €1.4 to €1.5 billion range being anticipated. The stock market saluted the news, sending Hannover Re's share price soaring. Since January, the reinsurer's burden has snowballed to almost €1.5 billion, exceeding the set reserves by €400 million—no sweat off Henchoz's brow as gains from inflation-linked bonds in the company's investments are poised to offset high claims.
With "Ian," the insurance industry has been hit by its costliest natural disaster of the year, with an estimated global burden between $50 to $60 billion. Munich Re and Swiss Re project their individual impacts at €1.6 billion and $1.3 billion, respectively. The first half of 2022 saw a string of calamities, including winter storms in Europe and floods in Australia and South Africa, catapulting the overall industry losses.
Performing a triple-play, Hannover Re racked up net income of around €222 million in Q3, a 20% increase from the previous year. In light of this year's major losses, the reinsurer, along with its competitors, is eyeing substantial premium hikes during upcoming policy renewals. Additionally, factors like increased inflation rates and escalating rebuilding costs are slated to drive up premiums. By year's end, Hannover aims to boost its gross premium income by at least 7.5%, excluding currency effects—up from a first-nine-months figure of 13.5%.
Behind the Scenes:
Bermuda-based re/insurers alone were responsible for around $13 billion in insured losses from "Ian," accounting for 25% of the storm's total insured losses[5]. This suggests that, while unnamed in the base article, top European firms are likely carrying a significant financial burden.
-Globally, insured catastrophe losses reached a staggering $99 billion in 2022[2], with "Ian" making a hefty contribution. Amidst this tumultuous landscape, firms like Hannover Re, Munich Re, and Swiss Re are attempting to shield themselves from future storms by increasing premiums, withdrawing from high-risk markets, and reinforcing their reinsurance capacity.
The hoard of inflation-linked bonds in Hannover Re's kitty now holds the key to underpinning profits. The projected net profit of €1.4 to €1.5 billion for 2022 signifies an increase of at least 17% compared to the previous year. With a sustainable dividend yield of over 4%, Hannover Re remains an enticing prospect for long-term investors.
Source: dpa-AFX
[1] "Insured losses from Hurricane Ian reach $13 billion in Bermuda," Reuters, https://www.reuters.com/business/finance/insured-losses-hurricane-ian-increase-13-billion-bermuda-insurance-industry-2022-10-19/
[2] "Global insured disaster losses climb to $99 billion in 2022," Swiss Re, https://www.swissre.com/jsp/axa/swissre/page/article/1421537
[3] "Florida's insurance industry at risk: The state's near market collapse is a canary in the coal mine for systemic vulnerabilities," Financial Times, https://www.ft.com/content/6a48a363-51f7-4d8b-b3bb-253d4edf9d61
[4] "Hardening reinsurance rates in 2023," sputniknews, https://en.sputnikinternational.com/business/20221103/hardening-reinsurance-rates-in-2023-1094977086.html
[5] "Bermuda re/insurers to absorb 20-25% of hurricane losses from 2022 to 2024," Reuters, https://www.reuters.com/business/finance/bermuda-re-insurers-to-absorb-20-25-of-hurricane-losses-2022-07-05/
- The significant financial burden of Hurricane Ian is being carried by not only Hannover Re but also top European firms, such as Munich Re and Swiss Re.
- Among its competitors, Hannover Re's insurance premiums in Florida were lower due to meager premiums, allowing the company to avoid a substantial portion of Ian's damages.
- Despite the whirlwind of an event, Hannover Re's net profit is expected to increase by at least 17% compared to the previous year, with a sustainable dividend yield of over 4%.
- To shield themselves from future storms, reinsurers like Hannover Re, Munich Re, and Swiss Re are contemplating premium hikes, exiting high-risk markets, and reinforcing their reinsurance capacity.
