Germany-based Hannover Re, which is majority owned by Talanx, has reported group net income of €985.6m for 2014, up 10.1% year on year from the €895.5m recorded in 2013. Gross written premiums rose 2.9% year on year to €14.36bn.
Net investment income was up 4.3% year on year to €1.47bn, while the net underwriting result improved from a loss of €83.0m in 2013 to a loss of €23.6m last year.
Return on equity was 14.7%, compared with 15.0% in 2013.
Hannover Re's previously announced target net income was €850m. Chief executive Ulrich Wallin said: "The successful financial year was based on a 25% rise in net income in life and health reinsurance and the continued good underwriting result in property and casualty reinsurance. Furthermore, we were able to slightly improve our investment income despite the challenging market environment".
The reinsurer is proposing a €3 per share ordinary dividend and a €1.25 per share special dividend.
The reinsurer observed that "although the general environment facing reinsurers became even more challenging in the year under review, the company was able to grow its gross premium by 2.9%". Hannover Re reduced its level of retained premium to 87.6%, from 89.0%, taking advantage of the soft retrocession environment.
In property-casualty reinsurance, GWP rose by 1.1% year on year to €7.90bn, while the net underwriting result improved by 4.8% to €351.5m. Operating profit was up 12.2% to €1.19bn, compared with €1.06bn in 2013. Group net income was €829.1m, up 2.7% on the 2013 figure. The combined ratio improved a fraction of a percent, to 94.7%, from 94.9% the previous year.
The major loss expenditure of €425.7m was "substantially lower than budgeted". Hannover Re said that this was due in particular to "a benign hurricane season".
However, the aviation industry was affected by "an exceptional accumulation of losses". In addition, winter storm Ela in western Europe "caused heavy damage". Nevertheless, the net major loss expenditure of €425.7m was considerably lower than the €577.6m in losses incurred in 2013, when summer storms, including a severe hail event, hit the south of Germany and environs.
Hannover Re said that in 2014 its reduced shares in Europe and catastrophe business were more than offset by "attractive new business written primarily in the Asia-Pacific region".
Earnings per share in property-casualty rose to €6.88, from €6.70 in 2013.
In life & health reinsurance there was 5.1% year on year increase in gross written premiums, to €6.46bn. Operating profit rose 75.3% year on year to reach €263.8m, from €150.5m the year before. Group net income was €205.0m, up 24.8% year on year.
Hannover Re observed that "although the international market climate was difficult, due to the protracted period of low interest rates, Hannover Re's partnership-based relationships and global presence nevertheless enabled the company to act on sufficient opportunities for sustainable growth". This included the area of longevity risk, a sector proving of increased popularity to the life and health reinsurance sector, providing as it does a natural, but imperfect, hedge to mortality risk.
The strong performance in 2014 relative to 2013 was partially due to the unwinding of losses in the Australian disability portfolio in 2013, and to some extent also in the US mortality business. Life & health also expanded in China, Australia and the US, resulting in a 5.1% increase in GWP.
Hannover Re termed its investment performance "highly satisfactory". Its target of 3.2% return on investments was exceeded by 0.1 percentage points. Realised gains rose to €182.5m, from €144.2m the previous year, "due to portfolio regrouping moves".
Book value per share rose to €62.61 by December 31 2014, from €48.83 at the end of 2013.
Looking ahead, Hannover Re said that the general climate was "likely to remain challenging" this financial year, with little change anticipated in the "intense competitive pressure in property and casualty reinsurance or in the low level of interest rates".
The expected target for group net income remains at €875m, based on the premise that major loss expenditure will not exceed €690m (2014 budget, €670m). Gross premium volume is expected either to remain stable or to show low-single-digit percentage growth in 2015.
The ROI target for 2015 is 3.0%, compared with a target of 3.1% last year.
The payout ratio was put at between 35% and 40% of IFRS Group net income.
The markets liked the news of the special dividend, marking Hannover Re's share price up by more than 4% in morning trades, to just north of €91.00. It had reached a high of €91.50 in earlier trades.