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Hannover Re set to post higher-than-expected 2017 premium growth

German reinsurer Hannover Re expects its 2017 gross premium to grow at a faster rate than previously anticipated after a strong performance in the first half and as the group's property and casualty reinsurance division helps offset a soft reinsurance market, its CEO said Aug. 10.

The group is now expecting gross premium growth of more than 5%, up from its previous target of a "low-single-digit increase."

"Based on the outcome of the first half of the year and midterm renewals, we increased our gross premium target to more than 5%, which is almost more than certain at this point in time because most of the business has already been written," CEO Ulrich Wallin told analysts following publication of the company's second-quarter results.

Hannover Re now expects to post a return on investment of more than 2.7% in 2017, slightly up from its previous target of 2.7% exactly, due to the "very positive development of our investment income in the first half of the year," Wallin said.

In the second quarter, gross written premium rose 10.7% year over year to €4.45 billion, while net premium earned for the second quarter increased by 4.6% to €3.79 billion. Net investment income increased to €386.5 million from €378.5 million.

Hannover Re's second-quarter profit rose 24.6% to €270.2 million from a restated €216.8 million, and the group said it was on track to achieve 2017 net income in excess of €1 billion.

Group net income at the property and casualty reinsurance division was up 31.5% to €228.6 million in the second quarter, while net income at the life and health reinsurance business inched up 1.6% to €53.6 million.

Wallin said the group's life and health segment continued to feel the negative impact from its U.S. mortality business, adding that earnings before interest and tax would be €50 million lower than expected at €300 million due to a commutation of a block of U.S. mortality treaties acquired by the group in 2009 from Scottish Re. A commutation terminates an agreement between a reinsured and a reinsurer.

"There is the possibility that we [will] see more of this next year," he said. "The large block of business of U.S. mortality that we assumed in 2009 will continue to be a drag on our results."

However, he added that it would be increasingly offset by a "very positive" financial solutions business, which is expected to show strong profit growth in the coming years.

Overall, the P&C reinsurance division would offset any downside on the life and health business, he said.

"The P&C side and the investment income should fill the hole that life and health leaves us in compared to our planned figures," he said. The firm expects to see continued growth in P&C in 2018.