Hannover Rück SE (HNR1) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I welcome you to today's Hannover Re Conference Call on the Q1 2021 results. For your information, this conference is being recorded. At this time, I would like to hand the call over to your host today, Mr. Jean-Jacques Henchoz, Chief Executive Officer. Please go ahead, sir.

Thank you very much, and good morning, everyone. Welcome to our conference call presenting our results for the first quarter of '21. Sorry to those of you particularly who are London-based for the inconvenience due to the unusual early time of this call. The reason is as for last year that the Annual Shareholders' Meeting is taking place later this morning at the 11 AM CET. As usual, I'll start with an overview before our CFO, Clemens Jungsthofel, goes over the financial details -- financial in detail. I'll then comment on the outlook and for the Q&A, I'm additionally joined by my board colleagues, Klaus Miller on the Life Science, Sven Althoff for B&D. I'm pleased to report that Hannover Re had a good start into 2021. In the first quarter of the year, we continue to successfully grow our business and group net income of EUR 306 million is very much in line with our full year guidance. Additionally, at 11.1%, the return on equity is well above our minimum target, and gross premium increased by 16.8% adjusted for currency effect. This is mainly driven by our Property and Casualty business group, where remarkable top line growth of 20% on the back of improving market conditions. In the first quarter, technical profitability in P&C returns to normal level. There was some loss activity in the quarter. But large loss stayed within the budget. In addition, our net estimate for COVID-19 related losses remained unchanged compared to year-end 2020 at EUR 950 million. Hence, the combined ratio of 96.2% is not only in line with our planning, but also a good reflection of the improving underlying profitability in the first quarter. And expected, the result of our life and health insurance business group continues to be impacted by the COVID-19 pandemics, in particular, the high number of deaths in January and February in the United States also led to losses in our in-force portfolio. Overall, losses connected to COVID-19 amounted to EUR 151 million, slightly higher than initially expected. As indicated in March, the restructuring within our U.S. mortality portfolio led to a positive one-off effect of EUR 129 million, offsetting a large part of the COVID impact in life and health. To be clear, this restructuring for our ING portfolio does not affect the business reinsured by an over read. However, change in the ownership of the leading company, allowed for some other changes, in particular with regards to the collateral structure. finally, we recorded pleasing premium growth of 8. 6% adjusted for currency effects. At 2. 5%, the return on investment is fairly well in line with expectations overall, and the capitalization according to Solvency II continues to be excellent, confirmed by the very strong solvency ratio of 252%. And at the end of the first quarter, well above our threshold of 200%. The operating cash flow in the first quarter was a particularly strong EUR 1.7 billion, mainly driven by attractive reinsurance growth as well as very solid results on the investment side. On top of that, the restructuring within our U.S. mortality portfolio, led to a positive operating cash flow of around EUR 640 million. Driven by this positive cash flow, total assets under our own management increased to a record high of EUR 52.5 billion. This growth was additionally supported by ForEx effect and the issuance of the EUR 750 million in hybrid capital in March. This new bond issuance is also visible on the next slide, bringing our total hybrid capital to EUR 3 billion. We still have flexibility in regards to our total hybrid capacity and shareholders' equity was rather stable in the first quarter of 2021. Market movements, again, had a strong impact in the first quarter and the negative change in unrealized gains due to increased interest rates, was stronger than the positive impact from currency differentiation. Altogether, the net income was enough to bring the balance back into a positive territory. On that note, I'd like to hand over to Clemens. Who will explain the figures in more detail.

Yes. Thank you, Jean-Jacques. Good morning, everyone. Moving on directly to the segmental reporting. I will start with the development of our property and casualty business group. Gross written premium grew by a remarkable 20% adjusted for currency effects. Based on the January renewals, the growth in our traditional reinsurance portfolio is stemming mainly from Europe, although premium volume also increased in the U.S. and in Asia. On top of this, we were also able to successfully conclude a number of treaties in our structured reinsurance. This shouldn't come as a surprise, as we had mentioned, our healthy pipeline in this area several times. Furthermore, the recognition of premium from the underwriting year 2020 was material and also supported the growth in the first quarter. This effect is generally most pronounced in the first quarter and should, therefore, not repeat itself in the coming quarters. The 2 latter effects are also the main reasons for the more pronounced growth in the first quarter compared to the premium growth reported for the 1/1 renewals. Major loss came in at EUR 193 million, slightly below our quarterly budget of EUR 215 million. And just as a reminder, in line with our usual practice, as you know, we have kept the unused part of the budget within our IBNR as a buffer for the remainder of the year. Even more importantly, we did not have any reasons to adjust our net loss estimate for COVID-19 in the first quarter. While the gross loss estimate did actually increased slightly, this was offset by our recruit protection. The runoff of our reserves was slightly negative in the first quarter, but this development is more a one-off in nature and does not reflect any general negative trend in our portfolio. However, as we've not changed our conservative reserving approach, I would expect the confidence level of our reserves to be stable compared to year-end 2020. Altogether, the 96.2% combined ratio is in line with our expectations. Ordinary investment income was stable. While realized gains were lower than in previous years, explaining the decrease in overall net investment income. Nevertheless, the first quarter 2021 also benefited from realized gains because we sold some of our listed equities. Other income and expenses amounted to minus EUR 91 million, mainly driven by negative currency effects of EUR 82 million. Altogether, the EBIT increased to EUR 324 million, thanks to the improved underwriting results. Finally, the tax ratio was below the normal level due to a favorable earnings contribution from lower tax subsidiaries. On the next slide, total net large losses accounted for EUR 193 million in the first quarter. Again, EUR 21 million below the budget. Here, I think there's not a lot more to say on this slide, so I will directly move on to our detailed large loss overview. As you can see on the next slide, the largest individual event was the Texas freeze, with a net loss of EUR 75 million, adding the storm in Spain since the Australian floods, the net impact from nat cat was EUR 105 million, hardly a severely impacted quarter for Hannover Re. On the manmade side, though, the quarter was more active with 1 satellite loss and 4 property claims, leading to a net loss burden of EUR 88 million . The next slide shows the technical profitability of our P&C portfolio by reporting line. The picture for the first quarter is a mixed one. As usual, for an individual quarter, the combined ratio is slightly above the target in some lines origins, mainly due to large losses and slightly better than the target in other areas. I see this as a confirmation of the benefit of our highly diversified portfolio. One comment just on credit and surety, which looks part -- particularly good. The government programs to now -- to mitigate the impact of the pandemic are still in place and have certainly had a positive impact on the reported numbers. Therefore, good 83 combined ratio is the result of the actual loss development in the first quarter and not driven by any reserve releases related to COVID-19. Overall, again, the 96. 2% combined ratio is very close to our target. So let's move on to Life and health. The pleasing premium growth highlights the fact that our strategic initiatives are bearing fruit, given that it's mainly driven by the APAC region and by longevity. The technical result is affected by losses in connection with COVID-19. As in previous quarters, the main impact is coming from our U.S. portfolio. Apart from the U.S., the bulk of the losses are from South Africa and to a lesser extent, from other countries. As indicated in March, the restructuring part of the ING portfolio in our U.S. mortality book led to a positive one-off effect of EUR 129 million. So when you look at this effect of the EUR 129 million, it might sound a bit complicated now. So I'll try to -- because this one-off shows up in 3 different lines in the P&L. First, the transfer of some assets as part of the funds withheld, led to a positive valuation gain of EUR 86 million. The restructuring of the collateral agreements had a positive impact of EUR 58 million in the other income in expenses. And the valuation effect of the ModCo derivative was minus EUR 14 million. So as mentioned by Jean-Jacques, this adds up to the EUR 129 million, offsetting, therefore, a large part of our COVID-19 losses in the first quarter. The ordinary investment income was in line with our expectations, while the fair value of financial instruments was significantly negative in the first quarter. This is driven by the valuation of the derivative embedded in the life reinsurance contract. Unfortunately, this derivative creates some volatility because the corresponding positive effect of the liabilities is not visible in our IFRS accounts due to IFRS accounting regime. Taking an economic view, the negative impact is, to some extent, offset. Other income and expenses are mainly driven by a further increase in the contribution from our financial solutions business, a large portion of which was recognized according to the deposit accounting method. Currency effects this quarter was slightly positive. All in all, the EBIT of EUR 80 million is affected by a number of larger individual effects. Adjusted for COVID losses the positive one-off from U.S. mortality and the negative derivative valuation, the result would have been in line with our expectations. At 37.9%, the tax ratio is above normal level driven by the taxation of certain business, but I would ask you not to read too much into quarterly tax rates. On the next slide, for life and health, premium development is just one way to measure growth, but what is probably even more important is the value of new business. On the next slide, you can see that we were quite active in our reporting categories and also the pipeline for new business remains very healthy. By region, North America, APAC, and the U.K. for longevity are currently the most promising, but European markets like Germany and France may also bring some new opportunities. Looking at the indicator for the new business value at the bottom the first quarter particularly, as you know, transactions in life and health are often rather bulky and the value of new business also closely linked to the duration of the business driven. In any case, I see our life and health business group as being well on track in terms of new business production. Next slide, the development of our investments in the first quarter. I think it was very satisfactory. The ordinary investment income is in line with our expectations. On the one hand, our portfolio of inflation-linked bond, as you know, is, to some extent, still affected by lower inflation. On the other hand, the return from alternative investment is back to higher levels compared to the previous year, around EUR 50 million of the realized gains are linked to the partial disposal of listed equities. The remainder is the result of normal portfolio maintenance in a low yield environment. Listed equities are not really strategically important asset class for us. Therefore, the realization was rather opportunistic following strong performance of equity markets. Additionally, we still have our desired exposure to private equity, as you know. Impairments and depreciations are comparable to last year, but still a really moderate level, I would say. As explained in my comments on life and health, the derivative valuation was negative, explaining the majority of the decrease in investment income compared to the previous year. The overall return on investment was 2. 5%, meaning that we are well on track to achieve our full-year target of roughly 2.4%. Unrealized gains decreased by almost EUR 1 billion due to the increase in interest rates, but are still on a very high level at above EUR 2 billion. More importantly, the rising interest rates are, of course, positive for the new money yield, even if the overall interest rate levels are still very low. On the next slide, the asset allocation. As you can see, remained rather stable in the first quarter '21. The only notable change I would mention is that we slightly increased the share of corporate to 32%. Here, we invested according to a broad-based approach with a focus on developed markets. The mentioned disposal of listed equities is not really visible here in this overview. And the rounded number is still at 1%. The contribution to ordinary investment income is diversified as usual, particularly pleasing to see that the contribution from private equity record to strong levels that we had seen before the market volatility caused by the pandemic in 2020. And to conclude my remarks, the overall results for the first quarter of 2021 does include a few larger extraordinary effects, as you can see, but both the reported net income and the underlying business development support our guidance for the full year, and I hereby hand back to you, Jean-Jacques for the target matrix and the outlook.

Thank you very much, Clemens. On the next slide, you see the target matrix, which confirms that we had a good start to 2021. Growth, as mentioned earlier, is significantly ahead of the strategic targets and our main profitability target for the group, the ROE is well above the minimum target and the industry average. The treaty renewals as at 1st April '21, we're also successful for Hannover Re, both the premium development and the price improvements are very much in line with the trends we saw in the January renewals. In the U.S., we particularly benefited from the underlying improvement in primary markets, and were able to generate double-digit growth, in Japan, growth was slightly lower, but overall in line with our expectations. And for the cat business, the reinsurance rates improved further on the back of the heavy loss burden in 2018 and 2019. Continued positive trends could also be observed in our aviation and marine portfolios. Overall, our premium in the April renewals increased by 7.4%. The risk-adjusted price change was about 5% positive. Looking at only at the nonproportional business, the price increase was even higher at 9%. Based on the favorable renewals in January and April, we see further opportunities to grow our highly diversified portfolio in an attractive market environment. And I would expect the general pricing trends affecting the reinsurance industry to persist in 2021 and to carry on into '22. Influencing factors will be the amplitude of further COVID-19 impact for the industry and also the large loss situation as usual. We still feel comfortable with our P&C reserving for COVID-19 related losses. And currently, we do not expect a material impact in 2021. In life and health reinsurance, growth is expected to be well supported by our strategic initiatives and most pronounced in longevity and financial solutions. In the latter case, this volume indication also includes business, which is booked according to the deposit accounting method and is, therefore, not visible in the premium income. In mortality, further losses from the COVID-19 pandemics are expected to decrease significantly compared to the first quarter, mainly driven by the progress of vaccination programs around the world, but particularly in the U.S. The premium is expected to be slightly lower, mainly due to the natural decrease in our inforce book and our limited appetite for new business in the most competitive traditional life segments, particularly in the U.S. and U.K. markets. In morbidity, the overall development is more stable. As mentioned by Clemens, the business development in the first quarter of the year supports our guidance for the full year. On the premium guidance, it even supports a slightly higher growth rate, and we have increased our expectation to high single-digit growth rate. We have kept the guidance for group net income unchanged. On the one hand, of course, the slightly higher assumption for growth will filter through it to the bottom line. On the other hand, the impact from COVID-19 was a little higher-than-expected in the first quarter. Finally, I can reconfirm our positive view of the dividend policy and the potential to pay a special dividend, if profit targets are reached and the capitalization remains strong. This concludes my remarks, and we would be happy to answer your questions. Thank you very much.

[Operator Instructions] And the first question is from Vinit Malhotra, Mediobanca.

So my 2 questions, please. One is the -- Jean-Jacques, you mentioned the pricing effect, and you mentioned an optimistic outlook for 2022, and you mentioned some factors, including COVID. Could you just elaborate a bit? Is it because you think COVID discussions haven't actually had the opportunity to take place this year, and that's why some of these effects could roll over into next year's profits? So that's my first question. Any other factors you'd like to highlight for next year would be helpful as well? And second question is the mortality COVID effect of EUR 151 million total, but only EUR 105 million, and I say, okay, EUR 105 million in the U.S., but so the ex U.S., you mentioned South Africa, could you just elaborate, is there some other risks, because so far, as a marketplace, we've mostly been focused on U.S. mortality, partly U.K.? And also I mean in that context, does something like the Indian situation bother you all at all in terms of loss risks. So just any comment on ex U.S. COVID mortality which seemed a bit higher than what I would have imagined?

Thank you for that. Just on the first question, you had several drivers for pricing. Of course, you have the large loss activity in the past few years. The interest rate environment, of course, puts some additional pressure. On COVID we did mention, I think we're of the view that we're well reserved conservatively across the line of business affected, but there are some uncertainty on client-by-client basis. And in some instances, this will still be a point on the agenda as we renew some of the businesses in January. So I think you still will see some impact and some further price pressure on the [ sedents ] given the burden of COVID. As of end of last year, of course, we had a much better view on the overall exposure, but this is worth, and this will be very much on a client-by-client basis. Maybe on the life and health, ex U.S., U.K., Klaus can have that.

Yes. And the COVID claims, excluding the U.S. in our portfolio are mainly from Latin America and South Africa. The worst country in Latin America is probably right now Brazil, but not in our portfolio. We have hardly any business in Brazil. But Chile, Colombia, even Mexico, to some extent, have caused losses in our portfolio. It's just in the double digits. And I don't know how long this will continue. It's nothing what we are really worried about in terms of our bottom line results. South Africa, the same, vaccination has not really started there. And we have a lot of financing business as well in South Africa, which can absorb a lot of COVID claims. But including the mortality covers we provide this is also, I guess, single digit, maybe double-digit loss in the first quarter. India is of not much importance for our bottom line. I guess, the total premium, premium is in the single digit millions. And that has absolutely no impact on the bottom line for us. These are the largest markets outside the U.S. and U.K. Europe, as such, is not really a problem so far. Please keep in mind that we have shifted our portfolio to financial solutions and longevity in the last 10 years, to a large extent, this definitely helps in this situation. I hope that answers your question.

The next question is from Michael Haid, Commerzbank.

Two questions, both on P&C Re. You mentioned the COVID-19 related losses the estimate is unchanged at EUR 950 million. It appears that new COVID-19 related losses are fully covered by retro, which is somewhat counterintuitive. Can you explain why this is the case and how the mechanics works here? Second question, the strong growth in P&C Re, 20.1% and you mentioned that some of this comes from structured reinsurance, however, I thought that premiums from structured reinsurance are generally deposit accounted. So can you elaborate a little bit how structured reinsurance lays into this strong growth? And whether the strong growth was affected by some large quota share transactions or anything like that?

Thank you, Michael. I guess so Sven will address both points.

On the COVID side, as Clemens explained, our gross position has only increased a little bit. So the gross claim grew by approximately 3%. This was coming out of mainly property related. So business interruption related new loss advices from our seeding companies and we saw a little bit of movement on the contingency side. So the property is covered by our successional protection. And the small increase from non property-related lines we have eliminated by adjusting other lines. We're very gradually downwards in order to keep with the overall EUR 950 million, which is an overall conservative number. So we wanted to have stability on that side in the first quarter. When it comes to the growth, the run-off of the 2020 business comes both from the traditional business and from the Advanced Solutions business which we have written at the 1/4 renewals and later last year. The reason why Advanced Solutions are also significantly contributing in that aspect is that the amount of business we rise on a deposit account basis in our P&C structured reinsurance practice is very, very small indeed. So we -- it would be more the exception than the norm that we have deposit accounted business in our structured P&C business. So they contribute exactly like any traditional quota share, for example, would contribute and given that we are talking about a business that was written after 1/1 last year. As Clemens said, this impact will phase out over the next couple of quarters. But to give you a little more detail when we reported about our growth in Q1 2020, 25% of that number at the time came from underwriting years '19 and prior. And we are now reporting about our growth in the first quarter of 2021, a remarkable 50% of that growth is coming from the previous underwriting years. So if you put the growth into the categories, the underwriting year 2020 and prior, it's more than we expected. When we look at underwriting year 2021, the growth we are seeing is very much in line with the premium growth we reported in early February when we talked about our January renewals.

Our next question is from Andrew Ritchie, Autonomous.

I joined the call a bit late, so apologies if you've addressed these topics. The first question was, could you just give us a color as to the FX noise in the other income in non life? Why is it so large? How can I forecast that? Or can I? What are the main sensitivities and what was driving? I think you flagged EUR 82 million in the slide? Second question, so you just give us a bit more color on your outlook for midyear renewals. There's definitely a bit more discussion as to whether there's an accelerating softening trend or still decent rate correction. Maybe give us a sense how much of your mid-year renewal is on sort of loss-affected business? And the final question, could you just give us a bit of color behind your decision to raise more debt in the quarter? It doesn't seem like from the outside that you particularly needed it, given your strong solvency and no imminent refinancing. So what was the thinking? Is it purely opportunistic? Do you feel the need to run at a particularly high capital coverage in anticipation of growth or some other metric? That would be useful, just some color on that would be great.

Thank you, Andrew, and I'll give the question on ForEx to Clemens also probably the hybrid capital and then media renewal for Sven.

Yes. Andrew, colleagues are looking at me with respect to the FX effect in P&C because it's actually an accounting question. So that goes to the CFO because yes, in a sense it's an accounting one. It's not an economic effect. The reason is the stronger -- mainly the stronger U.S. dollar in the first quarter development of the U.S. dollar. That's the underlying reason for it. And as we reevaluate our balance sheet, both on the liability and asset side, all the liability effects close through the P&L as the currency effect, whereas on the asset side, only so-called liquid assets, monetary assets that they are classified under IFRS flows through the P&L and the other effect goes straight into the currency OCI for particularly our non-monetary U.S. product assets, for example, our huge U.S. dollar private equity portfolio. You would have seen an opposite effect last year where we reported, again, on the P&C side. So it adds a certain volatility, of course, to our results, but the movements were quite significantly last year, as you know, in the U.S. dollar in this year as well. So that sort of flows through the P&L. However, again, that is a fully offsetting effect in OCI.

Would you also to address the debt or share shall we go first to the mid year renewals outlook?

Yes. On what we have seen at 1/4 is that the momentum on the rate side is -- was relatively unchanged to what we saw at the first of January renewal both on the insurance and on the reinsurance side. So when you ask about 1st of June, 1st of July renewals, we expect that positive trend to continue. There is some first signs of slowing down in the momentum. But the direction of travel is still up. I mean, we are not talking about an SB4 kind of market yet, where we are particularly seeing more pressure is on proportional treaties where seeding companies are arguing that in their business, they have achieved 2 very often need 3 rounds of rate increases. So they are not really prepared to decrease their seeding commissions further due to the fact that the underlying profitability of the business should be significantly better. So that's what we are seeing. The bulk of the business, we will renew at 1st of June and 1st of July is coming from the U.S. and Australia. U.S. was a heavy loss year, as you know, last year with Hurricane Laura and the various tornadoes and so from that point of view, we see little reason why that business should see a lesser rate momentum compared to the one business we have written in the U.S. Australia, on the other hand, had difficult years in 2019, 2020. A lot of that was already taken into account when we last renewed that business. The last 12 months. We're not loss free, but didn't experience the same sort of lost burden in Australia. So here, I would expect that we still see rate increases, but maybe not as high as we could report a year ago. So overall, the trend is still very much intact but maybe the rate increases we will be able to report when we talk about Q2, will come a little below what we could now report at 1st of April and 1st of January.

Yes. And just briefly on the hybrid. I mean it does give us, as you've seen in our Solvency II rate as well. It does give us some buffer, provide some buffer both in Solvency II, but also on other rating capital model. So there is some headroom for us, not necessarily in the first quarter, of course. But we thought the market environment was very good. So we took the chance, and it was an opportunistic move then in March, again, to drive a system buffers to take advantage of the good pricing environment in the market environment in the opportunities in the market.

And just to respond to also part of your question, Andrew, there is no different benchmark now when it comes to Solvency II. We're still at the same level and see this as a fairly high solvency ratio, but combined with the opportunistic nature of the debt raising that gives us a photography of the situation as of end of March, but the no change in our practice here.

Next question is from Jochen Schmitt, Metzler.

I have one question on your ordinary investment income from private equity in Q1 '21. Does this include any special dividends or any valuation effect? That's my question.

Thank you. Clemens will address that.

Yes. No, it's really just ordinary distributions from our private equity funds. It's variety a of private equity funds. There's no special effect in the -- and no evaluation effects. We don't evaluate our private equity investments through P&L. They all go to -- it all goes through the OCI. There are positive effect in the OCI, actually. But I think it was very pleasing what we saw compared to last year in terms of ordinary investment results from private equity, actually in excess of first quarter 2020.

The next question is from Kamran Hossain, RBC.

Just one question for me. And apologies if I missed this detail. I understand that you have a parametric cover for our life and health business, which kind of helps out in situations -- kind of a pandemic situations. Just wanted to ask how close are you to triggering this? And how much cover does it provide? I guess, given the situation elsewhere in the world, the U.S., U.K. seems to be getting a bit better. Does it also include non-U.S. debts? So color on that would be really helpful.

Yes. The cover we have bought is currently at USD 255 million capacity. And the trigger is certified as a weighted average of the population mortality of 3 countries: the U.S., the U.K. and Australia. We pick these 3 because they have the highest sum of risk in our portfolio. The weights are about 60% U.S., about 22% U.K., and about 18% Australia. Currently, a bid trigger starts at 110% of this weighted population mortality and it ends at 120%. So it's 10 percentage points. And the $255 million mean that each percentage point in excess of 110% is worth $25.5 million. Currently, we are pretty close at or to the trigger point of 110%, not much as expected from Australia in the rest of the year, just normal mortality. So it will not increase because of Australia. It will probably also not increase further due to U.K. because COVID claims are significantly reduced. And the U.S., we have to wait what happens there. Currently, there are still about 500 claims per day. I don't expect a large payout from that. And hopefully, this is not the case because that would mean that we have the COVID pandemic under control. So this is only linked to population mortality in these 3 countries.

The next question is from Vikram Gandhi from Societe Generale.

It's Vik from SocGen. I've got a couple of questions. First is on the deposit accounted treaties contribution would stand at about EUR 90 million for this quarter versus EUR 85 million Q1 '20. Can you just give us a bit more color if there is a slowdown in the growth that we have been used to in the past? Or is it more of because it's a lumpy business. Q1 was a slightly lower growth quarter, and you might expect the growth to pick up in the coming quarters. So any comments there would be very useful. And second was on the cyber insurance. Can you just explain how the book is shaping up, what were the premiums for the full year 2020? And how the things are looking for the current year?

On Financial Solutions business.

The Financial Solutions business is pretty stable, not impacted by the call it pandemic right now. And in -- we have 2 countries where most of the financial solutions business is coming from. One is the U.S., the other is China. U.S. is up to 20 years. So this is more long term. China is significantly shorter, but at least for the next 2 or 3 years, we don't expect a significant shift here. And we hope that we can write more business in the near future. So this is something what we see as a stable contributor to our bottom line results.

Sven, on the other question?

On the cyber portfolio, this continues to be a growing class for Hannover Re. So in 2020, we wrote approximately EUR 300 million of cyber reinsurance premium as you know, we were able at the 1st of July renewals onwards from last year. To reduce the silent cyber exposure on non affirmative cyber business. Which created some further headroom for us in order to keep growing our affirmative cyber portfolio. And for 2021, we had a successful start to the year. Where we could either increase shares on existing contracts or even like a few more. So we are going to approach a premium volume near EUR 400 million for the full underwriting year 2021. Our loss experience continues to be favorable in this class. We have seen an uptick in the loss frequency in the last 18 months. But the business we write is still well within the ultimate loss ratio picks that we had chosen for that business at the beginning when we were writing it so from that point of view, we see this as a good contribution to further increase the earnings capability of our P&C practice.

And there are currently no further questions. [Operator Instructions] And our next question is from Emanuele Musio, Morgan Stanley.

A quick question on the combined ratio. Can you please give us an indication of where the underline profitability stands compared to last year? Or maybe you can otherwise give me an indication of what the contribution from prior year developments for this year? Is it comparable to 2020? Is it more -- just some color about that, please.

Thank you, Manuel. Sven?

Yes, to the prior year development, as Clemens said, that came in a little less good compared to where we were a year ago due to some impacts on our short-tail losses. For example, the winter storm in Texas was mostly resulting from business which we wrote and underwrite in the year 2020. So this showed some negative runoff, therefore, for our 2020 property business. The runoff result for our long-tail losses casualty, in particular, was good, was positive. So no concern from that side. And as to your first question, question, I mean, of course, we are satisfied with the start to the year with our 96.2% combined ratio. So this makes us more confident that we will achieve our target of 96% or better at the end of the year. But of course, the year has only just started so there is a lot of exposure on the wind side waiting for us in the next couple of quarters. So at this stage, I would say it's a good start. It seems to reconfirm our guidance on that side, but we would not be more bullish than that at this stage.

[Operator Instructions] And we haven't received any further questions at this point. So I'll hand back to the speakers for closing remarks.

Well, thank you very much for joining this early call. So I think we handled the key topics we wanted to show that we had a solid start into the year with these quarterly results on the back of successful P&C renewals and good momentum in pricing and conditions with strong growth, as you've seen at a net Corona loss estimate, which is unchanged. In like and have, of course, some uncertainties remain, but we believe that with the vaccination programs, particularly in the U.S., things will improve in the coming quarters. But of course, still some uncertainties. Strong capitalization, we addressed that at the beginning of the year. And this is reflecting, of course, the hybrid bond, and the outlook is positive. We're quite confident about the guidance. We changed, of course, the top line guidance reflecting the P&C business. But as Sven mentioned, it's a bit early in the year to look at it in more detail. There's still some uncertainty. There is still some nat cat activity, which might be coming later. In the next few quarters. But all in all, we're very positive about the outlook for '21 and feel very comfortable with the guidance. With that, I'll close the session. Thank you again for joining today, and see you next time.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.