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 2021. 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 11:00 A.M. CET. As usual, I'll start with an overview before our CFO, Clemens Jungsthöfel, goes over the financials in detail. I'll then comment on the outlook. For the Q&A, I'm additionally joined by my board colleagues, Klaus Miller on the life side, and Svec Althoff for P&C. I'm pleased to report that Hannover Re had a good start into 2021.
In the first quarter of the year, we continued 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 we reaped remarkable top-line growth of 20% on the back of improving market conditions. In the first quarter, technical profitability in P&C returned to normal levels. There was some loss activity every quarter, but large losses 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.
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. As expected, the result of our life and health reinsurance business group continued to be impacted by the COVID-19 pandemic. 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 Hannover Re.
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 effect. 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% 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 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 translation. 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 first quarter. This effect is generally most pronounced in the first quarter and should therefore not repeat itself in the coming quarters.
The two 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 renewal. Major loss came in at EUR 193 million, slightly below our quarterly budget of EUR 215 million. 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 increase slightly, this was offset by our retro protection. 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. 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.
The EBIT increased to EUR 324 million, thanks to the improved underwriting result. 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.
There, I think it'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 to storm in Spain and the Australian flood, the net impact from Nat cat was EUR 105 million, hardly a severely impacted quarter for Hannover Re. On the man-made side, though, the quarter was more active with one satellite loss and four 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 or regions, 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 particularly good. The government programs to mitigate the impact of the pandemic are still in place and have certainly had a positive impact on the reported numbers. Therefore, the 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. 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. When you look at this effect of the EUR 129 million, it might sound a bit complicated now, I will try it, because this one-off shows up in three 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 agreement had a positive impact of EUR 58 million in the other income and expenses, and the valuation effect of the ModCo derivative was -EUR 14 million. As mentioned by Jean-Jacques, this adds up to 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 a 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 is recognized according to the deposit accounting method. Currency effect this quarter was slightly positive. 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. 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, 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, 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. 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 was particularly strong. As you know, transactions in life and health are often rather bulky, the value of new business also closely linked to the duration of the business written.
In any case, I see our Life and Health business group as being well on track in terms of new business production. The next slide, the development of our investments. In the first quarter, I think was very satisfactory. The ordinary investment income is in line with our expectations. On the one hand, our portfolio of inflation-linked bonds, 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 a 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 on 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 at 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 2021. 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 recovered to strong levels that we had seen before the market volatility caused by the pandemic in 2020. To conclude my remarks, the overall results for the first quarter 2021 does include few larger extraordinary effects, as you can see.
Both the reported net income and the underlying business development support our guidance for the full year. 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 of April 2021 were 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. For the cat business, the reinsurance rate 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 only at the non-proportional 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 2022. 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 pandemic 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 in-force 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 this first quarter of the year supports our guidance for the full year. On the premium guidance, it even supports a slightly higher growth rate. 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 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. We would be happy to answer your questions. Thank you very much.
Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask the question. If you find your question is answered before it's your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment for our first question. The first question is from Vinit Malhotra, Mediobanca. Your line is now open. Please go ahead.
Good morning. Thank you, and hope everything's okay with everybody. My two questions, please. One is, Jean-Jacques, you mentioned the pricing effect, and you mentioned 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 pricing? That's my first question. Any other factors you'd like to highlight for next year would be helpful as well. Second question is the mortality COVID effect, the EUR 151 million total, but only EUR 105 million in the U.S. This ex-U.S., you mentioned South Africa. Could you elaborate, is there some other risks? So far, as a marketplace, we've mostly been focused on U.S. mortality, partly U.K.
Also, in that context, does something like The Indian situation bother you at all in terms of loss risks? Just any comment on ex-U.S. COVID mortality, which seem to be higher than what I would have imagined. Thank you.
Thank you for that. Just on the first question, you have several drivers for pricing, of course. You have the large loss activity in the past few years. The interest rates environment, of course, put some additional pressure. On COVID, as mentioned, I think we're of the view that we're well reserved conservatively across the lines of business affected. There are some uncertainty on a client-by-client basis. In some instances, this will still be a point on the agenda as we renew some of the businesses in January. I think you still will see some impact and some further price pressure on the cedants, 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 worse. This will be very much on a client-by-client basis.
Maybe on the Life & Health ex U.S., U.K., Klaus can help there.
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, not in our portfolio. We have hardly any business in Brazil. 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 result. South Africa, the same. Vaccination has not really started there. We have a lot of financing business as well in South Africa, which can absorb a lot of COVID claims. 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 is in the EUR single- digit millions. 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 portfolios to Financial Solutions and longevity in the last 10 years, to a large extent. This definitely helps in this situation.
Thanks a lot.
I hope that answers the question.
Thank you.
The next question is from Michael Haid, Commerzbank. Your line is now open. Please go ahead.
Thank you very much. Good morning to everyone. Two questions, both on P&C Re. You mentioned the COVID-19 related losses that 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%. You mentioned that some of this comes from structured reinsurance. I thought that premiums from structured reinsurance are generally deposit accounted. Can you elaborate a little bit how structured reinsurance plays into this strong growth, and whether the strong growth was affected by some large quota share transactions or anything like that?
Thank you. I guess Sven will address both points.
On the COVID side, as Clemens explained, our gross position has only increased a little bit. The gross claim grew by approximately 3%. This was coming out of mainly property-related, so business interruption-related, new loss advices from our ceding companies. We saw a little bit of movement on the commutations side. The property is covered by our retrocessional protection. The small increase from non-property related lines, we have eliminated by adjusting other lines very gradually downwards in order to keep with the overall EUR 950 million, which is a overall conservative number. We wanted to have stability on that side in the first quarter. When it comes to the growth, the runoff of the 2020 business comes both from the traditional business and from the Advanced Solutions business, which we have written at the 1.4 renewal later last year.
The reason why Advanced Solutions is also significantly contributing in that aspect is that the amount of business we write on a deposit account basis in our P&C structured reinsurance practice is very, very small indeed. It would be more the exception than the norm that we have deposit accounted business in our structured P&C business. They contribute exactly like any traditional quota share, for example, would contribute. Given that we are talking about business that was written after 1/1 last year, as Clemens said, this impact will phase out over the next couple of quarters. 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 2019 and prior.
When 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. 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.
Thank you very much. Very helpful.
The next question is from Andrew Ritchie, Autonomous. Your line is now open. Please go ahead.
Oh, hi there. I joined the call a bit late. 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 was it so large? How can I forecast that, or can I? What are the main sensitivities and what was driving it? I think you flagged EUR 82 million in the slide. Second question, just give us a bit more color on your outlook for mid-year 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 loss-affected business. 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. 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.
Thank you, Andrew, and I'll give the question on Forex to Clemens, and also probably the hybrid capital. Then mid-year renewal for Sven.
Yes, good morning, Andrew. Colleagues are looking at me with respect to the FX effect in P&C, because it's actually an accounting question. That goes to the CFO. Again, it's an accounting one, it's not an economic effect. The reason is mainly the stronger U.S. dollar in the first quarter development of the U.S. dollar. That's the underlying reason for it. As we reevaluate our balance sheet, both on the liability and asset side, all the liability effects flow through the P&L as the currency effect. Whereas on the asset side, only so-called liquid assets, monetary assets as they are classified under IFRS, flow through the P&L. The other effect goes straight into the currency OCI, particularly our non-monetary U.S. dollar assets, for example, our huge U.S. dollar private equity portfolio.
You will have seen an opposite effect last year, where we reported again on the P&C side. It adds a certain volatility, of course, to our results. The movements were quite significantly last year, as you know, in the US dollar and this year as well. That sort of flows through the P&L. However, again, there is a fully offsetting effect in OCI.
Would you want to address the debt, or shall we go first to the mid-year renewals outlook?
Yeah. What we have seen at one-four is that the momentum on the rate side was relatively unchanged to what we saw at the 1st of January renewal, both on the insurance and on the reinsurance side. 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. The direction of travel is still up. We are not talking about an SP4 kind of market yet. Where we are particularly seeing more pressure is on proportional treaties, where ceding companies are arguing that in their business, they have achieved two, very often even three rounds of rate increases. They are not really prepared to decrease their ceding commissions further, due to the fact that the underlying profitability of the business should be significantly better. 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 various tornadoes. 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 were not loss free, but didn't experience the same sort of loss burden in Australia. Here I would expect that we still see rate increases, but maybe not as high as we could report a year ago. Overall, the trend is still very much intact.
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.
Just briefly on the hard rate. It does give us, as you've seen in our Solvency II rate as well, it does provide some buffer, both in Solvency II but also in our rating capital models. There is some headroom for us. Not necessarily in the first quarter, of course. We thought the market environment was very good. We took the chance, and it was an opportunistic move then in March, again, to provide us with some buffers to take advantage of the good pricing environment in the market, environment in the opportunities in the market.
Just to respond to also part of your question, Andrew, there is no different benchmark now when it comes to Solvency II. We are still at the same level and see this as a fairly high solvency ratio. Combined with the opportunistic nature of the debt raising, that gives us the photography of the situation as of end of March. No change in our practice here.
Okay. Thank you.
The next question is from Jochen Schmitt, Metzler. Your line is now open. Please go ahead.
Thank you. Good morning. I have one question on your ordinary investment income from private equity in Q1 2021. Does this include any specialty within 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 a variety of private equity funds. There's no special effect in there and no evaluation effect. We don't evaluate our private equity investments through P&L. They all go through the OCI. There are positive effects 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.
Thank you.
The next question is from Kamran Hossain, RBC. Your line is now open. Please go ahead.
Hi. Morning. Just one question from me. Apologies if I missed this detail. I understand that you have a parametric cover for your life and health business, which helps out in situations, pandemic situations. Just wanted to ask, how close are you to triggering this? How much cover does it provide? I guess given the situation elsewhere in the world, the U.S., the U.K. seems to be getting a bit better. Does it also include non-U.S. deaths? Color on that would be really helpful. Thank you.
Yes.
The cover we have bought is currently at $255 million capacity U.S. dollar. The trigger is defined as a weighted average of the population mortality of three countries, the U.S., the U.K., and Australia. We picked these three because they have the highest sums at risk in our portfolio. The weights are about 60% U.S., about 22% U.K., and about 18% Australia. Currently, the trigger starts at 110% of this weighted population mortality, and it ends at 120%, so it's 10 percentage points. 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 is expected from Australia in the rest of the year, just normal mortality.
It will not increase because of Australia. It will probably also not increase further due to U.K. because COVID claims are significantly reduced.
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. Hopefully, this is not the case because that would mean that we have the COVID pandemic under control. This is only linked to population mortality in these three countries.
Thank you. That's fair. Thanks very much.
The next question is from Vikram Gandhi, Societe Generale. Your line is now open. Please go ahead.
Oh, hi. Good morning, everybody. It's Vik from Societe Generale. I've got a couple of questions. First is on the deposit account treaties contribution, which stands at about EUR 90 million for this quarter versus EUR 85 million, Q1 2020. 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? Any comments there would be very useful. 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? Thank you.
On financial solutions business.
Yeah. The financial solutions business is pretty stable, not impacted by the COVID pandemic right now. We have two countries where most of the financial solutions business is coming from. One is the U.S., the other is China. The U.S. is up to 20 years, so this is more long-term. China is significantly shorter, at least for the next two or three years, we don't expect a significant shift here. We hope that we can drive more business in the near future. This is something that we see as a stable contributor to our bottom line results.
Good. Sven, on the other question.
On the cyber portfolio, this continues to be a growing class for Hannover Re. In 2020, we wrote approximately 300 million EUR of cyber reinsurance premium. You know, we were able, at the first of July renewals onward 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. For 2021, we had a successful start to the year, where we could either increase shares on existing contracts or even write a few more. We are going to approach a premium volume near 400 million EUR for the full underwriting year 2021. While the loss experience continues to be favorable in this class, we have seen an uptick in the loss frequency, in the last 18 months.
The business we write is still well within the ultimate loss ratio peaks that we had chosen for that business at the beginning, when we were writing it. From that point of view, we see this as a good contribution to further increase the earnings capability of our P&C practice.
Okay. Thank you very much.
There are currently no further questions. As a reminder, if you would like to ask a question, please press zero and one on your telephone keypad now. The next question is from Emanuele Musio, Morgan Stanley. Your line is now open. Please go ahead. Emanuele Musio, your line is now open. Please go ahead. We can't hear you at the moment.
Hello. Hi, sorry. I was on mute. Thanks for taking the question. A quick question on the combined ratio. Can you please give us an indication of where the underlying profitability stands compared to last year? Maybe you can otherwise give me an indication of what the contribution from prior year developments was this year. Is it comparable to 2020? Just some color about that, please.
Thank you, Emanuele. Sven.
Yes. To the prior year development, as Clemens has said, that came in a little less good compared to where we were a year ago, due to some impacts on our short- tail classes. For example, the winter storm in Texas was mostly resulting from business which we wrote in underwriting year 2020. This showed some negative run-off, therefore, for our 2020 property business. The run- off results for our long- tail classes, casualty in particular, was good, was positive. No concerns on that side. As to your first question, of course, we are satisfied with the start to the year with our 96.2 combined ratio. This makes us more confident that we will achieve our target of 96 or better at the end of the year.
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. 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.
Thank you.
Once again, as a reminder, if you would like to ask a question, please press zero and one on your telephone keypad. We haven't received any further questions at this point, so I hand back to the speakers for closing remarks.
Well, thank you very much for joining this early call. 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, net corona loss estimate, which is unchanged. In life and health, of course, some uncertainties remain. We believe that with the vaccination programs, particularly in the U.S., things will improve in the coming quarters, of course, still some uncertainties. Strong capitalization, we addressed that at the beginning of the year. This is reflecting, of course, the hybrid bonds, 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.
As Sven mentioned, it's a bit early in the year to look at it in more detail. There's still some uncertainty. There's still some NatCat activity which might be coming later in the next few quarters. All in all, we're very positive about the outlook for 2021 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.