- Growth of 6.9% with further improvements in terms and conditions in the 1 January property and casualty reinsurance renewals
- Average inflation- and risk-adjusted price increase of 2.3%
- Focus on sustained improvement of business quality
- Preliminary Group net income of EUR 1.8 billion for 2023 in line with expectations
- Guidance for 2024 confirmed: Group net income of at least EUR 2.1 billion
Hannover, 7 February 2024: Hannover Re generated an inflation- and risk-adjusted price increase on renewed business of 2.3% in the treaty renewals as at 1 January 2024 in traditional property and casualty reinsurance.
The market environment for the renewals proved to be more stable than in the previous year. At the same time, demand for reinsurance capacity, which was limited primarily to covers from existing market players, grew.
"We are satisfied with the outcome of the renewals. Against the backdrop of the loss experience in 2023, continuing high levels of inflation and geopolitical uncertainties, we were able to secure further necessary rate improvements in many lines and regions," said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re. "Building on the previous year's sustained improvement in the quality of our book of business, we are thus well placed to tackle future challenges."
Treaties with a premium volume of EUR 9,552 million were up for renewal on 1 January 2024. This corresponds to 62% of business in traditional property and casualty reinsurance (excluding facultative reinsurance, ILS business and structured reinsurance).
Hannover Re renewed a premium volume of EUR 8,671 million, while treaties worth EUR 881 million were either cancelled or renewed in modified form. Including increases of EUR 1,541 million from new treaties and from changes in prices and treaty shares, the total renewed premium volume grew in an attractive market environment by 6.9% to EUR 10,212 million.
Prices were generally stable or slightly higher. As in the previous year, Hannover Re grew its book of non-proportional reinsurance more strongly in the renewals. The premium volume here rose by 10.6% to EUR 3,178 million, with a risk-adjusted price increase of 4.4%. Proportional reinsurance grew by 5.3% to EUR 7,034 million. The price increase after risk adjustment came to 1.3%.
"Demand for our high-quality reinsurance protection was again very strong," said Sven Althoff, the member of Hannover Re's Executive Board responsible for property and casualty reinsurance. "This enabled us to generate further profitable growth in our diversified portfolio, especially on the non-proportional side. At the same time, attractive growth opportunities opened up in structured reinsurance and in the area of insurance-linked securities. All in all, we further improved the quality of our book of business."
Regional markets: High frequency of large losses
Following a year of heavy losses in the region Europe, Middle East and Africa, the focus of the renewals was on adjusting the risk profile and profitability of the portfolio. In so doing, Hannover Re retained its strong market position and enlarged the premium volume by 6.5%. Rate increases and improvements in terms and conditions were especially marked in loss-impacted natural catastrophe business.
In Germany, more reinsurance capacity was available than in the previous year. Overall, higher prices were obtained on a risk-adjusted basis. Appreciable rate increases were booked under loss-affected programmes. The sharp surge in loss expenditures in the motor line was a major topic.
In Italy, severe weather events that brought hail, heavy rain and flooding were a key driver of adjustments to prices, retentions and conditions.
The premium volume generated by Hannover Re in the renewals in the Americas region grew by 2.2%. It should, however, be noted that large parts of the business in this region are not renegotiated until the renewals on 1 June and 1 July 2024.
North America saw further rate improvements, extending also to liability business. For years now, clients in the Midwest have been faced with considerable losses from natural disasters such as severe wind events, prompting necessary adjustments in loss-making segments of the property line. Hannover Re scaled back its business with cyber covers in response to the intensely competitive state of the market.
Reinsurance capacity for catastrophe covers is still inadequate in some Latin American countries. Hannover Re acted on associated business opportunities within the scope of its risk appetite and kept up the trend towards improved rates and conditions. Rates are on a high level overall, and further upward adjustments should be possible in loss-affected business. The bulk of traditional property and casualty reinsurance is only renewed over the course of the year, however, most notably in the main renewals as at 1 July.
Broadly speaking, Asia-Pacific markets were stable. Particularly in Southeast Asia, Korea and the "Greater China" region, the main round of renewals took place on 1 January. Against a backdrop of adequate pricing with better terms and conditions due to a number of catastrophe losses in the region, Hannover Re boosted its premium volume by 10.1%.
Worldwide markets: Significantly improved terms and conditions in some lines
The premium volume in the credit, surety and political risks lines grew by 10.7% in an attractive market environment. Here, too, a shift away from proportional towards non-proportional programmes is evident, with good profitability of the underlying business.
Aviation and marine reinsurance saw premium volume grow by 11.5%. The positive trend of the previous year in the aviation sector was sustained, with price increases of more than 10% in non-proportional business, while growth on the proportional side was somewhat less vigorous.
Hannover Re maintained its robust market position in the marine sector despite the available reinsurance capacity.
Improved prices and conditions were recorded for coverage of strikes, riots and civil commotion (SRCC).
In agricultural insurance, further adjustments were particularly notable under programmes that had suffered losses. The premium volume was boosted by 16.4% in response to improved terms and conditions. Hannover Re was thus able to further grow its business in Brazil and act on market opportunities in China.
The prevailing market climate in structured reinsurance continues to present business opportunities that enabled Hannover Re to generate further profitable growth in its portfolio. A shift towards non-proportional coverage is still evident, which should lead to further improvements in prices and conditions.
The main renewal season in facultative reinsurance showed the expected stability in view of the attractive market landscape, with risk-adjusted prices remaining on a high level. Hannover Re posted moderate rate increases in catastrophe-exposed business.
The premium volume in natural catastrophe business recorded high single-digit percentage growth in the renewals as at 1 January 2024. Following the above-average rate increases in the previous year, significantly higher prices and improvements in coverage structures were again obtained in this round of renewals, especially for loss-impacted programmes.
Preliminary key figures for the full 2023 financial year
Based on preliminary, unaudited financial figures, Hannover Re reached an operating result (EBIT) of EUR 1.97 billion (EUR 1.52 billion) in the financial year 2023.
An increase in reserves in Property & Casualty reinsurance had a significant impact on EBIT, particularly in the fourth quarter, which led to a much greater increase in the confidence level of reserves than originally planned. According to initial estimates, the resiliency reserve at the end of the 2023 financial year will be significantly higher than the targeted EUR 1.7 billion (2022: EUR 1.38 billion).
Accordingly, the operating result for Property & Casualty reinsurance reached EUR 1.10 billion (EUR 0.87 billion). The underlying profitability, however, developed very favourably due to the attractive market environment and was fully in line with expectations. Life & Health reinsurance contributed EUR 0.87 billion (EUR 0.65 billion) to the operating result.
Group net income increased to EUR 1.8 billion (EUR 0.78 billion) and Hannover Re thus achieved its annual profit target of at least EUR 1.7 billion. In particular a one-off tax effect had a positive impact, reducing the Group tax rate to 1.4% in 2023 (22.7%).
Reinsurance revenue rose to EUR 24.4 billion (EUR 24.1 billion).
Guidance for 2024 confirmed
"The significantly improved profitability of our reinsurance business assures our resilience in a volatile environment," Henchoz said. "I am therefore convinced that we shall achieve our goals for the 2024 financial year."
As already announced in December, Hannover Re anticipates Group net income of at least EUR 2.1 billion for the 2024 financial year. Reinsurance revenue is expected to grow by more than 5% on the Group level, with volume growth likely to be stronger in property and casualty reinsurance than in life and health reinsurance. The return on investment should reach at least 2.8%.
Hannover Re expects a combined ratio under 89% for the Property & Casualty reinsurance business group in 2024 in view of the improved market environment.
In the Life & Health reinsurance business group, Hannover Re anticipates a reinsurance service result of more than EUR 850 million.
Achievement of the earnings guidance for 2024 is based on the premise that large loss expenditure does not significantly exceed the budgeted amount of EUR 1.825 billion (previous year: EUR 1.725 billion) and assumes that there are no unforeseen distortions on capital markets.
Hannover Re will publish its audited annual financial statement on 18 March 2024.