Hannover, 14 May 2024: Hannover Re increased Group net income by 15% in the first quarter to EUR 558 million and confirms its guidance for the full 2024 financial year.
We can look back on a rather benign quarter as regards large losses. We had a good start into the year, putting us on track to achieve our full-year profit target. At the same time, with the recent treaty renewals we have put in place a solid foundation for further profitable growth given the continued demand for high-quality and reliable risk protection in what is a challenging landscape.
Reinsurance revenue (gross) grew by 1.6% to EUR 6.7 billion (previous year: EUR 6.6 billion). Growth of 3.0% would have been booked at unchanged exchange rates.
The reinsurance service result, reflecting the profitability of underwriting activity less business ceded (primarily retrocessions and insurance-linked securities), increased by 27% to EUR 720 million (EUR 568 million). Adjusted for exchange rate effects, the reinsurance finance result – which includes in particular the interest accretion on technical reserves discounted in previous years – amounted to EUR -261 million (EUR -167 million).
The operating profit (EBIT) climbed by 13% to EUR 811 million (EUR 720 million). Group net income improved by 15% to EUR 558 million (EUR 484 million). Earnings per share thus came in at EUR 4.63 (EUR 4.02).
The shareholders' equity of Hannover Re amounted to EUR 10.9 billion as at 31 March 2024 (31 December 2023: EUR 10.1 billion). The annualised return on equity reached 21.3% (previous year: 20.8%). The book value per share stood at EUR 89.97 (31 December 2023: EUR 83.97).
The contractual service margin (net) rose sharply by 15% to EUR 8.9 billion (31 December 2023: EUR 7.7 billion). The increase reflects above all the business growth in the first quarter and the continued favourable earnings prospects. The risk adjustment for non-financial risk similarly increased accordingly by 4.9% to EUR 3.9 billion (31 December 2023: EUR 3.7 billion).
The capital adequacy ratio under Solvency II, which measures the risk-carrying capacity of Hannover Re, amounted to 266.8% at the end of March and was thus still clearly in excess of the long-term target of more than 200%.
Expenditures for catastrophe losses in property and casualty reinsurance came in below expectations in the first quarter and were thus comfortably within the envisaged and reserved budget. At the same time, the main renewal season in property and casualty reinsurance as at 1 January 2024 brought further improvements in risk-adjusted prices and conditions for Hannover Re.
Reinsurance revenue (gross) in property and casualty reinsurance rose by 3.1% to EUR 4.7 billion (EUR 4.6 billion). Growth of 5.0% would have been recorded at unchanged exchange rates.
In accordance with its usual practice, Hannover Re booked the entire large loss budget for the first quarter of EUR 378 million and took this as a basis for calculating the quarterly result. Losses were caused by the earthquake in Japan at the turn of the year in an amount of EUR 25 million, wildfires in Chile costing EUR 16 million and the collision between two aircraft at a Japanese airport amounting to EUR 12 million. At the time of the quarterly closing, it was not yet possible to put a number on what will probably be the largest individual loss resulting from the bridge collapse in Baltimore harbour. In total, however, the large loss expenditures incurred in the first quarter, including the Baltimore bridge collapse, will remain comfortably within the booked large loss budget.
The reinsurance service result increased by 61% to EUR 509 million (EUR 315 million). The combined ratio in property and casualty reinsurance improved to 88.0% (92.3%) and was thus within the expected level of less than 89%. The reinsurance finance result (net) excluding exchange rate effects amounted to EUR -228 million (EUR -129 million).
Investment income in property and casualty reinsurance surged by 41% to EUR 421 million (EUR 298 million).
The operating profit (EBIT) consequently increased by 35% to EUR 629 million (EUR 466 million).
In the first quarter Hannover Re generated a result in line with expectations in life and health reinsurance. This was attributable above all to sustained strong demand in financial solutions business and for solutions designed to protect against longevity risks. Traditional reinsurance of mortality and morbidity risks also saw business develop favourably.
The new business CSM (net) amounted to EUR 97 million (EUR 84 million). In addition, contract renewals and amendments in the in-force portfolio resulted in a significant increase in the contractual service margin (net) to EUR 6.1 billion. The new business LC (net) amounted to EUR 7.9 million (EUR 6.7 million).
Reinsurance revenue (gross) retreated by a modest 2.1% in the first quarter to EUR 1.9 billion (EUR 2.0 billion). A decline of 1.7% would have been booked at unchanged exchange rates.
The reinsurance service result (net) contracted as expected to EUR 211 million (EUR 253 million) and thus reached a satisfactory level for achieving the year-end target of more than EUR 850 million. Adjusted for exchange rate effects, the reinsurance finance result (net) came to EUR -33 million (EUR -38 million).
Investment income in life and health reinsurance totalled EUR 76 million (EUR 83 million).
The operating result (EBIT) in life and health reinsurance reached EUR 181 million (EUR 253 million).
"Our investments delivered a pleasing performance in the first three months, despite ongoing volatility associated with numerous geopolitical and economic headwinds," said Clemens Jungsthöfel, Chief Financial Officer of Hannover Re. "Furthermore, our continued prudent positioning positively impacted our investments."
The volume of investments again surpassed the previous year's level to reach EUR 61.4 billion at the end of March (31 December 2023: EUR 60.1 billion). The portfolio was favourably affected by a pleasingly strong operating cash flow, dividend income received from participating interests as well as by currency effects. Interest rate increases made themselves felt as an opposing factor.
Investment income was substantially higher overall than the corresponding figure for the previous year, coming in at EUR 498 million (EUR 381 million). This was driven primarily by strong earnings from the fixed-income portfolio, which clearly offset the somewhat lower income from investments recognised at fair value through profit or loss. The return on investment reached 3.3%, beating the full-year target of at least 2.8%.
Hannover Re expects reinsurance revenue in total business to grow by more than 5% in 2024 based on constant exchange rates. The currency-adjusted growth in reinsurance revenue will be disproportionately stronger in property and casualty reinsurance than in life and health reinsurance.
Group net income should reach at least EUR 2.1 billion for the full year. This assumes that there are no unforeseen distortions on capital markets and that large loss expenditure remains within the budgeted expectation of EUR 1.825 billion. Business in the Asia-Pacific region and North America as well as in some specialty lines traditionally comes up for renewal on 1 April. Hannover Re obtained slightly improved risk-adjusted prices and conditions here overall. The renewed volume grew by 7.1%. The inflation- and risk-adjusted price increase for the renewed business amounted to 1.5%.
"The 1 April renewals provided further confirmation that the market environment has stabilised on a high level after the substantial improvements in prices and conditions recorded in prior years," said Henchoz. "We are optimistic that this level can be sustained in the coming renewals as well. It remains the case that our clients value our quality as a strong partner and our focus on our core expertise, namely reinsurance."
In view of the improved market environment, Hannover Re anticipates a combined ratio under 89% for property and casualty reinsurance in 2024. Life and health reinsurance should generate a reinsurance service result of more than EUR 850 million in the current financial year.
The asset portfolios should continue to show moderate growth – assuming stable exchange rates and interest rate levels. The return on investment from assets under own management should be at least 2.8%.
The ordinary dividend is expected to increase year-on-year over the 2024-2026 strategy cycle. The ordinary dividend will be supplemented by a special dividend provided the capitalisation exceeds the capital required for future growth and the profit target is achieved.
Hannover Re is one of the world’s leading reinsurers. It transacts all lines of property & casualty and life & health reinsurance and is present worldwide with more than 3,500 staff. German business of the Hannover Re Group is written by the subsidiary E+S Rück. Established in 1966, Hannover Re is recognised as a reliable partner for innovative risk solutions, exceptional customer intimacy and financial soundness. The rating agencies most relevant to the insurance industry have awarded both Hannover Re and E+S Rück outstanding financial strength ratings: Standard & Poor's AA- "Very Strong" and A.M. Best A+ "Superior".
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