Some healthy results from Hannover Re posted recently, here’s a few highlights;
Hannover Re has generated a nine-month profit of EUR 1.4 billion and is thus confirming its Group net income target for the full year.
“We can look back on a favourable business development over the past nine months and with a more than satisfactory Group profit we are still well on track to achieve our full-year targets,” said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re. “The expenditures from large losses are within our budget after three quarters. We are, however, seeing a clear trend towards increasing frequency losses, above all from secondary risks, and a growing burden of man-made losses.”
Group net income rises by 25% to EUR 1.4 billion
With effect from 1 January 2023 Hannover Re is reporting its results on the basis of the new accounting standards IFRS 17 and IFRS 9.
The reinsurance revenue (gross) increased slightly by 1.0% to EUR 18.5 billion (previous year: EUR 18.3 billion). Growth would have reached 3.8% at constant exchange rates. The reinsurance service result, which reflects the profitability of underwriting activity less business ceded (primarily retrocessions and insurance-linked securities), increased by 47% to EUR 1.6 billion (EUR 1.1 billion). The reinsurance finance result adjusted for exchange rate effects, which includes in particular the interest accretion on technical reserves discounted in prior years, amounted to EUR -602 million (EUR -319 million).
The operating profit (EBIT) was boosted by 10.5% to EUR 1.8 billion (EUR 1.7 billion). Group net income climbed to EUR 1.4 billion (EUR 1.1 billion). Earnings per share thus amounted to EUR 11.60 (EUR 9.26).
Solvency II
The capital adequacy ratio under Solvency II, which measures Hannover Re’s risk-carrying capacity, stood at 269.9% at the end of September and thus remained comfortably above the limit of 180% and the internal threshold of 200%.
Large losses in property and casualty reinsurance within budget
Payments made to our clients for large losses totalled EUR 1,204 million (EUR 1,484 million) for the first nine months of the year and thus came in within the budgeted expectation of EUR 1,328 million for this period. The budget earmarked for the third quarter was marginally exceeded.
The largest individual losses in the first nine months included the devastating earthquake in Türkiye and Syria at the start of the year with net expenditure of EUR 273 million. Severe storms that affected northern Italy in the summer at a cost of EUR 132 million and wildfires in Hawaii amounting to EUR 87 million were further notable events. The major earthquake in Morocco resulted in additional losses of EUR 70 million. Tropical Cyclone Gabrielle in New Zealand and Hurricane Idalia in the United States took a further toll in amounts of EUR 66 million and EUR 55 million respectively. Additional costs were incurred in amounts of EUR 46 million in connection with unrest in France and EUR 38 million from May storms in Italy.
Result in life and health reinsurance as expected
The Life & Health reinsurance business group developed in line with expectations in the first nine months. Sustained demand was evident in financial solutions business. Particularly in the United States and China, Hannover Re was able to write further new business in the third quarter.
The new business CSM (net) amounted to EUR 228 million (EUR 347 million). In addition, contract renewals and amendments boosted the contractual service margin (net) by a further EUR 345 million. The new business LC (net) came to EUR 8.6 million (EUR 1.8 million).
Reinsurance revenue (gross) contracted by 2.8% to EUR 5.8 billion (EUR 5.9 billion). Modest growth of 0.3% would have been booked at constant exchange rates.
The reinsurance service result improved by 48% to EUR 677 million (EUR 458 million), thanks in particular to improved profitability in the area of mortality covers. The reinsurance finance result (net) adjusted for exchange rate effects amounted to EUR -130 million (EUR -90 million).
Net income from investments in life and health reinsurance, which had benefited from two sizeable special effects in the previous year, totalled EUR 315 million (EUR 359 million).
The operating result (EBIT) in life and health reinsurance grew by 14.7% to EUR 730 million (EUR 637 million) and is thus very well on track to achieve the full-year EBIT guidance of at least EUR 750 million for the business group.
Outlook for 2023: Still on track to deliver Group net income of at least EUR 1.7 billion
“Given what is still a challenging economic environment and increasing geopolitical uncertainties, our own superlative risk management coupled with reliable risk protection for our cedents remain indispensable,” said Henchoz. “In the course of the year we have again proven our resilience and demonstrated that we are a financially robust partner for our clients. Furthermore, we consider ourselves superbly placed to achieve our full-year profit target of at least EUR 1.7 billion.”
For the 2023 financial year it remains Hannover Re’s expectation that reinsurance revenue in total business will grow by at least 5% on the Group level assuming constant exchange rates. The currency-adjusted growth in reinsurance revenue should again be stronger in property and casualty reinsurance than in life and health reinsurance.
Hannover Re still anticipates a contribution to the operating result (EBIT) of at least EUR 1.6 billion from property and casualty reinsurance, with life and health reinsurance expected to contribute at least EUR 750 million.
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