Some key points from the Hannover Re results published earlier today;
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.
Group net income up by 15% to EUR 558 million
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).
Return on equity reaches 21.3%; capital adequacy ratio under Solvency II remains robust
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 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%.
Large losses in property and casualty reinsurance within the budgeted expectation
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.
BALTIMORE
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).
Result in life and health reinsurance in line with expectations
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.
Investment income: Return on investment of 3.3% generated
“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.
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