Hannover Re reports higher revenue and earnings

Hannover Re reports higher revenue and earnings

• Group net income increases by 21% to EUR 1.2 billion
• Reinsurance revenue grows by 5.2% to EUR 12.9 billion
• Large losses in property and casualty reinsurance within budget
• Result for life and health reinsurance in line with expectations
• Return on investment of 3.3% generated
• Return on equity reaches 22.3%
• Full-year guidance for 2024 confirmed

Hannover, 12 August 2024: Hannover Re increased its Group net income by 21% to EUR 1.2 billion in the first half-year and confirms its full-year guidance for 2024.

"We have a successful first six months behind us, with significant growth in property and casualty reinsurance and satisfactory Group net income. At the same time, we saw a continued trend towards increasing frequency losses and losses from secondary perils such as flooding," said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re. "Thanks to our selective underwriting approach and our retrocession strategy, we feel well prepared for the upcoming second half of the year – which tends to be more loss-intensive."

Group net income increases by 21% to EUR 1.2 billion

Reinsurance revenue (gross) was up by 5.2% to EUR 12.9 billion (previous year: EUR 12.3 billion). Growth would have reached 6.1% at unchanged exchange rates.

The reinsurance service result, reflecting the profitability of underwriting activity less business ceded (primarily retrocessions and insurance-linked securities), rose by 31% to EUR 1.4 billion (EUR 1.1 billion). The reinsurance finance result adjusted for exchange rate effects, which is structurally negative, amounted to EUR -500 million (EUR -342 million).

The operating profit (EBIT) increased by 23% to EUR 1.7 billion (EUR 1.4 billion). Group net income improved by 21% to EUR 1.2 billion (EUR 960 million). Earnings per share thus came in at EUR 9.63 (EUR 7.96).

Return on equity reaches 22.3%; capital adequacy ratio of 275.8%

The shareholders' equity of Hannover Re amounted to EUR 10.7 billion as at 30 June 2024 (31 December 2023: EUR 10.1 billion). The annualised return on equity reached 22.3% (previous year: 21.0%). The book value per share came to EUR 88.45 (31 December 2023: EUR 83.97).

The contractual service margin (net) grew by 20% to EUR 9.3 billion (31 December 2023: EUR 7.7 billion) and reflects the sustained growth as well as the profitability of the business written in the past six months. The risk adjustment for non-financial risk similarly increased accordingly by 6.4% to EUR 4.0 billion (31 December 2023: EUR 3.7 billion).

The capital adequacy ratio under Solvency II, which measures Hannover Re's risk-carrying capacity, stood at 275.8% at the end of June and thus remained significantly above the long-term target of more than 200%.

Large losses in property and casualty reinsurance within budget

The renewals in property and casualty reinsurance as at 1 April 2024 brought further modest improvements in risk-adjusted prices and conditions for Hannover Re. The new business CSM (net) increased by 1.9% to EUR 1.9 billion (EUR 1.8 billion). The new business LC (net) decreased to EUR 16 million (EUR 35 million).

Reinsurance revenue (gross) in property and casualty reinsurance increased significantly by 8.8% to EUR 9.1 billion (EUR 8.4 billion). Growth of 10.1% would have been recorded at unchanged exchange rates.

Expenditures for large losses amounted to around EUR 566 million in the first half-year, a figure within the allocated and booked budget of EUR 801 million. The largest net individual losses in the first six months were the flooding caused by heavy rainfall in southern Germany at a cost of EUR 120 million, civil unrest in the French overseas territory of New Caledonia amounting to EUR 82 million, flooding following intense downpours in Dubai and other parts of the United Arab Emirates in the order of EUR 82 million as well as floods after heavy rainfall in Brazil with expenditures of EUR 47 million. In addition, losses anticipated in connection with the bridge collapse in Baltimore are still comfortably covered by the remaining large loss budget, even though it is still not possible to put a concrete number on them.

The reinsurance service result increased by 61% to EUR 963 million (EUR 598 million), reflecting the healthy profitability of underwriting activity. The combined ratio in property and casualty reinsurance improved to 87.8% (91.7%) and thus came in within the target range of less than 89%. The reinsurance finance result (net) excluding exchange rate effects amounted to EUR -420 million (EUR -285 million).

The investment result in property and casualty reinsurance rose by 28% to EUR 797 million (EUR 625 million).

The operating profit (EBIT) was thus boosted by 40% to EUR 1.2 billion (EUR 829 million).

Result for life and health reinsurance in line with expectations

In the first half of the year Hannover Re generated a result in line with expectations in life and health reinsurance. The main driver here was sustained demand for financial solutions. Growth in business with longevity covers proved to be moderate as anticipated, with increasing interest observed in markets outside the United Kingdom such as the United States, Australia, Europe and Asia. Developments in traditional reinsurance involving mortality and morbidity risks were in line with expectations, with health insurance business in Latin America and low-volume new business in Europe and the Middle East delivering good contributions.

The new business CSM (net) amounted to EUR 185 million (EUR 152 million). In addition, contract renewals and amendments in the in-force portfolio resulted in a sharp increase in the contractual service margin (net) to EUR 6.4 billion. The new business LC (net) stood at EUR 10 million.

Reinsurance revenue (gross) contracted by 2.3% in the first six months to EUR 3.8 billion (EUR 3.9 billion). A decline of 2.5% would have been reported at unchanged exchange rates.

The reinsurance service result (net) totalled EUR 448 million (EUR 481 million) and came in ahead of the pro-rata level for the full-year target of more than EUR 850 million. The reinsurance finance result (net) adjusted for exchange rate effects amounted to EUR -80 million (EUR -58 million).

The investment result in life and health reinsurance totalled EUR 211 million (EUR 225 million).

The operating result (EBIT) in life and health reinsurance declined by 4.4% to EUR 501 million (EUR 525 million).

Investment result: 3.3% return on investment generated

"The performance of our investments was highly satisfactory in the first half of the year, with particularly strong earnings booked from our fixed-income portfolio," said Clemens Jungsthöfel, Chief Financial Officer of Hannover Re. "The returns are even more pleasing as they have proven to be resilient to market volatility thanks to our cautious positioning."

The investment portfolio amounted to EUR 62 billion at the end of June (31 December 2023: EUR 60 billion). Growth was driven primarily by the strong operating cash flow and dividend income from participating interests as well as currency effects. Interest rate increases also made themselves felt as an opposing factor.

The investment result climbed to EUR 1.0 billion (EUR 851 million) and was thus significantly higher overall than the previous year's level. This can be attributed principally to increased earnings from the fixed-income portfolio, which more than made up for the 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%.

Full-year guidance for 2024 confirmed

"The challenges that lie ahead for the reinsurance industry are many and varied. We shall overcome them in the future, as we have in the past, by relying on our proven strengths: our partnership-based approach, our business model geared to efficiency and our dedicated employees," said Henchoz. "This focus puts us in an optimistic mood for 2024 and also safeguards Hannover Re's success over the long term."

For 2024, Hannover Re expects to grow the reinsurance revenue in total business by more than 5% 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 for the full year should reach at least EUR 2.1 billion. This assumes that there are no unforeseen distortions on capital markets and that large loss expenditure remains within the expectation of EUR 1.825 billion.

Business in the Asia-Pacific region and North America as well as in some speciality lines is traditionally renewed in property and casualty reinsurance as at 1 June and 1 July. Overall, Hannover Re achieved modest improvements here in risk-adjusted prices and conditions. The renewed volume grew by 11.5%.  The inflation- and risk-adjusted price increase for the renewed business amounted to 1.3%.

Hannover Re expects a combined ratio of less than 89% in property and casualty reinsurance for 2024 in view of the improved market climate. The reinsurance service result generated in life and health reinsurance should reach more than EUR 850 million in the current financial year.

Assuming stable exchange rates and interest rate levels, the investment portfolio should continue to show moderate growth. The return on investments under own management should reach 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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