Hannover Re, one of the world's biggest reinsurers, increased its Group net income by 21% to EUR1.2bn ($1.3bn) in the first half-year and confirmed its full-year guidance for 2024.
"We have a successful first six months behind us, with significant growth in property and casualty (P&C) 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 Hannover Re CEO Jean-Jacques Henchoz. "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."
Highlights of Hannover Re’s 1H2024 financial performance are:
Reinsurance revenue (gross) was up by 5.2% to EUR12.9bn (previous year: EUR12.3bn). 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 EUR1.4bn (EUR1.1bn). The reinsurance finance result adjusted for exchange rate effects, which is structurally negative, amounted to EUR-500m (EUR-342m).
The operating profit (EBIT) increased by 23% to EUR1.7bn (EUR1.4bn). Group net income improved by 21% to EUR1.2bn (EUR960m).
Return on equity reaches 22.3%; capital adequacy ratio of 275.8%
The shareholders' equity of Hannover Re amounted to EUR10.7bn as at 30 June 2024 (31 December 2023: EUR10.1bn). The annualised return on equity reached 22.3% (previous year: 21.0%).
The contractual service margin (net) grew by 20% to EUR9.3bn (31 December 2023: EUR7.7bn) 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 EUR4.0bn (31 December 2023: EUR3.7bn).
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%.
P&C reinsurance
The new business CSM (net) increased by 1.9% to EUR1.9bn (EUR1. bn). The new business LC (net) decreased to EUR16m (EUR35m).
Reinsurance revenue (gross) in P&C reinsurance increased significantly by 8.8% to EUR9.1bn (EUR8.4bn). Growth of 10.1% would have been recorded at unchanged exchange rates.
Expenditures for large losses amounted to around EUR566m in the first half-year, a figure within the allocated and booked budget of EUR801m.
The reinsurance service result increased by 61% to EUR963m (EUR598m), reflecting the healthy profitability of underwriting activity. The combined ratio in P&C reinsurance improved to 87.8% (91.7%) and thus fell within the target range of less than 89%. The reinsurance finance result (net) excluding exchange rate effects amounted to EUR-420m (EUR-285m).
The investment result in P&C reinsurance rose by 28% to EUR797m (EUR625m).
EBIT was thus boosted by 40% to EUR1.2bn (EUR829m).
Life and health reinsurance
The new business CSM (net) amounted to EUR185m (EUR152m). In addition, contract renewals and amendments in the in-force portfolio resulted in a sharp increase in the contractual service margin (net) to EUR6.4bn. The new business LC (net) stood at EUR10m.
Reinsurance revenue (gross) contracted by 2.3% in the first six months to EUR3.8bn (EUR3.9bn). A decline of 2.5% would have been reported at unchanged exchange rates.
The reinsurance service result (net) totalled EUR448m (EUR481m) and came in ahead of the pro-rata level for the full-year target of more than EUR850m. The reinsurance finance result (net) adjusted for exchange rate effects amounted to EUR-80m (EUR-58m).
The investment result in life and health (L&H) reinsurance totalled EUR211m (EUR225m).
EBIT in L&H reinsurance declined by 4.4% to EUR501m (EUR525m).
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 Hannover Re CFO Clemens Jungsthöfel. "The returns are even more pleasing as they have proven to be resilient to market volatility thanks to our cautious positioning."
The investment result climbed to EUR1.0bn (EUR851m) 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 Mr 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 P&C reinsurance than in L&H.
Group net income for the full year should reach at least EUR2.1bn. This assumes that there are no unforeseen distortions on capital markets and that large loss expenditure remains within the expectation of EUR1.825bn.
Hannover Re expects a combined ratio of less than 89% in P&C reinsurance for 2024 in view of the improved market climate. The reinsurance service result generated in L&H should reach more than EUR850m in the current financial year.
The return on investments under own management should reach at least 2.8%.