EQS-News: Hannover Re boosts earnings and is well on track for full-year profit target

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EQS-News: Hannover Rück SE / Key word(s): 9 Month figures
Hannover Re boosts earnings and is well on track for full-year profit target

09.11.2023 / 07:30 CET/CEST
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Corporate news

Hannover Re boosts earnings and is well on track for full-year profit target

  • Group net income rises by 25% to EUR 1.4 billion
  • Reinsurance revenue reaches EUR 18.5 billion
  • Large losses in property and casualty reinsurance within budget
  • Result in life and health reinsurance as expected
  • Return on investment beats target at 3.0%
  • Return on equity comfortably ahead of minimum target at 20.0%
  • Outlook for 2023: Still on track to deliver Group net income of at least EUR 1.7 billion

Hannover, 9 November 2023: 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).

Return on equity comfortably ahead of minimum target at 20.0%

The shareholders' equity of Hannover Re as at 30 September 2023 amounted to EUR 9.6 billion (31 December 2022: EUR 9.1 billion). The annualised return on equity stood at 20.0% (previous year: 15.1%), surpassing the minimum target of 1,000 basis points above the risk-free interest rate. The book value per share amounted to EUR 79.39 (31 December 2022: EUR 75.12).

The contractual service margin (net) was boosted by 26% to EUR 8.3 billion (31 December 2022: EUR 6.6 billion). The substantial increase reflects the business growth and brighter profitability outlook, especially as a consequence of improved treaty conditions in property and casualty reinsurance. The risk adjustment (net), which represents an additional risk margin in the technical reserves, decreased slightly to EUR 3.5 billion (31 December 2022: EUR 3.7 billion).

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

The renewals in property and casualty reinsurance during the year brought improved conditions as well as inflation- and risk-adjusted price increases for Hannover Re. This was evident from the new business CSM (net), reflecting the profit expectations from the business written in the first nine months, which improved by 32% to EUR 2.2 billion (EUR 1.6 billion). The new business LC (net) decreased to EUR 39 million (EUR 273 million).

Reinsurance revenue (gross) in property and casualty reinsurance increased by 2.8% to EUR 12.7 billion (EUR 12.4 billion). Growth would have reached 5.5% at unchanged exchange rates.

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. 

The reinsurance service result improved by 46% to EUR 885 million (EUR 606 million). The result for the previous year had included provisions made for payments connected with the war in Ukraine. The combined ratio improved to 91.9% (94.6%). The reinsurance finance result (net) adjusted for exchange rate effects amounted to EUR -473 million (EUR -229 million).

Net income from investments in property and casualty reinsurance grew by 13.8% to EUR 949 million (EUR 833 million).

The operating profit (EBIT) rose by 7.9% to EUR 1,108 million (EUR 1,026 million). Hannover Re is thus on course to achieve its anticipated full-year EBIT for property and casualty reinsurance of at least EUR 1.6 billion.

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. Similar developments can be observed in the area of longevity covers, where demand remains strong around the world. Traditional reinsurance business involving mortality and morbidity risks developed favourably across a number of regions, including in Latin America and European markets such as Italy, France and Spain.

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.

Return on investment beats target at 3.0%

The portfolio of investments totalled EUR 57.6 billion as at the end of September (31 December 2022: EUR 55.3 billion).

Net income from investments climbed by 6.1% to EUR 1,266 million (EUR 1,193 million). The annualised return on investment reached 3.0% and was thus above the minimum 2.4% target set for the full financial year. While the income booked from alternative investment funds was lower than in the previous year, it still outperformed the original expectations.

"Once again, we benefited in particular from solid investment income," said Clemens Jungsthöfel, Chief Financial Officer of Hannover Re. "This gives us a tailwind for possible valuation adjustments in the areas of private equity and real estate, which we still anticipate before the end of the year."

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.

Group net income for the full year should reach at least EUR 1.7 billion. This assumes that large loss expenditure does not materially exceed the full-year budget of EUR 1.725 billion, no unforeseen distortions occur on capital markets and the Covid-19 pandemic does not have any further significant impact on the result in life and health reinsurance.

The investment portfolio should continue to show moderate growth – assuming stable exchange rates and interest rate levels. The return on investment from the asset portfolio should reach at least 2.4%.

Hannover Re's dividend policy remains unchanged. It is envisaged that the ordinary dividend will at least be on the level of the previous year. This will be supplemented by a special dividend provided the capitalisation exceeds the capital required for future growth and the profit target is achieved.

 

An overview of the terminology used in IFRS 17 accounting can be found online at www.hannover-re.com/1986186/glossary-ifrs17 

Hannover Re, with gross premium of more than EUR 33 billion, is the third-largest reinsurer in the world. It transacts all lines of property & casualty and life & health reinsurance and is present on all continents with around 3,500 staff. Established in 1966, the Hannover Re Group today has a network of more than 170 subsidiaries, branches and representative offices worldwide. The Group's German business is written by the subsidiary E+S Rück. 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".

Please note the disclaimer: www.hannover-re.com/535917

 

  2022¹ 2023  
in EUR million Q3   YTD Q3 YTD +/- previous year
Hannover Re Group            
Results            
Reinsurance revenue (gross) 6.515     18.331   6.242   18.514   +1,0 %  
Reinsurance service result (net) 370     1.064   483   1.561   +46,8 %  
Reinsurance finance result (net) ² -113     -319   -260   -602    
Net income from investments 368     1.193   415   1.266   +6,1 %  
Operating profit / loss (EBIT) 544     1.662   484   1.837   +10,5 %  
Group net income 301     1.116   439   1.399   +25,4 %  
             
Balance sheet            
Policyholders' surplus            13.683            13.721    
Equity attributable to shareholders of Hannover Rück SE              9.060              9.574    
Non-controlling interests                897                918    
Hybrid capital              3.726              3.229    
Contractual service margin              6.557              8.270    
Risk-Adjustment               3.717              3.546    
Investments            55.285            57.574    
Total assets            62.959            64.598    
             
Ratios            
Combined ratio (property and casualty reinsurance) ³ 95,0%   94,6% 92,2% 91,9%  
EBIT margin ⁴ 9,1%   9,9% 9,0% 11,4%  
Return on investment 2,7%   2,9% 2,9% 3,0%  
Return on equity 12,5%   15,1% 18,7% 20,0%  
             
Share            
Earnings per share (basic and diluted) in EUR             2,50               9,26             3,64            11,60 +25,3 %  
Book value per share in EUR            80,85              79,61            79,39            79,39 -0,3 %  
Share price at the end of the period in EUR          138,50            154,20          207,90          207,90 +34,8 %  
Market capitalisation at the end of the period          16.703            18.596          25.072          25.072 +34,8 %  
             
Property & Casualty reinsurance            
Reinsurance revenue (gross) 4.539     12.389   4.371   12.736   +2,8 %  
Reinsurance revenue (net) 4.154     11.259   3.701   10.885   -3,3 %  
Reinsurance service result (net) 209     606   287   885   +46,1 %  
Reinsurance finance result (net) ² -80     -229   -188   -473    
Net income from investments 285     833   324   949   +13,8 %  
Operating profit / loss (EBIT) 378     1.026   279   1.108   +7,9 %  
EBIT margin ⁴ 9,1%   9,1% 7,5% 10,2%  
Combined ratio ³ 95,0%   94,6% 92,2% 91,9%  
New business CSM & LC (net) 343     1.369   331   2.125   +55,2 %  
             
Life & Health reinsurance            
Reinsurance revenue (gross) 1.977     5.943   1.870   5.778   -2,8 %  
Reinsurance revenue (net) 1.836     5.533   1.690   5.233   -5,4 %  
Reinsurance service result (net) 161     458   196   677   +47,8 %  
Reinsurance finance result (net) ² -33     -90   -72   -130    
Net income from investments 83     359   91   315   -12,1 %  
Operating profit / loss (EBIT) 166     637   206   730   +14,7 %  
EBIT margin ⁴ 9,0%   11,5% 12,2% 14,0%  
New business CSM & LC (net) 117     345   72   219   -36,5 %  
             
¹ Restated pursuant to IAS 8            
² Before currency gains or losses            
³ Reinsurance service result / reinsurance revenue (net)            
⁴ EBIT / reinsurance revenue (net)            

Contact
External Communications: 
Oliver Suess
tel. +49 511 5604-1502 
oliver.suess@hannover-re.com

Jessica Locker
tel. +49 511 5604-1599
jessica.locker@hannover-re.com

Investor Relations:
Karl Steinle 
tel. +49 511 5604-1500 
karl.steinle@hannover-re.com

Axel Bock 
tel. +49 511 5604-1736 
axel.bock@hannover-re.com 

www.hannover-re.com

 



09.11.2023 CET/CEST Dissemination of a Corporate News, transmitted by EQS News - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.

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Language: English
Company: Hannover Rück SE
Karl-Wiechert-Allee 50
30625 Hannover
Germany
Phone: +49-(0)511-5604-1500
Fax: +49-(0)511-5604-1648
Internet: www.hannover-re.com
ISIN: DE0008402215
WKN: 840 221
Indices: DAX
Listed: Regulated Market in Frankfurt (Prime Standard), Hanover; Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange; Luxembourg Stock Exchange
EQS News ID: 1768711

 
End of News EQS News Service

1768711  09.11.2023 CET/CEST

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