EQS-News: Hannover Re generates Group net income of EUR 480 million in the first quarter despite considerable expenditures for California wildfires

Hannover Re generates Group net income of EUR 480 million in the first quarter despite considerable expenditures for California wildfires

• Group net income down by 13.9% year-on-year to EUR 480 million
• Return on equity reaches 16.1% and remains above strategic target
• Reinsurance revenue in property and casualty reinsurance grows by 7.2%
• Large losses of EUR 765 million in property and casualty reinsurance exceed budgeted expectation for the first quarter
• Good reinsurance service result in life and health reinsurance
• Return on investment reaches 3.5%
• Guidance for 2025 confirmed despite costly large losses

Hannover, 13 May 2025: Hannover Re reported Group net income for the first quarter that was 13.9% lower year-on-year due to considerable natural catastrophe losses. Thanks to the healthy underlying business, the company nevertheless remains well on track to achieve the targets set for the current financial year.

"The devastating wildfires in California are another example of how climate change is exacerbating the risks of extreme weather events. The expenditures for the wildfires put us significantly above the large loss budget for the first quarter. At the same time, our underlying business has continued to develop favourably, and we are therefore confident of achieving our full-year targets," said Clemens Jungsthöfel, Chief Executive Officer of Hannover Re.

Reinsurance revenue (gross) increased by altogether 4.5% to EUR 7.0 billion (previous year: EUR 6.7 billion). Growth of 2.4% would have been booked at unchanged exchange rates.

The reinsurance service result (net), reflecting the profitability of underwriting activity less business ceded (primarily retrocessions and insurance-linked securities), fell by 28.5% to EUR 515 million (EUR 720 million). This was due to expenditures caused by the wildfires in California in the first quarter. Adjusted for exchange rate effects, the reinsurance finance result (net) – which is structurally negative and reflects the interest accretion on technical reserves discounted in previous years – amounted to EUR -333 million (EUR -261 million).

The improvement in the currency result was driven primarily by the appreciation of the euro against the US dollar. Other income and expenses amounted to EUR -128 million (EUR -109 million). The operating profit (EBIT) contracted by 14.1% to EUR 696 million (EUR 811 million). Group net income was down by 13.9% to EUR 480 million (EUR 558 million). Earnings per share came in at EUR 3.98 (EUR 4.63).

Return on equity reaches 16.1% and remains above strategic target of 14%

The shareholders' equity of Hannover Re amounted to EUR 12.1 billion as at 31 March 2025 (31 December 2024: EUR 11.8 billion). The annualised return on equity came to 16.1% (previous year: 21.3%). The book value per share stood at EUR 100.19 (31 December 2024: EUR 97.80).

"Hannover Re stands for stability and resilience thanks to our excellent risk and capital management," said Christian Hermelingmeier, Chief Financial Officer of Hannover Re. "This is predominantly reflected in our consistently robust capital adequacy ratio. In addition, we further strengthened the resilience of our loss reserves from EUR 2.1 billion to EUR 2.5 billion in the 2024 financial year, as confirmed by a recent external audit. Even in particularly challenging times, we are thus able to stand shoulder to shoulder with our clients as a reliable reinsurance partner."

The contractual service margin (net) rose to EUR 8.8 billion (31 December 2024: EUR 8.2 billion). The risk adjustment for non-financial risk increased by 3.3% to EUR 4.1 billion (31 December 2024: EUR 4.0 billion).

The capital adequacy ratio under Solvency II, which measures the risk-carrying capacity of Hannover Re, amounted to 273% at the end of March. It allows for foreseeable ordinary dividend on a pro-rata basis for 2025 as well as planned growth in 2025. It thus remained clearly above the long-term target of more than 200%.

Large losses of EUR 765 million in property and casualty reinsurance significantly higher than quarterly expectation of EUR 435 million

The main renewal season in property and casualty reinsurance as at 1 January 2025 brought premium growth for Hannover Re at broadly stable conditions.

The new business CSM (net) increased by 5.8% to EUR 1.54 billion (EUR 1.45 billion). The new business LC (net) amounted to just EUR 17.8 million (EUR 22.8 million).

Reinsurance revenue (gross) in property and casualty reinsurance rose by 7.2% to EUR 5.1 billion (EUR 4.7 billion); growth of 5.1% would have been booked at unchanged exchange rates.

Expenditures for large losses totalling EUR 765 million exceeded the large loss budget of EUR 435 million for the first quarter. This resulted in a corresponding charge to the result in property and casualty reinsurance. The full-year large loss budget amounts to EUR 2.1 billion.

The largest net individual loss for Hannover Re was the California wildfires at a cost of EUR 631 million. Further large losses included the mid-air collision of a passenger plane and a helicopter above Washington, D.C., United States, in an amount of EUR 29 million, the Myanmar earthquake at a cost of EUR 25 million and a fire at a refinery in southern Germany at EUR 20 million. Additionally, Australia was impacted by Cyclone Alfred in March, with losses of EUR 17 million for Hannover Re.

The higher large loss expenditures contrasted with an underlying favourable business development and a positive currency result in the first quarter. Hannover Re also further boosted the resilience of its loss reserves.

Overall, the reinsurance service result decreased by 46.6% to EUR 272 million (EUR 509 million). The combined ratio reached 93.9% (88.0%) and was thus higher than the full-year target of less than 88%. Excluding exchange rate effects, the reinsurance finance result (net) came to EUR -283 million (EUR -228 million).

The operating profit (EBIT) in property and casualty reinsurance contracted by 29% to EUR 444 million (EUR 629 million).

Good operating result in life and health reinsurance

Hannover Re generated a good result in life and health reinsurance in the first quarter. This was attributable to the favourable development of business with longevity risk coverage. Successful renewals in the traditional reinsurance of mortality and morbidity risks delivered a major contribution to new business.

The new business CSM (net) grew to EUR 132 million (EUR 97 million), while the new business LC (net) amounted to EUR 8.3 million (EUR 7.9 million). In addition, contract renewals and amendments in the in-force portfolio came to EUR 100 million (EUR 93 million). The contractual service margin (net) fell by 1.1% to EUR 6.4 billion (31 December 2024: EUR 6.5 billion).

Reinsurance revenue (gross) retreated by a modest 2.4% to EUR 1.88 billion (EUR 1.93 billion). A decline of 4.1% would have been recorded at unchanged exchange rates.

The reinsurance service result (net) reached EUR 243 million (EUR 211 million), a good level for achieving the full-year target of more than EUR 875 million. Adjusted for exchange rate effects, the reinsurance finance result (net) came to EUR -51 million (EUR -33 million).

The operating result (EBIT) in life and health reinsurance improved substantially by 40% to EUR 253 million (EUR 181 million).

Return on investment reaches 3.5%

The portfolio of investments amounted to EUR 65.6 billion at the end of March (31 December 2024: EUR 65.9 billion).

Investment income grew by 15.8% to EUR 577 million (EUR 498 million) and was thus clearly higher than the previous year's level. The annualised return on investment reached 3.5% in the first quarter, beating the full-year target of at least 3.2%.

Guidance for 2025 confirmed despite costly large losses

Hannover Re continues to expect Group net income of around EUR 2.4 billion for the full financial year.

"The positive development of the underlying business is driven by our clear focus on the clients, our pragmatic and solution-centred approach as well as our long-term and partnership-based business model," said Clemens Jungsthöfel. "These qualities reinforce our confidence in our future growth prospects. This puts us on the right track to achieve our goals and enjoy lasting success."

Hannover Re traditionally renews business in the Asia-Pacific region and North America as well as in some specialty lines on 1 April. The negotiations here resulted in stable or slightly softer conditions at a price level that remained attractive. Volume growth of altogether 10.4% was achieved, while an inflation- and risk-adjusted price decline of 2.4% was recorded for the renewed business.

Reinsurance revenue (gross) in property and casualty reinsurance is set to grow by more than 7% at constant exchange rates, while the combined ratio is projected to come in below 88%.

Hannover Re anticipates a reinsurance service result (net) of more than EUR 875 million in the Life & Health reinsurance business group. The contractual service margin (net) is expected to grow by around 2%.

The return on investment should reach at least 3.2%.

As usual, achievement of the earnings guidance for 2025 assumes that there are no unforeseen distortions on capital markets and that large loss expenditure does not significantly exceed the expected level of EUR 2.1 billion.

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 around 3,900 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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