Hannover Re, one of the world’s largest reinsurers, is anticipating net income of at least €2.1 billion for 2024 and a combined ratio of below 89% in its property and casualty (P&C) reinsurance business in the period, as the firm unveils its programme for the strategy cycle through 2026.
Group net income of at least €2.1 billion in 2024 would represent growth of 24% compared to the earnings guidance for 2023.
Group-wide, the firm expects reinsurance revenue to increase by more than 5% next year, with growth in P&C expected to be stronger than in life and health (L&H).
Within P&C, the reinsurer expects a combined ratio of less than 89% in 2024 as a result of the improved market environment. In its L&H business, Hannover Re expects a reinsurance service result of more than €850 million.
The company notes that its profit guidance for next year is conditional on large loss expenditure not significantly exceeding the higher budget of €1.825 billion for the year (€1.725bn in 2023), and assumes that there are no unforeseen distortions on capital markets.
Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, commented: “Our strong position in the reinsurance market combined with successful cycle management will result in material earnings growth in 2024.
“Thanks to the improved underlying profitability of our reinsurance business, Hannover Re is superbly placed to continue on its successful course and generate further strong results in the coming financial year.”
The reinsurer’s ongoing three-year strategy cycle will come to a successful close at the end of 2023, and despite a challenging economic and geopolitical landscape, the firm says that it has delivered strong results over this period.
During this cycle, Hannover Re again generated returns on equity that outperformed the minimum target of 9.7%, reporting a 15% annualised average from 2021 to 30th September, 2023. Further, the increase in the operating result (EBIT) will likely exceed the targeted average growth rate of at least 5% per year by the end of 2023, with growth of 6% per year in P&C reinsurance and growth of 16% per year in L&H reinsurance.
“The new strategy cycle puts the focus squarely on what Hannover Re stands for: we are pragmatic, client-centric and have a business model geared to the utmost efficiency. Our financial ambition thus builds on our robust foundation to ensure Hannover Re’s lasting stability and resilience,” said Henchoz.
“We shall actively engage with the major trends affecting our business, the increasing global competition for talent, digitalisation and not least climate change, and develop tangible solutions to tackle our clients’ current and future challenges,” he added.
The new strategy is guided by the three beacons: focus, grow and accelerate. Hannover Re says that it will ensure profitable growth going forward, which will be supported by further strengthening of its cycle management and portfolio steering.
The reinsurer wants to achieve a return on equity of more than 14% annually on average over the upcoming strategy cycle, and growth of more than 5% in the operating result (EBIT). At the same time, the contractual service margin is planned to grow by more than 2% on average per year over the cycle, and a capital adequacy ratio under Solvency II of more than 200% is targeted.
