Global reinsurer Hannover Re has reported a 25% lift in net income to €1.4 billion for the first nine months of the year, as the reinsurance service result improved 47% to €1.6 billion and the combined ratio strengthened year-on-year.
Across the Group, reinsurance revenue rose 1% to €18.5 billion in 9M 2023, and would have grown 3.8% at constant exchange rates.
The reinsurance service result, which reflects the profitability of underwriting activity less business ceded, rose by €500 million year-on-year, while the reinsurance finance result adjusted for exchange rate effects, which includes in particular the interest accretion on technical reserves discounted in prior years, totalled -€602 million.
Alongside the rise in net income, Group operating profit rose more than 10% to €1.8 billion in 9M 2023, and the annual return on equity increased to 20% from 15.1% a year earlier.
Additionally, the contractual service margin (net) was boosted by 26% to €8.3 billion compared with €6.6 billion at the end of December 2022. Hannover Re attributes this to “business growth and brighter profitability outlook, especially as a consequence of improved treaty conditions in property and casualty reinsurance.”
Within its property and casualty (P&C) reinsurance business, Hannover Re notes improved conditions as well as inflation and risk-adjusted price increases. Business written in 9M 2023 increased 32% to €2.2 billion, while the new business LC (net) fell to €39 million from €273 million in 9M 2022.
Gross P&C reinsurance revenue rose almost 3% to €12.7 billion, and would have reached 5.5% at unchanged exchange rates.
In terms of large losses, Hannover Re paid out a total of €1.2 billion in the first nine months of 2023, down from €1.5 billion a year earlier, and importantly within the budgeted expectation of €1.328 billion for this period. Although, the budget the reinsurer had earmarked for the third quarter of 2023 was marginally exceeded.
At a net cost of €273 million, the earthquake in Turkey and Syria was the largest individual loss for Hannover Re in the first nine months of the year.
Elsewhere, severe storms that affected northern Italy in the summer cost the firm €132 million, and wildfires in Hawaii a further €87 million. The major earthquake in Morocco resulted in additional losses of €70 million for the firm.
Additionally, tropical cyclone Gabrielle in New Zealand and Hurricane Idalia in the US took a further toll in amounts of €66 million and €55 million, respectively. Hannover Re also booked losses of €46 million in connection with unrest in France, and €38 million from May storms in Italy.
The P&C reinsurance service result rose 46% year-on-year to €885 million, as the combined ratio strengthened by 2.7 percentage points to 91.9%.
Net income from investments in P&C reinsurance grew almost 14% to €949 million, while the operating profit rose by 7.9% to €1.1 billion.
Turning to its Life and Health (L&H) reinsurance unit, and the firm says that it developed in line with expectations in 9M 2023. The new business CSM (net) amounted to €228 million compared with €347 million a year earlier, and contract renewals and amendments boosted the contractual service margin (net) by a further €345 million.
L&H reinsurance revenue fell 2.8% year-on-year to €5.8 billion, although modest growth of 0.3% would have occurred at constant exchange rates.
The L&H reinsurance service result improved by 48% to €677 million, while net income from investments in the segment, which had benefited from two sizeable special effects in the previous year, totalled €315 million, down from €359 million a year earlier. The operating result increased by almost 15% to €730 million.
Year-on-year, net income from investments improved more than 6% to €1.3 billion, as the annualised return on investment reached 3%, so above the minimum 2.4% target set for the full financial year.
Looking to the full-year, and Hannover Re still expects reinsurance revenue in total business to grow by at least 5% on the Group level. The reinsurer expects a contribution to the operating result of at least €1.6 billion from P&C, and L&H is expected to contribute at least €750 million.
All in all, Hannover Re expects Group net income to reach at least €1.7 billion for full-year 2023, assuming that large loss expenditure does not materially exceed the full-year budget of €1.725 billion, there’s no unforeseen distortions on capital markets, and the pandemic does not have any further significant impact on the result in L&H.
Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re, commented: “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.
“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.”
“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. 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,” he added.
