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Hannover Re’s H1 reinsurance revenue climbs 3.9% to €12.3bn

9th August 2023 - Author: Kane Wells

Global reinsurer Hannover Re has reported that H1 reinsurance revenue increased by 3.9% to €12.3 billion, as large losses within the P&C reinsurance segment fell within the budgeted expectations.

Hannover Re’s H1 2023 reinsurance service result, which reflects the profitability of underwriting activity less business ceded, surged by 56% to €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 €-342 million, compared to €-205 million in H1 last year.

Meanwhile, the global reinsurer’s operating result increased by 21% to €1.4 billion, while group net income also rose to €960 million, up from €815 million in H1 2022.

The annualised return on equity in H1 reached 21.0% up from 16.4% last year, exceeding the minimum target of 1,000 basis points above the risk-free interest rate.

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Hannover Re’s capital adequacy ratio under Solvency II, which measures the firm’s risk-carrying capacity, amounted to 269.8% at the end of June and thus “remained comfortably above the limit of 180% and the internal threshold of 200%.”

The firm’s portfolio of investments totalled €56.5 billion as at the end of June, and net income from investments surpassed the level of the previous year’s period at €851 million.

Within property and casualty (P&C) reinsurance, the firm reported that reinsurance revenue (gross) in H1 2023 increased by 6.6% compared to the same period last year, reaching €8.4 billion.

Hannover Re added that growth would have reached 7.8% at unchanged exchange rates.

Expenditures from large losses in H1 totalled €607 million, down compared to H1 2022’s €850 million, and thus came in within the budgeted expectations of €751 million for the period.

According to Hannover Re, the largest individual losses in H1 2023 included the earthquake in Türkiye and Syria at the beginning of the year with expenditure of €257 million, as well as extensive flooding in January and Tropical Cyclone Gabrielle in February that impacted New Zealand at a cost of €45 million and €65 million respectively.

The P&C reinsurance service result in H1 2023 improved substantially by 51% to €598 million, as the previous year’s figure was hampered by provisions for losses from the Ukraine war and additional reserves established for prior-year losses.

The combined ratio in P&C reinsurance in H1 also improved to 91.7% from 94.4% the previous year, while net income from investments in the segment grew by 14% to €625 million.

Elsewhere, Hannover Re said that the result in life and health (L&H) reinsurance delivered a “pleasing performance” in the first half of the year.

The firm added that sustained strong demand, especially in the areas of financial solutions, longevity covers and in traditional business, had a favourable effect on the business development.

L&H Reinsurance revenue (gross) in H1 was down slightly at €3.9 billion, though growth of 0.8% would have been booked at unchanged exchange rates.

The L&H reinsurance service result in H1 improved considerably by 62% to reach €481 million, which the firm attributed to a better result in business with mortality covers.

H1 net income from investments in L&H reinsurance, which had benefited from two sizeable special effects in the previous year, normalised accordingly and fell by 19% to €225 million.

Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, commented, “We closed the first half with a good result and are thus still on track to achieve our year-end targets.

“In the recent renewals, we were also able to secure further – sometimes appreciable – improvements in prices and conditions, as reflected in another increase in the new business value.

“A selective underwriting approach remains the order of the day for us, in part because experience shows that the more eventful months of the year are still ahead of us. This prudence is exactly what sets us apart as a financially strong and reliable reinsurance partner.”

For the full 2023 financial year, Hannover Re expects to grow the reinsurance revenue in total business by at least 5%, assuming constant exchange rates.

The firm notes that currency-adjusted growth in reinsurance revenue should again be stronger in P&C reinsurance than in L&H reinsurance.

Henchoz added, “The increasing losses from natural disasters and other severe events as well as persistently high inflation in some regions are driving stronger demand for reinsurance protection.

“With our focus on the long-term profitability of our portfolio, I remain optimistic – despite all the challenges – that we can sustain the positive development of Hannover Re’s business in the second half of the year and achieve the goals we have set.”

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