Large European reinsurer Hannover Re has raised its profit target for 2024 on the back of a 30.4% rise in net income to €1.8 billion for the first nine months of the year, as the reinsurance service result increased by more than 36% to €2.1 billion.
Across the group, gross reinsurance revenue rose 6.4% to €19.7 billion in 9M 2024 compared with €18.5 billion a year earlier, and at unchanged exchange rates, growth would have been 7%.
Alongside the rise in the net reinsurance service result (a reflection of the profitability of underwriting activity less business ceded primarily retrocessions and insurance-linked securities) from €1.6 billion, the reinsurance finance result adjusted for exchange rate effects, which is structurally negative, amounted to -€784 million, up from 9M 2023’s -€602 million.
Overall, operating profit increased 33.3% to €2.4 billion from €1.8 billion, and net income rose to the aforementioned €1.8 billion, which also reflects the impact of a positive one-off tax effect of €120 million in the period.
In the company’s property and casualty (P&C) reinsurance division, both prices and conditions continued to improve in some segments of the market throughout the 2024 renewals, but did stabilise in other areas when compared with the prior year. Hannover Re notes that it capitalised on growth opportunities to expand its portfolio and write new business, with the net new business CSM up by 14.1% to €2.5 billion, compared with last year’s €2.2 billion.
Within P&C reinsurance, revenue jumped 9.4% year-on-year to €13.9 billion, and at unchanged exchange rates would have increased by 10.4%.
The segment’s service result rose by a significant 65.2% to €1.46 billion from €885 million, as the combined ratio, despite the impacts of natural disasters in the period, strengthened to 87.9% from 91.9%.
Expenditure for large losses totalled €1.3 billion in 9M 2024, so within the booked budget of €1.4 billion. Hannover Re has confirmed that the largest net individual losses in 9M 2024 included the flooding in parts of Central and Eastern Europe at a cost of €225 million, followed by hurricane Helene at a cost of €130 million, and flooding after intense rainfall in Dubai and other parts of the United Arab Emirates totalling €121 million. The reinsurer also revealed that an allowance of €100 million has been made for potential payments for losses associated with the Baltimore bridge collapse in the opening quarter of the year.
The net P&C reinsurance finance result, before currency effects, amounted to -€666 million, compared with €473 million last year, while the investment result in P&C reinsurance increased by 20.8% to €1.146 billion from €949 million. P&C reinsurance operating profit rose 56.8% to €1.737 billion.
Turning to the life and health (L&H) reinsurance arm, and the new business CSM came down very slightly to €223 million from €228 million, while contract renewals and amendments in the in-force portfolio increased the contractual service margin by €293 million. The segment’s revenue was flat at €5.8 billion, as the reinsurance service result came down from €677 million in 90M 2023 to €668 million in 9M 2024.
The investment result in L&H reinsurance contracted to €298 million from €315 million, as the operating result (EBIT) fell by 1.9% to €716 million.
“In the first nine months of the year Hannover Re continued to chart its successful course. Thanks to the adequate pricing level in property and casualty reinsurance, we are able to achieve a satisfactory level of earnings that puts us in a position to offer reliable reinsurance protection going forward, as we have in the past. The destruction left behind by Hurricanes Helene and Milton serves as a reminder that hurricane season is not yet over. Nevertheless, we are still very much on the right track and feel optimally positioned for the remaining months, and we are therefore raising our full-year profit target,” said Jean-Jacques Henchoz, Chief Executive Officer.
On the asset side of the balance sheet, the investment portfolio amounted to €63 billion at the end of September, up from €60.1 billion at the end of 2023, while the return on investment reached 3.1%, and the investment result increased to €1.445 billion from €1.266 billion.
Clemens Jungsthöfel, Chief Financial Officer, said: “With our prudent investment strategy, we were able to generate a strong investment result despite volatile interest rate markets and macroeconomic uncertainties. Particularly significant factors here were our fixed-income bonds and our highly resilient alternative investments, like private equity, real estate and infrastructure investments.”
On the back of the strong performance during the first nine months of the year, Hannover Re has increased its full-year profit target to around €2.3 billion from the original guidance level of at least €2.1 billion. This is based on no unforeseen distortions on capital markets and that large loss expenditure remains within the expectation of €1.825 billion.
For the year, the reinsurer expects to grow the reinsurance revenue in total business by more than 5% based on constant exchange rates, and anticipates a combined ratio of less than 89% in property and casualty reinsurance, and a service result of more than €850 million in L&H reinsurance.
Looking ahead to next year, Hannover Re says that it expects group net income of around €2.4 billion, with gross reinsurance revenue in P&C reinsurance projected to grow by more than 7% in 2025, with a combined ratio of less than 88%. In L&H reinsurance in 2025, the net CSM is projected to grow by around 2% and the reinsurer expects a reinsurance service result of more than €875 million.
The firm notes that the achievement of the profit target for 2025 is based on the assumption that large loss expenditure does not significantly exceed the budgeted level of €2.1 billion, and there are no unforeseen distortions on capital markets.
“Demand for the kind of high-quality reinsurance protection offered by Hannover Re will be sustained. In this attractive market environment, we see profitable growth opportunities in both business groups. For the 2025 financial year we are looking to increase earnings and revenue. Hannover Re’s long-term earnings stability and resilience remain our focus,” said Henchoz.
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