Hannover Re P&C Re operating profit +20.2% despite pricing. EUR 29m losses shared with ILS

Hannover Re reported this morning that its property and casualty reinsurance operating profit (EBIT) increased 20.2% to EUR 2.2 billion, from EUR 1.9 billion in the prior year, as it manages the softening cycle. While natural catastrophe losses are still running below budget, meaning only EUR 29 million was shared with insurance-linked securities (ILS).

While overall volumes have risen through the first nine months of 2026 for the reinsurer, the contract service margin on new business has declined as price and volume effects of the softening market take hold, it seems.

For the year to September 30th, Hannover Re has reported a 6.9% increase in group net income to EUR 2.1 billion, while its return on equity reached 21.1% and its overall operating profit (EBIT) rose 16.5% to EUR 2.9 billion (compared to EUR 2.5 billion last year).

Thanks to large losses coming in below budget, the P&C reinsurance combined ratio was improved at 83.7%.

The reinsurer has confirmed its full-year 2026 net income guidance of EUR 2.7 billion, seeing the target result as achievable despite evolving market conditions.

Clemens Jungsthöfel, Chief Executive Officer, commented, “We are thoroughly satisfied with the development of business in the first nine months. Our consistent focus on disciplined underwriting and our lean operating model enable us to grow profitably across all market phases, particularly in property and casualty reinsurance. Therefore, we are very confident of achieving our full-year guidance.”

Gross reinsurance revenue of EUR 19.5 billion for the nine months is down on the prior year from EUR 19.7 billion, but the net reinsurance service result rose to EUR 2.6 billion from EUR 2.4 billion.

While Hannover Re noted that it has “succeeded in writing an increased profitable volume in the various rounds of treaty renewals held during the year, thereby partially offsetting price declines and exchange rate effects,” the reinsurer’s net new business contract service margin on P&C business fell 11.9% to EUR 2.3 billion, from EUR 2.6 billion last year.

Hannover Re said that the decline reflects “change in price and volume in renewals (~175 m.) and negative impact from discounting and currency effects,” showing that the softened pricing environment is reducing the profit potential of new business underwritten.

As a result, property and casualty reinsurance gross revenues fell 4.9% to EUR 13.2 billion (from EUR 13.9 billion), which would have been 2.4% at unchanged exchange rates.

Large losses came out slightly higher than last year at EUR 1.316 billion for the first nine months of 2026, which is well below the budgeted EUR 1.7865 billion and as usual Hannover Re has booked the full budgeted amount to build reserve resilience.

The largest catastrophe losses of the nine months of 2026 were the August earthquake in Colombia at EUR 215.7 million, the severe Atlantic windstorms that impacted the Iberian Peninsula and Morocco at EUR 135.5 million and Winter Storm Fern in the United States and Canada at EUR 107.6 million.

Total nat cat losses were EUR 991.5 million gross, or EUR 892 million net, suggesting only minor use of retrocession across the year, with the largest gross to net differences evident in the three loss events named above and some severe storms in the US in April and June.

Man made losses were EUR 457 million gross and EUR 424.2 million net, again implying only minimal use of retrocessional protection, if any.

Due to the continued low level of major losses, Hannover Re disclosed that for the first nine months of 2026 now only EUR 29 million of these losses have been shared with its insurance-linked securities capital partners.

That figure after the first-half was EUR 18 million, suggesting only EUR 11 million of Q3 losses and any creep on first-half losses was shared with these ILS capital partners.

The continued low run-rate implies strong results for ILS arrangements. In 2025, Hannover Re shared EUR 524 million of losses with ILS capital partners, so the figure is running significantly lower in 2026.

“In the first nine months of this year we have once again demonstrated our earning power,” commented Christian Hermelingmeier, Chief Financial Officer of Hannover Re. “The profitable growth in our reinsurance portfolio continuously increases our investment volume, while we also benefit from the higher interest rate environment in our reinvesting activities. Both factors reinforce our current investment income and the reliable contribution made by our investments to the Group profit.”

Looking ahead, Hannover Re still expects to achieve its full-year 2026 net income target, as we said. While gross P&C reinsurance revenues are expected to grow in the mid-single-digit percentage range and it forecasts a combined ratio of less than 87%.