In reporting its first-quarter results this morning, Hannover Re’s CEO Jean-Jacques Henchoz called the successful growth and pricing achieved at reinsurance renewals so far this year, a “major cornerstone to secure Hannover Re’s long-term profitability.”
Hannover Re reported EUR 6.6bn of reinsurance revenues for the first-quarter of 2023, with group net income of EUR 484m achieved.
As a result, the company feels it has had a solid start towards its full-year targets.
“With the result for the first three months we have achieved more than a quarter of the full-year guidance of at least EUR 1.7 billion and are thus very much on course,” Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re explained. “At the same time, we have further strengthened our resilience. In the face of the current challenges we are thereby remaining a reliable partner for our clients.”
Demonstrating the profitability of the current reinsurance underwriting book, Hannover Re’s return on equity has been reported at a level well above its minimum target, at 20.8%.
New reporting comes into effect with this first-quarter, but across the business performance has been robust, particularly so in property and casualty reinsurance.
The reinsurance service result, which reflects the profitability of underwriting activity including business ceded (largely through retrocessions and the insurance-linked securities activities of Hannover Re), rose 35% to EUR 568 million (EUR 421 million).
“Initial application of the new financial reporting standards led to a number of changes in our key performance indicators that reflect our business model even better,” Chief Financial Officer Clemens Jungsthöfel commented. “Hannover Re’s successful business development and extremely robust capital strength remain unaffected.”
Large loss expenditure in P&C reinsurance, from catastrophes and other events in Q1 were relatively high at EUR 334m, but within the large loss budget of EUR 356m.
Hannover Re appears to have ceded at least some of the catastrophe and large losses to its retrocession partners in the first-quarter, judging by some of the metrics it reported.
On the losses, for the Turkey earthquakes, Hannover Re has retained a net loss of EUR 201m, while also reporting a net loss of EUR 52m for cyclone Gabrielle in New Zealand, and EUR 47m for the flooding in New Zealand.
The P&C reinsurance he combined ratio for the property and casualty reinsurance business improved to 92.3% for Q1.
In Q1 2023, Hannover Re has reported P&C reinsurance ceded of -EUR 368m, compared to a positive reinsurance result of EUR 78m in the prior year period.
Gross major losses were reported at EUR 427.1m for Q1, while the net retained was only EUR 333.9m, again suggesting some benefit from retrocession, as well as some losses shared via the ILS activity.
However, Hannover Re does now break-down the ILS share of major loss activity and this was only EUR 1m in Q1 2023, which compared to the full-year 2022 EUR 1.002bn indicates a very good start to the year for the ILS partners the reinsurer works with.
For the full-year, Hannover Re said it expects to grow its reinsurance revenue by some 5%, with P&C reinsurance growth the stronger side to its business.
At the recent April 1 reinsurance renewals, Hannover Re said that its premium volume growth reached 7.1%, while inflation- and risk-adjusted prices increased by 6.0% for the renewed business.
“In the renewal negotiations at 1 April we were able to build further on the significant improvements in prices and conditions achieved in the 1 January renewals,” Henchoz explained.
“We have thus put in place another major cornerstone to secure Hannover Re’s long-term profitability.”
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