Hannover Re looking ahead with confidence after successful 2023

Global reinsurance company Hannover Re has reported that large losses fell within budget at EUR 1.6 billion for 2023, as the firm’s property and casualty (P&C) reinsurance combined ratio strengthened to 94% in the period.

Large loss expenditure for the year came in EUR 125 million under budget and down on last year’s EUR 1.7 billion. For Hannover Re, the largest individual losses incurred included the severe July storms in Italy with a cost of EUR 313 million, the Türkiye and Syria earthquake at a cost of EUR 270 million, and Hurricane Otis in Mexico at a cost of EUR 142 million.

But despite 2023 being notable for a high frequency of mid-sized catastrophe losses, Hannover Re’s P&C reinsurance business performed well in the year, with gross revenue of EUR 16.8 billion, up 3.4% year-on-year.

The reinsurer notes substantial improvements in risk-adjusted prices and conditions throughout the 2023 renewals in property and casualty reinsurance. In fact, the new business CSM, which reflects the earnings expectations from the business written in the year, increased 30% to EUR 2.4 billion.

All in all, the reinsurance service result improved by 5.9% to EUR 849 million in 2023. And, despite the significantly strengthened confidence level of the loss reserves in 2023, Hannover Re has generated a P&C reinsurance combined ratio of 94% compared with 94.5% in 2022.

Net income from investments in P&C reinsurance reached EUR 1.2 billion in 2023, up considerably on the EUR 608 million reported in 2022.

The operating profit increased by 27% to EUR 1.1 billion, and therefore was below the targeted EBIT for P&C reinsurance of EUR 1.6 billion. Hannover Re explains that a major factor influencing the EBIT was the increase in the loss reserves, “which caused the confidence level of the reserves to rise considerably more strongly than originally planned.”

Supporting the strong P&C result, Hannover Re’s Life and Health (L&H) reinsurance arm witnessed sustained demand across all segments, with the firm writing significant new business in the area of financial solutions, while longevity covers continued to be in demand.

Within L&H reinsurance, the new business CSM decreased to EUR 359 million as the contractual service margin rose to EUR 6 billion from EUR 5.5 billion in 2022, and revenue contracted slightly to EUR 7.6 billion. The L&H reinsurance service result improved to EUR 810 million in 2023 form EUR 535 million in 2022, while the net investment result for the L&H reinsurance business climbed by 16.2% to EUR 415 million, which includes EUR 13.5 million from Hannover Re’s extreme mortality cover.

“We achieved a great deal in 2023: Our two business groups and our investments performed very well. We were able to beat our earnings target and significantly increase the dividend. At the same time, we further strengthened Hannover Re’s resilience,” said Jean-Jacques Henchoz, Chief Executive Officer.

“Despite the continued challenging environment, we have further improved the profitability of our business and cemented our role as a reliable partner and robustly capitalised reinsurer,” he added.

Group-wide, Hannover Re has reported that revenue increased slightly by 1.8% to EUR 24.5 billion in 2023, as the reinsurance service result rose by 24.1% to EUR 1.7 billion, and the operating result increased from EUR 1.5 billion to EUR 2 billion.

Group net income increased significantly to EUR 1.8 billion in 2023 compared with EUR 781 million in 2022.

Clemens Jungsthöfel, Chief Financial Officer, said, “This special tax effect provided additional room to further increase our resilience. We used this opportunity to additionally strengthen our loss reserves in property and casualty reinsurance, thereby significantly increasing the confidence level of our reserves.”

For 2024, and despite large losses in 2023 coming in below budget, Hannover Re has increased its large loss budget to EUR 1.825 billion, reflecting growth in the business.

For the year ahead, the reinsurer expects reinsurance revenue in total business to grow by more than 5%, with growth in P&C likely to be disproportionately stronger than in L&H reinsurance. The firm expects P&C reinsurance to produce a combined ratio of below 89% in 2024, and for L&H to generate a reinsurance service result of more than EUR 850 million.

Hannover Re anticipates group net income reaching at least EUR 2.1 billion in 2024, which would be an increase of roughly 15% on 2023.

“Our clients continue to value and look for solid and reliable reinsurance protection. This was borne out once again by the 1 January 2024 renewals. With the successful treaty renewals and the further strengthening of our resilience in the 2023 financial year, we have laid vital groundwork that enables us to look ahead with confidence to the goals we have set ourselves for 2024,” said Henchoz.