Hannover Re renewal volumes up 11.5% at mid-year, cedes no losses to ILS in H1

Global reinsurance company Hannover Re has continued to expand its business at the mid-year renewal season, reporting 11.5% growth in premiums and a “favourable market” environment that still delivered price increases.

Also of note, Hannover Re’s first-half has seen loss activity decline for the company, resulting in zero losses being passed on to insurance-linked securities (ILS) capital through the first six months of this year.

Hannover Re said it feels well-positioned for the second-half and with its large losses for the P&C reinsurance unit coming in well-below budget it has room to absorb more impacts should H2 prove more challenging from a catastrophe point of view.

In announcing its first-half 2024 results today, Hannover Re said its group net income rose by 21% to EUR 1.2 billion, while its reinsurance revenue grew by 5.2% to EUR 12.9 billion.

Jean-Jacques Henchoz, Chief Executive Officer of the reinsurance company said, “We have a successful first six months behind us, with significant growth in property and casualty reinsurance and satisfactory Group net income. At the same time, we saw a continued trend towards increasing frequency losses and losses from secondary perils such as flooding.

“Thanks to our selective underwriting approach and our retrocession strategy, we feel well prepared for the upcoming second half of the year – which tends to be more loss-intensive.”

Hannover Re’s reinsurance service result, that reflects the profitability of underwriting activity less business ceded (primarily via its retrocession program and insurance-linked securities (ILS) arrangements), increased by 31% to EUR 1.4 billion (EUR 1.1 billion).

With major losses, from natural catastrophes, severe weather and man-made events coming in at EUR 566 million for the first-half, which was well within the budgeted EUR 801 million, notably, Hannover Re said it saw a low retrocession recovery in the first-half of 2024.

Ceded reinsurance result fell to EUR 446 million in Q1 2024, down from EUR 504 million a year earlier.

For the first-half, the ceded reinsurance result amounted to EUR 855 million, down from EUR 872 million in H1 2023.

The gross to net on major losses also implied little retro support, but possibly some quota share, as of EUR 491.6 million in gross natural catastrophe losses, Hannover Re reported a net figure of EUR 419.3 million.

The German floods in early June were its largest nat cat loss of the first-half of the year, with a gross impact of EUR 160 million and a net impact of EUR 120 million.

The flooding in Dubai was Hannover Re’s next biggest catastrophe loss of H1 2024, with a gross impact of EUR 83.9 million and a net impact of EUR 81.6 million.

We suspect some quota sharing of nat cat losses in the first-half, but merely at what would be considered an attritional rate by those supporting structures like the K-Cessions sidecar that could have been exposed.

With large losses coming in below budget for the first-half, Hannover Re has reported that the ILS share of its gross loss for the period was zero, which reflects a stable first-half performance for the many ILS arrangements that Hannover Re fronts and transforms risk for.

Finally, Hannover Re has continued to grow strongly at the reinsurance renewals this year, reporting 8.8% P&C reinsurance revenue growth at April 1st, followed by an 11.5% increase in renewal volumes at the June and July 1st renewal season.

The reinsurer reports “modest improvements” in risk-adjusted prices and conditions at the renewal, with the inflation- and risk-adjusted price increase for the renewed business amounting to 1.3%.

Hannover Re forecasts a full-year combined ratio of less than 89% in property and casualty reinsurance for 2024, citing the “improved market climate”, while across the entire business the company is expecting its reinsurance revenue to grow by 5%.

“The challenges that lie ahead for the reinsurance industry are many and varied. We shall overcome them in the future, as we have in the past, by relying on our proven strengths: our partnership-based approach, our business model geared to efficiency and our dedicated employees,” CEO Henchoz commented. “This focus puts us in an optimistic mood for 2024 and also safeguards Hannover Re’s success over the long term.”