Hannover Re says reinsurance stabilised at high level, shares no losses with ILS

Global reinsurance company Hannover Re expects that the current “high levels” seen in the reinsurance industry can be sustained and it does not expect much change at upcoming renewals.

In announcing its first-quarter results today, Hannover Re also revealed that, thanks to a more benign quarter of natural catastrophe losses the company did not share any of its major losses with insurance-linked securities (ILS) investors during the period.

Hannover Re reported that its group net income rose by 15% to EUR 558 million in Q1 2024, while its reinsurance revenue rose to EUR 6.7 billion.

As a result, return on equity reached 21.3%, which was well-above the target of 14% set under the reinsurance firm’s strategy.

In property and casualty reinsurance, Hannover Re’s combined ratio came down from 92.3% a year ago, to just 88% for Q1 2024, which is below the full-year target of 89%.

As a result, major losses fell well within budget for the quarter and the natural catastrophe experience was not significant to Hannover Re’s business.

“We can look back on a rather benign quarter as regards large losses. We had a good start into the year, putting us on track to achieve our full-year profit target,” Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re commented. “At the same time, with the recent treaty renewals we have put in place a solid foundation for further profitable growth given the continued demand for high-quality and reliable risk protection in what is a challenging landscape.”

In P&C reinsurance, Hannover Re noted some growth in the area of structured transactions and insurance-linked securities (ILS), particularly in EMEA and the Americas.

This is where the reinsurers business that sees it retroceding risk to ILS investors is undertaken, as the company continues to front and transform risk for capital market investors.

Large losses came in at EUR 52 million for the period, although Hannover Re has not put a figure on its loss from the Baltimore Bridge collision, but it has booked the full budget for the quarter anyway, of EUR 378 million, and said that event will be easily covered.

In the quarter, Hannover Re noted a “low retrocession recovery” with no positive impact from the large losses booked, that came in below budget.

Gross large losses were booked at EUR 59 million, net at the aforementioned EUR 52 million, but Hannover Re also noted that the share of loss for ILS investors was zero in the period, as none of the events were severe enough to attach the ILS contracts Hannover Re has facilitated and partnered on.

The Japanese earthquake at the beginning of the year only resulted in a net loss of EUR 25 million, while wildfires in Chile cost EUR 15.8 million. In addition there was an aviation loss at EUR 11.7 million.

Looking to the full-year, Hannover Re expects positive conditions to persist in reinsurance, forecasting that its reinsurance revenue in total business will grow by more than 5% this year, at constant exchange rates, while group net income is forecast to reach at least EUR 2.1 billion.

CEO Henchoz commented on market conditions, saying, “The 1 April renewals provided further confirmation that the market environment has stabilised on a high level after the substantial improvements in prices and conditions recorded in prior years.

“We are optimistic that this level can be sustained in the coming renewals as well. It remains the case that our clients value our quality as a strong partner and our focus on our core expertise, namely reinsurance.”