The company attributes this growth to effective management of large losses within the property and casualty (P&C) reinsurance sector, aligning with the budgeted expectations.
One of the standout achievements in the H1 2023 report is the reinsurance service result, a key indicator of profitability in underwriting activity after accounting for business ceded. This metric has soared by an impressive 56%, reaching €1.1 billion.
However, the reinsurance finance result, after adjustments for exchange rate effects, including technical reserve interest accruals from previous years, reported a figure of €-342 million for the period. This is a change from the €-205 million reported in H1 of the previous year.
The operating result, another crucial measure of performance, exhibited a substantial 21% increase, amounting to €1.4 billion. The group’s net income also experienced a notable uptick, rising to €960 million from the €815 million recorded in the first half of 2022.
In terms of returns, the annualized return on equity for H1 2023 stands at an impressive 21.0%, a leap from last year’s 16.4%. This achievement has exceeded the required minimum target of 1,000 basis points above the risk-free interest rate.
Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, explained, “We closed the first half with a good result and are thus still on track to achieve our year-end targets. “In the recent renewals, we were also able to secure further – sometimes appreciable – improvements in prices and conditions, as reflected in another increase in the new business value.
“A selective underwriting approach remains the order of the day for us, in part because experience shows that the more eventful months of the year are still ahead of us. This prudence is exactly what sets us apart as a financially strong and reliable reinsurance partner.”
Hannover Re occupies a robust market position
Hannover Re has also demonstrated robust capital strength, as reflected in its capital adequacy ratio under Solvency II, a measure of risk-bearing capacity. This ratio stood at 269.8% at the end of June, well above the minimum limit of 180% and the internal threshold of 200%.
The company’s investments totaled €56.5 billion by the end of June, with net income from investments surpassing the previous year’s figure, reaching €851 million.
Within the property and casualty reinsurance sector, Hannover Re reported a strong growth in reinsurance revenue (gross), marking a 6.6% increase in H1 2023 compared to the same period last year, reaching a total of €8.4 billion. The growth could have been even more significant at 7.8% if exchange rates remained unchanged.
Despite facing significant expenditures from large losses in H1, amounting to €607 million, the company managed to stay within the budgeted expectations of €751 million for the period. Notable losses included expenses related to the earthquake in Türkiye and Syria, as well as extensive flooding and a tropical cyclone impacting New Zealand.
The property and casualty reinsurance service result also demonstrated significant improvement, rising by 51% to €598 million in H1 2023, benefiting from a more favorable environment compared to the previous year.
In the life and health reinsurance sector, Hannover Re reported a “pleasing performance” in H1 2023, highlighting strong demand in areas such as financial solutions, longevity covers, and traditional business. Although gross revenue for this sector was slightly down at €3.9 billion, a growth rate of 0.8% would have been observed under unchanged exchange rates.
The life and health reinsurance service result in H1 showed a substantial 62% improvement, amounting to €481 million, attributed to better performance in mortality cover-related business.
Despite challenges, Hannover Re remains optimistic about the future. Henchoz said, “The increasing losses from natural disasters and other severe events as well as persistently high inflation in some regions are driving stronger demand for reinsurance protection.
He added: “With our focus on the long-term profitability of our portfolio, I remain optimistic – despite all the challenges – that we can sustain the positive development of Hannover Re’s business in the second half of the year and achieve the goals we have set.”
