Hannover Re Continues to Deliver on Its Specialist Lines and Lower Costs

After Hannover HNR1 Re prereleased its earnings for full-year 2022 in February, the business released its full results on March 9. As we wrote in February, final numbers are a little light compared with our forecasts. Our estimate was for EUR 1,692 million net income. It delivered EUR 1,406 million. We had already written in February that the business delivered strong growth; higher claims and commissions led to lower results. Management has grown the top line in property and casualty by 26.1%, 22% at constant currency. This has been well balanced across all lines of business, with structured reinsurance, agricultural risks, and credit and surety warranting special callouts. While not quite so dramatic, growth has also been buoyant in life and health. Here, management grew gross written premiums by 5.8%, 1.7% at constant currency, with North America, the U.K., and Asia warranting special callouts. Where the business has suffered is in incurred claims in its property and casualty division, but not so much in life and health.

The war in Ukraine added EUR 331 million to Hannover Re’s large-loss budget, taking it beyond EUR 1.4 billion guidance. Further, the division incurred an extra EUR 269 million for claims in Asia that fall under accident and health. These are mainly due to higher frequency, low-value claims caused by the onset of coronavirus. Negative prior-year developments relating to the drought in Brazil resulted in a EUR 106 million drain on results. Property and casualty reinsurance claims came in at EUR 15.6 billion versus our EUR 14.9 billion forecast. This has partially been rectified by inflation-linked bonds that Hannover Re holds, delivering a EUR 458 million boost.

Hannover Re announced a EUR 5.0 per-share normal dividend with a EUR 1.0 per-share special in addition to this, a bit better than we forecast. After we rolled our model and revisited our assumptions, we maintain our EUR 180 per-share fair value estimate. We also maintain our narrow moat rating.