Hannover Re Earnings: Good Start to the Year

Hannover Re HNR1 has reported a good start to the year, reporting net income of EUR 484 million over the first quarter. At the moment, that places the business well in terms of its full-year EUR 1.7 billion net income target. However, there is a lot further to travel this year. We maintain our fair value estimate of EUR 180 per share and our rating of a narrow economic moat.

The large losses so far relate to the earthquakes in Turkey and Syria and the storms in New Zealand, and the business has reserved around EUR 300 million for these. That means that in the quarter, the company remains within budget, although there is always a heavy quarter three. Including these, the combined ratio is 92.6% that includes the new accounting changes and some buffer rebuilding. In the life and health division, claims from pandemic-related cases continued to decline and amounted to EUR 11.5 million. The reinsurance service result of EUR 253 million places the business well in terms of its EUR 750 million target for earnings before tax and interest.

The contractual service margin has risen by 13.3% as an indicator of the success of the renewals, and the risk adjustment has risen by 2.9%, highlighting the more gradual rise in the business’ estimates for claims. These will both run off into the profit or loss running through reinsurance revenue. The dividend outlook remains unchanged.