Hannover Re has to accept a setback in operating profit due to high provisions, as the reinsurer recently announced. According to the DAX-listed company, the EBIT in 2023 was significantly below market expectations.
However, due to a positive tax effect, the company was able to score in net profit and meet the analysts' forecast. The operating profit amounted to 2 billion euros, while the consensus expectation was 2.4 billion euros and the previous year's figure was 2.1 billion euros.
In the fourth quarter, provisions were made that led to an unexpectedly sharp increase in the confidence level of the reserves.
The Operating Result in the Property and Casualty Reinsurance Remained at 1.1 Billion Euros, Below Market Expectations of 1.6 Billion Euros. However, the Underlying Profitability Remained "Very Satisfactory and Fully Met Expectations" Due to the Solid Market Environment.
In life reinsurance, EBIT contributed even more than expected to the positive result with 0.9 billion euros. The net profit was 1.8 billion euros and thus exceeded the target mark of at least 1.7 billion euros. However, due to the changeover of accounting to IFRS17, a direct comparison with the previous year's value of 1.4 billion euros is not possible.
Hannover Re will publish the complete figures for the year 2023 on March 18.
Also in the annual renewal round on January 1, Hannover Re was once again able to enforce higher prices. Adjusted for inflation and risk, prices in traditional property and casualty reinsurance rose by 2.3 percent, as announced by the DAX-listed company.
The following translation conveys the heading in English:
The renewed premium volume also increased. Of the 9.5 billion euros due for renewal, 8.6 billion euros were extended, while 881 million euros were either canceled or renewed in a modified form.
Overall, the renewed premium volume could be increased by 6.9 percent to 10.2 billion euros thanks to the attractive market environment.
The reinsurer Hannover Re is confident in achieving its target of at least 2.1 billion euros in surplus by 2024, thanks to renewed premium increases. CEO Jean-Jacques Henchoz recently reaffirmed this in Hannover, emphasizing that contract renewals with primary insurers such as Allianz and Generali went positively.
In the past year, Hannover Re was able to record a record profit of 1.8 billion euros thanks to a positive tax effect in Bermuda, exceeding the management's expected minimum benchmark. This was partly due to the utilization of tax loss carryforwards in Bermuda, which amounted to approximately 200 million euros and thus reduced Hannover Re's tax rate from 22.7 percent to 1.4 percent.
According to Henchoz, the board used this opportunity to increase provisions for future damages while still exceeding the profit target. The higher reserves are intended to help the group achieve its goals for the years 2024 and 2025.
The current business figures cannot be directly compared with the previous year's figures, as new rules for calculating the business figures have applied since 2023. The profit for the year 2022 was initially stated as 1.4 billion euros, but according to the new rules, it would have been only about 780 million euros.
According to Henchoz, this is due to various accounting effects and the establishment of a joint venture with Munich Re. Hannover Re's insurance revenue increased by about one percent to 24.4 billion euros in 2023, and a profit of just under two billion euros was generated before interest and taxes, an increase of about 30 percent compared to the previous year.
However, analysts had expected a higher profit and had not anticipated such a substantial addition to loss reserves. The final figures and information about the dividend will be announced upon the release of the annual report on March 18.
Despite higher prices in contract renewals on January 1st, Hannover Re also extended some contracts with primary insurers at the turn of the year. Adjusted for inflation and changed risks, the prices increased by 2.3 percent and the renewed premium volume grew by 6.9 percent to 10.2 billion euros.
The management primarily relies on so-called non-proportional contracts, in which a reinsurer only takes on risks from primary insurers starting from a certain amount of damage, or only up to a maximum amount. The news was positively received on the stock market, and the Hannover Re share temporarily reached a new all-time high of €231.20, which corresponds to an increase of 1.99 percent.
Since the beginning of the year, the stock has already gained more than six percent in value. The final business figures for the year 2023 and information on the dividend will be announced upon the release of the annual report on March 18.
