The German insurer reiterated it expects reinsurance revenue to grow more than 5% this year, after further improvements in terms and conditions and sustained attractive prices at renewals.
Hannover Re is aiming for a €2.1bn profit in 2024 and a combined ratio of 89%, the reinsurer has stated, following a successful 1/1 reinsurance renewals.
The firm achieved its 2023 profit target with €1.8bn group net income. Reinsurance revenue was €24.4bn in 2023, according to the firm’s preliminary figures, from €241.bn the year before.
In the treaty renewals at 1 January 2024 the German firm said it saw prices increase by 2.3% on traditional property and casualty reinsurance renewed business, on aggregate and adjusted for changes in inflation and risk.
Overall, the market environment for the renewals was marked by stability than in the previous year’s dramatic rises. The firm said demand for reinsurance capacity grew, limited primarily to covers from existing market players.
Premium volume grew in some lines more than others.
Agricultural insurance premium volume was boosted by 16.4% in response to improved terms and conditions, with standout growth in Brazil and China.
In credit, surety and political risks lines, premium volume was up by 10.7%, and in aviation and marine reinsurance saw premium volume grow by 11.5%.
Prices were generally stable or slightly higher. As in the previous year, Hannover Re grew its book of non-proportional reinsurance more strongly in the renewals.
Non-proportional premium volume was up 10.6% to €3.178bn, with a risk-adjusted price increase of 4.4%. Proportional reinsurance grew by 5.3% to €7.034bn. Price change after risk adjustment was 1.3%.
“We are satisfied with the outcome of the renewals,” Jean-Jacques Henchoz, CEO, Hannover Re.
“Against the backdrop of the loss experience in 2023, continuing high levels of inflation and geopolitical uncertainties, we were able to secure further necessary rate improvements in many lines and regions,” he said.
“Building on the previous year’s sustained improvement in the quality of our book of business, we are thus well placed to tackle future challenges,” Henchoz added.
Treaties with a premium volume of €9.552bn were up for renewal by Hannover Re on 1 January. This corresponds to 62% of business in traditional property and casualty reinsurance, excluding facultative reinsurance, ILS business and structured reinsurance.
Hannover Re renewed a premium volume of €8.671bn, while treaties worth €881m were either cancelled or renewed in modified form. Including increases of €1.541bn from new treaties and from changes in prices and treaty shares, total renewed premium volume grew “in an attractive market environment” by 6.9% to €10.212bn.
“Demand for our high-quality reinsurance protection was again very strong,” said Sven Althoff, the member of Hannover Re’s executive board responsible for property and casualty reinsurance.
“This enabled us to generate further profitable growth in our diversified portfolio, especially on the non-proportional side. At the same time, attractive growth opportunities opened up in structured reinsurance and in the area of insurance-linked securities. All in all, we further improved the quality of our book of business,” he said.
Regional markets
After heavy losses in the Europe, Middle East and Africa region, Hannover Re enlarged the premium volume by 6.5%. Rate increases and improvements in terms and conditions were especially marked in loss-impacted natural catastrophe business, the reinsurer said.
In Germany, more reinsurance capacity was available than in the previous year, the company said. Overall, higher prices were obtained on a risk-adjusted basis. Appreciable rate increases were booked under loss-affected programmes. The sharp surge in loss expenditures in the motor line was a major topic, Hannover Re noted.
In Italy, severe weather events that brought hail, heavy rain and flooding were a key driver of adjustments to prices, retentions and conditions, the reinsurer added.
Americas premium volume grew by 2.2%. It should, however, be noted that large parts of the business in this region are not renegotiated until the renewals on 1 June and 1 July 2024.
North America saw further rate improvements, extending also to liability business, Hannover Re said.
For years now, clients in the Midwest have been faced with considerable losses from natural disasters such as severe wind events, prompting necessary adjustments in loss-making segments of the property line. Hannover Re scaled back its business with cyber covers in response to the intensely competitive state of the market.
Reinsurance capacity for catastrophe covers is still inadequate in some Latin American countries, Hannover Re suggested. Rates were “high level overall, and further upward adjustments should be possible in loss-affected business”.
Hannover Re said it kept up the trend towards improved rates and conditions, but noted the main renewals lie ahead at 1 July.
Asia-Pacific markets were stable, broadly speaking, according to the reinsurer.
Particularly in Southeast Asia, Korea and the “Greater China” region, the main round of renewals took place on 1 January. Against a backdrop of adequate pricing with better terms and conditions due to a number of catastrophe losses in the region, Hannover Re boosted its premium volume by 10.1%.
The reinsurer reiterated its expectations, first made in December, for a 5% rise in reinsurance revenues in 2024.
“The significantly improved profitability of our reinsurance business assures our resilience in a volatile environment. I am therefore convinced that we shall achieve our goals for the 2024 financial year,” Henchoz said.
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