Major losses were offset by investment contributions and a strong performance within life and health reinsurance
Hannover Re has increased its group net income by 14.2% in the 2022 financial year to the record level of €1.41 billion (previous year: €1.23 billion).
However, the property and casualty combined ratio increased to 99.8% (97.7%) on account of the considerable loss expenditure and the provision made for possible losses from the war in Ukraine.
“In the 2022 financial year we once again demonstrated Hannover Re’s resilience,” said Jean-Jacques Henchoz, chief executive officer of Hannover Re.
“The environment in which we are operating remains challenging. Property and casualty reinsurance, in particular, saw heavy losses in 2022 from natural catastrophes, the war in Ukraine and the pandemic.
“Thanks to good profit contributions from the investments and from life and health reinsurance, we were nevertheless able to deliver a pleasing Group net income. Building on this success, we can offer our shareholders the prospect of an even more attractive dividend.”
“In view of advancing climate change, considerable expenditures for large losses and protracted geopolitical conflicts, the risk situation worldwide will remain challenging for the foreseeable future,” Henchoz continued.
“Against this backdrop, Hannover Re’s solid and reliable reinsurance protection will continue to be highly sought-after among our clients. At the same time, though, our own resilience will be called on even more than it has to date.
”With the significant improvements in prices and conditions obtained in the 1 January renewals, we have put in place a crucial basis for meeting these challenges.
“My assessment of Hannover Re’s sustained earning power is correspondingly upbeat. This optimism is reflected not least in another increase in the ordinary dividend.”
Growth in premiums as market hardens
The Group gross premium booked by Hannover Re grew by 19.9% to EUR 33.3 billion (EUR 27.8 billion); adjusted for exchange rate effects, the increase would have been 12.7%.
The various rounds of treaty renewals in property and casualty reinsurance during 2022 passed off favourably, said the group.
It expects asset portfolios will continue to show moderate growth – assuming stable exchange rates and interest rate levels.
“Business showed gratifying growth, with significantly improved prices and conditions in some areas. The clear improvement in prices and conditions was also sustained in the renewals as at 1 January 2023,” said Hannover Re.
The capital adequacy ratio under Solvency II amounted to 251.9% as at 31 December 2022 (31 December 2021: 243.1%), remaining comfortably above the limit of 180% and the internal threshold of 200%.
“In the 2022 financial year we further improved our already very robust capital adequacy ratio,” said chief financial officer Clemens Jungsthöfel. “At the same time, we are looking back on several financial years with above-average loss expenditures and will therefore adhere even more closely to our prudent reserving policy going forward in 2023.”
Impact of nat cats and War in Ukraine
The net expenditures from large losses in the 2022 financial year surpassed expectations for the sixth year in succession. They added up to EUR 1.7 billion (EUR 1.3 billion) and thus clearly exceeded the budgeted level of EUR 1.4 billion.
The largest individual losses were Hurricane Ian with a net strain of EUR 322 million, the severe flooding in Australia at a cost of EUR 233 million as well as winter storm Ylenia in Central Europe in an amount of EUR 107 million.
Furthermore, Hannover Re constituted an IBNR reserve of EUR 331 million for possible losses from the war in Ukraine.
Losses from the previous year, including amounts of EUR 106 million for the drought in Brazil and EUR 54 million for floods in Malaysia, took an additional toll on the result.
The losses incurred from the pandemic can now also be better quantified for property and casualty reinsurance. Among other things, a positive run-off was recorded in the credit, surety and political risks line.
On the other hand, the pandemic-related losses in accident and health insurance in the Asia-Pacific region were substantially higher than expected. All in all, the developments described above gave rise to a charge of EUR 269 million in the year under review.
Hannover targets 2023 net income of “at least EUR 1.7 billion”
For 2023, Hannover Re expects to grow its reinsurance revenue in total business by at least 5% assuming constant exchange rates.
Based on the treaty renewals as at 1 January 2023, the currency-adjusted growth in reinsurance revenue should again be stronger in property and casualty reinsurance than in life and health reinsurance.
Hannover Re anticipates a contribution of around EUR 1.6 billion to the operating result (EBIT) from property and casualty reinsurance in 2023, with life and health reinsurance set to contribute around EUR 750 million.
Group net income should reach at least EUR 1.7 billion. This is conditional on major loss expenditure not significantly exceeding the budgeted level of EUR 1.725 billion and also assumes that there are no exceptional distortions on capital markets and the Covid-19 pandemic has no further material effect on the result in life and health reinsurance.