Hannover Rück SE (HVRRF) Q4 2024 Earnings Conference Call Transcript

2025-03-19 16:39:31 ET

Hannover Rück SE (HVRRF)

Q4 2024 Earnings Conference Call

March 13, 2025, 08:00 PM ET

Company Participants

Karl Steinle - General Manager Investor and Rating Agency Relations

Jean-Jacques Henchoz - Chairman

Clemens Jungsthöfel - CFO

Sven Althoff - Member of the Executive Board

Conference Call Participants

Michael Huttner - Berenberg

Kamran Hossain - JPMorgan

James Shuck - Citi

Shanti Kang - Bank of America Merrill Lynch

Vinit Malhotra - Mediobanca

Will Hardcastle - UBS

Chris Hartwell - Autonomous

Henry Heathfield - Morningstar

Roland Pfänder - ODDO BHF

Ivan Bokhmat - Barclays

Presentation

Karl Steinle

Good afternoon, everyone, and welcome to our earnings call on our Financial Results for the Full Year 2024.

Today's speakers will be our CEO, Jean-Jacques Henchoz and Clemens Jungsthöfel, our CFO. For the Q&A, we will be joined by Claude Chèvre and Sven Althoff.

And with that, and for the last time as CEO at Hannover Re, I hand over to you, Jean-Jacques, to summarize the business development of another successful year of our company.

Jean-Jacques Henchoz

Thank you very much, Karl, and good afternoon on my side. I'm very satisfied with Hannover Re's performance in the 2024 financial year with the Group net income slightly above EUR2.3 billion. We have delivered on the increased target of around EUR2.3 billion compared to the initial target of around EUR2.1 billion. The outperformance is driven by favorable investment income as well as a higher-than-expected reinsurance service result in both business groups.

In other words, the operating performance was strong across all areas. Based on this positive development and very healthy capitalization, we will propose an increase in the ordinary dividend to EUR7 per share, complemented by a special dividend of EUR2. This brings the total dividend to EUR9, an increase of 25% compared to the previous year.

In P&C, we have successfully expanded our portfolio in an attractive market environment, resulting in a currency-adjusted growth rate in reinsurance revenue of 11%. The combined ratio of 86.6% sits very well within our target range below 89%, reflecting the very good underlying profitability of our P&C portfolio. Furthermore, the impact of large losses was about EUR200 million below budget, providing us with an opportunity to take a more cautious view on specific claims from older underwriting years, including the Russia-Ukraine loss complex and also to grow our resiliency in reserving, at least in line with the overall growth of our book of business.

In life and health, reinsurance revenue was rather stable year-on-year. Increasing volumes in morbidity and longevity were mainly offset by an accelerated runoff of our U.S. mortality business following the last recaptures connected to our in-force management actions in 2018. Looking at the new business generation of EUR624 million, we have been successful in seizing attractive business opportunities and a reduction, compared to the previous year, was mainly attributable to the extension of an individual large treaty in the prior year, but also reflects our selective underwriting approach in longevity and the impact of regulatory changes on the financial solutions business in China.

The profitability of our life and health business is very satisfactory. Experience variance was overall positive within all reporting categories and mitigated the reserve strengthening for pockets of our morbidity book of business, mainly in China. With the reinsurance service results of EUR883 million, we have exceeded our target of more than EUR850 million for the business. The return on investments of 3.2% was also very satisfying. The strong ordinary income is mainly driven by a combination of higher interest rates and a strong operating cash flow of EUR5.7 billion.

Additionally, the moderate impact of impairments on real estate of EUR37 million compared favorably with our expectations. Change in ECL, as well as the change in fair value, recorded in the P&L had a minor impact on the results. Cost efficiency, as you know, is another very important metric for Hannover Re. And with a Group cost ratio of 3.2%, we can confirm our continued success in maintaining our competitive edge in this respect. Altogether, the return on equity of 21.2% highlights the company's very strong earnings power and the solvency ratio of about 261% reflects our company's very healthy capitalization....

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