Hannover Rueck SE (HVRRF) Q4 2024 Earnings Call Highlights: Surpassing Targets and Boosting ...
Group Net Income: Slightly above EUR2.3 billion, exceeding the initial target of EUR2.1 billion.
Total Dividend: EUR9 per share, including a EUR7 ordinary dividend and a EUR2 special dividend, a 25% increase from the previous year.
P&C Reinsurance Revenue Growth: 11% currency-adjusted growth rate.
Combined Ratio: 86.6%, within the target range below 89%.
Large Loss Impact: EUR200 million below budget.
Life & Health Reinsurance Revenue: Stable year-on-year.
Reinsurance Service Result: EUR883 million, exceeding the target of more than EUR850 million.
Return on Investments: 3.2%, driven by higher interest rates and strong operating cash flow.
Operating Cash Flow: EUR5.7 billion.
Group Cost Ratio: 3.2%.
Return on Equity: 21.2%.
Solvency Ratio: Approximately 261%.
Shareholders' Equity Increase: Up by 16.5%.
CSM Increase: About 6%.
Risk Adjustment Increase: 7.4%.
EBIT for P&C: More than doubled to EUR2.4 billion.
Life & Health EBIT: EUR934 million, an increase of 7%.
New Business Generation: EUR624 million.
Investment Result: Strong ordinary income with a return on investment of 3.2%.
Warning! GuruFocus has detected 3 Warning Sign with HVRRF.
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Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Hannover Rueck SE (HVRRF) reported a group net income slightly above EUR2.3 billion, surpassing the initial target of EUR2.1 billion.
The company proposed an increase in the ordinary dividend to EUR7 per share, complemented by a special dividend of EUR2, totaling EUR9, a 25% increase from the previous year.
The P&C reinsurance segment saw a currency-adjusted growth rate of 11% in reinsurance revenue, with a combined ratio of 86.6%, indicating strong profitability.
The return on investments was 3.2%, driven by higher interest rates and strong operating cash flow, exceeding the target of 2.8%.
Hannover Rueck SE (HVRRF) maintained a strong solvency ratio of about 261%, reflecting healthy capitalization and providing flexibility for future growth opportunities.
The Life & Health reinsurance revenue remained stable, with growth in morbidity and longevity offset by the runoff of the US mortality business.
The company faced regulatory challenges in China affecting the Financial Solutions business, impacting new business generation.
The impact of large losses was EUR1.63 billion for the full year, with Hurricane Milton alone causing a net impact of EUR230 million.
The currency result was negatively impacted by the strengthening of the US dollar, resulting in a minus EUR143 million effect.
The reserve strengthening for the Russia-Ukraine loss complex and other older underwriting years added pressure on the financial results.
Q: Can you provide an update on the German motor insurance market and your outlook on pricing? A: Sven Althoff, Member of the Executive Board, explained that both insurers and reinsurers have increased rates due to inflation, particularly in physical damage. The additional rate increases during the 2025 renewals are expected to bring the business back into profitable territory, meeting hurdle rates.
Q: How do you view the reserve resilience and its development moving forward? A: Clemens Jungsthofel, CFO, stated that the reserve resilience, including the risk adjustment, is strong, with a level of around 7% relative to reserves. The company expects this to grow nominally and in relative terms, maintaining a stable level. The risk adjustment is seen as part of the hard capital by rating agencies.
Q: What are the main drivers behind the increase in SCR from P&C underwriting risk? A: Clemens Jungsthofel, CFO, noted that the increase is due to growth in nat-cat capacity and reserve risk, driven by business growth and loss development. The reduction in retrocession also contributed. The market risk increase was due to higher volumes in real estate, private equity, and fixed income.
Q: Can you explain the rationale behind the dividend payout ratio and potential for future increases? A: Jean-Jacques Henchoz, CEO, explained that the payout ratio reflects a balance between a favorable earnings outlook and growth opportunities. The 47% payout ratio aligns with historical levels, and the company prioritizes reinvesting in well-priced growth opportunities.
Q: What is your outlook for Life & Health growth, given the challenges in China and longevity competition? A: Clemens Jungsthofel, CFO, acknowledged the regulatory changes in China affecting financial solutions but emphasized ongoing work to adapt. The company remains cautious in longevity due to competition but sees potential for growth in other areas, maintaining a positive long-term outlook.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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