Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hannover Rueck SE (HVRRF, Financial) reported a 21% growth in group net income, reaching EUR1.2 billion.
- Return on equity stood at an impressive 22.3%, highlighting strong earnings power.
- Reinsurance revenue grew by 10% on a ForEx adjusted basis, driven by a favorable market environment.
- The combined ratio of 87.8% is well below the target of 89%, indicating strong underlying profitability.
- Investment performance was robust with a return on investment of 3.3%, surpassing the target of 2.8%.
Negative Points
- An increasing frequency of large losses was observed in the second quarter, impacting overall results.
- Life and health reinsurance revenue decreased moderately due to regular portfolio management and nonrecurring effects.
- The impact from large losses, although below expectations, required the full large loss budget to be booked for the first half of the year.
- Currency translation had a negative impact of EUR74 million on the other result.
- The combined ratio includes a discount effect of around 7%, which is higher than the interest accretion in the reinsurance finance result.
Q & A Highlights
Q&A Highlights from Hannover Rueck SE (HVRRF) Q2 2024 Earnings Call
Q: Could you discuss the potential for increased dividends given the strong net income target and current capital position?
A: (Jean-Jacques Henchoz, CEO) We are very satisfied with our capital position and confident about reaching our 2024 targets. This increases the likelihood of implementing our strategy of increasing the base dividend and potentially issuing a special dividend, but we will decide later in the year after the hurricane season.
Q: Can you provide more context on the China critical illness reserves and their impact on the life and health results?
A: (Claude Chevre, Member of the Executive Board) We regularly review our reserves for critical illness in China. The current estimate is based on observed trends. Despite this, our overall profitability in life and health remains strong, and we are confident in our full-year guidance.
Q: The combined ratio in P&C reinsurance is running below the 89% target. Will this trend continue, and how will it impact the P&L?
A: (Clemens Ungsthofel, CFO) The combined ratio includes a risk adjustment build-up, and while we do not plan for extraordinary reserve buffer building as last year, we will continue to monitor and adjust as necessary. The current run rate is slightly below the target.
Q: How sustainable is the growth from extensions on existing life and health contracts?
A: (Claude Chevre, Member of the Executive Board) The growth from extensions is not surprising to us. Under IFRS 17, there is flexibility in categorizing new business and extensions. Both should be considered together to understand the full impact on our business.
Q: Can you provide details on the financial solutions' contribution to the life and health service results?
A: (Clemens Ungsthofel, CFO) Financial solutions contributed around EUR250 million to EUR260 million out of the EUR448 million service result in the first six months.
Q: What is your current reinvestment yield, and how does it compare to the running yield?
A: (Clemens Ungsthofel, CFO) The running yield across all currencies is roughly 3.4%, and the reinvestment yield at the end of June was 4.6%.
Q: Can you elaborate on the positive experience variances in life and health and their sustainability?
A: (Claude Chevre, Member of the Executive Board) The positive experience variances come from various regions and segments, including financial solutions, longevity, and mortality. While these variances can be volatile, they generally balance out over time.
Q: How are secondary perils affecting the P&C reinsurance market, and do you expect any changes in market sentiment?
A: (Sven Althoff, Member of the Executive Board) We do not expect a change in sentiment regarding technical price adequacy. The market remains focused on pricing that reflects underlying risks, particularly in the lower parts of CAT programs where most climate change-related losses occur.
Q: Can you provide more color on the P&C renewals and their impact on margins?
A: (Sven Althoff, Member of the Executive Board) The midyear renewals were diversified and maintained the same capital hurdle assumptions as the one-one renewals. The growth was broad-based, with significant contributions from the Americas and Australia.
Q: Are you doing anything in relation to your inflation-linked position as interest rates change?
A: (Clemens Ungsthofel, CFO) Our inflation-linked bonds are not part of our investment strategy but are used to protect our P&C reserves against inflation. We regularly review our positioning based on reserve development and duration.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
