Hannover Re writes major P&C reserves in Q4, defends bottom line

Hannover Re wrote major new reserves in P&C reinsurance in the fourth quarter, pushing resiliency reserves well above the €1.7 billion target and pushing operating profit well below plan. 

“An increase in reserves in property & casualty reinsurance had a significant impact on EBIT,” management told markets in a fourth quarter profit warning. 

The group’s resiliency reserve at year-end was likely “significantly higher” than the targeted €1.7 billion, management said of its preliminary count.  

Management did not identify lines, geographies or accident years requiring the added reserves. 

New reserves knocked operating profits in P&C reinsurance to €1.6 billion, leaving the group operating profit at €1.97 billion, well below a consensus estimate of €2.4 billion

Management comforted that both underlying trends and the bottom line target remained intact and in line with market forecasts.

Underlying profitability in P&C reinsurance “underlying profitability, however, developed very favourably due to the attractive market environment and was fully in line with expectations,” management said. 

Life & Health likely reinsurance contributed €870 million to the operating result, management added.

The group net income tally likely hit €1.8 billion to push Hannover Re past its annual profit target of at least €1.7 billion and up to the consensus estimate, thanks in part to a one-off tax benefit. 

The warning to markets came just ahead of a planned release of Hannover Re's results at the 1.1 renewals.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.