Hannover Re reactivates Q2: new growth & margin on April-July renewals
Global reinsurance group Hannover Re attacked renewals and upped its gross P&C reinsurance revenues at a double digit pace in the second quarter of 2023 while giving a bump to underwriting margins, Q2 financial statements indicated.
IFRS17's new top line measure 'reinsurance revenues', an earned-in tally already inclusive of margin estimates, rose 15.4% for the total book or 11.5% net after an uptick in the group's external retrocession.
Revenue growth is a decisive acceleration from a subdued first quarter when Hannover Re had largely shunned growth at the January renewals. April and the mid-years brought out the German reinsurer at force.
“We closed the first half with a good result and are thus still on track to achieve our year-end targets,” CEO Jean-Jacques Henchoz, said. “In the recent renewals we were also able to secure further – sometimes appreciable – improvements in prices and conditions, as reflected in another increase in the new business value.”
Hannover Re moved from its skittish January renewals performance to a 7% gain in premium at April ahead of the 12.6% claimed for the mid-year renewals.
Management cited “strong growth” from EMEA, Americas and structured reinsurance/ILS plus some unspecified new business in APAC where revenues overall edged down as other business was trimmed.
The P&C reinsurance combined ratio is down 1.7 points to 90.8% for the Q2 read, now within the group's rough and ready target range of 91-92%. The H1 tally has also fallen back into that range at 91.7%.
The underwriting margin improvement is highly visible on new business just added to the book, management said. The new business added to the book in Q2 likely added twice the forecast margin (IFRS17 new business contract service margin) than what the group had added in the prior year period.
The Q2 2023 combined ratio calculation also included new reserve padding designed to recoup buffers worn down in 2022, management noted.
Management declined to pin down to what extent the new reserves were built out of the unutilized H1 nat cat budget or the adjustment to discounting, but suggested its underlying combined ratio would also have hit an adjusted target range.
For the full first half, and including gains in life & health, group underwriting profits are up 3.9% year on year.
After rising investment income, Hannover Re could claim a 17.8% increase in first half net profits to €960 million, allowing management to confirm plans to beat the €1.7 billion mark for the full-year.
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