HANNOVER (dpa-AFX) – The reinsurer Hannover Re pushed through significant price increases with its customers when it renewed their contracts on January 1st. Adjusted for inflation and changed risks, the prices in the contracts in the property and casualty business have risen by eight percent, the Dax (DAX 40) group (DAX 40) announced on Wednesday in Hanover. Customers – i.e. primary insurers such as Allianz and AXA – did not want to dig so deep into their pockets. Despite the higher prices, the renewed premium volume fell slightly overall to 9.8 billion euros. Following the news, the Hannover Re share experienced a slight ups and downs.
In the morning, its course initially rose by a good one and a half percent, but then turned negative by up to one percent. In the early afternoon, the paper was almost back to the level of the previous evening at EUR 181, but was one of the weakest titles in the Dax. Since the turn of the year, the paper has lost around two percent. Analysts on Thursday were mostly positive about the results of the treaty renewal. The strong price increases in particular were well received. However, some experts criticized the somewhat weak premium volume.
In the renewal round on January 1, the major reinsurers such as Munich Re (Munich Reinsurance Company), Swiss Re and Hannover Re are negotiating most of their property and casualty contracts. This time, contracts with a premium volume of almost EUR 9.9 billion were up for renewal at Hannover Re, which corresponds to around 63 percent of the previous business volume. There are additional renewal dates throughout the year for certain lines of business and regions.
Like other reinsurers, Hannover Re demanded higher premiums from primary insurers this time because of increased claims and high inflation. It was thus able to assert itself above all in the so-called non-proportional business, in which, for example, it only steps into the breach for a primary insurer above a certain amount of damage. According to the information, the risk-adjusted price increase here was 20.7 percent.
The situation is different in proportional business, in which reinsurers assume part of the risks from primary insurers right from the start and receive a corresponding share of the premiums in return: Here the Group was only able to push through risk-adjusted prices that were 3.4 percent higher. Accordingly, he reduced his business here by almost nine percent and, in return, expanded it in non-proportional business by more than 21 percent.
“We had to make some conscious portfolio management decisions to respond to market challenges,” said CEO Jean-Jacques Henchoz. He expects this to result in a more profitable contract portfolio.
Reinsurance cover for natural catastrophe risks rose particularly sharply. According to its own statements, Hannover Re pushed through risk-adjusted prices that were around 30 percent higher on average and expanded its business volume by the same amount. Due to the recent high level of damage, prices and conditions have in some cases improved more significantly than they have in decades, it said.
The reinsurer referred to the devastating hurricanes such as Hurricane Ian and Hurricane Fiona in North America. The continent was also the focus of natural catastrophe losses last year due to extreme cold waves, thunderstorm fronts and tornadoes. When it came to the renewal of treaties, Hannover Re also pushed through “sometimes significant price increases” beyond natural catastrophe covers. In this context, some primary insurers have also increased their deductibles, it said.
According to preliminary figures, last year Hannover Re made the highest profit in its history at a good 1.4 billion euros, as it announced last week. In doing so, it more than offset high catastrophe losses from Hurricane Ian and the floods in Australia. CEO Henchoz is aiming for a profit of at least 1.7 billion euros for the current year. However, this value is not easily comparable with the profits of previous years because Hannover Re, like other large insurers, will calculate its figures according to the new IFRS 17 accounting standard from 2023.
The group intends to publish its final annual financial statements for 2022 on March 9th. Analysts expect that Hannover Re will again pay a special dividend in addition to the regular dividend and that the payout will increase overall. For 2021, the reinsurer had distributed EUR 5.75 per share./stw/mne/mis
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