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Investing.com -- Hannover Re (OTC:HVRRY) on Tuesday posted a 13.9% drop in first-quarter net income to €480 million, primarily due to large catastrophe losses, including the California wildfires, but strong underlying business and a solid capital position helped the company remain on track to meet its 2025 targets.
Reinsurance revenue rose by 4.5% to €7 billion, with Property & Casualty (P&C) reinsurance growing by 7.2%.
However, P&C reinsurance faced large losses totaling €765 million, exceeding the budgeted €435 million for the quarter.
The California wildfires were the largest contributor, accounting for €631 million of the losses.
Despite the large loss impact, the P&C reinsurance service result fell by 46.6% to €272 million, and the combined ratio increased to 93.9%, higher than the target of less than 88%. Operating profit in P&C reinsurance contracted by 29% to €444 million.
On a positive note, Life & Health (L&H) reinsurance reported strong results, with a 40% increase in operating profit to €253 million.
L&H reinsurance revenue declined modestly by 2.4% to €1.88 billion, while the service result rose to €243 million, putting the company on track to meet its full-year target of more than €875 million.
Investment income grew by 15.8% to €577 million, with a return on investment of 3.5%, surpassing the full-year target of 3.2%.
“Earnings aside though, we find ourselves pleasantly surprised by the quality of Hannover Re’s balance sheet,” said analysts at Jefferies in a note.
Shareholders’ equity increased to €12.1 billion from €11.8 billion at the end of 2024. The company’s Solvency II ratio stood at 273%, well above the long-term target of 200%, which supports its capital strength and dividend strategy.
Resiliency reserves were boosted to €2.5 billion, reflecting Hannover Re’s proactive approach to financial stability.
The company confirmed its full-year guidance, maintaining an expectation of Group net income around €2.4 billion for 2025.
Hannover Re also anticipates P&C reinsurance revenue to grow by more than 7% at constant exchange rates and expects the contractual service margin for L&H reinsurance to rise by around 2%.