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Investing.com -- Hannover Re (ETR:HNRGn) shares fell more than 2% on Tuesday after the reinsurer’s life and health business posted weaker-than-expected second-quarter results, offsetting gains from its property and casualty segment and a sharp rise in net income.
The company’s reinsurance service result in the life segment missed forecasts by 14%, weighed down by a €167 million loss component, of which €151 million was linked to morbidity business adjustments, including an increase in the risk adjustment.
“Although we do not expect such unfavourable adjustments to recur, this is not the first disappointment in Hannover Re (OTC:HVRRY)’s life business,” said analysts at Jefferies in a note.
The Solvency II ratio stood at 261%, 11 percentage points below expectations, partly due to this adjustment and lower investment income.
Despite the shortfall, Hannover Re reported a 38% increase in second-quarter net income to €833.5 million from €603 million a year earlier, driven by improved underwriting in property and casualty reinsurance and a higher reinsurance service result.
Group operating profit (EBIT) rose to €1.07 billion from €846.7 million, while earnings per share increased to €6.91 from €5.
Reinsurance revenue (gross) for the quarter rose to €6.37 billion from €6.24 billion, and the reinsurance service result (net) climbed to €904.7 million from €691.5 million.
In property and casualty reinsurance, revenue grew to €4.45 billion from €4.36 billion, EBIT jumped to €850.9 million from €531.7 million, and the combined ratio improved to 82.1% from 87.6%.
In life and health reinsurance, revenue edged up to €1.92 billion from €1.89 billion, but EBIT dropped to €216.9 million from €320.3 million. The investment result for the quarter declined to €469 million from €511.1 million.
For the first half of 2025, group net income increased 13.2% to €1.31 billion from €1.16 billion, and reinsurance revenue rose 3.3% to €13.34 billion.
The reinsurance service result edged up to €1.42 billion from €1.41 billion, while EBIT increased 6.3% to €1.76 billion. Earnings per share for the half-year were €10.90, up from €9.63.
Property and casualty half-year revenue grew 4.8% to €9.54 billion, with a combined ratio of 88.4% compared with 87.8% a year earlier, and EBIT rose to €1.29 billion from €1.16 billion.
Life and health reinsurance revenue fell 0.5% to €3.80 billion, and EBIT decreased 6.3% to €469.9 million.
Large loss expenditure for the first six months totaled €935 million, slightly above budget, including €615.1 million from California wildfires, €76 million from a Texas oil refinery fire, €59 million from an earthquake in Myanmar, and €50 million from tornadoes in the US Midwest.
Equity attributable to shareholders was €11.10 billion at the end of June, down from €11.79 billion at year-end 2024, with book value per share at €92 compared with €97.80.