Hannover Rueck SE Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Huttner - Berenberg - Analyst : Thank you so much for another set of amazing results. I only had two questions. One is kind of nosy and the other one is -- I don't quite understand. The nosy one is you're one of the few reinsurers which actually participate directly, I think, on a quote-to-share basis in German Motor. So I just wondered if you can provide the latest in terms of pricing and outlook there? Particularly, I think you're the main reinsurer, the market leader. And the second is on pricing from memory, and my memory always fails me, so apologies if I get it wrong. Renewal pricing was down 2.7%. The wildfires are -- give or take, I mean, if they're in the middle of the target range, around 1/3 of your full year budget, and you're still guiding to profits being up. I know there's a lot of conservatism built in, in the 2024 results. So if you strip that out, of course, you would have some buffers. But maybe you can explain why you remain so confident despite these two negatives?

Question: Michael Huttner - Berenberg - Analyst : Oh, I see. It's me. Sorry, sorry. I was muttering. So really, simply, German motor, you're the one reinsurer who underwrites German motor. I just wonder if you can provide an update on how much uplift you will get if -- and how much the rate rise were and how much uplift it means for you?

Question: Michael Huttner - Berenberg - Analyst : Brilliant, thank you.

Question: James Shuck - Citigroup - Analyst : Thank you and good afternoon, Jean-Jacques, same for me. Best of luck for the future. You still feel like the new CEO from my perspective. I don't know whether the time has gone by so quickly, but thank you for your help. I had three questions, please. So the first one, just looking at the increase in SCR from P&C underwriting risk, that was up EUR0.8 billion year-on-year. That's quite a large increase. And I presume part of that is because you've taken on lower retro than in the past. But I'm kind of getting mixed signals from other parts of the business that the structured premium in '24 was up 58% and it's a big number. But the PMLs are up significantly, too. I just look at the -- for example, the US windstorm, I think the PML is up 30% year-on-year. So I'm just kind of keen to understand what drove that increase in SCR, where it's coming from? And really to try if you're able to provide any indication of the kind of expected profit from allocating that increase in SCR, that would be very helpful. I don't know whether you want to express that in relation to the new business CSM for '25 outlook or some other metric, but any insight there would be helpful. Secondly, on the discrete Q4 combined ratio in P&C Re, 82.5%. Just struggling to understand this a little bit because you mentioned that there's kind of negative runoff result in Q4. We can see that through the experience variance. It looks like kind of over EUR200 million or so in Q4 discrete. You've added a little bit to the buffer perhaps. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 13, 2025 / 1:00PM, HNRGn.DE - Q4 2024 Hannover Rueck SE Earnings Call So where is that -- I don't know -- I mean, one quarter is obviously volatile. But if I start kind of making adjustments, that 82.5%, I start to get a very low number indeed. So what's wrong with doing that sort of calculation? Where do you kind of view the normalized level of combined ratio in Q4, please? And then finally, just on the nominal -- sorry, the nominal runoff, reserve runoff, before risk adjustments. I'm looking at the claims triangles on a net basis. It's unusual, but there's EUR95 million adverse development across all years. You may have alluded to this in some of your opening comments, and obviously, it's not a big number in the context of EUR14 billion of reserves. But you are seeing adverse development in 2018 and 2023. I presume that's connected to Russia and Italian hail. But if you could just clarify what's happening there, please? Thank you very much.

Question: James Shuck - Citigroup - Analyst : Okay, thank you very much.

Question: Henry Heathfield - Morningstar - Analyst : Good morning, good afternoon, sorry. Thank you for taking my questions. I was just wondering if you could talk a little bit more about the top line growth in Property and Casualty within the Americas and the EMEA region, what in particular was driving that? And then in the Life & Health, could you just kind of remind me or confirm whether the US mortality -- US mortality portfolio that's been in runoff, is that now finished? That's sort of closed? And perhaps talk a little bit about whether there was any experience variance within US mortality business in Life & Health.

Question: Henry Heathfield - Morningstar - Analyst : Great, thank you very much.

Question: Michael Huttner - Berenberg - Analyst : I'm very lucky. So one is indeed a follow-up on the Life because if I look at your guidance, EUR875 million and I take the EUR889 million figure and I add the EUR37 million kind of insolvency number, which presumably is not repeated. I get already to -- this is just 2024, to above -- well above the EUR875 million. So I just wondered if you can give us a little bit more on how you -- I know the question has been asked in terms of CSM, but maybe you can ask it in terms of this number as well. And the other question is also on growth, on P&C growth, of 7%. The 7% feels low given the way you're commenting about how you want to keep powder dry and stuff. Can you talk about -- a little bit about how much you would expect from the renewals still to come up relative to the 7.2%, I think you had, in January?

Question: Michael Huttner - Berenberg - Analyst : Yes.

Question: Michael Huttner - Berenberg - Analyst : Okay. But I was going to say that your Hannover RE, I think you dream -- you live positive experience variances. And that's why I'm just -- it's almost like the answer you've given me would be -- I would understand if it came from a weaker, maybe French, competitor. But from you, it's almost like you're speaking from a different company. That's why -- but anyway, I take the comment.

Question: Michael Huttner - Berenberg - Analyst : Yes. But -- well, maybe let me have another go then, please, if I may. On US mortality, what are you seeing at the moment? Is there -- have we bottomed? Because I see the change in estimates is longevity in your CSM. So that's the opposite of mortality. So that looks -- feels like mortality is getting worse, but I don't know. But is there a change in the US, are people starting to live longer again? Unidentified Company Representative So the change in estimates that you're seeing on the mortality and longevity side was -- that's something that were communicated on the UK So in the UK we have seen a change in the mortality, let's say, mortality improvement. So, we have less strong mortality improvements in the UK than what we thought, which led then to positive assumption changes on the longevity business in the UK and obviously to negative assumption changes on the mortality business in the UK We don't see anything similar right now in the US Sven Althoff Member of the Executive Board Well, on the revenue guidance for P&C, I mean, the year has started well. I mean, as we reported during -- for the January renewals, which is 60% of our traditional treaty business, we managed to grow by 7.6%. We also had a good 1/1 for the structured activities, which is not part of the temporary reporting we are doing. So I mean, let's wait and see. It's early in the year. Let's particularly wait what the April renewals bring. So as we sit here today, I would say that the likelihood of us achieving the 7% has certainly increased after the January renewal. And let's revisit that once we have a few more renewal dates behind us, but there could potentially be a chance of going over and above the 7% for the full year.

Question: Ivan Bokhmat - Barclays - Analyst : So one question from me would be quite general. I mean we're observing some fairly tectonic shifts, I think, in the European competitiveness in the fiscal rules in Germany. So I'm just wondering if you could get your general thoughts on what underwriting opportunities that investment super cycle may present for you? Or maybe what changes to the investment portfolio you would anticipate in that respect? And second question, a lot less general. In your guidance for 2025 for investment results, do you anticipate some specific impairments on real assets?

Question: Ivan Bokhmat - Barclays - Analyst : Well, it was a very general question. So, I suppose I'll work at better formulating it next time.