Hannover Ruck SE

Good afternoon, everyone, and welcome to our earnings call on our financial results for the full year 2024. Today's speakers will be our CEO, Jean-Jacques Auchan, and Clemens Jungstöffel, our CFO. For the Q&A, we will be joined by Claude Schewel and Sven Althoff. And with that, and for the last time as CEO at Hanover E, I hand over to you, Jean-Jacques, to summarize the business development of another successful year of our company.

Thank you very much, Karl, and good afternoon on my side. I'm very satisfied with Hanover Re's performance in the 2024 financial year with a group net income slightly above 2.3 billion euro. We have delivered on the increased target of around 2.3 billion euro. Compared to the initial target of around 2.1 billion euro, the outperformance is driven by favorable investment income as well as a higher than expected reinsurance service result in both business groups. In other words, the operating performance was strong across all areas. Based on this positive development and the very healthy capitalization We will propose an increase in the ordinary dividend to €7 per share, complemented by a special dividend of €2. This brings the total dividend to €9, an increase of 25% compared to the previous year. In P&C, we have successfully expanded our portfolio in an attractive market environment. resulting in currency adjusted growth rate in reinsurance revenue of 11%. The combined ratio of 86.6% sits very well within our target range below 89%, reflecting the very good underlying profitability of our PNC portfolio. Furthermore, the impact of large losses was about 200 million euros below budget, providing us with an opportunity to take a more cautious view on specific claims from older underwriting years, including the Russia-Ukraine loss complex, and also to grow our resiliency in reserving, at least in line with the overall growth of our book of business. In life and health, reinsurance revenue was rather stable year on year. Increasing volumes in morbidity and longevity were mainly offset by an accelerated runoff of our U.S. mortality business following their last recaptures connected to our in-force management actions in 2018. Looking at the new business generation of 624 million euro, We have been successful in seizing attractive business opportunities and the reduction compared to the previous year was mainly attributable to the extension of an individual large treaty in the prior year, but also reflects our selective underwriting approach in longevity and the impact of regulatory changes on the financial solutions business in China. The profitability of our life and health business is very satisfactory. Experience variance was overall positive within all reporting categories and mitigated the reserve strengthening for pockets of our morbidity book of business, mainly in China. With a reinsurance service result of 883 million euro, we have exceeded our target of more than 850 million euro for the business. The return on investments of 3.2% was also very satisfying. Strong ordinary income is mainly driven by a combination of higher interest rates and a strong operating cash flow of 5.7 billion euro. Additionally, the moderate impact of impairments on real estate of 37 million Euro compared favorably with our expectations. Change in ECL as well as the change in fair value recorded in the P&L had a minor impact on the results. Cost efficiency, as you know, is another very important metric for Hanover RE and with a group cost ratio of 3.2% we can confirm our continued success in maintaining our competitive edge in this respect. Altogether, the return on equity of 21.2% highlights the company's very strong earnings power, and the solvency ratio of about 261% reflects our company's very healthy capitalization. Our strong capitalization is also the starting point for our dividend proposal for the 2024 financial year. It gives us the necessary flexibility to act on future growth opportunities in an attractive market environment, while at the same time paying a growing dividend to shareholders. The increased ordinary dividend of seven euro per share reflects the favorable business development in 2024 and our strong confidence in future earnings growth as the 7 euro figure will be the new baseline for our targeted progressive growth in ordinary dividends. In combination with the proposed 2 euro special dividend, the total dividend of 9 euro results in a payout ratio of 47.5. percent, which is broadly in line with historical levels. The proportion of retained earnings expresses our confidence in growing our book of business profitably at double digit return on equity also going forward. Shareholders' equity is up by 16.5 percent. The increase is driven primarily by the group net income for the period. although the overall impact from interest rates and currency movements was also quite positive. The CSM increased by about 6%, mainly reflecting the new business value generated by both business groups. We're very pleased with this development as it clearly exceeds our strategic growth target of more than 2% for the CSM. Risk adjustment. increased by 7.4%, mostly due to new business in P&C and assumption changes in life and health. Altogether, the growth in shareholders' equity, CSM, and risk adjustment highlights an attractive value creation in 2024 and gives us a strong foundation for our earnings outlook. Our long-term ROE performance highlights the fact that we're continuously providing our shareholders with attractive double-digit returns above the cost of capital, no matter whether we look at the 5-, 10-, or 15-year average. ROE performance also screens favorably compared to peers. As you know, we aspire to achieve not only a high ROE, but also a less volatile ROE. As you can see in the chart on the right-hand side of the slide, comparing the 10-year ROE performance with the market, we continue to deliver on this ambition. And in the top left quadrant, annulary is well-placed with clearly above-average ROE and below-average volatility. On that note, give the floor to Clemens for some more details on the financials.

Thank you, Jean-Jacques, and good afternoon, everyone. Starting with the development in P&C reinsurance, we have successfully expanded our portfolio, resulting in an increase in reinsurance revenue of 11%, adjusted for currency effects. The increase in net revenue was even slightly more pronounced as our ILS business came in very strong and the volume of our retrocession program has been reduced. As the reinsurance market environment continues to be favorable in most regions and lines of business, the growth has been well diversified. In APAC, the favorable underlying growth was mitigated by our portfolio pruning in 2023. The impact of large losses was 1.6 3 billion for the full year, the largest event in 2024, and in the fourth quarter was Hurricane Milton, with a net impact of 230 million euros for Hanover. Apart from this, the large loss experienced in Q4 was benign. Altogether, net large losses were around 200 million below our full year budget. providing us with the opportunity, as Jean-Jacques said, to take a more cautious view on specific claims from older underwriting years, including the Russia-Ukraine loss complex. Furthermore, the strong underlying profitability provided the flexibility to grow our resiliency level. In relation to the total reserves, which have grown in 2024, of course, we expect the resiliency to be at least stable. The analysis of Willis-Towers-Watson is not fully concluded yet, but is expected to confirm our internal view. The actual outcome of the third-party assessment will be disclosed, as usual, in May. Overall, our reserve resiliency, and I want to stress this, should be measured, including the risk adjustment. And the risk adjustment has increased now by another 143 million to around 1 billion at year-end 2024. Last not least, the combined ratio includes a discount effect of around 7.5%. This is still higher than the interest accretion in the reinsurance finance results, but our prudent initial reserving should offset, as in previous year, that difference. The increase in the discount effect in the fourth quarter can be explained by the increase in reserve resiliency at year-end, which largely happened in long-tail line, and by some true-up effects in the year-end calculations for this prior quarter. Altogether, the combined ratio of 86.6 is slightly better than our target and reflects the very healthy underlying profitability and our continued prudent reserving approach for both new business and older underwriting years. The strong investment result in P&C primarily stems from the improved ordinary income. The increase is mainly driven by higher interest rates supported by higher volumes from a strong operating cash flow. The amortization of our inflationary bonds added 149 million euros. Impairments on real estate spoke about this in Q3. They are at 37 million now, so moderate, also compared to our initially planned number for the year. The currency result, as part of the other result, was mainly impacted by the strengthening of the US dollar in the fourth quarter and amounted to minus 143 million euros. So this is really a swing by almost 250 million euros compared to the previous year. Altogether, the EBIT more than doubled to 2.4 billion euros. On the next slide. slide, the main contributor to the P&C service result is clearly the CSM release, reflecting the 2023 and 2024 renewals in a very attractive market environment. The rather high release in the second half of the CSM includes some catch-up effects due to a more prudent release in previous quarters. Importantly, I really want to note this, this does not have any impact on the overall level of profits because the higher CSM release is offset by a quite conservative reserving approach for the current year and a negative experience variance as you can see here. Apart from this, the negative experience variance also includes the offset of the tailwind from higher discounting versus HIFI, as mentioned earlier, and our P&C runoff results reflect a positive development in most lines of business but also some individual negative developments, including large losses like the Italy hail events from 2023, and also provisions for the Russia-Ukraine loss complex. Furthermore, the increase in resiliency is having an impact on the runoff results, in particular in the fourth quarter, which would be higher without this balance sheet strengthening. The loss component from new business, as you can see, is quite low, confirming the attractive rate environment in P&C reentry. The moderate decrease in the CSM in 2024 is connected to the previously mentioned catch-up effect. On a normalized basis, the CSM would have increased in 2024. So let's move on to life and health. Reinsurance revenue remained rather stable as expected. Underlying growth in morbidity and longevity has largely been offset by the runoff of our U.S. mortality book, which accelerated following the recaptures connected to our in-force management action in 2018. The reinsurance service result fully in line with our expectations with favorable contributions from mortality, longevity, and financial solutions. In morbidity, the result has mainly been impacted by further strengthening of the reserves for critical illness business in China. Furthermore, a client insolvency in the third quarter resulted in a negative one-off impact of 37 million euros connected to a financing treaty with this client. The investment result mainly reflects The good ordinary income, as mentioned earlier, the change in fair value of financial instruments had a positive impact of 57 million euros, partly offset by a negative 36 million impact from the valuation of an equity participation. Both effects should be seen as non-recurring. Altogether, our Life and Health Business Group reported EBIT of 934 million euros, an increase of 7%. Looking at the drivers for the reinsurance services, both the CSM release and the risk adjustment release are within the expected range. The experience variances of plus 204 million euros is driven by a table of claims experience across different lines of business and also by in-force management actions for our critical illness business in China. This partly mitigates the negative impact from the loss component of 439 million euros. The new business loss component was a minor 6 million euros. The main driver for the change in loss component was the reserves strengthening in mobility and the aforementioned client insolvency affecting the financing treaty. Altogether, the reinsurance Service design, as Jean-Jacques mentioned, sits comfortably within the target range above 850 million euros. The new business CSM and extensions on existing contracts together amounted to 624 million euros based on a diversified contributions from financial solutions, mortality, and morbidity. Changes in estimates had a positive impact of 415 million euros The main driver here for the positive change in estimations was our UK longevity business, and to a smaller extent, recaptures in US mortality. Adding positive currency effects, empty interest accretion, the total CSM increased by almost 10% after recognizing the regular CSM release. Altogether, I would like to point out that from an economic perspective, Assumption changes were rather neutral for Hanoveri. This is because changes in estimates within the CSM offset changes in estimates resulting in a loss component affecting the pH, P, and L for the current period. You know this was the imperative principle embedded in the standard here. This highlights the benefit of having a diversified portfolio in Lysenhill. On the next slide, the development of our investments. I think it's fair to say it was, again, very satisfactory. The ordinary investment income is strong. Several factors played a role here. The asset volume increased based on a strong operating cash flow. In addition, the reinvestment yields are still nicely above our average portfolio yield, with a continued positive impact on our returns from fixed income securities. The contribution from inflation-linked bonds was at 149 million euros. And finally, the contribution for alternative investments, so our real estate, private equity, infrastructure investments, increased as well. The impact from ECL and the overall valuation at fair value through P&L had only a minor impact. For our real estate investments, we recorded moderate impairments of 33%. 7 million euros driven by decreasing valuations for some objects. You may remember that we had taken a precautionary review as mentioned earlier already in the third quarter. So based on the year end information, the actual impairments were actually slightly lower and overall lower than expected in our guidance. So all in all, the return on investment of 3.2% is well above our 2%. 2.8% target. So, to conclude my remarks, the result for the financial year 2024 reflects a very healthy underlying profitability. 2024 also marks the first year of our current strategy cycle and all targets according to our strategic financial ambition have been met. Top and bottom line are growing nicely, providing strong basis for the coming years. And on that note, I'll hand back to you, Jean-Jacques, for the comments on the outlook. Thank you very much, Clemens.