Hannover Ruck SE

Well, good morning, everyone, and welcome to our earnings call on the first quarter results of 2025. Today's speakers are Clemens Jungstorfer, our news CEO, and for the first time, Christian Helmeningmeier, our CFO. For the Q&A, we are joined by Sven Althoff and Claude Schaefer, as in the past. And with that, I hand over to you, Clemens.

Thank you, Karl, and good morning from Hanover. I'm pleased to report that we got off to a very solid start in 2025, despite a significant impact from large losses in P&C reinsurance against the backdrop of absorbing the losses from the LA wildfires with an impact of $631 million. This is very satisfying and highlights the resilience of our diversified earnings generation. With group net income of $480 million, we also remain in a position to confirm our full-year target of around $2.4 billion. The strong underlying profitability and the further strengthened balance sheet gives me considerable confidence to be even better positioned in potentially volatile times. In P&C, re-revenue increased by 5.1%, adjusted for FX The reported growth number is affected by a refinement in the calculation for the non-distinct investment component. Excluding this effect, the underlying growth would be in the double digits, a level that provides good support for our target of more than 7%. A couple of additions and details on the non-distinct investment components will be explained by Christian later on. Our successful January renewals are reflected in a strong new business CSM, including loss component of 1.5 billion euros. The combined ratio of 93.9 reflects the fact that our large loss budget was exceeded by 330 million, mainly driven by the mentioned LA wildfire losses. Furthermore, the ratio reflects our prudency in our reserving approach also in the first quarter. Hence, and I would really like to emphasize this, the underlying profitability of our P&C portfolio was very strong again and clearly supports our full-year target below 88%. In life and health reinsurance, revenue decreased by 4.1%, adjusted for currency effects, The main reason is the reducing volume in our US mortality book. Generally, the more important number to measure growth in life and health is really the new business generation. And at 232 million euros in the first quarter, this has been quite a successful quarter in this regard. The reinsurance service result of 243 million is in line with the overall stable positive trend observed in previous quarters and clearly supports our target for 2025. The investment performance was very satisfactory. The return on investment of 3.5% is comfortably above the target and is based on strong ordinary income. Finally, the capitalization remained strong with a solvency ratio of 273%. This figure includes foreseeable dividends based on a quarterly accrual of the ordinary dividend paid for the year 2024. As you probably saw on the news ticker last week, give my strong capitalization. According to all relevant capital models, we intend to redeem a 500 million euro hybrid bond on the first call date, which is in June. Refinancing of this bond is currently not envisaged. On the shareholders' equity, increased by 2.4%. The positive contribution from Q1 earnings was partly diminished by currency translation. The CSM increased by 8.4%, mainly reflecting, of course, the new business generated by both business groups. As you know, the new business contribution from P&C is seasonally high due to the recognition of the January renewals. The risk adjustment increased by further 3.3%, driven by new business in P&C and assumption changes in life and health. On a more general note, we are now in the third year of IFRS 17 reporting, and observing the progressive growth in the CSM and the risk adjustment gives us a lot of comfort as regards future earnings growth. On that note, Christian, over to you.

Yeah, thank you, Clemens, and good morning, everyone. Also, from my side, a pleasure to guide you for the first time through our figures. Our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The top line growth is slightly below our 7% target for the full year. As Clemens already mentioned, the reported number is impacted by a refinement in our accounting. We have adjusted the approach to calculate the non-distinct investment components from a written to an earned basis. This is more in line with the earning pattern of the other components of the reinsurance revenue. However, this modification was not reflected in Q1 2024. um and this results in a one-off effect when comparing the revenue numbers for the individual quarters excluding this base effect from q1 2024 the reinsurance revenue would have increased by more than 10 percent the healthy growth trends are additionally confirmed by the underlying premium growth also being in the double digits last but not least the seated business is not impacted by the refined ending calculation hence the impact on reported growth in the net revenue is a bit more pronounced in summary i would like to emphasize that firstly there is no impact on earnings because there are corresponding effects in the service expenses offsetting the impact on reinsurance revenue. And secondly, on an underlying basis, the growth trends are very healthy and well in line with our plan. The accounting impact on reported growth will decline over the course of the year. The combined ratio of 93.9% reflects the impact from large losses that ended up 330 million euro above our quarterly budget. Apart from the LA wildfires, the overall large loss experience was benign, excluding the impact of large losses exceeding the budget. Our combined ratio is well in line with our target of below 88%. This means that the underlying profitability was, again, very healthy. Furthermore, I would like to emphasize that despite the impact of large losses on the results in the first quarter, we have not changed our prudent reserving approach for the current and prior underwriting years. Finally, the combined ratio includes a discount effect of around 8%. This is still higher than the interest accretion in the reinsurance finance results, but our prudent initial reserving should reflect the difference. The strong investment results primarily stems from the increased ordinary income from fixed income securities and very solid returns from alternative assets. For the sake of completeness, the amortization of our inflation-linked bonds added 42 million euro. The other result includes positive currency effects of 66 million. The main contributor to the P&C service result is the CSM release, reflecting the recent renewals in a very attractive market environment. As in 2024, the CSM release includes some catch-up effects due to a prudent release in previous periods, but the impact in the first quarter was minor and will remain so throughout 2025. The experience variants mainly reflect the AI wildfires, pushing total large losses clearly above our quarterly budget. The runoff result was an overall minus 167 million euro, and continued prudency is the reason why this number is negative. The underlying reserve runoff was positive as expected. The loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The CSM growth is mainly determined by our successful January renewals, resulting in a strong new business CSM of 1.5 billion euro, as already mentioned. Compared to the previous year, the number increased moderately. This development mirrors our renewal reporting growth at slightly lower risk-adjusted prices and a reduced session rate to our retro programs. changes in interest and if X rates had a smaller effect overall. Let's move now on to life and health. Here, reinsurance revenue decreased by 4.1%, largely driven by US mortality. Growth was mainly recorded in UK longevity. The reinsurance service result lines up well with the rather stable and good profitability in previous quarters. The mortality experience has been favorable, including a positive one-off of around €20 million from a client recapture, offsetting a negative effect from increasing the risk adjustment for our morbidity book in Asia. And this again highlights the benefits of our diversified portfolio. The contribution from financial solutions and longevity continued to be strong, Overall, the reinsurance service result of €243 million provides good support for our full-year target of more than €875 million. The investment result mainly reflects good ordinary income from fixed income. Altogether, the EBIT contribution from our life and health business group was €253 million in the first quarter. Looking briefly at the IFRS 17 components of the service result, the CSM release is the main profit driver and the release in Q1 is within the expected range. The risk adjustment release was extraordinary low in the first quarter. We expect a normalization over the course of the year. The experience variance is clearly positive, mainly driven by our mortality book. based on a diversified contribution from different geographies. This mitigates the negative impact from the loss component of 77 million euro. The new business loss component was a minor 8 million euro, the main driver being an increase in risk adjustment for our mobility business in China. This is not based on new trends resulting in assumption changes, but the overall level of profitability in life and health allowed us for more cautious positioning with regards to our critical illness book in Asia. Altogether, the reinsurance service result is slightly ahead of our expectation. The CSM development on the right side is negatively impacted by currency effects, The CSM generation, which includes the new business CSM and also extensions on existing contracts amounted to 232 million Euro based on a diversified contribution from financial solutions, morbidity and mortality. Changes in estimates did not have a material impact in this first quarter. Altogether, the total CSM remained almost stable. The development of our investments was again very satisfactory. The ordinary investment income reflects the continued rollover in a higher yield environment and a strong operating cash flow. Inflation-linked bonds contributed, as mentioned, 42 million euro in line with our expectation. And additionally, the contribution from also alternatives was very solid in the first quarter. As you can see on this slide, all other line items in the investment income had no real meaningful influence on the results, particularly with regard to impairments and the change in expected credit loss. This highlights the strong resilience of our portfolio. All in all, the return on investment of 3.5% marks a good start to the year and is above our 3.2%. At the bottom of this slide, you can see that the unrealized gains within the OCI have changed materially in the category others. Let me explain this. This reflects our participation in viridium that has now to be accounted as an asset held for sale and so just is reclassified in the reporting. As the annual reserve review by Willis Towers Watson has been concluded, I'm happy to share and provide you with their final view on our reserve adequacy at the end 2024. And the final number is 2.523 billion euro. This means that the reserve resiliency has increased more than initially indicated in March. We are always cautious, of course, in predicting the outcome of an independent third-party review, so this does maybe not come as a real surprise. Still, it provides additional comfort for our reserving approach and future assumptions, and particularly for the long tail lines. In light of a generally uncertain claims environment, we even more prefer to be here on the cautious side. This is also visible in the loss triangles for 2024, which we have published today on our website. The increase in prudency is clearly visible, particularly there in the long tail lines. The underlying trends in the development of our loss ratios are largely positive, but specific underwriting years in the liability segment also include a limited increase in our best estimate reserves. Generally, we feel very comfortable with the current reserving position. At the end of 2024, the overall prudency level of resiliency reserves plus risk adjustments stood at 7.7% of nominal net reserves. Going forward, our unchanged reserving approach for new business and the in-force book should view further growth in our resiliency reserves in absolute terms, reflecting the increase in business volume. To conclude now my remarks, while the LA wildfires had an impact on our quarterly results, there is still substantial loss budget available for the rest of the year. Our business model is designed to absorb volatility from large cut events, moreover with our strong P&L and balance sheet. And the fact that we have confirmed our profit guidance for the year underlines our ability to do so. And on that note, I'll hand back to you, Clemens, for some comments on the outlook.