Hannover Ruck SE

Good morning, everyone. Welcome to our earnings call on our results for the first quarter of 2026. Today's speakers are Clemens Jungkirchel, our CEO, and Tristan Hamelin-Majadis, CEO of Hanovery. For the Q&A, they will be joined by George Hever and Sven Althoff. With that, I'll hand over to you, Clemens. Thank you, Axel, and good morning from Hanover. So, let's dive into it. I think it's fair to say that we had a strong start into the year 2026. We've seen a continuation of the positive trends from recent quarters. Underlying profitability was very pleasing in both business groups, and the balance sheet and the resilience of Hanna-Marie have clearly been further strengthened. This will support sustainable earnings growth and will help to manage volatility going forward. We are operating in an unstable geopolitical environment. The Iran war, with its severe implications for people across the region, as well as for global economies, is contributing to elevated uncertainty. The impact on insurance and reinsurance from these ongoing events also remains uncertain. As it is not yet possible to come up with reliable estimates, we have not yet booked any precise amounts as a large loss estimate. So far, we have received only, I would say, a minimal number of claims notifications from our clients. We do expect to have some exposure. However, we feel comfortable that any losses that may potentially have occurred will be more than covered by the unused part of our large loss budget in the first quarter. So let me come back to Hanover East's overall performance in the first quarter, 2026, with a group net income of 711 million euros. We had a very good start to the year. In P&C reinsurance, The combined ratio of 83.6% is well below our target of 87%. And in line with our usual approach, as you all know, we have booked the full large loss budget for the quarter, despite actual large losses coming in clearly lower amounts. Additionally, the strong underlying profitability allowed for a further increase in reserve resiliency. The top-line growth in P&C has been impacted by currency effects and a decreased volume in structured reinsurance. which is a bit lumpy, as you all know. This is mainly driven by the anticipated reduction in the session rate for some individual large reinsurance programs. In fact, based on our strong relationship, we were able to even increase our share on this business, partially mitigating the underlying reduction in seeded reinsurance volumes. In the traditional business, The FX-adjusted growth was 2.1%. This is slightly below the target range for the full year. Supported by strong growth opportunities in the April renewal, our full-year growth target does remain achievable. The slightly weaker growth in Q1 can partly be explained by the impact of IFRS 17 accounting. Changes in commissions, and particularly in the structure of profit and sliding scale commissions, had a visible impact on the growth, not necessarily on the growth of premium, but on reinsurance revenue. So here it is important to mention that the high amount being directly deducted in the top line does not filter through one-to-one to the bottom line. The impact on earnings. is expected to be a lot lower. The underlying premium growth was approximately two percentage points ahead of the revenue growth. The new business CSM of 1.1 billion euro mainly reflects our successful January renewals and fully supports our planning for the year. And Christian will provide some further details on the new business CSM. The business performance in life and health reinsurance confirmed the positive trends seen in recent quarters. We were successful in growing our portfolio. The new CSM generation of 249 million euros increased compared to the previous year. In combination with the reinsurance service result of 254 million euro, The business group is well on track to deliver on our targeted profitable growth. The investment performance was very satisfactory. The return on investment of 3.6% is slightly above the target and is based on a strong, ordinary income from fixed income securities. Finally, the capitalization remained strong with a solvency ratio of 254%. This figure includes foreseeable dividends based on a quarterly accrual of dividends to be paid for 2026. And apart from this, the decrease compared to the year 2025 is mainly driven by market movements and the successful capital deployment for growth with the corresponding increase in required capital. On the next slide, shareholders' equity increased by 7.3%. Apart from the positive contributions from Q1 earnings, currency effects were also positive. The CSM increased by 9.7%, mainly reflecting the new business generated by both business groups. And as you know, the new business contribution from P&C is seasonally high, due to the recognition of the January renewals. The risk assessment increased by 5.2%. This is also driven by new business and some assumption changes in life and health. Altogether, the developments on this slide show a continued positive value creation for our shareholders. And on that note, I'd like to hand over to you, Christian.

Yeah, thank you, Clemens, and good morning, everyone. I'm now on slide seven. Our P&C result is based on the strong quality of our diversified portfolio, and as we booked the full large loss budget for the quarter, the result did not benefit from the benign cut environment in the first quarter. And additionally, the combined ratio of 83.6% includes a further increase in reserve resiliency. As usual, we do not provide exact numbers for the change in resiliency without full reserve analysis, which is only available at the end. But what I can say is that the underlying runoff result was clearly positive, and our decision to add additional prudency is the reason why the reported runoff result is negative at minus 48 million euros. Therefore, the underlying combined ratio is even better than the reported 83.6%. As Clemens already explained, the reasons for the decline in reinsurance revenue, our mid-single-digit growth target for the traditional business remains achievable. We continue to see growth opportunities in the current market environment, but we will not pursue top-line growth just for the sake of growth. The accounting impact from changes in sliding scale and profit commission is having an impact on reported growth figures, but altogether, the likelihood of ending at the lower end of our target range is probably higher than at the upper end. The investment result increased mainly driven by a higher contribution from our fixed income portfolio. The other result does not include any unusual items. The currency result was fairly neutral. The main contributor to the T&C service result is the CSM release reflecting recent renewal trends. Our prudent reserving approach is the main reason for the negative experience variance and also, as explained, the negative runoff result. Additional prudency for business earned from recent underwriting years is reflected in the experience variance. Additional prudence for prior underwriting years shows up as a negative runoff. The very low new business loss component confirms that rates remained adequate on a broad basis despite the rate increases we've seen in recent renewals. The increase in CSM in the first quarter is mainly driven by our successful January renewals with a diversified contribution from different regions and lines of business. The new business CSM amounted to 1.1 billion euros. It should not come as a surprise that this number has decreased compared to the previous year as the reinsurance industry and also Hennemarie reported decreasing reinsurance rates for the January renewals. Furthermore, our volume in structured reinsurance has decreased. Those two effects account for roughly 250 million of the decline compared to previous year. So that's can be explained by currency and also discounting effects. As those factors were largely anticipated, the level of CSM at the end of the first quarter fully supports our targets for 2026. In life and health reinsurance, we have recorded strong top-line growth of plus 15% adjusted for currency effects. Main drivers for the growth are larger deals in US financial solutions and also expansion of business in our Australian subsidiary. Large part of the revenue contribution from U.S. financial solutions is connected to short-term deals. The revenue contribution from these deals may well be lower again in the coming year. The reinsurance service result of 254 million euro provides a very good starting point to meet our full-year target of 925 million. The result does not include any larger extraordinary items. The experience variance was clearly positive, whereas assumption changes and the prudent increase in risk adjustment had a negative impact on our results. The investment result mainly reflects the good ordinary income from fixed income, but also includes a negative impact from the valuation of an equity participation. The currency result was minus 25 million Euro. The two-letter effects are the reason for a slightly weaker EBIT performance compared to the reinsurance service result. Looking now at the IFRS 17 components of the service result, the CSM release is the main profit driver, and the release in Q1 is slightly above our expected range. We have been quite successful in financial solutions in recent quarters, and some of the deals have a rather quick release pattern with a visible impact on the overall release pattern. Risk adjustment release was in line with expectations. As mentioned, the experience variance is clearly positive based on a diversified contribution across our traditional business. This mitigates the negative impact from the change in loss component of 133 million euros. So altogether, a diversified experience compared to initial expectations and not unusual for a diversified portfolio. The main reasons for the loss component are assumption changes for onerous business and a prudent increase in risk adjustment for morbidity businesses. Larger part of this can be attributed to critical business in China, but also other regular assumption values contributed to this overall number. CSM development on the right side shows that the new CSM generation, which includes extensions on existing contracts and the IFI are nicely ahead of the regular release supporting sustainable earnings growth in our life and health business group. The contribution to the new CSM generation comes from financial solutions and traditional business. Changes in estimates did not have a material impact in the first quarter. Additionally, supported by positive currency effects, the CSM increased by 3%. The development of our investments was, again, satisfactory. The ordinary investment income reflects the continued rollover in the higher-yield environment. And as you know, we have accelerated this with active loss realization in 2025, and we are now benefiting from these actions. Distributions from alternative assets were below average in the first quarter. By contrast, though, the fund valuation for alternative assets recognized at their value through P&L had a positive impact, and the P&L contribution in total from alternative assets was very solid. Realized gains are mainly driven by the sale of some real estate. So, all in all, the ROI of 3.6% marks a good start to the year and is slightly above our 3.5% target. Our investment portfolio is well positioned to deliver a resilient performance in volatile times. Also, with respect to private credit, the risk is very manageable. Our exposure in the narrowest end, meaning private credit funds, is around 1% of our assets under management and highly diversified, even including exposure to direct infrastructure debt and highly rated CLOs. The total exposure to private debt is in the low single-digit billions. This is not at all a concern from a risk perspective. At the bottom of this slide, you can see that interest rate movements led to an increase in unrealized losses in our fixed income portfolio. The next slide is the annual reserve review by Willis Towers Watson has been concluded. I'm more than happy to provide you with the final view on our reserve adequacy at year end 2025. The final number is 3.2 billion euro, and in line with our initial indication provided in March. In relation to total undiscounted reserves and including the risk adjustment, the total resiliency has increased from 7.7 to 8.6%. Generally, we feel very comfortable with the current reserving position and there remains flexibility around the level. So, going forward, our unchanged reserving approach for new business and the InfosBook should view further growth in our reserve resiliency in absolute terms, reflecting the increase in business volume. Considering the generally uncertain claims environment, recently increased risk around inflation trends and the softening market environment, We prefer to be on the cautious side. The developments in 2025 are also visible in the loss triangles for 2025, which we have published on our website today. The increase in prudency is clearly visible, particularly in the long taglines. The underlying trends in the development of our loss ratios are largely positive, but specific underwriting years in the liability segment also include an increase in our best estimate reserves. And now to conclude my remarks, the first quarter 2026 was a good start to the year. We reported strong earnings and strengthened again our balance sheet at the same time. On that note, I'll hand over back to you, Clemens, for some comments on the outlook.

Thank you, Christian. So, let's start with a view on the April renewals, which you can find on slide 17. I think it's fair to say the renewals were characterized by a market environment quite similar to the January renewals. Re-insurers are well capitalized and continue to see re-influence market as an attractive place to deploy capital, and as a result, The competition has led to continued price pressure in the April renewals. However, the competition does remain rational. The rates are softening from attractive levels, and reinsurance rates remain risk adequate on a broad basis. In this environment, our strong market position, including our low cost ratio, enabled us to act on selective growth opportunities. The overall strong growth was predominantly driven by our digital business and an expansion of our footprint in India. Furthermore, we grew successfully in specialty lines. The overall risk-adjusted price change for our diversified portfolio, as you can see here, was minus 3.6%. Rate reductions were most pronounced for loss-free property cap business. Other areas renewed more stable. In U.S. casualty and loss-affected non-proportional business in aviation, we could achieve price increases. Overall, the volume-weighted growth in 26 renewals is at 5.6%, so in line with the targeted growth for our traditional business. So based on the business performance in the first quarter and the outcome of recent renewals, we do confirm the guidance for 2026 without any changes. As explained, the growth target in P&C remains achievable. The strong quality of our P&C portfolio with a combined ratio of 83.6% in the first quarter puts us in a good position to deliver on the combined ratio target of below 87%. Based on a normal large loss experience, we should additionally remain in a position where we can build resiliency reserves in 2026. Also, in life and health, we are well on track to achieve our target for the reinsurance service result of around 925 million euros. The return on investment is expected to reach around 3.5%. So altogether, we are confident to deliver on earnings growth in 2026 and in the following year. This concludes my remarks, and we would be happy to answer your questions now. Thank you.