Investors react to 'messy' Q2 results from Hannover Re

By David Bull

Aug 13 - (The Insurer) - Shares in Hannover Re were trading flat at midday on Wednesday after closing down 3.5% on Tuesday in response to what KBW analyst Darius Satkauskus described as a “messy quarter” for the reinsurer.

On the company’s second-quarter earnings call yesterday, analysts pressed management about the miss on its Solvency II ratio, which was at 261% at the end of June 2025, below consensus of 272%.

KBW’s Satkauskus said: “Hannover Re’s 2Q25 results were not taken well by the market, with the shares down over 3% on the day. We think the miss in Solvency 2 led to the most confusion given the disclosure limitations.”

The analyst said that following the conference call and conversations with Hannover Re’s management, his view is that operating capital generation was not an issue, assuming that reserve additions made by the reinsurer were “true” prudence.

“This prudence build-up together with the moving parts in the 'other' bucket, including taxes, likely explain the miss today,” he suggested.

Satkauskas, who holds a market perform rating on Hannover Re’s shares, remained positive on the stock, however.

He noted that positives in the company’s earnings included a strong underlying combined ratio, which suggests Hannover Re is “well-positioned” to support its combined ratio during the softening phase of the hard market, “particularly as run-off should still see hard market benefits coming through”.

Hannover Re's second-quarter P&C combined ratio improved to 82.1% from 87.6%, while its P&C combined ratio deteriorated slightly to 88.4% from 87.8%, including the impact of large net individual losses, such as the California wildfires, and reserve strengthening, including for Russia-Ukraine claims.

Normalised for large losses, Satkauskas said the reinsurer’s P&C combined ratio stood at 87.9%, just below the 88% full-year target.

He noted that Hannover Re’s management had used “robust headline results” to add prudence to reserve buffers, which explained a negative 419 million euro ($491 million) run-off result.

He said that management apportioned around 5 percentage points of the first-half combined ratio to the prudence built during the period.

“This means that the real underlying result could be running in the low 80s. It is debatable whether we should also normalise for the low triple-digit Russian and Ukraine reserve addition,” he said.

“Compared to the peers, we think Hannover Re is the strongest soft market play. The group is yet to recognise some of the recent hard market benefits via run-off whilst the peers have been reflecting more of the benefits in the opening loss picks, we think,” the analyst continued.

As previously reported, the reinsurer maintained its full-year net income guidance of around 2.40 billion euros after increasing the metric by 38% to 833.5 million euros for the quarter and by 13.2% to 1.30 billion euros for H1 2025.

Hannover Re CEO Clemens Jungsthöfel said that his firm is benefiting from a third consecutive year in a “very attractive market environment”, with stable renewal conditions in traditional lines outside property cat and double-digit growth for structured products.