Hannover Re has reported a substantial 20.2% surge in its property and casualty reinsurance operating profit, climbing to EUR 2.2 billion from EUR 1.9 billion in the previous year. This growth occurs despite a prevailing softening market cycle. Notably, natural catastrophe losses have remained below initial projections, leading to a modest EUR 29 million being allocated to insurance-linked securities (ILS) partners. The reinsurer is confident in meeting its full-year net income target of EUR 2.7 billion, showcasing its ability to navigate dynamic market landscapes effectively.
For the first nine months of 2026, Hannover Re's group net income saw a 6.9% rise, reaching EUR 2.1 billion, with an impressive return on equity of 21.1%. The overall operating profit (EBIT) also increased by 16.5% to EUR 2.9 billion, up from EUR 2.5 billion. The property and casualty reinsurance segment's combined ratio improved to 83.7%, primarily due to large losses falling below budgeted amounts. This strong performance underscores the company's disciplined underwriting approach and efficient operational framework, allowing for profitable expansion across various market conditions.
Despite an increase in overall business volumes during the first three quarters of 2026, the contract service margin for new business has experienced a decline. This reflects the impact of reduced pricing and volume shifts within the softening market. Gross reinsurance revenue for the nine-month period slightly decreased to EUR 19.5 billion from EUR 19.7 billion year-over-year. However, the net reinsurance service result improved to EUR 2.6 billion, compared to EUR 2.4 billion previously. The reinsurer successfully secured increased profitable volumes in treaty renewals, partially mitigating the effects of price reductions and currency fluctuations.
The net new business contract service margin for P&C operations decreased by 11.9% to EUR 2.3 billion, down from EUR 2.6 billion last year. This reduction is attributed to changes in pricing and volume from renewals, along with negative influences from discounting and currency effects, indicating that the softer pricing environment is indeed diminishing the potential profitability of newly underwritten business. Consequently, property and casualty reinsurance gross revenues fell by 4.9% to EUR 13.2 billion, or 2.4% at constant exchange rates.
Large losses for the first nine months of 2026 totaled EUR 1.316 billion, slightly higher than the previous year but still comfortably below the budgeted EUR 1.7865 billion. Hannover Re has prudently booked the full budgeted amount to bolster its reserve resilience. Significant catastrophe events included an August earthquake in Colombia (EUR 215.7 million), severe Atlantic windstorms affecting the Iberian Peninsula and Morocco (EUR 135.5 million), and Winter Storm Fern in the United States and Canada (EUR 107.6 million). Total net natural catastrophe losses amounted to EUR 892 million, with only EUR 29 million of these losses shared with ILS capital partners due to the consistently low level of major events.
The ongoing subdued level of major losses points to favorable outcomes for ILS arrangements. In contrast to 2025, when Hannover Re shared EUR 524 million in losses with ILS capital partners, the 2026 figure is significantly lower. Christian Hermelingmeier, Chief Financial Officer, highlighted the company's strong earning power, noting that profitable portfolio growth continuously expands investment volume, benefiting from higher interest rates in reinvestment activities. Both factors are enhancing current investment income and ensuring a reliable contribution to group profit. Hannover Re anticipates mid-single-digit percentage growth in gross P&C reinsurance revenues and a combined ratio below 87% for the full year 2026.
