Hannover Re: How much longer?

The reinsurer's management is exceptional in every respect, while its slogan "somewhat different" is not entirely untrue amongst its peers in the reinsurance sector.

In summer 2024, this did not prevent us from warning in these columns that its current levels of profitability and valuation appeared difficult to sustain.

Were we right? Its stockmarket valuation has been stagnant since then, while results for Q3 2025, published this morning, show that business appears to have stabilized.

For the first nine months of the year, adjusted for inflation, operating profit is thus identical to last year's. This is in a context that remains exceptionally favorable, with a combined ratio of only 86%, compared with 88% at the same time last year, still well below the historic sector average.

This favorable economic environment has enabled the property and casualty insurance segment to easily absorb the slip of the life insurance segment—which accounts for a quarter of consolidated premium income—and the investment segment, which was penalized by an "actively realized" loss on an undisclosed investment.

Hannover Re therefore maintained a return on equity of 22% in Q3, a level that remains well above its historical average. In 2025, it forecasts net profit of €2.6bn. For the following year, it projects net profit of €2.7bn.

These projections are, of course, based on the promise that there will be no unexpected disasters or distortions in the financial markets, nor any contraction in the reinsurer's structured solutions segment, particularly regarding so-called "bulky" transactions, i.e., opaque but occasional mega-contracts that can quickly reach hundreds of millions of dollars.

Last October, CEO Clemens Jungsthöfel reassured analysts by arguing that the dizzying price increases since 2022 had enabled the reinsurer to provision its risk in a perfectly comfortable manner—a policy he described as "tough but fair" to clients.

In ten years, Hannover has doubled its profits and dividend distributions to shareholders. Its profitability continues to evolve at levels well above the norm in an unusually favorable claims environment. In this respect, fears of an economic downturn remain high, as at such valuation levels, this would undoubtedly be severely punished by investors.