Table of Contents
As the world's third-largest reinsurer, Hannover Rück (ISIN: DE0008402215) is benefiting from several long-term megatrends. Climate change and demographic change are two of them. Strong pricing power in an inflationary environment is also providing tailwinds. The same applies to interest rates, which have been rising for some time.
Source: Hannover Rück stock price
It is therefore hardly surprising that sales and profits have been rising for years. And shareholders are rewarding this. Over the past ten years, the stock price has more than tripled. However, with an expected P/E ratio of 13, the valuation is by no means high. There are also attractive dividends, which analysts expect to rise further. But is that alone enough to justify a purchase? The following Hannover Rück stock analysis reveals more.
With a market capitalization of around €34 billion, Hannover Rück is one of the largest reinsurance companies in the world – the third largest, to be precise. It acts as a reinsurer for primary insurers, thereby assuming part of their risks. Hannover Rück pursues a two-pronged strategy, operating in the property and casualty reinsurance segments. These will be explained in more detail below.
Source: Factsheet Hannover Rück FY2024
Let's move on to the company's core segment, property and casualty reinsurance. It accounts for more than 70 percent of reinsurance premiums. In 2024, more than €18 billion was generated here, representing an increase of almost 11 percent. Risks from property, liability, motor, and other property insurance are covered. Typical examples of insured risks include natural disasters, industrial and liability claims. However, cyber risks and parametric risks are also offered for coverage.
The significantly smaller segment is life and health reinsurance. It generated reinsurance premiums of €7.7 billion in 2024, growing by 1.1 percent. Here, Hannover Rück assumes risks from life, health, and disability insurance. These include traditional life insurance, biometric risks such as death, occupational disability, or long-term care, and reinsurance in connection with private health insurance. The company also offers tailor-made solutions for capital relief and risk transformation for primary insurers.
There are advantages here: personal reinsurance is characterized by a high degree of risk predictability and long-term earnings stability. However, growth has recently been clearly weaker than in property and casualty reinsurance. In terms of EBIT margins, however, both segments are similarly profitable. EBIT margins were above the 12 percent mark in both cases.
In addition to the large reinsurance segments, investment income is also generated. This arises from investments of insurance premiums on the capital market. In 2024, this resulted in additional investment income of just over two billion euros. Growth was more than 26 percent. This is attributable to the sharp rise in interest rates. However, the capital base also grew exceptionally strongly, rising by 9.6 percent to just under 66 billion euros.
The reinsurance market has several distinctive features that set it apart from other insurance or financial markets. A key feature is the cyclical nature of the market. Premium levels and demand for reinsurance cover are subject to what is known as an underwriting cycle. This means that premiums rise in periods of frequent major losses or capacity constraints, while they fall in quieter periods when capital is readily available and competition increases. In economics, a similar effect is known as the “pig cycle.” The market is also capital-intensive and risk-prone. Reinsurers must therefore have strong capital reserves to cover extreme loss events such as natural disasters, pandemics, or major industrial losses. Reinsurers are hit hard because they are only called upon to pay out once thresholds have been exceeded. But when they are, they pay out handsomely.
In addition to good risk management and a solid capital base, a global orientation is also important. Why? Reinsurers operate internationally in order to diversify their risks geographically and limit their exposure to local events. The market is also characterized by a high degree of concentration. A relatively small group of large reinsurers dominates global business. The Big 3 account for around 30 percent of the market. At the same time, there are niche providers that specialize in specific regions or lines of business. Their risk profile is more specialized and may also involve higher risks. Hannover Rück's biggest competitors in the global reinsurance market are Münchener Rück, Swiss Re, and SCOR SE.
Source: Peer comparison of leading reinsurers
A peer comparison of market capitalizations clearly shows the market leader's outperformance. However, Hannover Rück, the third-largest player, also outperforms the number two in the market, Swiss Re. SCOR from France, the smallest European provider, brings up the rear.
In addition to these three companies, Hannover Rück also competes with other reinsurers such as Berkshire Hathaway Reinsurance Group, Lloyd's of London, and regional and specialized reinsurance providers.
Although the first quarter of 2025 initially impressed with a 4.6 percent increase in gross reinsurance income to just under EUR 7 billion, there was a setback in terms of earnings: the consolidated result fell significantly by almost 14 percent to EUR 481 million. The reinsurance service result was particularly weak, falling by 29 percent to EUR 515 million. Let us now turn our attention to the individual segments.
Source: Financial data from Hannover Rück
In property and casualty reinsurance, exceptionally high major losses initially led to a decline in earnings, although premium income in this segment grew by 7.2 percent. However, the losses significantly exceeded the budgeted major loss budget, which ultimately had a negative impact on the operating result. As a result, the reinsurance service result fell by almost 47 percent and the operating segment result by 29.4 percent.
In contrast, life and health reinsurance performed well despite a decline in reinsurance premiums. The strong operating result was particularly impressive. The segment EBIT for life and health reinsurance rose by almost 40 percent. Longevity covers—which insure against the risk that an insured person will live longer than statistically expected—and successful contract renewals were the main factors supporting the positive business development in this area. However, due to the significantly lower figures, the segment was unable to offset the burdens from property and casualty reinsurance. The same applies to the development of investments.
In the investment segment, the investment result rose by 15 percent to EUR 577 million in the first quarter of 2025. This exceeded expectations, as the return on investments was 3.5 percent above the annual target. At 273 percent, the capital coverage ratio under Solvency II remains well above the long-term target. Hannover Rück therefore appears to remain on a solid financial footing.
Despite the difficult start to 2025 and the challenges posed by major losses, the reinsurer remains confident that it will achieve its targets for the full year 2025. Net consolidated profit is expected to rise to around €2.4 billion. This is based on a market environment that remains favorable for reinsurers and solid operating performance in both business segments.
In property and casualty reinsurance, for example, management expects currency-neutral premium growth of more than seven percent. At the same time, the combined ratio is expected to be below 88 percent. This initially points to a good underwriting result. In order to take account of the increased risks from natural catastrophes, the major loss budget for the year as a whole has been increased from €1.825 billion to €2.1 billion.
In personal reinsurance, on the other hand, Hannover Rück expects growth in the contractual net service margin (CSM) of around two percent. In addition, a reinsurance service result of more than €875 million is targeted, supported by positive business development, particularly in longevity coverage.
The company is also optimistic about its investment activities. The return on investments is expected to reach at least 3.2 percent, with a moderate increase in the investment volume overall and stable market conditions. This is naturally lower than the Q1 figures, but can be explained by lower interest rates on the market.
However, Hannover Rück remains conservative in some areas. The prerequisite for achieving the profit targets is that the actual burden from major losses remains within budget and there are no serious disruptions on the capital markets. Major losses can therefore quickly ruin the result – in the truest sense of the word. The same applies to stock market crashes, which can weigh on investment income.
In the dividend analysis, Hannover Rück achieved a strong overall score of 13 points. This makes it one of the most reliable dividend payers on the market. It is therefore also listed among the top dividend scorers in StocksGuide. The reinsurance stock is particularly impressive due to its high reliability and attractive dividend growth.
Source: Development of dividends on Hannover Rück stock
For example, dividends have been paid consistently over the past ten years, which has been rewarded with the highest score for continuity. The average dividend growth of just under 12 percent over the past five years is indicative of a shareholder-friendly distribution policy. At around 48 percent, the payout ratio for the last three years is balanced – conservative enough to strengthen the capital base, but also generous enough to offer investors an appropriate stock in the company's success. Dividend increases have been accompanied by regular profit growth.
Analysts expect this trend to continue in the future. The dividend is already estimated at €13.75 for 2029. The expected dividend yield could therefore rise to almost 5 percent. By contrast, the current dividend yield is solidly in the mid-range at 2.5 percent. Historically, the yield has been slightly above 3 percent.
Source: Dividend score of the Hannover Rück stock
The dividend analysis of Hannover Rück stock thus shows that, from a forward-looking perspective, the stock may be particularly interesting for long-term income investors who value stability and growth. Let's move on to the valuation.
In terms of valuation, Hannover Rück stock is not overvalued, either currently or historically, with a trailing twelve-month (TTM) P/E ratio of 14.9.
Source: Price / Earnings Chart
With an expected P/E ratio of 13.4, the company is once again below this level. This will be achieved through further earnings growth. A look at analyst estimates reveals more.
Source: Earnings per share, P/E ratio and EV/sales Estimates 2025, 2026 to 2029
For example, revenue growth is expected to be in the mid-single digits in the coming years. With a bit of luck, EPS growth could even land in the high single digits more often. However, analysts also predict a period of weakness for the years 2027 to 2028. Either way, the P/E ratio could fall to just under 11 by 2029.
Hannover Rück is an impressive defensive reinsurer with stable earnings power, high capital discipline, and a strong market position.
Specifically, the reinsurance company benefits from structural growth drivers such as climate change, demographic change, and growing risk awareness in the economy and society. Despite temporary burdens, such as above-average major losses, the strategic course remains intact and the targets for the 2025 fiscal year have been confirmed. Best of all, however, the valuation does not appear overpriced based on the P/E ratio. It is in line with historical levels. The stock therefore offers an attractive overall package, particularly for investors with a long-term horizon. It has a solid dividend history with a growth-oriented distribution policy, a reliably high return on equity above the target level, and an overall fair valuation.
Source: Hannover Rück target price
Analysts also tend to agree with this assessment. More than half of them recommend buying the stock. However, the average target price of €289.11 is only slightly above the current price. This means that there is likely little left to gain for many investors. As a result, 29 percent of analysts consider the stock to be a hold, while 19 percent even recommend selling.
The author and/or persons or companies associated with the StocksGuide own or may own stocks in Hannover Rück.
This post represents an expression of opinion and not investment advice. Please note the legal information.