(Alliance News) - Hannover Re on Tuesday reported a decline in first-quarter profit, as large losses from natural catastrophes - especially wildfires in California - weighed on results.

The Hannover-based reinsurer said net income fell by 14% in the three months to March 31 to EUR492.4 million from EUR571.4 million. Diluted earnings per share also fell by 14%, to EUR3.98 from EUR4.63.

Pretax profit declined to EUR670.8 million from EUR784.6 million, while earnings before interest and tax fell 14% to EUR696.5 million.

The company attributed the lower profit to natural catastrophe losses, which totalled EUR765 million in the quarter, far exceeding the EUR435 million budget. The most costly event was the California wildfires, with a net loss of EUR631 million.

Partially offsetting the claims hit, reinsurance revenue rose 4.5% to EUR6.97 billion from EUR6.67 billion. Within this, property and casualty reinsurance grew 7.2% to EUR5.10 billion, while life and health reinsurance slipped 2.4% to EUR1.88 billion.

The reinsurance service result, which reflects underwriting profitability, dropped 29% to EUR514.8 million. The combined ratio in property and casualty rose to around 94% from 88%, exceeding the company's full-year target of below 88%. A combined ratio below 100% indicates a profit on underwriting, so the lower the better.

Hannover Re's investment result rose 16% to EUR576.9 million from EUR498.3 million, yielding a return on investment of 3.5% for the quarter, above the full-year target of at least 3.2%.

The company reaffirmed its 2025 guidance for group net income of around EUR2.4 billion, up from EUR2.3 billion in 2024, assuming normal large loss activity and stable capital markets.

It also reiterated plans to grow property and casualty reinsurance revenue by more than 7% at constant exchange rates and achieve a reinsurance service result of more than EUR875 million in life and health, up from EUR883 million.

Return on equity for the quarter was 16%, above Hannover Re's strategic target of 14%, while book value per share rose to EUR100.19 from EUR97.80 at the end of 2024. The capital adequacy ratio under solvency II was 273%, well above the long-term target of more than 200%.

"The expenditures for the wildfires put us significantly above the large loss budget for the first quarter," said Chief Executive Officer Clemens Jungsthofel.

By Eva Castanedo, Alliance News reporter

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