But the reaction on the capital market was anything but friendly: with a minus of more than five percent, the share was by far the biggest loser in the Dax that day. This example alone shows the difficult relationship between Hannover Re and investors on the stock market.
The share has been listed in the leading index for almost a year. Hannover Re wasn’t even worth reporting what would have led to a storm of celebration elsewhere. Of course you are happy, it was said when asked. But basically the Dax decision is in the hands of the German stock exchange. They would rather continue to increase profits and be a reliable partner for customers.
Euphoria looks different. “The Hannover Re share is a special investment and has a core fan club,” says Steffen Weyl, fund manager at the cooperative Union Investment. Hedge funds and “quick money”, on the other hand, are more likely to invest in competitor Swiss Re, which is more aggressive in the market.
This is also reflected in the course development. The Hannover Re share has performed better overall since it was listed on the Dax. Since the beginning of the year, however, it has been lagging behind Swiss Re.
Half a year earlier, Hannover Re had just failed to get promoted to the Dax. At that time, a large part of the workforce said that the leap into the top stock exchange league had been avoided – that says a lot about the mentality in our own ranks.
This attitude also shows why the Talanx subsidiary, the third largest reinsurer in the world behind Munich Re and Swiss Re, still leads a shadowy existence in the world of Germany’s top 40 companies. Participants report that the conservative Hannover Re and its investors often do not understand each other during regular exchanges. Above all, the reinsurer wants to achieve its own forecasts, while investors want to exceed their plans. Information on the financial consequences is always desired if another major catastrophe occurs anywhere in the world.
That’s what happened in early October. The group had invited to the Investors’ Day in London – a week after Hurricane “Ian” caused severe devastation in the south of the USA. It is now known that “Ian” is the third most severe hurricane of all time by insured losses. At that time, however, CEO Jean-Jacques Henchoz did not find an answer to possible burdens for his company and referred to the estimates of the damage modelers and his own calculations, which were probably only available a month later.
The investors who came acknowledged their reluctance with sales – the share was one of the biggest losers in the Dax. “Hannover Re is not exactly striving for attention,” says Werner Schirmer, analyst at Landesbank Baden-Württemberg (LBBW), describing the relationship between the two sides.
Ranked third among the worst hurricanes of all time by insured losses.
(Photo: IMAGO/ZUMA Wire)
Henchoz has headed the reinsurer since 2019. The 58-year-old Swiss, who has spent most of his working life at competitor Swiss Re, is considered an experienced industry expert and has carefully developed Hannover Re since taking office. He opened up new markets in Asia and business areas such as cyber insurance. However, the vision of “striving for sustainable outperformance” sounds as calm as the company’s overall public image: solid, reliable and reserved.
Henchoz leads Hannover Re with caution – and boredom
Henchoz leads the group carefully. Numerous crises in the recent past, such as pandemics, war or severe natural disasters, had less of an impact on the balance sheet than expected. Quite in contrast to the competitor Swiss Re, which had slipped into the red in the meantime. Hannover Re under Henchoz, on the other hand, offers the kind of boredom that investors like to look for in reinsurers, according to investors.
Recently, however, competitors have been a long way from being bored. In December, world market leader Munich Re raised its profit forecast for this year to four billion euros, causing a stir in the industry. It would be EUR 700 million more than in the previous year, even if the two figures cannot be compared directly due to the change in accounting rules to the new IFRS 17 standard.
The situation was reversed for a long time. Many investors saw Hannover Re as the better alternative – lower costs, a leaner portfolio and a focus on business areas that promised higher returns. Munich Re shares have been soaring for months now, showing that priorities have shifted. “The market currently believes that Munich Re is more down-to-earth. Hannover Re, on the other hand, stands out under the term conservativeness,” says Union Investment fund manager Weyl.
The Swiss has been leading the reinsurer since 2019.
(Photo: IMAGO/sepp spiegl)
Even after the recent high, investors see more potential in Munich. This is also due to the fact that the share’s valuation is still below that of Hannover Re. At the same time, the yield for the expected dividend this year is slightly higher for the Munich rivals.
Analysts like Ashik Musaddi from the major American bank Morgan Stanley now have to admit that their expectations of Hannover Re’s rise to the Dax have not been met. After the ascent, he took up the assessment and defined a price potential of 27 percent at 200 euros at the time. This mark has not been reached to date. Meanwhile, Musaddi advises holding Hannover Re shares while continuing to recommend Munich Re as a buy. His colleague Tyfonas Spyrou from the private bank Berenberg behaves the same way.
Even the parent company, Talanx, which owns just over half of Hannover Re’s shares, is now doing a lot more to please investors. To the surprise of many, CEO Torsten Leue announced a dividend of two euros per share for the past year shortly before Christmas, 40 cents more than a year earlier. The industry and investors took notice. By the end of 2025, the dividend should be EUR 2.50 per share. Almost a year after the Dax promotion, such surprises are missing from Hannover Re.
More: Hannover Re is aiming for a profit of at least 1.7 billion euros