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SRC Research the bank-independent analysts house for Financial and Real Estate stocks today presents a rating update about MDax-listed reinsurer Hannover Re
The bottom line rocketed by 17% to Euro 1.15bn and the RoE was unchanged to last year at very high 14.7%, despite a more than Euro 500m hike in shareholders' equity. This 15% Roe is the highest in global reinsurance industry and HNR managed to deliver about 15% RoE very steady for the last four years since 2012. This is a great success story in this low interest world and with a soft non-life reinsurance market where Hannover Re faces some fierce competition in several lines of business. Another great success came from the Life & Health unit where EBIT jumped by more than 50% to over Euro 400m.
We see Hannover Re well prepared for 2016 and the years ahead. The premiums volume should stay more or less stable and company's guidance for the 2016 net profit is at least Euro 950m which is a bit conservative in our view. With regards to a Euro 4.75 dividend per share for 2015 the dividend yield is at c. 5%. For 2016 we expect the dividend payment to be similar to the year 2015, again at about Euro 4.75 (Euro 3.25 basis and Euro 1.50 bonus for capital management). The dividend should come from another high net profit, being in a range of Euro 1.0bn to Euro 1.1bn which is the most realistic 2016 scenario for us, at the moment. The Hannover Re share has further upside and should profit from the good sentiment after the 2015 record year. We upgrade the stock from Accumulate to Buy and also lift our target price from Euro 105 to Euro 108 which comes from our RoNAV valuation model. Even with a Euro 108 share price Hannover Re has a very decent dividend yield of 4.4%.
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