Hannover Re: Travel vs. Arrive On Credit Already Priced Tightly

Hannover Re (HNR1 GY) cross-asset view. Strong performance of equity and credit running into results is now driving a minor sell-off. Lack of incremental good news is the issue, alongside credit priced very tightly to start with, we fear.

• Results this morning were focused on the upgraded ordinary dividend (in common with a range of insurance peers) but the recent strong run in the equity wasn’t pushed higher by larger incremental positives. Equity was down as much as 2.5% but now only c.1% lower in a relatively flat market.
• Across Euro IG credit, senior financials are broadly the weakest performing sector but still 0.1bp tighter in absolute terms. The big losers today are DePfa’s senior credits, OTP’s Slovenian bank, Grenke, CBRE GI with Hannover Re coming in at 9^th weakest performer.
• One commonality we’re seeing across insurers is some positive results on Solvency II ratios (as we saw here) but upgraded payouts to equity holders tempering improvements in spreads. Reinsurers’ credit has tightened meaningfully YTD (generally 10-25bp against 6bp for wider EuroIG credit), so perhaps this is simply a failure of results to show incremental upgrades to expectations.