Hannover Re & Munich Re could combine forces on PE investments

Hannover Re and  Munich Re could combine their private equity investments in a single entity to increase their power on the PE market while smoothing the investment earnings volatility for both groups, officials at Hannover Re have acknowledged.

“We have tried to find ways to reduce the volatility, the future volatility, in the valuation of those portfolios, and therefore we thought about further increasing the diversification of a combined portfolio together with Munich Re,” Hannover Re chief financial officer Clemens Jungsthöfel (Pictured) told his company’s Q3 investor call.

Hannover Re’s private equity investments to date have proven “quite diversified across regions, currencies and industries,” Jungsthöfel claimed, but pending IFRS accounting changes will push more of the volatility in valuation changes into the P&L, he explained.

Further advantages could include increased bargaining power as a combined investment entity. Jungsthöfel expects reduced investment expense rates, access to higher-tier funds, increased investment rights and larger allocations or other padded terms and conditions.

Sides are just regulatory nods away from consummation. “There are still some regulatory hurdles to take,” Jungsthöfel said. “Therefore, it is all in the planning for 2022 for the fourth quarter.”

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