European markets opened strongly after Bayer AG announced stronger-than-expected first quarter earnings, pushing its stock 11% higher. The pharmaceutical giant’s sales reached 13.74 billion euros, surpassing analysts’ expectations of 13.52 billion euros. This strong performance stands in contrast to recent challenges faced by German reinsurers, particularly Hannover Re, which disclosed significant losses attributed to the California wildfires.
Hannover Re reported its largest net individual loss of 631.4 million euros stemming from the wildfires that devastated large portions of California. The group’s net profit declined by 14%, to 480 million euros. This continued drop is a reminder of the financial burden associated with these disasters. The reinsurance sector did over one billion euro in losses due to wildfires in Los Angeles. This unusually large hit underscores the disproportionate risk that natural disasters pose to the industry.
In its Q1 statement, the company disclosed that gross payments for major claims reached €764.7mn in the first quarter alone. This sum far exceeded the original budgeted amount of 435 million euros. Similarly, Hannover Re disclosed that large-loss payments jumped to EUR 764.7 million during Q1. This spike was almost entirely due to the tragic California wildfires, far surpassing large loss budget of EUR 435 million.
Bayer’s strong financial performance reversed Bayer’s financial guidance for the entire industry. The company’s shares surged by 9% following the earnings announcement, which not only beat expectations but confirmed its guidance for constant currency growth amidst a challenging tariff environment.
“All in all, it was encouraging to see Bayer beat expectations and confirm its constant currency guidance, despite the uncertain tariff environment. However, we caution that the underlying results continued to be weak, with significant earnings declines and ongoing high legal risks.” – Falko Friedrichs, equity analyst at Deutsche Bank.
The Stoxx 600 index reflected this positive sentiment, climbing 0.2% at 8:37 a.m. in London. The U.S. stock futures fell sharply during overnight trading even as stocks were rising in Europe. Investors are jittery, waiting for more inflation data, including the producer price index report due Thursday.
Softbank’s Vision Fund business reported a record loss for the fiscal year ending in March. They showcased a deceleration in earnings growth due to the heavy upfront spending on technology. This perfect storm only exacerbates an already fragile market fueled by rapidly changing economic indicators and continued geopolitical strife.