Hannover Re: Very pleasing half-yearly result

Friday, 03. August 2007 07:30



Very pleasing half-yearly result

* Operating profit (EBIT) + 15.8%
* Group net income + 14.2%
* Non-life reinsurance highly satisfactory despite
significant burden of catastrophe losses (net income for the
reporting period + 9.4%)
* Life and health reinsurance posts excellent result (net
income for the reporting period + 75.8%)
* Sale of Praetorian completed in Q2
* Return on equity 19.9%

Hannover, 3 August 2007: In its half-yearly report presented today
Hannover Re expressed considerable satisfaction with the development
of its business. "Our result as at 30 June 2007 is a good platform
for achieving our 2007 profit target - namely a return on equity of
at least 15 percent after tax", Chief Executive Officer Wilhelm
Zeller affirmed.

Effective 31 May 2007 the sale of Praetorian Financial Group, Inc.,
the US primary insurer transacting specialty business, was
successfully completed. The balance sheet structure of the Hannover
Re Group has improved still further as a consequence of this sale;
the provisional disposal profit amounts to 17.7 million euro. As in
the first quarter, the after-tax result of Praetorian is reported in
a separate line within the consolidated statement of income (net
income from discontinued operations) in accordance with IFRS. The
figures for the previous year have been adjusted accordingly in order
to preserve year-on-year comparability.

"Following the sale of Praetorian we shall now concentrate
exclusively on our core business of non-life and life/health
reinsurance. With our strategic orientation as a 'Multi Specialist'
we are positioned across a broad front and optimally diversified",
Mr. Zeller emphasised.

The operating profit (EBIT) as at 30 June 2007 increased by 15.8%
year-on-year to 467.7 million euro (403.9 million euro). Group net
income improved by 14.2% to 293.0 million euro (256.6 million euro),
generating earnings of 2.43 euro (2.13 euro) a share.

The gross premium booked by the Hannover Re Group contracted by
10.4 % to 4.5 billion euro (5.0 billion euro). The principal factors
here were the sale of Praetorian and also the associated withdrawal
of Clarendon from active specialty business. It was not possible to
entirely offset these effects despite the vigorous growth achieved in
life and health reinsurance. At constant exchange rates the decrease
in gross premium would have been 7.8%. Given the increased retention
of 85.8% (77.0 %), net premium came in 1.9% higher at 3.7 billion
euro (3.6 billion euro).

The state of the market in non-life reinsurance, the largest business
group, remains favourable after eight consecutive years of rate
increases. The June/July treaty renewals in the United States passed
off better than expected. Although modest rate deterioration was
observed in property business, the price level is still adequate. In
property catastrophe business prices largely remained on a high
level; only in some subsegments were slight reductions in rates
recorded. All in all, the business prospects in non-life reinsurance
are most promising.

"The development of business in our domestic market is especially
gratifying. In order to derive optimal benefit from the opportunities
available in the attractive German market we increased our stake in
E+S Rück, which bears sole responsibility within the Group for German
business, by 10% as at 1 April 2007 to 65.8%", Mr. Zeller explained.

The gross premium income booked in total non-life reinsurance, which
since the beginning of the year has also included structured covers
(formerly financial reinsurance) and the remaining specialty business
in the primary sector, contracted in line with expectations to
3.0 billion euro (3.7 billion euro) as at 30 June 2007, a fall of
20.5% compared to the same period of the previous year. At constant
exchange rates, especially against the US dollar, the decline would
have been 18.1%. Due to a significantly higher retention of 83.3%
(73.2%), net premium earned fell by a less marked 7.3% to 2.3 billion
euro (2.5 billion euro).

Following comparatively heavy expenditure on catastrophe losses in
the first quarter - attributable to winter storm "Kyrill" in Europe
-, the second quarter brought a number of catastrophe events on a
small to moderate scale. They included, most notably, windstorm
events in Australia and the Arab region as well as flooding in the
United Kingdom. Overall, the total net burden of catastrophe losses
and major claims for the second quarter amounted to 46.3 million
euro; the figure for the first half-year totalled 214.5 million euro,
corresponding to 9.2% of net premium in non-life reinsurance. The
combined ratio stood at 101.9% (99.4%).

The net underwriting result came in at -56.1 million euro
(-14.9 million euro). The operating profit (EBIT) in non-life
reinsurance increased by 5.9% to 321.5 million euro (303.6 million
euro). Group net income climbed by 9.4% to 241.4 million euro
(220.6 million euro), equivalent to earnings of 2.00 euro (1.83 euro)
a share.

The development of the life and health reinsurance business group as
at 30 June 2007 was thoroughly gratifying, building seamlessly on the
robust growth momentum of the 2006 financial year. Hannover Re
operates under the Hannover Life Re brand in this business group and
transacts its business on the basis of a "five pillar model". This
encompasses the financing of new and existing business, the
development of new markets and products (including for example
special seniors' and annuity products), bancassurance, partnerships
with large multinational insurance groups as well as traditional
life, annuity, accident and health business. "This broad positioning
ensures that we enjoy a promising portfolio and vigorous organic
growth going forward", Mr. Zeller stressed.

In the United Kingdom our focus continues to be on enhanced
annuities; in the United States special health products for senior
citizens offer good growth opportunities. The company supports
clients in the cultivation of new markets, assisting them inter alia
with the design of insurance products according to Islamic principles
as well as with marketing and distribution methods.

The gross premium volume in life and health reinsurance surged by a
vigorous 19.5% to 1.5 billion euro (1.3 billion euro) as at 30 June
2007. At constant exchange rates growth would have come in at 22.8%.
The level of retained premium increased slightly to 90.2% (88.0%).
Net premium earned consequently climbed by as much as 22.5% to
1.4 billion euro (1.1 billion euro).

Hannover Re also expressed considerable satisfaction with the results
trend as at 30 June 2007. The operating profit (EBIT) was boosted by
65.2% to 129.2 million euro (78.2 million euro). This amount includes
extraordinary income of some 25 million euro from the write-back of
reserves that are no longer required. The EBIT margin of 9.4% was
comfortably in excess of the minimum target of five percent; even
without the aforementioned special effects it would have reached
7.5%. Group net income increased by a very good 75.8% to
89.9 million euro (51.2 million euro); this is equivalent to earnings
of 75 cents (42 cents) a share.

Hannover Re was similarly highly satisfied with the performance of
its investments: the cash inflow into the technical account in
conjunction with market movements and a weaker US dollar left the
volume of assets under own management virtually unchanged from 31
December 2006 at 19.5 billion euro. Ordinary income excluding
interest on deposits grew by 6.3 % due to the higher average yield in
the asset portfolios to reach 409.5 million euro (385.1 million
euro). As part of a proactive approach to portfolio management -
especially in the area of equity securities - the highly favourable
market trend was used to realise profits of 134.3 million euro
(49.9 million euro) on the disposal of investments. This contrasted
with roughly unchanged realised losses of 36.7 million euro
(38.0 million euro). Net income from investments under own management
climbed by 29.7% to 482.0 million euro (371.5 million euro). The
interest on deposits of 98.0 million (112.4 million euro) showed a
further decline owing to the planned reduction of funds held by
ceding companies, particularly under old structured covers. Net
investment income from the total portfolio improved by an appreciable
19.8% to 579.9 million euro (483.9 million euro) as a consequence of
the highly gratifying performance of the assets under own management.

Outlook
In view of the continued good profit opportunities available on many
markets, not only in non-life and life/health reinsurance but also on
the capital markets, Hannover Re is looking to a very good result for
the full 2007 financial year.

"What is more, we have already reallocated the risk capital freed up
by the sale of Praetorian to other attractive business avenues in the
reinsurance sector", Mr. Zeller explained. By running a higher
retention in the still lucrative property catastrophe segment it is
possible to tap into promising scope for boosting profitability. Not
only that, the expansion of life and health reinsurance, the
cultivation of new markets in Central and Eastern Europe as well as
in the high-growth Islamic reinsurance market - together with the
increased stake in E+S Rück - all offer Hannover Re favourable
opportunities for redeployment of freed up capital.

Market conditions in non-life reinsurance are still largely good, an
observation supported by all the treaty renewal phases completed so
far within the year. "This trend was confirmed most recently by the
renewals as at 1 July 2007 in the United States, when around a third
of our portfolio in North America was renegotiated", Mr. Zeller
noted. Even though the hard market has now passed its peak and some
ceding companies are raising their retentions, the rate level remains
attractive overall. While some slight deterioration has been seen in
property business, the rates for business written by our company are
still commensurate with the risks. Rates in US catastrophe business
continue to be on a high level, with only a few subsegments seeing
modest erosion.

Notable major losses incurred so far in the third quarter are a plane
crash in Brazil and renewed flooding in the southwest of England. The
information currently available suggests that the earthquake and a
typhoon that affected Japan will not lead to any significant loss
expenditure.

All in all, the net premium volume for total non-life reinsurance
should come in at least on a par with the previous year. Provided the
burden of major claims remains within the expected bounds of around
8% of net premium, a gratifying profit contribution can be
anticipated.

The market opportunities available in life and health reinsurance
should facilitate double-digit organic premium growth and a similar
rise in profits. Growth impetus is expected to derive from European
and various Asian markets as well as from South Africa. Pilot
projects in the US market aimed at tapping into growth opportunities
for alternative sales channels with the aid of system-supported
underwriting are also bearing fruit. The marketing of simple,
transparent life insurance products can therefore be expected to
unleash fresh growth stimuli in the US life market. For the business
group as a whole we anticipate substantial enlargement of the premium
volume and double-digit increases in results.

As far as the investment portfolio is concerned, the expected
positive cash flow over the further course of the year should serve
to boost the volume of assets. In a normal market environment the
income from assets under own management should continue to increase.

In view of the developments described above Hannover Re expects to
close the full 2007 financial year on a very good note. "Assuming
that the burden of major claims is within the expected bounds and
there are no downturns on capital markets, another excellent result
should be attainable in the current year. Additional non-recurring
income of around 180 million euro is expected from the reform of
corporate taxation", Mr. Zeller noted. Yet even without the effect of
tax reform Hannover Re anticipates a result in excess of that in
2006. It remains the company's intention to pay out a dividend in the
range of 35% to 40% of the normalised result.


For further information please contact:

Press and Public Relations / Investor Relations:
Stefan Schulz (tel. +49 / 511 / 56 04-15 00,
e-mail: stefan.schulz@hannover-re.com)

Press and Public Relations:
Gabriele Handrick (tel. +49 / 511 / 56 04-15 02,
e-mail: gabriele.handrick@hannover-re.com)

Investor Relations:
Gabriele Bödeker (tel. +49 / 511 / 56 04-17 36,
e-mail: gabriele.boedeker@hannover-re.com)


Hannover Re, with a gross premium of around 9 billion euro, is one of
the leading reinsurance groups in the world. It transacts all lines
of non-life and life and health reinsurance. It maintains business
relations with more than 5,000 insurance companies in about 150
countries. Its worldwide network consists of more than 100
subsidiaries, branch and representative offices in around 20
countries with a total staff of roughly 2,000. The rating agencies
most relevant to the insurance industry have awarded Hannover Re very
strong insurer financial strength ratings (Standard & Poor's AA-
"Very Strong" and A.M. Best A "Excellent").


Disclaimer:
Some of the statements in this press release may be forward-looking
statements or statements of future expectations based on currently
available information. Such statements are naturally subject to risks
and uncertainties. Factors such as the development of general
economic conditions, future market conditions, unusual catastrophic
loss events, changes in the capital markets and other circumstances
may cause the actual events or results to be materially different
from those anticipated by such statements. Hannover Re does not make
any representation or warranty, express or implied, as to the
accuracy, completeness or updated status of such statements.
Therefore, in no case whatsoever will Hannover Re and its affiliate
companies be liable to anyone for any decision made or action taken
in conjunction with the information and/or statements in this press
release or for any related damages.



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Hannover Rück
Karl-Wiechert-Allee 50 Hannover Germany

WKN: 840221;
ISIN: DE0008402215; Index: CDAX, CLASSIC All Share, HDAX, MDAX,
MIDCAP, Prime All Share;
Listed: Prime Standard in Frankfurter Wertpapierbörse, Amtlicher
Markt in Niedersächsische Börse zu Hannover,
Freiverkehr in Börse Berlin Bremen, Freiverkehr in Börse Düsseldorf,
Freiverkehr in Hanseatische Wertpapierbörse zu Hamburg, Freiverkehr
in Bayerische Börse München,
Freiverkehr in Börse Stuttgart, Amtlicher Markt in Frankfurter
Wertpapierbörse;
View document
Related Links: Hannover Rück SE
Author:
Hugin
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