Hannover Re reports highly satisfactory interim result

Donnerstag, 08. November 2007 07:30



Hannover Re reports highly satisfactory interim result

* Operating profit (EBIT) +14.3%
* Group net income +55.0%
* Return on equity 25.7%
* Non-life reinsurance: Net income for the reporting period
+17.5%
* Life and health reinsurance: Further increase in operating
profit (EBIT) and special effects almost triple the net income for
the reporting period
* Outlook for the full financial year revised upwards
* Dividend increase envisaged

Hannover, 8 November 2007: In its interim report published today
Hannover Re expressed considerable satisfaction with the development
of its business as at 30 September 2007. "With our result we have put
in place a good platform for surpassing our originally envisaged
profit target for the full financial year - namely a return on equity
of at least 15 percent. Indeed, taking into account the non-recurring
effect from the tax reform, the return on equity is set to reach at
least 20 percent", Chief Executive Officer Wilhelm Zeller explained.

Although the hard market in non-life reinsurance has now passed its
peak, rates are still commensurate with the risks after eight
consecutive years of consistent price increases. Hannover Re thus
continues to be able to generate profitable business. The development
of life and health reinsurance was exceptionally favourable.

The operating profit (EBIT) as at 30 September 2007 improved by 14.3%
on the same period of the previous year to reach 690.3 million euro
(603.6 million euro). Group net income surged by 55.0% to
589.3 million euro (380.1 million euro). This figure, which reflects
in part a reduction of 179.0 million euro (after minority interests)
in deferred taxes resulting from the corporate tax reform, was
equivalent to earnings of 4.89 euro (3.15 euro) a share.

Hannover Re continues to enjoy a strong capital base: compared to the
position as at year-end 2006 shareholders' equity grew by 314.8
million euro to 3.2 billion euro. The book value per share increased
accordingly by 10.9%. The total policyholders' surplus, comprised of
shareholders' equity, minority interests and hybrid capital, stood at
5.1 billion euro (4.9 billion euro).

The gross premium booked by the Hannover Re Group contracted as
expected by 11.1% as at 30 September 2007 to 6.4 billion euro
(7.2 billion euro). Key factors here were the sale of Praetorian and
the associated withdrawal of Clarendon from active specialty
business. These effects were not entirely offset by the vigorous
growth in life and health reinsurance. At constant exchange rates the
decline in gross premium volume would have been 8.0%. In view of the
increase in the level of retained premium to 86.4% (76.3%), net
premium nevertheless climbed by 4.5% to 5.5 billion euro (5.3 billion
euro).

The state of the market in non-life reinsurance, the largest business
group, remains favourable even though the hard market has now passed
its peak. "The decisive factor is that rates in most segments are
still commensurate with the risks and hence the business outlook
remains bright", Mr. Zeller emphasised. Only in a few lines, such as
US casualty business - and here especially directors' and officers'
(D&O) insurance -, are prices and conditions no longer adequate in
certain segments. Hannover Re consequently scaled back its business
volume accordingly in these areas. The situation in property business
was still adequate despite modest rate cuts. Prices in US property
catastrophe business for the most part remained high, with slight
rate reductions observed only in a few isolated areas. All in all,
prospects in non-life reinsurance continue to be favourable.

Hannover Re considers itself optimally positioned to face the
challenges of a softening market: in typically cyclical non-life
reinsurance business it has practiced a policy of systematic cycle
management for many years, meaning that in upward phases it enlarges
its market share, only to scale it back as the cycle turns downwards
- while at the same time pinpointing attractive market and product
niches such as reinsurance transacted in accordance with Islamic
principles. Along with property catastrophe business, worldwide
credit and surety reinsurance, marine reinsurance and the markets of
Central and Eastern Europe currently offer the highest levels of
profitability. The share of the lucrative German market was also
boosted thanks to new business relationships.

As anticipated, gross premium in total non-life reinsurance
contracted as at 30 September 2007 by 21.8% relative to the same
period of the previous year, falling to 4.1 billion euro (5.2 billion
euro). At constant exchange rates, especially against the US dollar,
the decrease would have been 19.0%. With the level of retained
premium rising sharply to 83.9% (72.6%), net premium declined only
marginally by 4.7% to 3.4 billion euro (3.6 billion euro).

On the claims side the third quarter passed off thoroughly
satisfactorily. A number of smaller natural catastrophe losses were
incurred - including hurricane "Dean" with loss expenditure coming in
below 10 million euro - as well as two aviation claims. All in all,
the burden of catastrophe losses and major claims in the third
quarter stood at 35.7 million euro. The total net burden for the
first nine months amounted to 259.2 million euro. This is equivalent
to 7.6% of net premium in non-life reinsurance and hence within the
multi-year average of 8%. The combined ratio came in at 100.6%
(100.5%).

The net underwriting result of -50.3 million euro was on a par with
the previous year. The operating profit (EBIT) in non-life
reinsurance contracted by 2.6% to 453.2 million euro (465.3 million
euro). Due to the positive effect of the corporate tax reform, Group
net income rose by a substantial 17.5% to 393.8 million euro
(335.2 million euro), corresponding to earnings of 3.27 euro
(2.78 euro) a share.

The development of the life and health reinsurance business group as
at 30 September 2007 was dynamic and most gratifying: opportunities
to generate growth and profitability here by organic means continue
to be very good. Hannover Re, which operates in this business group
under the Hannover Life Re brand name, conducts 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
(such as special senior citizens' and annuity products),
bancassurance, partnerships with large multinational insurance groups
as well as traditional life, annuity, accident and health business.
"This strategy ensures that we enjoy a promising portfolio and
vigorous organic growth, thereby enabling us to further significantly
boost our premium volume and result in the third quarter", Mr. Zeller
emphasised.

The company has identified clear growth prospects for annuity
insurance in individual retirement provision in the industrialised
nations: in the United Kingdom the focus continues to be on enhanced
annuities; in the United States special health insurance products for
seniors offered good growth potential. "In life and health
reinsurance, as in non-life reinsurance, we have also set our sights
on the emerging market of (re)insurance in conformity with Islamic
principles. In this area we assist our clients not only with risk
transfer but also with the design of new products, and we support
them as regards marketing and sales methods", Mr. Zeller added.

Gross premium in life and health reinsurance climbed by a vigorous
17.7% as at 30 September 2007 to reach 2.3 billion euro (2.0 billion
euro). At constant exchange rates growth would have been 21.6%. The
level of retained premium rose to 90.5% (86.0%), and net premium
earned consequently surged by an even more appreciable 23.6% to
2.1 billion euro (1.7 billion euro).

Hannover Re was similarly satisfied with the results as at 30
September 2007. The operating profit (EBIT) was virtually doubled to
209.9 million euro (107.8 million euro). This amount includes
extraordinary income of around 25 million euro both from the first
half-year and from the third quarter. The resulting EBIT margin of
10.0% was thus comfortably in excess of the target figure of 5.0%.
Yet even without the special effects the EBIT margin would have been
a very good 7.6%. Against this backdrop and assisted by the
implications of the corporate tax reform, Group net income surged
exceptionally strongly to 203.6 million euro after 70.8 million euro
in the comparative period of the previous year. This was equivalent
to earnings of 1.69 euro (59 cents) a share.

Hannover Re was similarly satisfied with the performance of its
investments: although capital markets were jittery in the third
quarter - as a consequence of the credit crunch and the crisis on the
US housing market - and hence subject to considerable volatility,
Hannover Re was scarcely affected by these market movements due to
its conservatively oriented, diversified portfolio. Given the very
minimal holding of bonds with subprime exposure relative to the total
asset volume, write-downs of a mere 4.6 million euro were taken. The
cash inflow into the technical account in conjunction with market
movements and a weaker US dollar left the portfolio of assets under
own management - totalling 19.5 billion euro - virtually unchanged
from the position as at 31 December 2006. Ordinary income excluding
interest on deposits climbed by 10.5% to 627.3 million euro
(567.6 million euro) due to a higher average yield in the portfolios.
As part of the proactive approach taken to portfolio management -
especially with regard to equities - profits of 164.3 million euro
(189.8 million euro) were realised on the disposal of investments.
This contrasted with virtually unchanged realised losses of
60.1 million euro (70.1 million euro). Net income from the portfolio
of assets under own management grew by 5.8% to 681.0 million euro
(643.6 million euro). Interest on deposits increased by 8.4% to
166.6 million euro (153.7 million euro). Against this backdrop the
net investment income from the total portfolio improved on the same
period of the previous year by 6.3% to 847.6 million euro
(797.3 million euro).

Outlook
Based on the attractive market opportunities available in non-life
reinsurance and life/health reinsurance and given the current state
of the capital markets, Hannover Re is looking to a very good result
for the full 2007 financial year.

The company has used the risk capital freed up by the sale of
Praetorian to tap into other attractive opportunities in reinsurance
business: by running a higher retention in segments that are still
lucrative it can pursue promising potential avenues for boosting
profitability. Furthermore, by expanding its life and health
reinsurance portfolio and cultivating new markets in Central and
Eastern Europe as well as in the high-growth Islamic reinsurance
market - not to mention the increased stake in E+S Rück and the
assumption of the remaining 50% interest in Hannover Life Re
Australasia as at 1 October 2007 - Hannover Re enjoys good scope for
allocating the capital that has become available.

Despite a softening market in non-life reinsurance conditions remain
broadly positive - as has been borne out by all the rounds of treaty
renewals completed in the course of the year to date. In those areas
that have seen rate reductions, such as aviation business, prices are
nevertheless still adequate. Catastrophe losses such as winter storm
"Kyrill", the flooding in the United Kingdom and the windstorm/flood
event in Australia should serve to at least hold prices for natural
catastrophe business stable. Rate reductions in the single-digit
percentage range are anticipated in the United States owing to the
absence of damaging hurricanes so far this season. Property
catastrophe business nevertheless remains profitable. In Germany rate
increases under non-proportional programmes in motor liability
business are possible in light of rising expenditures for bodily
injury claims.

"The annual get-togethers of reinsurers and their clients in Monte
Carlo in September and in Baden-Baden and the United States in
October similarly demonstrated that the rate level as a whole
continues to be commensurate with the risks", Mr. Zeller noted.

Current estimates suggest that the widespread fires that raged across
California in the fourth quarter will produce a market loss of at
least 1.5 billion US dollars. Hannover Re anticipates a net loss
burden in the low double-digit millions from this event.

For the full 2007 financial year the net premium volume in non-life
reinsurance is likely to come in at least on a par with the previous
year. Provided the burden of catastrophe losses and major claims for
the full year remains in line with the expected figure of around 8%
of net premium, a gratifying profit contribution can be expected.

In life and health reinsurance Hannover Re is looking to further good
growth impetus - stemming inter alia from European markets as well as
a number of Asian markets and South Africa. In October 2007 Hannover
Re established a new subsidiary in Bermuda that will assume an
important position within the life and health reinsurance group and
significantly strengthen the worldwide network. For the business
group as a whole Hannover Re expects appreciable growth in premium
volume and double-digit increases in results.

On the investment side the anticipated positive cash flow over the
remainder of the year should serve to boost the asset volume. Given a
normal market environment, further growth is likely in the income
generated from assets under own management.

Bearing in mind the good development of the operational business
described above and the non-recurring effect associated with the
reform of corporate taxation, Hannover Re anticipates a very good
result for the full 2007 financial year. "Assuming that the burden of
catastrophe losses and major claims is in line with expectations and
provided there are no adverse movements on capital markets, we are
now looking at a return on equity of at least 20 percent for the full
2007 financial year", Mr. Zeller stated. Subject to the approval of
the relevant boards, an increased dividend should therefore be
possible. The Executive Board intends to keep to its payout ratio in
the range of 35% to 40% of the ordinary result. In order to enable
shareholders to also share in the once-only effect of the tax reform,
the Executive Board is considering an additional special
distribution.


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, Freiverkehr in Börse Düsseldorf,
Freiverkehr in Hanseatische Wertpapierbörse zu Hamburg, Freiverkehr
in Bayerische Börse München,
Freiverkehr in Börse Stuttgart, Amtlicher Markt in Frankfurter
Wertpapierbörse;
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Enlaces afines: Hannover Rück SE
Autor:
Hugin
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