Hannover Re delivers good result for the first half-year 2010

Tuesday, 10. August 2010 07:15
Hannover Rück / Hannover Re delivers good result for the first half-year 2010 processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement.

* Net premium rises by 7.9%
* Major loss burden still higher than the expected level
* Combined ratio in non-life reinsurance: 99.5%
* Double-digit premium growth in life and health reinsurance and EBIT margin
within the target corridor
* Investment income of EUR 551.4 million in line with expectations
* Satisfactory Group net income: EUR 310.6 million
* Shareholders' equity grows by 14.1%
* Return on equity: 15.6%
* Profit forecast for the full financial year confirmed: Group net income of
around EUR 600 million expected

               Hannover, 10 August 2010: Hannover Re is satisfied with the
development of business in the first half-year. "Despite a disproportionately
heavy burden of major losses in the first half-year we generated net income
after taxes in excess of EUR 300 million. This offers a good platform for
achieving our 2010 profit target - namely Group net income of around EUR 600
million", Chief Executive Officer Ulrich Wallin explained.

               Further premium growth in the first half of 2010
               The gross written premium booked by the Hannover Re Group
totalled EUR 5.7 billion (EUR 5.3 billion) as at 30 June 2010,  an increase of
8.2% relative to the corresponding period of the previous year. At constant
exchange rates, especially against the US dollar, growth would have come in at
5.7%. The level of retained premium decreased to 90.3% (93.0%). Net premium
earned climbed by 7.9% to EUR 4.8 billion (EUR 4.5 billion).

               The operating profit (EBIT) as at 30 June 2010 totalled EUR
490.7 million (EUR 603.3 million). The comparable period had, however, been
influenced by positive special effects amounting to around EUR 161 million.
These derived from the acquisition of the ING life reinsurance portfolio as well
as the reversal of unrealised losses on deposits held by US clients on behalf of
Hannover Re (ModCo derivatives). Adjusted for these special effects, EBIT would
have grown by EUR 48.4 million or 11%. Group net income in the first half-year
came in at EUR 310.6 million. The result for the corresponding period of the
previous year in an amount of EUR 433.5 million included positive special
effects of roughly EUR 144 million; after factoring out these special effects,
Group net income would have grown by 7% as at 30 June 2010. Earnings per share
amounted to EUR 2.58 (EUR 3.59); the annualised return on equity stood at 15.6%

               Pleasing development of non-life reinsurance despite exceptional
burden of major losses
               Prices on non-life reinsurance markets were for the most part
adequate. In keeping with its policy of active cycle management, Hannover Re
enlarges its portfolio only in markets and segments that promise a return in
line with its margin requirements. The premium volume in the non-life
reinsurance business group as at 30 June 2010 improved on the comparable period
by 6.2% to reach EUR 3.3 billion (EUR 3.1 billion). At constant exchange rates,
especially against the US dollar, growth would have been 4.6%. Net premium
earned climbed 6.3% to EUR 2.6 billion (EUR 2.5 billion).

               While the burden of major losses in the second quarter of 2010
was lower than in the first quarter, it again exceeded the expected level for
the second quarter. The loss of the "Deepwater Horizon" drilling rig in the Gulf
of Mexico in April resulted in substantial environmental damage as well as
corresponding strains for the insurance industry. Given the considerable
uncertainty surrounding possible liability claims, the total loss expenditures
are still difficult to forecast at the present time. "The loss reserves that we
have established - giving rise to a net strain of EUR 89 million - reflect all
concrete and potential exposures of our portfolio from this loss complex that
are currently known to us", Mr. Wallin emphasised. Altogether, the net burden of
major losses in the first half-year stood at EUR 407.6 million (EUR
163.3 million), a figure appreciably higher than the expected level. The
combined ratio amounted to 99.5% (97.1%).

               The net underwriting result declined from EUR 57.3 million in the
comparable period to EUR 7.2 million. The operating profit (EBIT) in non-life
reinsurance increased by 5.3% as at 30 June 2010 to EUR 333.8 million (EUR
317.1 million). Group net income contracted by 3.6% to EUR 215.1 million (EUR
223.2 million), equivalent to earnings per share of EUR 1.78  (EUR 1.85).

               Further organic growth in life and health reinsurance
               Hannover Re is thoroughly satisfied with the further development
of its life and health reinsurance business group. The company generated organic
growth across a broad front in the first half of 2010. In addition to continued
expansion in developed markets such as the United Kingdom, United States and
Germany, Hannover Re recorded further disproportionately strong percentage gains
inter alia in the growth markets of East Asia, and here most notably in China.

               Gross written premium posted another double-digit increase of
11.2% as at 30 June 2010 to EUR 2.4 billion (EUR 2.2 billion). At constant
exchange rates growth would have totalled 7.2%. Net premium earned climbed
10.0% to EUR 2.2 billion (EUR 2.0 billion).

               Profitability as at 30 June 2010 was also highly gratifying: the
operating profit (EBIT) amounted to EUR 145.5 million (EUR 269.3 million). The
result for the comparable period included positive special effects of around EUR
161 million. EBIT growth would have been as much as 34% if these effects were
factored out. The EBIT margin of 6.7% is comfortably within the target corridor
of 6% to 7%. Group net income reached EUR 113.8 million (EUR 227.0 million). If
the special effects in the comparable period of around EUR 144 million for net
account were eliminated, Group net income would have risen by 37%. Earnings per
share stood at 94 cents (EUR 1.88).

               Satisfactory investment income
               Thanks to another rise in ordinary income and lower write-downs -
and despite unrealised losses -, net investment income came in virtually on a
par with the previous year, totalling EUR 551.4 million as at 30 June 2010 (EUR
569.2 million). Assisted by the inflow of cash from the technical account, but
primarily due to interest and exchange rate movements on the markets, the
portfolio of assets under own management grew to EUR 25.4 billion (31 December
2009: EUR 22.5 billion).

               Further pleasing growth in shareholders' equity
               The shareholders' equity of the Hannover Re Group improved on the
level of 31 December 2009 (EUR 3.7 billion) by EUR 524.9 million or 14.1% to
reach EUR 4.2 billion. The return on equity still came in at 15.6% despite the
enormous surge in shareholders' equity. The book value per share amounted to EUR
35.15 (31 December 2009: EUR 30.80).

               In view of its very good market position and the overall
satisfactory conditions prevailing on international reinsurance markets,
Hannover Re anticipates a good result for 2010. The net premium volume booked by
the Group should show growth in the region of 5%.

               By and large, markets in non-life reinsurance are still seeing
adequate prices. There is, however, no mistaking the fact that the substantial
capacity offered by reinsurers relative to the demand for their products is
leading to more intense competitive pressure. Consequently, rate increases can
now only be obtained in loss-impacted sectors of the business. In view of the
drilling rig disaster in the Gulf of Mexico, Hannover Re expects significant
price increases in the offshore insurance market. The treaty renewals for some
North American business as well as for the portfolio in Australia and New
Zealand were completed on 1 July. Given that the capacity available in the
American market is entirely sufficient, rate increases were for the most part
recorded only under programmes that had suffered losses. Treaties in property
catastrophe business were predominantly renewed after rate reductions. Prices in
casualty business remained stable. In Australia moderate premium erosion could
be observed - even under loss-affected programmes.

               Hannover Re continues to expect net premium in non-life
reinsurance to grow by around 4% in 2010.

               In life and health reinsurance Hannover Re stands by its
assumption that net premium will increase by around 10% in 2010. The EBIT margin
is expected to come in within the target range of 6% to 7%.

               The company is aiming for a return on investment of 3.5% on its
asset portfolio in 2010.

               Hannover Re confirms that it expects to achieve its profit
forecast - namely Group net income of around EUR 600 million - for the 2010
financial year. "We are fully on track to build on the good 2009 result -
adjusted for positive one-off effects", Mr. Wallin affirmed. This is subject to
the premise that the major loss burden in the second half-year does not exceed
the expected level of around EUR 280 million and also assumes that there are no
drastically adverse movements on capital markets. As for the dividend, Hannover
Re continues to aim for a payout ratio in the range of 35% to 40% of its IFRS
Group net income.

               For further information please contact:

               Corporate Communications:
               Karl Steinle (tel. +49 511 5604-1500,
e-mail: karl.steinle@hannover-re.com)

               Media Relations:
               Gabriele Handrick (tel. +49 511 5604-1502,
e-mail: gabriele.handrick@hannover-re.com)

               Investor Relations:
               Daniela Gissinger (tel. +49 511 5604-1529,
e-mail: daniela.gissinger@hannover-re.com)

               Please visit: www.hannover-re.com

               Hannover Re, with a gross premium of around EUR 10 billion, 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 on all five continents with a total staff of roughly 2,100. 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.


--- End of Message ---

Hannover Rück
Karl-Wiechert-Allee 50 Hannover Germany

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