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PRESS RELEASE: Hannover Re reports very pleasing result for the first half of 2009

Hannover Re reports very pleasing result for the first half of 2009 

*         Gross premium + 26.7%
*         Net premium + 30.8% due to stronger demand, ING acquisition
  and increased retention
*         Net investment income +27.9%
*         Operating profit (EBIT) +49.9%
*         Group net income +66.1%
*         Burden of catastrophe losses within the expected bounds
*         Combined ratio 97.1%
*         EBIT margin in non-life and life/health reinsurance clearly
  better than target range
*         Annual targets within reach 

Hannover, 6 August 2009:  In  its  interim  report  published   today
Hannover Re expressed considerable satisfaction with the  development
of  its  business.  "We  achieved  gratifying  results  in  both  our
underwriting business  and  on  the  investments  side,  and  we  are
therefore well on track to generate the forecast return on equity  of
at least  18% for  the  full 2009  financial year",  Chief  Executive
Officer Ulrich Wallin explained. 

The operating profit (EBIT) as at 30 June 2009 grew by a  substantial
49.9% year-on-year to  reach EUR  600.1 million (EUR  400.2 million).
Group net income increased  by a similarly  gratifying 66.1% -  inter
alia due  to the  good overall  development of  business as  well  as
positive special  effects in  life and  health reinsurance  - to  EUR
419.0 million (EUR 252.2 million). This was equivalent to earnings of
EUR 3.47 (EUR 2.09) a share; the annualised return on equity stood at
27.9% (16.4%). 

Gross written  premium  climbed  26.7%  as  at  30 June 2009  to  EUR
5.3 billion (EUR 4.1 billion). "This significant increase derived  in
large measure from  organic growth, although  the acquisition of  the
ING life reinsurance portfolio  was also a  factor here", Mr.  Wallin
noted. Given the higher level  of retained premium at 93.0%  (89.5%),
net premium earned grew to EUR 4.5 billion (EUR 3.4 billion). 

The development  of  non-life  reinsurance  continued  to  be  highly
satisfactory for Hannover  Re. The  capital squeeze  felt by  primary
insurers in  the wake  of  the financial  market  crisis has  led  to
stronger demand for reinsurance protection. "The treaty renewals on 1
June and 1 July  also passed off very  well for our company  overall.
Yet we were not satisfied with the movements in the rate level in all
segments", Mr.  Wallin explained.  "In  view of  our  profit-oriented
underwriting policy, we therefore reduced our exposures -  especially
in property catastrophe business in the United States and Japan,  but
also in some casualty segments." 

Stronger demand  for  reinsurance  protection was  also  observed  in
worldwide credit  and surety  insurance. In  the area  of  structured
covers, too,  the  reverberations  of  the  financial  market  crisis
injected significant growth impetus as  anticipated. All in all,  the
prospects for worldwide non-life reinsurance are very promising. 

Gross premium in non-life reinsurance as at 30 June 2009 improved  on
the comparable period  of the  previous year  by 16.0%  to reach  EUR
3.1 billion (EUR 2.7 billion). At constant exchange rates, especially
against the US dollar, the increase would have been 12.0%. The  level
of retained premium  climbed to  94.1% (89.4%) due  to sharply  lower
retrocessions. Net premium earned consequently  rose by 19.2% to  EUR
2.5 billion (EUR 2.1 billion). 

In the second quarter  Hannover Re incurred only  a modest number  of
major losses. The largest single loss  event was the crash of an  Air
France passenger jet  with a strain  of some EUR  30 million for  net
account. The  total  net  burden  of major  losses  amounted  to  EUR
163.3 million (EUR 130.0 million). This was equivalent to 6.6% of net
premium in non-life reinsurance, a figure below the expected level of
10%. The combined ratio stood at 97.1% (98.4%). 

Net underwriting  income in  non-life reinsurance  improved from  EUR
23.6 million in the corresponding period of the previous year to  EUR
57.3 million. The  operating profit  (EBIT)  in this  business  group
increased by 10% to EUR 317.1 million (EUR 288.2 million). Group  net
income grew by 14.1% to EUR 223.2 million (EUR 195.7 million). 

Developments  in  life  and  health  reinsurance  were  exceptionally
pleasing. Owing to a  visible weakening in  the solvency position  of
life insurers, demand for reinsurance  solutions continued to rise  -
leading to an  increased clamour for  risk- and financially  oriented
products. This state of affairs was especially evident in the  United
States,  where  the  insurance  industry  had  suffered  considerable
erosion of its capital base. 

Hannover Re's worldwide life and health reinsurance business  enjoyed
further profitable  growth  following  the  acquisition  of  the  ING
portfolio in January  2009. "With  this transaction we  were able  to
further strengthen  the segment  of risk-oriented  life  reinsurance,
which had hitherto been underrepresented  in the United States",  Mr.
Wallin explained.  Hannover  Re  remains  keenly  interested  in  the
seniors' health market and the financial solutions sector in the  US.
Not only that, the new markets segment - in which Hannover Re  writes
enhanced annuities and ranks among the market's leading reinsurers in
the United Kingdom - also offers considerable potential. Here, as  is
also the case  with the  reinsurance of existing  pension funds,  the
opportunities for further profitable expansion are very good. 

Hannover Re maintains a regional focus on the so-called BRIC  markets
(Brazil, Russia, India and China), although Korea - the largest  life
reinsurance market in Asia -  also offers good growth prospects.  The
main drivers of  business nevertheless continue  to be the  developed
insurance markets of the United  Kingdom, United States, Germany  and
Australia. 

Spurred on by the acquisition  of the ING life reinsurance  portfolio
and brisk organic growth,  gross written premium as  at 30 June  2009
surged by 45.6%  to EUR  2.2 billion (EUR  1.5 billion). At  constant
exchange rates growth would have been as high as 49.6%. The level  of
retained premium rose from 89.6%  to 91.6%, while net premium  earned
increased by 48.9% to EUR 2.0 billion (EUR 1.3 billion). 

The investment  income  generated  in  life  and  health  reinsurance
doubled from EUR 154.8 million to EUR 314.0 million. Positive special
effects were  a  factor  here.  They derived  from  the  reversal  of
unrealised losses on deposits with  US cedants (B36 derivatives)  and
from improvements in the value of deposits assumed by Hannover Re  in
the context of the ING transaction. The result was adversely impacted
by opposing effects in UK annuity business. On balance, the operating
result  (EBIT)  in   life  and  health   reinsurance  profited   from
non-recurring  effects  of  around  EUR  150  million  in  the  first
half-year. 

The operating profit (EBIT) as at 30 June 2009 consequently increased
sharply to EUR 266.1 million (EUR  87.2 million). The EBIT margin  of
13.4% thus comfortably surpassed the target corridor of 6.5% to 7.5%.
Group  net  income  rose   appreciably  to  EUR  212.5 million   (EUR
65.0 million). 

Although conditions on the  financial markets are still  challenging,
Hannover Re  expressed  satisfaction  with  the  development  of  its
investments. Thanks to  a positive  cash flow, the  assets under  own
management grew to EUR 21.0 billion, thereby improving on the  volume
as at 31 December 2008 (EUR 20.1 billion). Ordinary income  excluding
interest on deposits  fell just slightly  short of the  level in  the
corresponding period of the previous  year at EUR 398.8 million  (EUR
407.9 million), a testament to the  fact that the company is  correct
in pursuing an investment policy geared to generating stable ordinary
income. The balance of  realised gains and  losses totalled EUR  55.5
million for the first half-year, as against EUR 102.3 million in  the
comparable period of the previous  year; this had been influenced  by
high realisations owing  to the tactical  shortening of durations  in
the  USD  portfolio.  Along  with  impairments  taken  on  structured
products in the amount of EUR 26.2 million, the volume of write-downs
totalling altogether EUR 93.4 million (EUR 130.6 million) was due  in
large measure  in  the  amount of  EUR  64.1 million  to  alternative
investments; of  this amount,  EUR 41.9 million  was attributable  to
private equity. Unrealised gains on  asset holdings measured at  fair
value through  profit  or loss  amounted  to EUR  87.2 million;  this
contrasted  with  unrealised  losses  of  EUR  15.1 million  in   the
corresponding  period   of  the   previous  year.   This   gratifying
development was due chiefly to  the doubling of investment income  in
life and health reinsurance. 

Net investment income increased  by 27.9% to  EUR 569.2 million  (EUR
445.1 million), assisted  first and  foremost by  the improvement  in
unrealised gains and the reduced  volume of write-downs. This  figure
includes income from interest on  funds withheld, which at EUR  144.9
million was substantially higher than in the comparable period of the
previous year (EUR 102.3 million). 

Outlook
Based  on  its  strategic   orientation  and  the  available   market
opportunities, Hannover Re anticipates a good result for 2009 in both
non-life and life/health reinsurance. At constant exchange rates  the
net premium volume is expected to grow by approximately 25%. 

In non-life reinsurance the markets offer a good price level overall,
although further rate increases are  needed in certain segments.  The
treaty renewals as at 1 July  2009 in the United States, when  around
one-third of the portfolio is  renegotiated, reinforced the trend  of
prior renewal phases.  Yet prices did  not rise in  all areas to  the
extent needed.  Particularly  in  the case  of  property  catastrophe
covers, efforts  to secure  the required  price increases  were  only

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August 06, 2009 01:30 ET (05:30 GMT)

PRESS RELEASE: Hannover Re reports very pleasing -2-

partially successful.  Sufficient  capacity  was for  the  most  part
available here. While  the rate level  in standard casualty  business
remained  stable,   price  rises   were  obtained   in  the   workers
compensation segment. Rates in the professional indemnity lines  were
broadly unchanged, although conditions  improved under treaties  that
had suffered  losses.  Hannover Re  was  satisfied overall  with  the
treaty renewals in Australia and New Zealand. 

Net premium in non-life reinsurance should show growth of around  20%
by year-end 2009. Provided the burden of major losses remains  within
the anticipated bounds of roughly 10% of net premium, a very  healthy
profit contribution is to be expected. 

The fundamental business  climate in life  and health reinsurance  is
also positive.  Here,  too, the  financial  and economic  crisis  has
prompted stronger demand  for reinsurance and  hence provided  growth
stimuli. Hannover Re will continue  to expand its involvement in  the
field of enhanced annuities and  intends to extend its activities  to
the North American market during the current financial year. 

Owing to  the  acquisition  of the  ING  life  reinsurance  portfolio
effective 1 January 2009,  net premium for the  current year in  life
and health reinsurance  is likely to  grow by more  than 35% and  the
profit contribution to total business should be very good. 

On the investments side the  anticipated positive cash flow should  -
subject to stable exchange  rates - result in  further growth in  the
asset holdings. In  the area of  fixed-income securities the  company
continues to  stress  the high  quality  and diversification  of  its
portfolio. Following Hannover  Re's move  to reduce  its exposure  to
listed equities  to  virtually  zero,  further  volatility  on  stock
markets can of course  have only a limited  effect on the  investment
income. "Our goal  is to  protect our portfolio  even better  against
interest rate fluctuations and other  market risks. Although we  have
made plans to resume our investments in equities in the future,  such
a step will  only be  contemplated once  the market  climate is  more
stable", Mr. Wallin emphasised. 

In light  of  its  strategic orientation  and  the  available  market
opportunities in non-life  and life/health  reinsurance, Hannover  Re
continues to anticipate  a good  result for the  full 2009  financial
year. Assuming that the burden of major losses does not significantly
exceed  the  expected  level  of  10%  of  net  premium  in  non-life
reinsurance, and as long as there are no further adverse movements on
capital markets, Hannover Re expects - allowing for the non-recurring
effect from the acquisition of the ING life reinsurance portfolio - a
minimum return on equity  of 18% and earnings  per share of at  least
EUR 5 for the 2009 financial  year. It remains the company's goal  to
pay a dividend in the range of 35% to 40%. 

For further information please contact: 

Press and Public Relations / Investor Relations:
Stefan Schulz (tel. +49 511 5604-1500,
e-mail: stefan.schulz@hannover-re.com) 

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

Investor Relations:
Klaus Paesler (tel. +49 511 5604-1736,
e-mail: klaus.paesler@hannover-re.com) 

Please visit: www.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   on  all   five
continents 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. 

This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement. 

http://hugin.info/130686/R/1332760/315704.pdf
http://www.hannover-re.com
Copyright © Hugin AS 2009. All rights reserved. 

(END) Dow Jones Newswires

August 06, 2009 01:30 ET (05:30 GMT)