SOURCE: Hannover Re

March 11, 2010 04:51 ET

Hannover Re posts very pleasing result for the 2009 financial year

HANNOVER, GERMANY--(Marketwire - March 11, 2010) -

Hannover RE / Hannover Re posts very pleasing result for the 2009 financial year processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement.


*        Overall premium growth + 26.5%
*        Combined ratio in non-life reinsurance: 96.6% (95.4%)
*        Investment income sharply higher at EUR 1.1 billion (EUR 278.5
         million)
*        Operating profit (EBIT) surpasses EUR 1 billion for the first
         time
*        Group net income: EUR 731.2 million
*        Earnings per share: EUR 6.06
*        Return on equity: 22.4%
*        Dividend proposal for 2009: EUR 2.10

Hannover Re closed the 2009 financial year with substantial profit growth. "For the first time we succeeded in generating an operating profit (EBIT) in excess of one billion euro. We also increased our shareholders' equity by more than 30%", Chief Executive Officer Ulrich Wallin stated at the press briefing on the annual results in Hannover. The very healthy Group profit was further boosted by the moderate burden of catastrophe losses and the acquisition of the US ING life reinsurance portfolio.

2009 financial year The gross written premium booked by the Hannover Re Group surged by an appreciable 26.5% to EUR 10.3 billion (EUR 8.1 billion). At constant exchange rates the premium volume would have grown by 26.1%. The level of retained premium climbed to 92.6% (89.1%). Net premium earned consequently rose more sharply by 31.8% to EUR 9.3 billion (EUR 7.1 billion).

The operating profit (EBIT) increased exceptionally strongly to EUR 1.1 billion, having been overshadowed by the effects of the financial crisis in the previous year (EUR 148.1 million). Group net income climbed - in part due to special effects associated with the ING life reinsurance portfolio as well as the performance of some funds withheld by ceding companies - by EUR 858.2 million to EUR 731.2 million, the largest net income in the Group's history. Even without the special effects of around EUR 130 million, the Group's result would have been highly gratifying at roughly EUR 600 million. The earnings per share amounted to EUR 6.06 (-EUR 1.05); excluding special effects, earnings of EUR 4.97 a share would have been recorded.

Shareholders' equity increased by a substantial 31.2% relative to the level of 31 December 2008 to reach EUR 3.7 billion (EUR 2.8 billion). The policyholders' surplus (including minority interests and hybrid capital) climbed by 19.3% to EUR 5.6 billion, compared with EUR 4.7 billion in the previous year. The return on equity stood at 22.4% (-4.1%). Excluding special effects it would have reached 18.3%.

Non-life reinsurance delivers substantial profit contribution In the wake of the heavy loss expenditures incurred in the previous year, stable prices and price increases were obtained in 2009. In some segments, such as credit and surety insurance or catastrophe business, the price rises even ran into double-digit percentages. "In view of the very favourable market conditions we stepped up our involvement, especially in attractive segments", Mr. Wallin explained.

To this extent, gross written premium in non-life reinsurance business rose sharply by 15.2% to EUR 5.7 billion (EUR 5.0 billion). At constant exchange rates - particularly against the US dollar - growth would have come in at 13.4%. Net premium earned climbed by 22.3% to EUR 5.2 billion (EUR 4.3 billion).

Owing to a moderate burden of catastrophe losses the net strain of EUR 239.7 million in the year under review was below the expected level. The largest single loss event for Hannover Re was the severe bush fires in Australia, which cost the company EUR 34.7 million. Winter storm "Klaus" and the crash of an Airbus each produced loss expenditure of EUR 33.8 million. The slightly higher combined ratio of 96.6 % relative to the previous year (95.4%) reflects a prudent reserving policy; Hannover Re further increased the safety level of its loss reserves.

The operating profit (EBIT) in non-life reinsurance grew exceptionally vigorously to reach EUR 731.4 million (EUR 2.3 million). Group net income in the segment surged to EUR 472.6 million (-EUR 160.9 million), corresponding to earnings of EUR 3.92 (-EUR 1.33) a share.

Life and health reinsurance grows strongly "Hannover Re noted increased demand for reinsurance protection in the year under review because the financial crisis had weakened the capital resources and solvency position of many life insurers", Mr. Wallin observed.

As a further factor, Hannover Re had acquired the US ING life reinsurance portfolio in 2009. With premium income in excess of 1 billion US dollars, the acquisition considerably strengthened the company's mortality risk business in the United States. The UK pension market, in which Hannover Re is increasingly reinsuring the longevity risk, is another lively growth sector. This business brings about the desired risk spreading in the life reinsurance portfolio relative to the assumed mortality risks. Appreciable growth was also generated in Asian markets. Stronger demand for financing solutions and a resurgence of interest in risk-oriented offerings designed to provide income and asset protection for policyholders delivered further stimuli for the reinsurance sector.

Gross written premium in life and health reinsurance soared by an impressive 44.5% to EUR 4.5 billion (EUR 3.1 billion) in the year under review. Of this amount, EUR 0.8 billion was attributable to the acquisition of the ING life reinsurance portfolio; yet organic growth also reached a pleasing double- digit percentage level. At constant exchange rates gross premium would have grown by 46.2%. Net premium earned climbed to EUR 4.1 billion (EUR 2.8 billion).

The operating profit (EBIT) in the segment tripled to EUR 372.2 million (EUR 120.7 million). Even after elimination of special influencing factors, associated inter alia with the acquisition of the ING life reinsurance portfolio and fair value adjustments, EBIT would have been within the expected bounds at around EUR 230 million. Group net income in life and health reinsurance moved sharply higher to EUR 295.5 million (EUR 78.3 million), producing earnings of EUR 2.45 (65 cents) a share.

Investment income back to the level before the financial crisis Thanks to a positive cash flow from the technical account, the portfolio of assets under own management showed further growth to reach EUR 22.5 billion (EUR 20.1 billion). Investment income (incl. income on funds withheld and contract deposits) bounced back to the level before the financial crisis at EUR 1.1 billion (EUR 278.5 million). The return on investment improved appreciably from 0.4% to 4.0%. Positive special effects resulting from the reversal of unrealised losses on reinsurance funds deposited with US cedants were also a factor here at EUR 122 million. Ordinary investment income fell slightly short of the previous year at EUR 810.5 million (EUR 829.8 million) owing to the lower level of interest rates overall. The balance of deposit interest and expenses improved to EUR 276.8 million (EUR 199.6 million).

Dividend proposal for 2009: EUR 2.10 "In view of our good Group net income and our dividend policy of paying out 35% to 40% of our profit, the Executive Board and Supervisory Board will propose to the Annual General Meeting that the dividend should be further increased - relative to previous planning - to an amount of EUR 2.10 per share", Mr. Wallin explained.

Outlook for 2010 Hannover Re looks to the current financial year with optimism. The treaty renewals as at 1 January 2010 in non-life reinsurance passed off in line with expectations. "Given our very good ratings we are able to profit from market opportunities and consequently expect business to develop favourably", Mr. Wallin explained.

In 2010 Hannover Re will concentrate - in keeping with its strategy of active cycle management - on segments in which risk-adequate premiums can be obtained or where prices are rising. The latter is particularly true of worldwide credit and surety reinsurance as well as aviation business. "In non-life reinsurance we anticipate growth of around 4% in net premium and a healthy profit contribution", Mr. Wallin noted. Given the lower returns attainable on investments on account of the reduced interest rate level, Hannover Re will keep an especially close eye on the underwriting result.

In life and health reinsurance, too, market conditions remain favourable. The demographic trend should be reflected in heightened risk awareness in developed insurance markets such as the United States, Japan, United Kingdom and Germany and hence ensure sustained growth stimuli. In leading emerging markets such as China, India and Brazil increasing urbanisation is fostering a rapidly growing middle class which is increasingly clamouring for insurance solutions. For the current financial year Hannover Re expects net premium in life and health reinsurance to grow by 10%.

Hannover Re anticipates a return on investment of around 3.5% for 2010.

For the full 2010 financial year Hannover Re anticipates a good result in both the non-life and life and health reinsurance business groups. Despite the latest catastrophe losses it remains Hannover Re's assumption that the return on equity target of at least 15% is not in danger. The Chile earthquake and winter storm "Xynthia" will result in net loss burdens in the order of EUR 185 million and around EUR 40 million respectively. As a consequence of these catastrophe events the major loss expectancy for the first quarter has been significantly surpassed. Attainment of the targeted return is conditional upon there being no further exceeding of the major loss expectancy and no drastic downturns 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 after tax.

For further information please contact:

Press and Public Relations / Investor Relations:
Karl Steinle (tel. +49 511 5604-1500,
e-mail: karl.steinle@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 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 2,000. 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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