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Profit forecast for 2002 unchanged

  • Neither the WTC losses nor the US business create a need for additional reserves;
  • Only a moderate decrease in net investment income;
  • Underwriting result according to plan;

Hannover, 31 July, 2002:

Due to recent profit warnings by other reinsurers, Hannover Re has received frequent enquiries as to its own situation. In response we issue the following statement:

Our selective underwriting practice and reserving policy under the former soft market conditions for property and casualty reinsurance is now paying off. The latest audit confirms that the level of our loss reserves is appropriate. This applies to the US business as well.

Based on the latest information available, the loss reserves built up in the wake of the terrorist attacks of 11 September continue to prove sufficient. Shortly after the attacks we calculated the potential loss burden on a treaty by treaty basis. Due to the fact that our portfolio consists mainly of non-proportional treaties, we stand by the continuing validity of our original calculations.

For the first half-year we are expecting a good underwriting result which is in the range of our initial forecast. With regard to major loss events, in the second quarter we estimate the loss burden to amount to a mere EUR 60 million, in the first quarter the amount was even less.

It was not possible, however, to separate the development of our net investment income completely from the current situation of the capital markets. Even though the proportion of stocks in Hannover Re's investments is at a low 7%, after we already had reduced the proportion of stocks significantly at the beginning of 2001, we could not completely avoid a reduction in the value of our portfolio. Write-offs of approximately EUR 50 million were necessary in the second quarter 2002.

The spectacular business collapses of the last few months did not affect us significantly, neither on the investment side, nor on the underwriting side (credit insurance). The loss incurred by the Worldcom insolvency adds to a low single-digit million amount in Euro.

More detailed information concerning the second quarter will be released on 21 August, 2002. Right now we can safely assume that our net income during the first half-year will be in line with the forecast for the entire year (EBIT of more than EUR 600 million, net income of about EUR 300 million).