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Hannover Re with innovative dividend policy

Hannover, 28 August 1997:

Hannover Re intends again this year to distribute the entire after-tax profit of DM 76m to shareholders. The dividend is to total DM 3.15 per DM 5.00 share. In accordance with the pay-out-claw-partially-back principle, the portion of earnings which would have been retained under a conventional dividend policy will be clawed back from shareholders by way of a rights issue. "In this way, shareholders decide on the profit appropriation, participate in the company's tax advantage and receive one of the highest dividend yields on the entire German stock exchange", commented Wilhelm Zeller, Chairman of the Executive Board of Hannover Re.

The technical handling of this dividend policy, which was launched last year, is somewhat complex. For this reason, the intention now is to greatly simplify the procedure: Shareholders will be asked by their bank whether they would like the dividend as a traditional cash payment or whether - on the model of the US stock dividend - they would like to receive it in the form of new shares. This option is made possible by a close correlation between the time of the dividend payment and the issuing of the new shares. Once the dividend has been declared at the Annual General Meeting on 19 September 1997, both the dividend and the new shares will be settled on 22 September 1997.

The details of the capital increase were determined today by the boards of the company: the share capital will be increased by DM 2,271,555.- to DM 147,651,075.-. The 454,311 new shares are to be issued in a subscription ratio of 64 : 1 at a price of DM 112.00 per DM 5.00 share. The company claws back a total of DM 51m representing some 60 % of the dividend pay-out. The new shares carry a dividend entitlement for the entire 1997 financial year. Trading in subscription rights will take place in the period 8 - 18 September 1997.

Mr. Zeller stated that the new dividend system would enable shareholders to finance their new Hannover Re shares without having to pay in additional money, as illustrated by the following example: a shareholder who has 64 shares will receive a net dividend of DM 147.42 (64 x DM 3.15 = 201.60 minus 54.18 taxes). With this amount, the shareholder can purchase one share for DM 112.00 and retain a remaining dividend of DM 35.42.