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Hannover Re acquires Skandia International's Portfolio

Hannover, 22. September 1997:

The Hannover Re Group has acquired the in-force portfolios of Skandia International Insurance Company (SIIC), Stockholm, the reinsurance company within the Swedish Skandia Group. Hannover Re has reached agreement on the acquisition with Skandia Insurance Company Ltd., the parent company of the Skandia Group. The agreement was signed in Stockholm this weekend. Hannover Re will pay a total of 1.060 billion SEK (140 million USD) for the transaction.

Wilhelm Zeller, Chairman of the Executive Board of the Hannover Re Group, commented: This acquisition ideally complements our existing book of business. It will bring us considerably closer to achieving our priority strategic objectives. Mr. Zeller added that, as a consequence of the acquisition, the estimated premium income for 1997 would increase by around 2.8 billion SEK (370 million USD) to in excess of 7.2 billion DM (4.2 billion USD). Gross premiums will show further growth of around 300 million SEK (40 million USD) in 1998.

The Hannover Re Group will take over SIIC's entire portfolio of life and health reinsurance, facultative reinsurance and aviation/space insurance with retroactive effect as from 01.01.1997. Mr. Zeller added that Skandia's UK subsidiary Skandia Reassurance (UK) Ltd., which transacts life reassurance, is also included in the agreement. With regard to the remainder of the portfolio - property/casualty treaty reinsurance -, he explained that Hannover Re would merely acquire the renewal rights as at 01.01.1998.

Mr. Zeller asserted that Skandia International's life and health reinsurance business perfectly complemented the Hannover Re Group's portfolio, both in terms of geographical origin and range of products offered. The acquired gross premium volume is put at 1.9 billion SEK (250 million USD). The life and health proportion of the total gross premium income of the Hannover Re Group will therefore rise to approximately 23 % (previous year: 17.3 %). The company reported that in just two years it had thus been possible to almost double the proportion of life and health reinsurance, a segment with a particular strategic focus. The long-term objective is that life and health reinsurance should account for at least 30 % of the Group's gross premium income.

The premium volume in facultative reinsurance, Hannover Re's second strategic priority sector, is set to increase by 416 million SEK (55 million USD) to around 300 million DM (173 million USD). Mr. Zeller observed that Hannover Re had thus taken a major stride towards achieving its long-term strategic objective of raising the facultative pro-portion of gross premium in indemnity reinsurance to approximately 10 %; this transaction alone would add another 2.5 percentage points, boosting its share to 5.7 %. Furthermore, Mr. Zeller pointed out that by purchasing the SIIC portfolio Hannover Re would also acquire a significant part of the worldwide infrastructure and additional expertise needed to further expand facultative business.

Skandia International transacts aviation and space business as a primary insurer, and it is internationally recognized in this field as a lead market. Mr. Zeller commented that Hannover Re also accorded aviation/ space business a strategic priority status. The acquired portfolio worth in the region of 500 million SEK (66 million USD) would, he asserted, boost Hannover Re's gross premium in this class of business close to 400 million DM (230 million USD). This will put the company among the top group of reinsurers with the highest volume of aviation/space premium in the world.

Once all the agreed transactions have been executed, Skandia International will discontinue its active business operations with effect from 31.12.1997, and go in run-off.

Mr. Zeller explained that on acquiring the above mentioned portfolios, Hannover Re would establish two new branch offices in Stockholm. The company's UK subsidiary, International Insurance Company of Hannover (Inter Hannover), had all the required licenses for the aviation and space primary insurance; for this reason, Skandia International's aviation/space business together with all employees will be integrated with a new Inter Hannover Stockholm Aviation Branch. The second branch will be established directly by Hannover Rück-versicherungs-AG. Mr. Zeller reported that the entire life portfolio as well as Skandia International's facultative business together with all employees will be integrated with the Hannover Re Stockholm Branch. SIIC's service companies for these businesses in France, Spain and Mexico were also being taken over. He explained that those parts of the casualty and property treaty portfolio which were to be acquired will be integrated directly with Hannover Re.

Hannover Re is to finance 80 % of the consideration for the transaction, while its subsidiary E+S Rück will contribute the balance of the funding. No debt financing or rights issue was necessary for the financing according to Mr. Zeller.

Completion of the transaction is subject to the approval of the relevant regulatory authorities.