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US GAAP Group Accounts 1998

Stockholders' equity and net income several times in excess of the values under German accounting regulations


Hannover, 30 July 1999:

Wilhelm Zeller, Chairman of the Executive Board of Hannover Re, presented a US GAAP reconciliation of the Group annual accounts at today's Annual General Meeting. This puts the Group's stockholders' equity at DM 2.7 billion almost four times the figure of DM 703 million on the basis of German accounting rules (HGB). Although the Group's net income of DM 378.4 million according to US GAAP showed a slight decline, it is still also nearly four times the corresponding value under the German accounting regime. (DM 103.2 million).

Mr. Zeller stated that in the previous year Hannover Re had been the first German (re-)insurance company to present a reconciliation of the annual accounts in accordance with international accounting standards. Before switching over entirely to US GAAP in the coming year and dispensing with a corresponding HGB financial statement, the present reconciliation offers the first year-on-year comparison.

Compared with the German annual accounts, the increase in the stockholders' equity was largely attributable to the different accounting of the fluctuation reserve and revaluation of investments. The manifold increase in the net income derived mainly from the posting of higher investment income, the different reporting of the transfer to the fluctuation reserve and the deferral of acquisition costs in life and health reinsurance.

Mr. Zeller also emphasized the effect of international standards to key figures, which have a bearing on the share price. At DM 12.81, US GAAP earnings per share exceeded the DVFA result in 1998 by more than 85 %. While the price/earnings ratio of the Hannover Re share on the basis of the consensus estimate for the year 2000 is around 17 for the DVFA result, it falls to considerably less than 10 according to US GAAP. According to Mr. Zeller, it is thus apparent that the Hannover Re share is currently traded "at a bargain sale price".

The more than 700 participants at the well-attended Annual General Meeting also approved all the items on the agenda by a vast majority, including the company's usual full distribution of the profit for the financial year. The dividend target made public three years ago of distributing a gross payout of DM 100 million by the year 2000 was thus reached ahead of schedule.