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Press Release on Interim Report 2/2001

Hannover, 30 October 2001:

Hannover Re expressed its satisfaction with its business development in the first half-year 2001. As stated in its interim report, an after-tax profit of EUR 118.8 million (+ 15.2%) was generated with gross premium income of EUR 4.5 billion (+ 20.6%).

"In property and casualty reinsurance we have systematically exploited the opportunities offered by the tightening market", stated Wilhelm Zeller, Chairman of the Executive Board. The premium volume in this business segment was boosted by 22.9% compared to the same period in the previous year. Despite increased natural and man-made catastrophe losses this year as compared to the first half-year 2000, the combined loss & expense ratio improved further to 105.1% (108.9%).

In life and health, business development was according to plan. Mr. Zeller pointed out, however, that premiums and profits in this business segment are not spread equally over the quarters. The profit contribution of just EUR 14 million (EUR 11 million) cannot therefore be taken as an indication of the result for the year as a whole.

In program business premium volume and retention rose sharply. Compared to the same period in the previous year, net premiums earned climbed by 142.6%. The net income was in line with the plan. Due to its position as US market leader in this segment, the Clarendon subsidiary was able to write attractive new business.

The development of financial reinsurance was exceptionally good. Demand for alternative solutions clearly surpassed original expectations. "We took full advantage of this market climate and almost doubled our premium volume", Mr. Zeller pointed out. The profit contribution was 10.9% higher than in the same period of the previous year.

In line with the general situation in the capital markets, net investment income declined year-on-year by 4.7%. Ordinary investment income grew by 29.6% despite the lower interest rate levels, although this was more than offset by a sharp decrease in realized capital gains.

On balance, the after-tax result for the first half-year amounted to EUR 118.8 million or EUR 4.02 per share (+15.2%).

The outlook for the third quarter and for the year-end result has been overshadowed by the unprecedented scale of losses resulting from the terrorist attacks in the USA on 11 September 2001. "This event, which has gone down as the largest loss in the history of the insurance industry, will cost our company around EUR 400 million and unfortunately wipe out our entire pre-tax profit", Mr. Zeller regretted.

The gross losses from the terrorist attacks will be in the order of EUR 1.32 billion. Hannover Re has protected itself against such events by obtaining its own reinsurance cover (so-called retrocessions). "It should be stressed in this context that 94% of roughly EUR 920 million of our total retrocessional relief is secured by cash and cash equivalents which are already at Hannover Re's disposal, or by reinsurers which are rated Aor above", emphasized Mr. Zeller.

Hannover Re again made it clear that its net loss of EUR 400 million constitutes a robust estimate since the company did not follow a top-down approach by deriving the volume of its losses from the still uncertain amount of the total market loss. We took the extra time to carefully evaluate our loss estimates by scrutinising our portfolio on a conservative bottom-up contract-by-contract basis. It remains the case that we see no need to adjust our figure, insisted Mr. Zeller.

Since the net loss of EUR 400 million corresponds to Hannover Re's estimated pre-tax profit for 2001, the current financial year is expected to show a break-even result.

As a reaction to the unprecedented scale of losses from the terrorist attacks, the current situation in the reinsurance markets is extremely favourable. It can already be foreseen that substantial rate increases will take hold in the property and casualty reinsurance market. These increases derive in part from the imbalance of supply and demand, but also and more significantly from the reassessment of risks. To this extent, Hannover Re is already experiencing significant premium increases with a considerably higher profit potential. "We have reason to anticipate that we shall be able to recoup the losses from the terrorist attacks in less than three years", stated Mr. Zeller.

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