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Hannover Re expects 2004 performance to exceed its return-on-equity target and reaffirms existing profit expectation for 2005

Hannover, 12 October 2004:

Hurricane "Jeanne" was the fourth severe hurricane to make landfall in the USA within just a few weeks. Such an accumulation of losses in a single US state has a return period of at most once in a hundred years. With a total estimated loss amount of up to USD 40 billion, this is the largest insured loss of all time in the United States and indeed worldwide. The third quarter also witnessed an accumulation of severe typhoons in the Pacific region.

The net burden of losses before tax for Hannover Re resulting from all these windstorm events totalled almost EUR 340 million in the third quarter (see the enclosed table for further details). As things currently stand, this figure is to a large extent still based on estimates; nevertheless, in view of the structure of its protection covers, it is the company's assumption that this amount cannot be significantly exceeded. The loss expenditure incurred as a consequence of other major losses stood at EUR 12 million in the third quarter, following EUR 52 million in the first half-year.

As has been explained in the past, Hannover Re's profit forecast is based inter alia on a burden of major losses costing around 5% of net premiums in property and casualty reinsurance. This corresponds to the multi-year average for major losses. The figure of 12.5% for the first three quarters of 2004 clearly exceeds this level. A further factor to be borne in mind is that the four hurricanes also adversely impacted the portfolio of program business.

"Despite this unusually high burden of major losses we remain confident of generating net income for the year of EUR 300 million a figure that will still enable us to achieve our return-on-equity target of more than 12%", Wilhelm Zeller, Chairman of the Executive Board, emphasised. What is more, the dividend should be higher than in the previous year. "In light of the exceptional strains incurred in recent weeks this is a very good result that not only bears witness to the sustained strong profitability of property and casualty reinsurance but also testifies to our prudent risk management." Hannover Re's minimum return-on-equity target is 750 basis points over and above the average five-year yield on 10-year German government bonds (currently standing at 4.7%). Averaged over the past five years the company has comfortably surpassed this target with an ROE of 15.3%.

Unaffected by the very high natural catastrophe losses, Hannover Re's portfolio continues to perform successfully in all business groups. Consequently, the company's anticipated profit for 2005 also remains unchanged. In concrete terms, Mr. Zeller indicated a range of EUR 430 to EUR 470 million or EUR 3.60 to 3.90 a share. As always, this forecast assumes major-loss expenditure within the bounds of the multi-year average and the absence of unforeseen adverse movements on capital markets.

"It is our expectation that the recent hurricanes will favourably impact the treaty negotiations as at 1.1.2005", Mr. Zeller concluded. "The price erosion anticipated by many market players in natural catastrophe reinsurance is now unlikely to materialise."

Appendix: Summary of Major Losses