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Hannover Re heavily impacted by Hurricane "Katrina"

  • Return on equity after tax will remain in double digits

Hannover, 2 September 2005:

Hurricane "Katrina" is presumably set to become the most expensive ever natural disaster suffered by insurers in industry history. Estimates of the total insured losses currently amount up to USD 30 billion.

With this in mind Hannover Re anticipates a net loss burden resulting from this hurricane of EUR 250 million before tax. It should also be noted that the financial year had already witnessed an above-average intensity of major claims prior to Hurricane "Katrina".

As has been explained on previous occasions, Hannover Re bases its profit expectation on a number of factors – including projected major loss expenditure in the order of 6% of net premiums earned in property and casualty reinsurance; this figure reflects the multi-year average burden of major losses. As at 30 June 2005 actual expenditure on major losses – at EUR 112.3 million or 6.1% of net premiums – was still roughly on a par with this level. The third quarter then saw numerous additional major loss events: Hurricane "Dennis" in the United States, damage to an oil platform in the Indian Ocean, several aviation claims, flooding in Mumbai, India, and most recently the floods in German-speaking parts of the Alpine region. All in all, the major loss expenditure incurred to date in 2005 is nearly EUR 500 million. The proportion of major losses relative to the total net premiums that the company expects to earn in the financial year is consequently already at least double the multi-year average.

As a result the profit expectation, which among other things is always under the provision that the burden of major losses remains within the multi-year average, can not be achieved anymore for this year. The company now expects an overall result that is at least at the level of the previous year (EUR 309.1 million), thus also in 2005 generating a return on equity in the double-digit percentage range. "In view of the extraordinarily heavy burden of losses this is a very good performance", CEO Wilhelm Zeller emphasised.

Unscathed by Hurricane "Katrina", the rest of Hannover Re's property and casualty reinsurance portfolio continues to perform very well. "It is our assumption that 'Katrina' – just like last year’s hurricanes – will have further favourable implications for the treaty negotiations as at 1 January 2006 and we expect to see additional significant hardening of prices and conditions in natural catastrophe and marine reinsurance", Mr. Zeller stressed.

Hannover Re will be providing more detailed insights into its expectations for the treaty renewal season on 12 September 2005 at its press breakfast to be held as part of the Reinsurance Rendez-Vous in Monte Carlo.