For explanations of technical terms regarding the reinsurance business and financial reporting, please refer to our online glossary.

Share FAQs

1. How many shares are issued and how are they structured?

The share structure of Hannover Re consists – effective 1 July 2003 – of 120,597,134 no-par-value registered shares which are listed under the security identification number 840 221, ISIN DE 000 840 221 5. All shares are fully paid and listed on the stock exchange with unrestricted transferability. Shareholders are not entitled to evidencing of their shares. The complete changeover to registered shares and the harmonisation of all Hannover Re shares under the aforementioned security identification number took place on 16 October 2000. In July 2002 a share split in a ratio of 3-for-1 was implemented.

With our combined capital increase for cash and contribution in kind implemented on 12 June 2003, the number of shares in 2003 developed as follows:

97,163,928 shares up to and including 12 June 2003, 106,880,320 from 12 June 2003 onwards (9,716,392 shares from the capital increase for cash) and 120,597,134 with retroactive effect as at 1 July 2003 (13,716,814 from the capital increase for contribution in kind).

On 18 February 2004, Talanx AG successfully placed on the market a 20.6% stake in Hannover Re with institutional investors. The number of shares amount to 24.8 million and take the free float up to 49.8% therefore reducing the Talanx stake in Hannover Re shares to 50.2%. This has a positive effect on the liquidity of Hannover Re shares.

2. What is the breakdown of Hannover Re's shareholder structure?

The majority shareholder of Hannover Re is the also listed Talanx AG. Talanx AG is a 79% owned subsidiary of HDI V.a.G. On 18 February 2004, Talanx AG successfully placed on the market a 20.6% stake in Hannover Re with institutional investors and therefore held 50.2% of the share capital of Hannover Re; the remaining 49.8% is widely spread.

Further information on the shareholder structure is provided in the following section:

Shareholder structure

3. On which stock exchanges is the Hannover Re share listed?

The Hannover Re share is traded under the security identification number 840 221, ISIN DE 000 840 221 5 on all German stock exchanges (including in Frankfurt and Hannover in official trading) and in Xetra.
Click here for the Xetra share price.

In addition, Hannover Re trades its shares in the USA in the form of American Depositary Receipts (ADR Level 1 Program). For more information please refer to question no. 5.

4. What are the stock exchange IDs of the Hannover Re share?

Stock exchange IDs of the Hannover Re share
Share (security identification number): 840 221
ISIN: DE 000 840 221 5
Reuters: HNRGn.DE
HNRGn.F
Bloomberg: HNR1 GY
Investdata: HNR
ADR: HVRRY

5. What is and who handles the Hannover Re ADR program in the USA?

Hannover Re was the first German reinsurer to trade its shares in the USA in the form of American Depositary Receipts (ADR). Trading commenced on 1 October 1997 under the symbol "HVRRY", with two ADRs corresponding to one HNR share. ADRs are American depositary receipts for non-US shares; they are issued by US banks and traded in place of the original shares. This provides US investors with an opportunity to acquire non-US shares in the form of USD-denominated securities directly through the "over-the-counter" (OTC) market.

The purpose of the ADR programme is to increase awareness of the share in the USA. In this way, the company was also seeking to expand its shareholder base and generate additional demand.

As of the beginning of 2004 The Bank of New York is acting as the depositary bank handling the ADR (Level 1) dealing through the "over-the-counter" (OTC) market.

6. Is it possible to purchase shares directly from Hannover Re?

It is not possible to deal directly with Hannover Re when buying or selling HNR shares. Please contact your custodian bank in this regard.

7. What is Hannover Re's dividend policy?

As a German corporation, Hannover Re pays its dividend in EUR. The dividend is payable on the next working day following the Annual General Meeting.

It is part of our shareholder-friendly dividend policy to distribute 35 to 40% of the group net profit of Hannover Re (parent company) to its owners.

Please find more details in our dividend section.

Company FAQs

1. What is reinsurance?

"Reinsurance is the insurance of the risk assumed by the insurer" (Article 779, paragraph 1 German Commercial Code),

in other words the

"insurance of insurers according to the principle of risk assumption and risk spreading".

These two definitions already illustrate the key points of reinsurance. Reinsurers insure the so-called "primary" insurers by participating in the risks which they have assumed. A primary insurer is an insurance company which has a direct contractual relationship with the customer (private individual, company, organisation) and which accepts its risks in exchange for an insurance premium. The chain of risk assumption and spreading thus begins when a primary insurer concludes an insurance contract with his customers in respect of a particular risk. The primary insurer can then seek so-called reinsurance cover for this risk or a combined group of similar risks from one or more reinsurers. A reinsurer's clients are thus exclusively insurance companies - private individuals cannot obtain insurance from a reinsurer.

Risk diversification as basic principle

If an insurance contract is made between insurer and reinsurer, the reinsurer assumes a contractually defined share of any claim which may arise. As illustrated by the following diagram, it is very common for a risk to be spread among a group of reinsurers rather than being passed on to just one reinsurer. This risk atomisation constitutes a further fundamental principle of reinsurance. Many risks can only be insured in the first place by breaking them down and spreading the total risk across several pairs of shoulders.

Which kind of risks need reinsurance?

If we consider the question of which risks are appropriate for or indeed even necessitate sharing with reinsurers, it is almost inevitable that we first think of major risks such as natural catastrophes (earthquakes, storms etc.) or major losses attributable to other causes, such as a plane crash. In such cases it is evident that a risk can cause a loss amount which no single insurer could bear, and which therefore renders risk atomisation absolutely indispensable. However, the situation is similar with smaller, more normal risks. Thus, for example, as an individual risk, a motor own damage policy is undoubtedly small enough for the primary insurer to carry alone; however, this insurer may have many thousands of such risks in his portfolio, and taken together they may very well add up to a level of exposure which necessitates risk spreading with the aid of reinsurance. Such a scenario can occur, for example, if a hailstorm hits a city and damages several thousand vehicles, producing a combined loss running into millions. In principle, therefore, any insured risk can give rise to a need for atomisation and the participation of reinsurers.

High expertise in the field of risk assessment

Since reinsurers are not obliged to accept risks and there are no uniform standards governing prices or terms and conditions, reinsurers have developed considerable expertise in the field of risk assessment. With the aid of highly developed specialist know-how, the goal is to assess a risk correctly and arrive at an accurate price/risk ratio which then determines whether the risk is accepted or declined. To this end, expert knowledge has to be assembled from a highly diverse range of fields. As a result, the major reinsurance companies operating today employ not only insurance specialists, but also mathematicians, meteorologists, medical experts, engineers and so on.

Innovative financial service provider

Nowadays, however, the traditional function of (joint) risk carrier is no longer the only task performed by reinsurers. On the contrary, in recent years and decades the reinsurance industry has evolved into a highly specialised provider of financial services. Thus, for example, reinsurers now offer solutions aimed at easing the strain imposed on newly established insurance companies by the cost-intensive acquisition of new business. Furthermore, increasing importance is attached to insurance arrangements which cover an insurer's entire balance sheet or income statement - especially when the client is a company listed on the stock exchange. Such concepts are frequently highly complex in nature and are tailored to the needs of individual clients. The provision of advice and support for primary insurers has now evolved into a further generally recognised role for reinsurers. Thanks to their expertise in extremely diverse fields, reinsurers are able to offer valuable support, for example with risk assessment, pricing and the development of new products for the insurance market. All these examples, which admittedly have only been outlined very briefly, demonstrate that reinsurers today are more than mere risk-carriers; rather, the demand is for reinsurance companies which possess considerable know-how in the financial services sector, which develop products geared to their clients' special requirements and which also support them in a capacity as consultant.

2. How is Hannover Re positioned in the worldwide reinsurance market?

Profitability first and foremost

Our actions are guided primarily by earnings considerations. We therefore concentrate on attractive segments of reinsurance business. For we seek to be one of the three most profitable reinsurers in the world.

Quantitative targets

For the medium term our strategic goal is to boost the earnings per share by at least 6.5 percent and book value per share by at least 7.5 percent every year. Not only that, our minimum profit target is to generate a return on equity of 900 basis points above the 5-year average yield on 10-year German government bonds.

Diversification: Multi-specialist with a global footprint

We are not all things to all people. We specialise in what we are best at. Both in our non-life and life/health reinsurance business groups we concentrate on a number of strategically important and profitable lines of business. Traditional reinsurance business is complemented by innovative products. This strategy of diversification enables us to safeguard a positive overall result and a stable business development over the long term. Additional risk spreading by region and risk type, both across and within the individual business groups and lines of business, makes us the best diversified reinsurer in the world.

Innovative capital management

We take a proactive approach to capital management. Keeping the costs for our capital base as low as possible is a cornerstone of our strategy. For this reason, we prefer hybrid capital and other equity substitutes within the tolerances of the supervisory authorities and rating agencies. Hybrid capital is subordinated and typically long-term in nature, and it is therefore available on the capital markets at considerably more favourable conditions than equity capital. By raising capital in this way we can at the same time support our rating and ensure a consistently high return on equity.

3. What are the advantages of diversification?

Diversification serves to stabilise premium volume and earnings, hence leading to an improved return on equity

One of our overriding strategic objectives is to optimally diversify our underwriting portfolio. Hannover Re is considered the best diversified reinsurer in the world today. The advantage of our portfolio diversification lies in the stabilisation of premium growth and profitability. By adopting a more broadly diversified stance, our portfolio as a whole is less vulnerable to unfavourable developments in individual segments. In a well-diversified portfolio a variety of independent sources of earnings can offset strains in individual lines of business and hence safeguard a positive overall result.

Reduction of equity requirements

What is more, this risk spreading within the portfolio reduces the company's equity requirements, since a reinsurer's equity is used not least to protect the reinsured risks. Fluctuations in the loss experience (volatility) make it more difficult to plan corporate results. This is where our strategy of diversification comes in again: if one segment within the total portfolio is impacted by exceptionally heavy losses, the other business segments can compensate for these strains. The level of equity required to protect the assumed risks is thus reduced.

Optimised profitability

Furthermore, a reduced equity requirement cuts the cost of capital and hence optimises the company's profitability. A more efficient equity structure also enhances the earnings-equity ratio: less capital is needed to generate the company's profit, hence boosting the return on equity.

Our success in executing this strategy of diversification with the benefits described above is borne out by our unusually high return on equity over the past ten years.

4. Structured reinsurance: How does it differ from traditional reinsurance?

We provide tailor-made solutions for comprehensive earnings and balance sheet protection.

Structured reinsurance constitutes one of Hannover Re's strategic fields of action. The purpose of structured reinsurance is to stabilise our clients' earnings and protect their balance sheets. This aspect is increasingly gaining in importance since companies, and especially those listed on the stock exchange, are coming under steadily growing pressure to show stable results in both the short and long term. Given the differing needs of our clients, structured reinsurance solutions are usually geared to each individual situation and are therefore not a commodity product.

Limit of risk transfer

We develop solutions which enable our clients to self-finance their risks, thereby allowing them to keep such risks on their own books - along with the associated profits and losses. At the same time, such products provide protection for key ratios in the income statement and balance sheet, respectively (e.g. dividends). Thus, our products ensure that incurred losses will not have a negative impact on the client's key financial variables - even though the client carries them himself. In contrast to the full risk transfer associated with traditional reinsurance, a limited risk transfer thus lies at the heart of structured coverage. One means of self-financing and limited risk transfer is the multi-year contract, for example, which ultimately enables insurers to finance their own risks over a period of time.

Example: Spread loss contract

This can be illustrated by the following example: Primary insurer and reinsurer conclude a so-called spread loss contract, i.e. a contract which covers the risks of a defined portfolio over a multi-year period. The period is fixed at five years, the reinsurance cover amounts to 50 EUR million per loss event - with the proviso that losses passed on to the reinsurer may not exceed 75 million EUR over the entire period of the contract. The insurer pays an annual reinsurance premium of 10 million EUR. During the period of the contract, losses carried by the reinsurer may at no time exceed the cumulative reinsurance premiums already paid to the reinsurer at the date of loss. If, at maturity of the contract, the losses carried by the reinsurer are less than 90% of the cumulative reinsurance premiums collected, the insurer receives a profit commission.

Reduced volatility

This example illustrates just one possible type of contract. Nevertheless, it clearly demonstrates some of the aforementioned basic principles, such as the limitation of the risk transfer and a possible multi-year contract duration. Both the insurer and the reinsurer will benefit from such contractual arrangements. For the insurer, the initial appeal is that he can base his calculations on constant and predictable reinsurance premiums. Furthermore, this type of reinsurance is more affordable for him than traditional coverage. Yet at the same time the insurance company is able to protect itself against the negative effects of a major loss event in individual financial years and it will receive a profit commission if the business it writes is profitable. For the reinsurer, such arrangements primarily provide a stable, predictable volume of business over a multi-year period. More importantly, however, this type of solution offers risk limitation and hence reduced loss volatility. Consequently, the amount of equity required to cover the underwriting risk is lower under this type of contract.

Above-average return on equity

The reduced equity requirements as opposed to those of traditional reinsurance solutions are a particularly attractive feature, which generates the above-average returns on equity associated with this segment.

5. Property and casualty reinsurance: Can this business segment be underwritten profitably?

Profitability before volume

The scope of non-life reinsurance

Non-life reinsurance comprises the traditional reinsurance of property and casualty risks as well as structured reinsurance, i.e. this term subsumes the reinsurance of all risks which do not derive from the life, health or personal accident sectors. In terms of gross premium volume, non-life business constitutes the largest segment in reinsurance; due to its cyclical nature, however, it is also the most difficult.

Cyclical market developments

A reinsurance market cycle may take the following course: prompted by one or more financial years with high losses, some reinsurers withdraw from the market because they no longer see any possibility of operating this business profitably. This leads to a shortage in the reinsurance capacity offered market-wide, which in turn prompts a rise in the price of reinsurance protection. Those players who have remained in the market thus profit from this cyclical upswing (hard market). The now favourable market trend attracts new reinsurers, however, and as a result after a few years the available capacity once again exceeds demand. Consequently, this heralds a fall in prices and the onset of a cyclical downturn (soft market).

Major loss events

Yet it is not only cyclical market developments that make non-life reinsurance a difficult business segment to forecast. In particular, major loss events such as natural catastrophes and (very) large man-made losses can also significantly impact the success of this segment.

Focus on profitable business

Nevertheless, despite its cyclical nature, property and casualty reinsurance can be a highly profitable business segment – especially in a hard market. By means of our active cycle management we concentrate even more systematically on profitable market segments within the cyclical and volatile non-life reinsurance business group. Our sole concern is the profitability of the business: we do not consider premium volume or market share to be guiding strategic ratios. In property and casualty reinsurance we enlarge our market share only during upswings characterised by favourable market conditions (hard market), whereas we reduce our share again as the cycle turns downwards (soft market).

Consequent diversification

In order to limit as far as possible the negative impacts of the market cycle in non-life reinsurance on our overall business development, Hannover Re also pursues a systematic strategy of diversification.

6. Accounting Rules: What is IFRS (International Financial Reporting Standards) and what are the main differences to US GAAP (United States General Accepted Accounting Principles)?

Our Group Annual Results 2005 for the first time have been published according to IFRS.

These accounting standards are drawn up by the International Accounting Standards Board (IASB), a London-based civil-law organisation of national accountancy and auditing bodies. An EU directive adopted in 2002 requires almost all capital market-oriented companies in the European Union to prepare and publish their consolidated financial statements in accordance with IFRS (formerly IAS) from financial year 2005 onwards.

The changes over US GAAP are minimal. The main differences are as follows:

  1. The minority interest in profit and loss is calculated identically, but reported as earnings allocation, and thus shown "below the line" (not "above the line" as under US GAAP) in the annual and interim reports.
  2. Minority interests on the balance sheet are thus reported as part of shareholders' equity (not as part of long-term liabilities as under US GAAP)
  3. Investment classification and valuation is adjusted after the requirements of IAS 32 "Financial instruments: presentation and disclosure" and IAS 39 "Financial instruments: recognition and measurement".
  4. Segmental reporting is extended by a "Consolidation column", which shows business between segments as well as positions that can be allocated to the group (the corporate centre = the unallocated overhead)
    • Inter-segment transactions und corporate financing are shown here (under US GAAP those were allocated to the segments)
    • Hybrid capital will only be shown on a whole-group basis (not allocated to segments like under US GAAP)
  5. Reinsurance contracts are classified after IFRS 4 "Insurance contracts". The valuation of the whole technical accounting is still in accordance with US GAAP, which means no major technical deviations compared to the previous year.