• Total premium growth: + 10.3%
  • Combined ratio in non-life reinsurance: 123.8% (previous year: 99.3%)
  • Investment income: EUR 392.0 million (EUR 279.5 million)
  • Operating profit (EBIT): EUR 46.1 million (EUR 238.8 million)
  • Quarterly net income: EUR 52.3 million (EUR 151.0 million)
  • Earnings per share: EUR 0.43 (EUR 1.25)
  • Net burden of major losses: EUR 572 million (EUR 264 million)
  • Forecast for Group net income 2011: roughly EUR 500 million

Hannover, 3 May 2011:

Hannover Re today presented its results for the first quarter of 2011. "The current financial year has been dominated so far by severe natural catastrophe events, which have produced an exceptional major loss burden of EUR 572 million for our company. This is around EUR 452 million higher than the loss expectancy for the first quarter – equivalent to 41.6% of net premium in non-life reinsurance – and caused net income after tax to fall well short of our expectations at EUR 52 million", Chief Executive Officer Ulrich Wallin explained. "On a positive note, though, I would point out that even in this challenging quarter we still posted a net profit."

Premium growth in the first quarter of 2011

Gross written premium for the Hannover Re Group climbed sharply by 10.3% to EUR 3.1 billion (EUR 2.9 billion) as at 31 March 2011. At constant exchange rates growth would have come in at 8.7%. The level of retained premium decreased slightly to 89.3% (90.8%). Net premium earned increased by 8.8% to EUR 2.5 billion (EUR 2.3 billion).

Owing to the major loss situation, the operating profit (EBIT) of EUR 46.1 million as at 31 March 2011 was considerably lower than in the corresponding quarter of the previous year (EUR 238.8 million). Group net income amounted to EUR 52.3 million (EUR 151.0 million). "The fact that we were able to generate a quarterly profit despite the enormous catastrophe loss burden was due to the following effects: run-off profits booked on reserves constituted for losses in prior years, very healthy investment income, the refund of taxes paid for the years 1993 to 2001 as well as the satisfying performance of our life and health reinsurance business", Mr. Wallin emphasised. Earnings per share amounted to EUR 0.43 (EUR 1.25).

Exceptional major loss events take a toll on the result in non-life reinsurance

The treaty renewals in non-life reinsurance as at 1 January 2011 passed off better than expected for Hannover Re. On the whole, the rate level was still commensurate with the risks. Despite softer market conditions the company was able to write profitable business and further consolidate its market position.

Gross premium in non-life reinsurance increased by an appreciable 11.8% relative to the corresponding period of the previous year to reach EUR 1.9 billion (EUR 1.7 billion). At constant exchange rates, especially against the US dollar, growth would have come in at 10.7%. The level of retained premium retreated marginally to 87.8% (90.1%). Net premium earned climbed 9.4% to EUR 1.4 billion (EUR 1.3 billion).

Even though the impact of the major losses on Hannover Re was, if anything, disproportionately low – relative to its market shares –, the net burden of major losses totalling EUR 572 million (EUR 264 million) not only far exceeded the expected level for the first quarter, it even surpassed the major loss budget for the entire year (EUR 530 million). The largest single loss for Hannover Re was the devastating earthquake and subsequent tsunami in Japan with a net strain of EUR 232 million. The severe earthquake in New Zealand cost the company EUR 152 million. The flooding in Brisbane/Australia resulted in loss expenditure of EUR 52 million for Hannover Re. There were also a number of other mid-sized and smaller major losses.

The combined ratio consequently stood at 123.8% (99.3%); the net underwriting result declined to –EUR 330.9 million (EUR 5.5 million). The operating result (EBIT) in non-life reinsurance contracted to –EUR 24.5 million (EUR 165.6 million). The Group net income of EUR 17.3 million (EUR 109.4 million) in non-life reinsurance was assisted, most notably, by run-off profits on reserves constituted for losses in prior years, very healthy investment income and the refund of excess taxes and interest paid thereon in an amount of EUR 113.5 million. The tax refund was based on a decision of the Federal Fiscal Court (BFH) in October 2010 regarding the taxation of foreign-sourced income under the Foreign Transactions Tax Act. Earnings per share amounted to EUR 0.14 (EUR 0.91).

Life and health reinsurance developing as planned

The general business environment in international life and health reinsurance remains favourable. The ageing of the population in mature markets such as the United Kingdom, United States and Germany is prompting growing demand for annuity and health insurance products. Yet in key emerging markets such as China, India and Brazil demand for retirement provision solutions also continues to rise.

Gross written premium climbed 8.1% to EUR 1.2 billion (EUR 1.1 billion) as at 31 March 2011. At constant exchange rates growth would have reached 5.7%. Net premium earned increased by 8.0% to EUR 1.1 billion (EUR 1.0 billion).

The operating profit (EBIT) totalled EUR 58.4 million (EUR 62.6 million). Owing to negative exchange rate effects, the EBIT margin of 5.2% did not quite match up to the targeted level of 6%. Group net income in life and health reinsurance amounted to EUR 41.5 million as at 31 March 2011, a figure slightly lower than the result of the corresponding quarter of the previous year (EUR 45.8 million). Earnings per share came in at EUR 0.34 (EUR 0.38).

As in previous years, Hannover Re is reporting on the Market Consistent Embedded Value (MCEV) in the context of its first interim report. This also encompasses the expected future profits as well as the allocated capital, and hence provides a good basis for assessing long-term profitability. Bearing in mind the present state of capital markets, the MCEV developed very well as at 31 December 2010. It amounted to EUR 2.6 billion (EUR 2.1 billion), equivalent to an increase of 24.3%. The value of new business also recorded a strong increase to reach EUR 149.3 million (EUR 78.9 million).

Very pleasing investment income

Due to fair value and exchange rate effects the portfolio of assets under own management contracted slightly to EUR 24.8 billion (EUR 25.4 billion). Despite the low level of interest rates, ordinary income from assets under own management actually improved somewhat on the corresponding period of the previous year to reach EUR 222.7 million (EUR 214.2 million). Income on funds withheld and contract deposits increased to EUR 75.9 million (EUR 74.0 million). The unrealised gains on assets recognised at fair value through profit or loss amounted to EUR 69.0 million – as against unrealised losses of EUR 12.9 million in the comparable quarter of the previous year. This development was driven chiefly by the positive change in the fair value of inflation swaps taken out last year. Net investment income surged by a vigorous 40.3% to EUR 392.0 million (EUR 279.5 million).

In the first quarter of 2011 Hannover Re parted company with its portfolio of listed equities. "We decided to take this step because we found the market climate in March to be excessively volatile – in part as a consequence of events in Japan, the implications of which for the global economy were difficult to foresee", Mr. Wallin emphasised. The equity disposal reduced investment income by a modest EUR 7.2 million.

Shareholders' equity remains on a high level

Reflecting the fall in fair value reserves due to interest rate rises and also on account of exchange rate effects, shareholders' equity showed a modest decrease. It totalled EUR 4.3 billion at the end of the first quarter (31.12.2010: EUR 4.5 billion). The book value per share amounted to EUR 36.05 (EUR 37.39).


Even though the 2011 financial year is already notable for an exceptionally high incidence of major losses, the business prospects for a financially strong reinsurer nevertheless remain very good. This is true of both non-life and life/health reinsurance. Market opportunities are opening up, inter alia with an eye to the preparations for Solvency II. With this in mind, the net premium volume should – at constant exchange rates – grow by 7% to 8%.

After prices in non-life reinsurance had been flat of late or even declined in some lines, substantial rate increases can be seen in the wake of the recent major loss events. The outcome of the treaty renewals as at 1 April 2011 for Japan, Australia and New Zealand as well as in marine and aviation business was correspondingly favourable.

For 2011 the company expects net premium in total non-life reinsurance to grow by around 5% in the original currencies.

In life and health reinsurance, too, the business outlook is very bright. Hannover Re expects to grow its net premium by roughly 10% to 12% for 2011. The EBIT margin should be in excess of 6%.

The company anticipates a return on investment of 3.5% on its asset portfolio for 2011.

In view of the attractive business opportunities that are opening up and the advantageous situation on reinsurance markets, Hannover Re currently expects to generate – despite the major loss expenditure incurred to date – Group net income in the order of EUR 500 million. This is subject to the premise that the burden of major losses in quarters 2 to 4 does not exceed the expected level of EUR 410 million for the remainder of the financial year and also assumes that investment income is not influenced by any special adverse effects. Following the first quarter of 2011 the profit target has consequently decreased from EUR 650 million to EUR 500 million.

As for the dividend, Hannover Re continues to aim for a payout ratio in the range of 35% to 40% of its Group net income after tax.