Hannover Re Posts Strong 1st Half Earnings

August 12, 2004

Germany’s Hannover Re posted strong first half results with operating profit (EBIT) up 31.6 percent to 375.4 million euros ($460 million), net income up 30.2 percent to 211.5 million euros ($260 million), and net investment income 16.6 percent in comparison to the same period in 2003.

The company’s combined ratio in P/C reinsurance was 94.3 percent, compared to 98.6 percent for the first half of 2003.

Hannover Re said that all four business groups contributed to this performance. “This business development puts us absolutely on track to achieve our ambitious profit targets for the full financial year”, observed Wilhelm Zeller, Chairman of the Executive Board. “A significant decline in gross premium income, due in part to our proactive cycle management, is in no way cause for concern. Quite the contrary, we have once again demonstrated that profitability alone is what counts in our industry, not volume.”

As Zeller indicated, the company has been concentrating on the bottom line. As a result it noted that “gross premium income contracted significantly in the second quarter. Across all four business groups it declined by 19.8 percent for the first half-year 2004 to 4.8 billion euros [$5.88 billion],” compared to 6.0 billion euros ($7.35 billion) in the same period last year.

The announcement indicated that at “constant euros exchange rates, especially against the US dollar, the reduction would have been 15.0 percent. The level of retained premiums again increased appreciably, as a consequence of which net premiums fell by a mere 4.9 percent to 3.5 billion euros [$4.29 billion]. Adjusted for exchange-rate effects, net premiums would have been roughly on a par with the previous year.”

Among other highlights, Hannover noted that its “claims experience in the second quarter was very modest; as in the first quarter, no natural catastrophe losses were recorded. The only major claim was the collapse of a structure at Paris Charles de Gaulle Airport.” It’s projecting a net expenditure of around 15 million euros ($18.4 million) from the event.

The company also noted that “the net burden of major losses for the entire first half-year amounts to 51.9 million euros [63.6 million]. This corresponds to roughly 3.5 percent of net premiums, a figure well below the multi-year average of five percentage points.”

Zeller affirmed: “In view of the developments described above and provided major loss expenditure remains in line with the multi-year average and there are no adverse movements on capital markets, we stand by our forecast of consolidated net income for the full financial year of between 390 and 430 million euros [$478 and $527 million].”

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