Hannover Re: Capital increase of around EUR 500 million

Thursday, 12. June 2003 06:45

Capital increase of around EUR 500 million through combined
transaction of cash and contribution in kind
- Institutional cash placing of new shares representing 10% of issued
share capital
- Majority shareholder will participate through EUR 310 million
contribution in kind
- Expansion of highly profitable financial reinsurance operations
- Expanded capital base will enable Hannover Re to fully capitalise
on continuously
attractive property/casualty reinsurance market by increased
Hannover, 12 June 2003: The Executive Board of Hannover Re yesterday
decided upon and received Supervisory Board approval for an increase
in stockholders' equity by means of a combination of a capital
increase for cash and a capital increase for a contribution in kind,
each to be made from authorised capital and excluding pre-emptive
rights of existing shareholders.
10% capital increase against cash: The 9,716,392 new shares from the
capital increase against cash are being offered today by Dresdner
Kleinwort Wasserstein to institutional investors in Europe and the
U.S. in a private placement by means of an accelerated bookbuilding.
Based on the closing price as of 11 June 2003 this will generate
proceeds of up to EUR 230 million depending on the final issue price,
which will be determined by the bookbuilding process.
C. 13% capital increase against contribution in kind: In the context
of the capital increase against contribution in kind, Talanx AG, the
intermediate holding company of HDI Group, will contribute its shares
in HDI Reinsurance Ireland Ltd. (HDI Re) into Hannover Re effective
1 July 2003 against issuance of new shares. Thus, Hannover Re will
acquire the financial reinsurance activities of the HDI Group
previously managed independently.
Under the management of Hannover Re Advanced Solutions, HDI Re is
located in the International Financial Services Centre in Dublin and
specialises in low-risk financial reinsurance business and holds an
attractive portfolio. Mr Zeller, Chairman of the Executive Board of
Hannover Re, explained: "The business written by HDI Re, which was
neither accessible to us nor to the reinsurance market in the past,
is highly profitable. HDI Re is the perfect complement to Hannover
Re's Irish operations. Furthermore, as a consequence of this
transaction a capital increase at our existing Irish subsidiary which
had become necessary due to considerable growth during the last few
years will be accomplished."
Based on a valuation report of a renowned international auditing
firm, the value of HDI Re has been agreed at EUR 310 million.
At the effective date of contribution, the shareholders' equity of
the contributed company will amount to approximately EUR 180 million.
Furthermore, the company holds an attractive portfolio of reinsurance
contracts, guaranteed for 10 years, with an estimated net portfolio
value of some EUR 130 million. There will be no goodwill resulting
from this transaction.
With forecast 2003 net premiums of some EUR 300 million HDI Re has a
considerably higher capital base than necessary for its current
portfolio. Based on Hannover Re's risk-based-capital model the excess
capital of around EUR 150 million will be available to further expand
this profitable segment.
The average RoE of HDI Re over the past five years (including
H1 2003) was in excess of 15% after tax. The Management of Hannover
Re Advanced Solutions expects RoE after 1 July 2003 to continue to
exceed Hannover Re's internal "hurdle rate" of currently 12.3% after
tax. The estimated RoI of 10% clearly exceeds Hannover Re's cost of
capital. "On these terms, HDI Re is valued very attractively in our
view", explained Mr Zeller.
The number of new shares issued to Talanx AG as compensation for its
participation in the capital increase against contribution in kind
will be determined by the issue price per share resulting from the
capital increase against cash. Based on yesterday's closing price,
Hannover Re's shareholders' equity is expected to rise by c. 13%
resulting from the capital increase against contribution in kind. The
admission to listing of the new shares from the capital increase
against contribution in kind is expected for autumn 2003.
Strengthening of equity capital base: As a result of the two capital
increases, the Executive Board expects an increase in shareholders'
equity of approximately EUR 500 million and an increase in expected
2003 earnings after tax by EUR 40 million to EUR 320 million to
EUR 350 million. "Although Hannover Re's shareholders' funds will be
increased by approximately 30%, forecast 2003 earnings per share will
only be diluted slightly", Mr Zeller added.
This capital increase will allow Hannover Re to implement its strong
expansion plans in financial reinsurance and to increase its
retention in the currently very profitable property/casualty
reinsurance business.
"With the capital increase we pre-empt extended new core capital
requirements of the rating agencies", Mr Zeller explains further.
"Moreover, our investors, clients and brokers highly welcome a
strengthening of our equity capital base. This enhancement is of
strategic importance as it allows us to benefit from very favourable
market opportunities especially in property/ casualty reinsurance, as
well as in financial reinsurance."
Expected future shareholder structure: Based on yesterday's closing
price the free float of Hannover Re is expected to rise to c. 28%
post-transactions, the 75% stake currently held by Talanx is expected
to decrease to c. 72%.
Lock-up: Hannover Re as well as Talanx and its subsidiaries have
agreed with Dresdner Kleinwort Wasserstein to submit to a lock-up
period of six months in respect of any further capital market
transactions in Hannover Re shares.

Contact: Roland Vogel (Tel.: +49/ 511/ 56 04-12 00, Fax: +49/ 511/56
04-68 92, E-Mail: roland.vogel@hannover-re.com).

Hannover Re, with gross premiums of EUR 12.5 billion, is the
fifth-largest reinsurer in the world. It transacts all lines of
property/casualty, life/health and financial/finite-risk reinsurance
as well as program business. It maintains business relations with
more than 2,000 insurance companies in over 100 countries. Its
worldwide network consists of more than 100 subsidiaries, branch and
representative offices in 19 countries. The rating agencies most
relevant to the insurance industry have each awarded Hannover Re
their second-highest rating (Standard & Poor's AA- "Very Strong" and
A.M. Best A+ "Superior").

This press release contains and incorporates by reference
forward-looking statements that are based on current expectations,
estimates, forecasts and projections about the industries in which we
operate, management's beliefs and assumptions made by management.
Such statements include, in particular, statements about our plans,
strategies and prospects. Words such as "expects", "projects",
"anticipates", "intends", "plans", "believes", "seeks", "estimates",
variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes
and results may differ materially from what is expressed or
forecasted in these forward-looking statements.
This press release is not an offer of securities for sale or a
solicitation of an offer to purchase securities in the United States.
The shares in Hannover Re (the "Shares") may not be offered or sold
in the United States or to or for the account or benefit of U.S.
persons (as such term is defined in Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act")) unless
registered under the Securities Act or pursuant to an exemption from
such registration. The Shares have not been and will not be
registered under the Securities Act.
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