Hannover Re generates another record result

Wednesday, 12. March 2008 11:00
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Hannover Re generates another record result

* Operating profit (EBIT) + 14.6%
* Group net income + 42.6%
* Return on equity 23.5%
* Major loss burden in line with expectations
* Book value per share + 15.6%
* Proposed dividend: 1.80 euro + 50 cent bonus
* Goals for 2008
- Return on equity > 15%
- Earnings per share in the region of 5 euro

Hannover, 12 March 2008: Hannover Re enjoyed another highly
successful financial year in 2007. "We surpassed our profit targets
and reported the highest Group net income in our company's history",
Chief Executive Officer Wilhelm Zeller announced at the press
briefing on the annual results held in Hannover. Even without the
special effect associated with the tax reform in Germany, Hannover Re
would have recorded the best result since it was first established.

The operating profit (EBIT) - which does not include the profit of
around 22 million euro booked by the Praetorian Financial Group, Inc.
- was boosted by 14.6% to 940.0 million euro (819.9 million euro).
Group net income surged by 42.6% to 733.7 million euro (514.4 million
euro). Even without the special effect of corporate tax reform
amounting to 164.7 million euro (after minority interests), Hannover
Re would have achieved a record result of 568.9 million euro. The
earnings per share climbed from 4.27 euro to 6.08 euro (of which 1.37
euro derived from the special effect associated with tax reform).

The gross written premium of the Hannover Re Group contracted as
expected by 11.1% to 8.3 billion euro (9.3 billion euro). This was
attributable to the sale of Praetorian and the associated withdrawal
from US specialty business. The vigorous growth generated in life and
health reinsurance failed to offset these influencing factors. At
constant exchange rates the decrease in gross premium would have been
8.0%. The level of premium retained within the Group climbed 11.1
percentage points year-on-year to reach 87.4%. Net premium
consequently increased by 2.8% to 7.3 billion euro (7.1 billion
euro).

The return on equity stood at 23.5%; without the extraordinary effect
of the tax reform it would have been 18.2%.

Hannover Re's financial strength was further reinforced in the year
under review: shareholders' equity grew by 15.6% to 3.3 billion euro
(2.9 billion euro). The policyholders' surplus (including minority
interests and hybrid capital) climbed 8.5% to 5.3 billion euro,
compared to 4.9 billion euro in the previous year.

The state of the market in non-life reinsurance remained favourable
in the year under review. Although the hard market has now passed its
peak, the rate level - with a few exceptions - held stable. In areas
that saw more appreciable rate reductions, for example in aviation
business, prices were still coming from a thoroughly adequate level.
"We are especially satisfied with the development of our business in
Germany and in the credit and surety lines", Mr. Zeller stressed.

Due to the sale of US specialty business, lower premium income in the
area of structured products and a reduction in peak exposures, the
gross written premium in non-life reinsurance contracted by 20.1% to
5.2 billion euro (6.5 billion euro). At constant exchange rates,
particularly against the US dollar, the decrease would have been
17.3%. The level of retained premium rose by 12.9 percentage points
to 85.3% (72.4%). Net premium consequently fell by a mere 4.7% to
4.5 billion euro (4.7 billion euro).

The burden of catastrophe losses and major claims was considerably
heavier than in the previous year. Winter storm "Kyrill" was
particularly notable in this regard. For Hannover Re this event
produced a net loss burden of 115.6 million euro. A number of less
substantial natural catastrophe losses as well as several major
claims were also incurred. All in all, the net strain from
catastrophe losses and major claims totalled 285.4 million euro
(107.3 million euro). This figure is equivalent to 6.3% (2.3%) of the
net premium booked in non-life reinsurance and is thus within the
expected bounds of 8%.

The combined ratio stood at 99.7% (100.8%), a figure that reflects
the current portfolio mix: Hannover Re continues to set aside prudent
levels of reserves, especially for more recent years in long-tail
casualty business. The underwriting result nevertheless improved to
-26.7 million euro, after -71.0 million euro in the previous year.

Net investment income in non-life reinsurance declined by 5.8% in the
year under review to 783.3 million euro (831.7 million euro). The
operating profit (EBIT) developed most satisfactorily: despite
reduced premium income it came in on a par with the previous year at
667.6 million euro (670.1 million euro). The EBIT margin consequently
improved to 14.8% (14.2%). Net income in non-life reinsurance climbed
17.1% to 560.5 million euro (478.5 million euro). The special effect
resulting from the reduction in deferred taxes amounted to
118.6 million euro (after minority interests). Earnings per share
grew to 4.65 euro (3.97 euro), of which 98 cents can be attributed to
the special effect of the tax reform.

Hannover Re was extremely satisfied with results in life and health
reinsurance. "The development of our business can be rated excellent.
We not only achieved our premium and profit targets, we comfortably
surpassed them", Mr. Zeller asserted. Hannover Re, which operates in
this business group under the Hannover Life Re brand, sees clear
growth potential for annuity insurance in the area of individual
retirement provision in the industrialised nations. The largest
single market is the United Kingdom, where the company's focus
remains on enhanced annuities. In life and health reinsurance, as in
non-life reinsurance, Hannover Re is also cultivating the emerging
market of (re)insurance transacted in accordance with Islamic law. In
this area the company offers its clients new products and supports
them with an eye to marketing and sales
methods.

Gross written premium in life and health reinsurance exceeded the 3
billion euro threshold for the first time in the year under review,
growing by 10.4% to 3.1 billion euro (2.8 billion euro). At constant
exchange rates growth would have come in at 14.0%. The level of
retained premium climbed by 5.4 percentage points to 90.8%. Net
premium earned consequently rose by a more vigorous 17.8% to 2.8
billion euro, compared to 2.4 billion euro in the previous year.

Hannover Re boosted its operating profit (EBIT) in life and health
reinsurance by 65.4% to 230.8 million euro (139.5 million euro); this
includes special effects associated inter alia with the commutation
of contracts concluded in previous years in an amount of roughly
30 million euro. The EBIT margin rose to 8.3% (5.9%). Even after
elimination of the special effects it would have reached 7.2%, a
figure comfortably in excess of the targeted 5%. Net income improved
by a gratifying 83.9% to 188.7 million euro (102.6 million euro); the
positive effect associated with the reform of corporate taxation
totalled 46.1 million euro (after minority interests). Earnings per
share stood at 1.57 euro (85 cents), of which 38 cents was
attributable to the special effect of tax reform.

Hannover Re expressed similar satisfaction with the development of
its investment income. The relatively modest rise in assets under own
management - compared to the previous year - primarily reflected the
downward slide of the US dollar: the portfolio of assets under own
management grew by 1.6% to 19.8 billion euro (19.5 billion euro) as
at 31 December 2007. Ordinary income excluding deposit interest
nevertheless improved on the previous year by 8.4% to 859.0 million
euro (792.6 million euro). On balance, deposit interest and expenses
contributed 220.1 million euro (221.9 million euro) to net investment
income. As part of the company's proactive approach to portfolio
management - especially in relation to equities - profits of
244.0 million euro (305.1 million euro) were realised on the disposal
of investments. This contrasted with realised losses of 69.7 million
euro (87.7 million euro). Compared to the previous year, the positive
balance of realised gains and losses thus declined to 174.3 million
euro (217.4 million euro). Write-downs on securities totalled
71.4 million euro (15.0 million euro), of which 34.2 million euro
(7.8 million euro) were taken on equities. Net investment income thus
came in 5.7% lower than in the previous year at 1,121.7 million euro
(1,188.9 million euro).

"Our conservatively oriented, well diversified portfolio was scarcely
affected by the crisis on the US housing market. Given our modest
holding - relative to the total asset volume - of securities with
subprime exposure, our write-downs in this connection were negligible
at around 10 million euro", Mr. Zeller emphasised.

Overall, Hannover Re was highly satisfied with its 2007 financial
year: "In view of the outstanding development of our business and in
accordance with our dividend policy of distributing between 35% and
40% of net income, the Executive Board and Supervisory Board will
propose to the Annual General Meeting that a dividend of 1.80 euro as
well as a bonus of 50 cents be paid", Mr. Zeller announced.

Outlook
Based on its strategic orientation, the available market
opportunities in non-life reinsurance and especially life/health
reinsurance as well as the current state of the capital markets,
Hannover Re anticipates another good result in 2008. Both gross and
net premium should grow by around 5% in original currencies.

In non-life reinsurance Hannover Re is well placed as a
Multi-Specialist to continue to operate profitably even as the market
becomes increasingly difficult. Despite appreciable softening
tendencies in the market, rate reductions in the treaty renewals as
at 1 January 2008 were more modest than anticipated, and to a very
large extent the prices and conditions obtained were thus
commensurate with the risks. Increases in the German market as well
as in worldwide credit and surety reinsurance will likely offset
premium declines in some areas, and non-life reinsurance net premium
in original currencies should therefore remain stable. "Since the
effects of incipient market softening are only reflected in the
statement of income after a certain time lag for systemic reasons,
2008 should bring an increase in the operating profit", Mr. Zeller
explained. In the current financial year Hannover Re has incurred two
catastrophe losses to date: the snowstorm in southern China led to an
estimated net burden in the order of 10 million euro, while in the
case of winter storm "Emma" it is still too early to reliably
estimate the resulting loss expenditure.

In life and health reinsurance Hannover Re expects the dynamic pace
of growth to continue unabated. Long-term growth impetus in
international life and annuity will be driven by the demographic
trend in industrialised countries, the retirement of the baby boomer
generation and the rapid emergence of a middle class in many
developing countries. A special focus is on the expansion of
activities in Asia: in the first half of the current year Hannover Re
plans to commence operational business at its branches in China and
South Korea. In India Hannover Re will set up a service company to
leverage the future potential of the local life insurance market over
the long term. "For 2008 we are looking to continued favourable
profitability and double-digit premium growth in original
currencies", Mr. Zeller explained.

Turning to investments, the expected positive cash flow which
Hannover Re generates from its technical account and from the
investment portfolio will lead to further growth in the volume of
assets. Assuming that capital markets settle down in the course of
the year, the company expects to increase the income from assets
under own management. In the area of fixed-income securities the
stress placed on the high quality and diversification of the
portfolio will be maintained; combined with investments in equities,
this should make it possible to generate another stable profit
contribution.

With market conditions expected to remain acceptable, and given the
broad diversification of the company's reinsurance business and
investment portfolio, Hannover Re anticipates another good result for
the full 2008 financial year. "Provided the burden of major losses
does not significantly exceed the adjusted expected level of 10% of
net premium in non-life reinsurance and assuming capital markets
stabilise, we expect to see a return on equity in excess of
15 percent and earnings per share of around 5 euro for the 2008
financial year", Mr. Zeller affirmed. As for the dividend, the
company continues to aim for a payout ratio in the range of 35% to
40%.


For further information please contact:

Press and Public Relations / Investor Relations:
Stefan Schulz (tel. +49 / 511 / 56 04-15 00,
e-mail: stefan.schulz@hannover-re.com)

Press and Public Relations:
Gabriele Handrick (tel. +49 / 511 / 56 04-15 02,
e-mail: gabriele.handrick@hannover-re.com)

Investor Relations:
Gabriele Bödeker (tel. +49 / 511 / 56 04-17 36,
e-mail: gabriele.boedeker@hannover-re.com)


Hannover Re, with a gross premium of around 8 billion euro, is one of
the leading reinsurance groups in the world. It transacts all lines
of non-life and life and health reinsurance. It maintains business
relations with more than 5,000 insurance companies in about 150
countries. Its worldwide network consists of more than 100
subsidiaries, branch and representative offices in around 20
countries with a total staff of roughly 1,800. The rating agencies
most relevant to the insurance industry have awarded Hannover Re very
strong insurer financial strength ratings (Standard & Poor's AA-
"Very Strong" and A.M. Best A "Excellent").


Disclaimer:
Some of the statements in this press release may be forward-looking
statements or statements of future expectations based on currently
available information. Such statements are naturally subject to risks
and uncertainties. Factors such as the development of general
economic conditions, future market conditions, unusual catastrophic
loss events, changes in the capital markets and other circumstances
may cause the actual events or results to be materially different
from those anticipated by such statements. Hannover Re does not make
any representation or warranty, express or implied, as to the
accuracy, completeness or updated status of such statements.
Therefore, in no case whatsoever will Hannover Re and its affiliate
companies be liable to anyone for any decision made or action taken
in conjunction with the information and/or statements in this press
release or for any related damages.



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Hannover Rück
Karl-Wiechert-Allee 50 Hannover Germany

WKN: 840221;
ISIN: DE0008402215; Index: CDAX, CLASSIC All Share, HDAX, MDAX,
MIDCAP, Prime All Share;
Listed: Prime Standard in Frankfurter Wertpapierbörse, Amtlicher
Markt in Niedersächsische Börse zu Hannover,
Freiverkehr in Börse Berlin, Freiverkehr in Börse Düsseldorf,
Freiverkehr in Hanseatische Wertpapierbörse zu Hamburg, Freiverkehr
in Bayerische Börse München,
Freiverkehr in Börse Stuttgart, Amtlicher Markt in Frankfurter
Wertpapierbörse;
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