Quarterly Report • Aug 6, 2009
Quarterly Report
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| Figures in EUR million | 2009 | 2008 | ||||||
|---|---|---|---|---|---|---|---|---|
| 1.1.–31.3. | 1.4.–30.6. | +/- previous Year |
1.1.–30.6. | +/- previous Year |
1.4.–30.6. | 1.1.–30.6. | 31.12. | |
| Results | ||||||||
| Gross written premium | 2,661.9 | 2,588.7 | +38.5% | 5.250.5 | +26.7% | 1,869.1 | 4,144.6 | |
| Net premium earned | 2,091.3 | 2,374.6 | +36.7% | 4.465.9 | +30.8% | 1,736.7 | 3,415.4 | |
| Net underwriting result | (1.7) | (73.3) | (75.1) | +106.9% | (7.7) | (36.3) | ||
| Net investment income | 198.2 | 371.0 | +103.3% | 569.2 | +27.9% | 182.5 | 445.1 | |
| Operating result (EBIT) | 305.8 | 294.2 | +90.4% | 600.1 | +49.9% | 154.6 | 400.2 | |
| Group net income (loss) | 216.1 | 202.9 | +101.3% | 419.0 | +66.1% | 100.8 | 252.2 | |
| Balance sheet (as at the end of the quarter) |
||||||||
| Policyholders' surplus | 4,784.4 | 5,036.7 | +7.0% | 4,708.4 | ||||
| Total shareholders' equity | 2,937.1 | 3,171.2 | +12.1% | 2,830.1 | ||||
| Minority interests | 483.8 | 501.3 | -0.0% | 501.4 | ||||
| Hybrid capital | 1.363.5 | 1,364.1 | -0.9% | 1,376.9 | ||||
| Investments (excl. funds held by ceding companies) |
20,950.4 | 21,047.4 | +4.5% | 20,137.2 | ||||
| Total assets | 40,966.7 | 41,557.6 | +9.4% | 38,001.7 | ||||
| Share | ||||||||
| Earnings per share (diluted) in EUR | 1.79 | 1.68 | +100.0% | 3.47 | +66.1% | 0.84 | 2.09 | |
| Book value per share in EUR | 24.35 | 26.30 | +12.1% | 23.47 | ||||
| Share price at the end of the period in EUR | 24.00 | 26.36 | -15.9% | 26.36 | +17.2% | 31.35 | 31.35 | 22.50 |
| Market capitalisation at the end of the period |
2,894.3 | 3,178.9 | +17.2% | 3,780.7 | 2,713.4 | |||
| Ratios | ||||||||
| Combined ratio (non-life reinsurance) 1) | 95.0% | 98.9% | 97.1% | 97.4% | 98.4% | |||
| Large losses as percentage of net premium earned (non-life reinsurance) 2) |
8.4% | 5.0% | 6.6% | 4.4% | 6.2% | |||
| Retention | 91.7% | 94.4% | 93.0% | 90.5% | 89.5% | |||
| Return on investment (excl. funds held by ceding companies) |
2.7% | 5.4% | 4.1% | 2.9% | 3.6% | |||
| EBIT margin 3) | 14.6% | 12.4% | 13.4% | 8.9% | 11.7% | |||
| Return on equity (annualised) | 30.0% | 26.6% | 27.9% | 13.6% | 16.4% |
1) Including funds held
2) Natural catastrophes and other major losses in excess of EUR 5 million gross for the Hannover Re Group's share
3) Operating result (EBIT)/net premium earned
Ulrich Wallin Chairman of the Executive Board
Dear shareholders, Ladies and Gentlemen,
On 1 July 2009 a change occurred in the leadership of Hannover Re; having served on the Executive Board for eight years I have now taken over as Chairman of this body. During my many years of service for Hannover Re, going back as far as 1984, I have had the opportunity to perform a range of tasks in reinsurance business. They included, most notably, the development and leadership of our Specialty Division, by which we mean worldwide aviation and marine reinsurance business as well as facultative reinsurance, i.e. the underwriting of individual risks. In addition, I was entrusted with responsibility for our protection cover programmes for major risks.
My move to become Chief Executive Officer of your company represents the continuous refinement of our successful business model. Particularly in the current financial market crisis, this has proven its worth despite the unsatisfactory result of the previous year. We were able to assert our position as a financially strong undertaking, and we are well placed to profit from the prevailing attractive conditions for reinsurers.
In order to remain successful over the long term, we shall fine-tune our business model with the aim of being able to cover our clients' reinsurance needs as a reliable, financially robust partner. What is more, we must develop skills that enable us to recognise even better business opportunities upon which we can then act in concert with our clients.
Last but not least, especially in light of my experience on the Executive Board of Hannover Re, I shall seek to reduce the volatility of our results wherever possible. With this aim in mind, we are continuing to systematically enhance our risk management.
I would now like to turn my attention to the current financial year, which has passed off very favourably to date. Our result in the first half-year puts in place a good platform to achieve our targets for 2009.
We are highly satisfied with the development of our non-life reinsurance business as at 30 June 2009. After several years in which we did not record any growth, we booked a vigorous organic surge in premium income. This can be attributed firstly to the rise in demand for reinsurance – triggered in part by the financial market crisis – and secondly to our good positioning in the markets. Overall, the rate level in non-life reinsurance has been commensurate with the risks in the current financial year, and our acceptances therefore show a healthy profit potential that meets our required margins. Yet this is not
true of all segments: in some areas of property catastrophe business and US casualty business we scaled back our exposures.
As you, our valued shareholders, are aware, the transfer of insurance risks to the capital market has for some years played a special role for our company. These transactions enable us to obtain adequate cover for peak risks, especially in times when prices on the retrocession market are very much on the high side. In July, therefore, we succeeded in renewing our "Eurus" catastrophe bond that we had originally issued in 2006. This cat bond with a volume of EUR 150 million provides cover against severe windstorm events in seven European countries.
We are also thoroughly satisfied with the development of our second business group – namely life and health reinsurance. The acquisition of the US ING life reinsurance portfolio not only strengthens our risk-oriented life reinsurance business in the United States, an area in which we had hitherto been underrepresented; it also marks a major stride towards ensuring that life and health reinsurance – which is characterised by greater stability relative to more volatile non-life reinsurance business – now accounts for a larger share of the total portfolio. In the current financial year we were able to tap into two very positive special effects of the acquisition – along with the regular premium income – which led to a sharp surge in profitability. Yet even without the effects of this latest acquisition we have every reason to be very pleased with the development of our life and health reinsurance business group. In the enhanced annuities segment we are making good progress: building on our already very good positioning in the United Kingdom, we intend to enter the North American market before the end of this year. In our assessment, life and health reinsurance offers considerable further potential for organic growth and we shall also continue to review appropriate acquisition offers.
All in all, despite the difficult conditions still prevailing on international capital markets, we are satisfied with the performance of our investments in the first six months. Our goal is to improve still further our portfolio's protection against interest rate fluctuations and other market risks. Within the limits of our investment strategy we shall increase our investments in real estate. Whether or not to move back into listed equities will be decided at the appropriate time. In any event, we shall participate on a strictly controlled basis in a stable environment. We were once again compelled to take write-downs in the second quarter on private equity. Assisted by the positive extraordinary effects of the fair-value measurement of assets deposited with our clients, we recorded further substantial growth in our investment income.
I am pleased to inform you, our valued shareholders, that our share again fared rather well in the first six months of the year. Since the turn of the year the share price has shown a gain of 17.2%, hence outperforming both the Dax and the MDax. Since we still consider our share to be undervalued, however, there should be scope for further pleasing upward price movement if the second half of the year continues to develop favourably.
I would like to thank you for your trust in Hannover Re. Rest assured: my colleagues on the Executive Board and I will do everything in our power to equip your company to handle the opportunities and risks that lie ahead.
Yours sincerely,
Ulrich Wallin Chairman of the Executive Board
| Herbert K. Haas 1) 2) 3) Burgwedel |
Chairman (since 5 May 2009) |
|---|---|
| Dr. Klaus Sturany 1) Dortmund |
Deputy Chairman |
| Wolf-Dieter Baumgartl 1) 2) 3) Berg |
|
| Uwe Kramp 4) Hannover |
|
| Karl Heinz Midunsky 3) Gauting |
|
| Ass. jur. Otto Müller 4) Hannover |
|
| Dr. Immo Querner Ehlershausen |
|
| Dr. Erhard Schipporeit 2) Hannover |
|
| Gert Waechtler 4) Burgwedel |
| Ulrich Wallin Hannover |
Chairman (since 1 July 2009) |
|---|---|
| Wilhelm Zeller Burgwedel |
Chairman (until 30 June 2009) |
| André Arrago Hannover |
|
| Dr. Wolf Becke Hannover |
|
| Jürgen Gräber Ronnenberg |
|
| Dr. Elke König Hannover (until 31 March 2009) |
|
| Dr. Michael Pickel Isernhagen |
|
| Roland Vogel Wennigsen (since 1 April 2009) |
Deputy Member |
1) Member of the Standing Committee
2) Member of the Balance Sheet Committee 3) Member of the Nomination Committee
4) Staff representative
Conditions in worldwide reinsurance business are favourable for our company, enabling us to close the first half-year with a satisfactory underwriting result. Both the premium volume and profitability in our two business groups came in in line with our expectations.
Gross written premium in total business increased by 26.7% to EUR 5.3 billion (EUR 4.1 billion) as at 30 June 2009. Of this strong growth, an amount of EUR 408.6 million was attributable to the acquisition of the US ING life reinsurance portfolio in the first quarter. The effect of exchange rate movements was only marginal at 1.1%. The level of retained premium climbed as planned to 93.0% (89.5%). Net premium consequently surged by an even more vigorous 30.8% to EUR 4.5 billion (EUR 3.4 billion).
Following a below-average incidence of catastrophe losses in the first quarter, the second quarter also passed off relatively favourably; the burden of catastrophe losses and major claims for the first six months therefore remained within our expected bounds.
In view of the challenging state of international capital markets we are satisfied with our investment income. The volume of assets under own management grew slightly owing to a positive inflow of cash from the technical account. Ordinary investment income fell somewhat short of the corresponding period of the previous year at EUR 398.8 million (EUR 407.9 million). Interest on deposits climbed by an appreciable 41.7% to EUR 144.9 million (EUR 102.3 million). While scarcely any write-downs were incurred on listed equities (EUR 2.6 million) and those taken on fixedincome securities retreated to EUR 26.2 million (EUR 31.7
We continue to be satisfied with the development of our non-life reinsurance business: the situation on the international reinsurance markets is favourable for our company. The repercussions of the financial crisis have served to enhance the appeal of reinsurance as a tool for capital management at our clients in the primary insurance sector. million), it was again necessary in the second quarter to take further write-downs of EUR 30.5 million (first half-year: EUR 64.1 million) on private equity investments. Positive effects made themselves felt in the second quarter in connection with the recognition of ModCo reinsurance contracts, under which securities deposits are held by cedants and payments are rendered on the basis of the income from certain securities of the ceding companies. The effect of these contracts on our unrealised gains/losses had been negative as at 31 December 2008 and 31 March 2009. In addition, positive effects derived from the measurement of deposits in connection with the ING acquisition. Although the general environment is still highly challenging, we were therefore able to boost our net investment income to EUR 569.2 million (EUR 445.1 million), an improvement of some 27.9% compared to the same period of the previous year.
The operating profit (EBIT) increased by 49.9% to EUR 600.1 million (EUR 400.2 million). Group net income as at 30 June 2009 surged – in part owing to the special effects associated with the ING life reinsurance portfolio and the funds held by ceding companies – by 66.1% to EUR 419.0 million (EUR 252.2 million). The earnings per share thus totalled EUR 3.47 (EUR 2.09) and the annualised return on equity stood at 27.9% (16.4%).
Shareholders' equity improved by EUR 341.2 million on the level of 31 December 2008 and stood at EUR 3.2 billion. The book value per share consequently also increased by 12.1% to EUR 26.30 (EUR 23.47). The policyholders' surplus, comprised of shareholders' equity, minority interests and hybrid capital, totalled EUR 5.0 billion (EUR 4.7 billion).
This is continuing to generate stronger demand for reinsurance protection. As a result, the price increases obtained during the treaty renewals as at 1 January 2009 were sustained in subsequent renewal phases within the year. In contrast to the rate declines witnessed in South Korea and
Japan in the previous year, it was possible to secure price increases in the renewals as at 1 April 2009 in these markets.
The renewals on 1 June and 1 July similarly passed off satisfactorily for our company overall. Nevertheless, we did not consider movements in the rate level to be adequate in all segments. In view of our profit-oriented underwriting policy, we therefore scaled back our exposures in such segments. This is true, for example, of property catastrophe business in Japan and the United States, where we reduced our peak risks. In some casualty segments we also wrote smaller volumes in response to inadequate rates.
The development of our worldwide credit and surety business gave grounds for satisfaction. With prices rising to
levels that are commensurate with the risks, we have expanded in this segment – even though the claims rates are not as positive as in previous years owing to higher default rates. Our portfolio in Central and Eastern Europe, where we were able to acquire new business and enlarge our shares under existing accounts, continues to perform well.
In the area of agricultural risks we are pursuing a global strategy of acquiring additional market shares.
Demand for structured covers continues to be fuelled by the reverberations of the financial market crisis. Further highly attractive business opportunities are opening up in this area.
| Figures in EUR million | 2009 | 2008 | |||||
|---|---|---|---|---|---|---|---|
| 1.1.–31.3. | 1.4.–30.6. | +/- previous year |
1.1.–30.6. | +/- previous year |
1.4.–30.6. | 1.1.–30.6. | |
| Gross written premium | 1,656.0 | 1,425.5 | +24.0% | 3,081.5 | +16.0% | 1,149.3 | 2,656.2 |
| Net premium earned | 1,180.9 | 1,301.0 | +19.8% | 2,481.9 | +19.2% | 1,085.7 | 2,082.6 |
| Underwriting result | 53.6 | 3.7 | -86.2% | 57.3 | +143.0% | 26.9 | 23.6 |
| Net investment income | 117.8 | 120.1 | +28.2% | 237.9 | -12.0% | 93.7 | 270.4 |
| Operating result (EBIT) | 187.6 | 129.5 | +21.3% | 317.1 | +10.0% | 106.8 | 288.2 |
| Group net income | 126.1 | 97.1 | +18.2% | 223.2 | +14.1% | 82.2 | 195.7 |
| Earnings per share in EUR | 1.05 | 0.81 | +18.2% | 1.85 | +14.1% | 0.68 | 1.62 |
| Combined ratio 1) | 95.0% | 98.9% | 97.1% | 97.4% | 98.4% | ||
| Retention | 92.4% | 96.0% | 94.1% | 90.4% | 89.4% |
1) Including expenses on funds held and contract deposits
All in all, developments in our non-life reinsurance business group were highly gratifying. The gross premium volume as at 30 June 2009 grew by 16.0 % relative to the same period of the previous year to reach EUR 3.1 billion (EUR 2.7 billion). At constant exchange rates, especially against the US dollar, the increase would have amounted to 12.0%. The level of retained premium rose to 94.1% (89.4%) on the back of sharply reduced retrocessions. Net premium earned consequently climbed by 19.2% to EUR 2.5 billion (EUR 2.1 billion).
We incurred only a few catastrophe losses in the second quarter, notably including the severe earthquake centred on the Italian city of L'Aquila. The largest individual loss for our company was the crash of an Air France jet with a net strain in the order of EUR 30 million. All in all, the total net burden of catastrophe losses and major claims for the first halfyear stood at EUR 163.3 million (EUR 130.0 million). This is equivalent to 6.6% of net premium in non-life reinsurance and hence within our expected level of 10%. The combined
ratio stood at 97.1% (98.4%), a figure in line with our expectations for the full 2009 financial year.
The net underwriting result in non-life reinsurance improved from EUR 23.6 million in the comparable period of
In life and health reinsurance we operate in five strategic business segments: financial solutions, bancassurance, new markets, multinational insurance clients and conventional risk-oriented reinsurance.
In many countries the international financial market crisis has stimulated demand among life insurers for reinsurance solutions. Owing to the visible weakening of their solvency position, insurers are adopting a considerably more cautious risk strategy and financial policy, hence leading to an increased clamour for both risk- and financially oriented reinsurance solutions. This state of affairs is particularly evident in the United States, where the insurance industry suffered marked erosion of its capital base. In view of its special focus on the needs of clients, our US subsidiary Hannover Life Re US is well placed to respond appropriately to these developments. Our worldwide portfolio of life and health reinsurance recorded further profitable growth with the acquisition of the US ING life reinsurance business in January. This
the previous year to EUR 57.3 million. The operating profit (EBIT) increased by 10.0% to EUR 317.1 million (EUR 288.2 million). Group net income climbed 14.1% to EUR 223.2 million (EUR 195.7 million), producing earnings per share of EUR 1.85 (EUR 1.62).
transaction also served to strengthen our risk-oriented reinsurance presence in the United States, a segment in which we had previously been underrepresented.
Along with the seniors' market for health insurance products, we continue to regard financial solutions as an area of key importance for our company in the United States. Our portfolio also seeks to tap into considerable potential in the new markets segment, where we write inter alia so-called enhanced annuities – in the United Kingdom we are in fact the leading reinsurer of business in this area. This profitable subsegment ensures the healthy diversification of our life and health portfolio. Here, as is also the case with the reinsurance of existing pension funds, we see excellent scope for further lucrative expansion. With an eye to our enhanced annuities business, for example, we are planning to enter the US market with suitable partners before the end of 2009.
| Figures in EUR million | 2009 | 2008 | |||||
|---|---|---|---|---|---|---|---|
| 1.1.–31.3. | 1.4.–30.6. | +/- previous year |
1.1.–30.6. | +/- previous year |
1.4.–30.6. | 1.1.–30.6. | |
| Gross written premium | 1,005.9 | 1,163.2 | +61.5% | 2,169.1 | +45.6% | 720.0 | 1,490.1 |
| Net premium earned | 910.4 | 1,073.6 | +64.9% | 1,984.0 | +48.9% | 651.0 | 1,332.8 |
| Net investment income | 75.8 | 238.2 | +203.2% | 314.0 | +102.9% | 78.6 | 154.8 |
| Operating result (EBIT) | 117.5 | 148.6 | +278.0% | 266.1 | +205.1% | 39.3 | 87.2 |
| Group net income | 98.0 | 114.4 | +329.5% | 212.5 | +227.1% | 26.6 | 65.0 |
| Earnings per share in EUR | 0.81 | 0.95 | +329.5% | 1.76 | +227.1% | 0.22 | 0.54 |
| Retention | 90.6% | 92.4% | 91.6% | 90.7% | 89.6% | ||
| EBIT margin 1) | 12.9% | 13.8% | 13.4% | 6.0% | 6.5% |
1) Operating result (EBIT)/net premium earned
The regional focus of our strategy remains firmly on the BRIC markets (Brazil, Russia, India and China). Yet Korea – the largest life reinsurance market in Asia – also offers us attractive growth opportunities. The main drivers of our business nevertheless continue to be the developed insurance markets of the United Kingdom, United States, Germany and Australia.
Gross written premium increased by 45.6% as at 30 June 2009 to EUR 2.2 billion (EUR 1.5 billion) on account of the acquisition of the ING life reinsurance portfolio as well as brisk organic growth. At constant exchange rates growth would have been as high as 49.6%. The level of retained premium rose from 89.6% to 91.6%, while net premium earned climbed by 48.9% to EUR 2.0 billion (EUR 1.3 billion).
Net investment income in life and health reinsurance doubled to EUR 314.0 million (EUR 154.8 million). Most signifi-
The partial restoration of confidence in the equity markets has not as yet been backed up by hard facts on the ground. While yields on European government bonds in the shorter and medium duration ranges scarcely saw any changes in the second quarter – with only longer-duration yields moving higher –, yields on US Treasury securities increased across all durations in excess of one year. We observed an appreciable reduction in risk premiums for corporate bonds, with favourable implications for the development of the fair values of these instruments. This trend similarly left a favourable mark on our portfolio, too.
cant here were above all positive effects deriving from the reversal of unrealised losses on deposits with US clients (B36 derivatives) and improvements in the value of deposits that we took over in the context of the ING transaction. The result was, however, adversely impacted by opposing effects in UK annuity business. All in all, then, the operating result (EBIT) reported in life and health reinsurance profited from a non-recurring effect of around EUR 150 million.
The operating profit (EBIT) improved considerably to EUR 266.1 million (EUR 87.2 million). The EBIT margin of 13.4% consequently came in above the target range of 6.5% to 7.5%. Group net income climbed to EUR 212.5 million (EUR 65.0 million). This figure includes a nonrecurring effect from the ING life reinsurance transaction. Earnings per share amounted to EUR 1.76 EUR (EUR 0.54).
The protracted turmoil on international capital markets only minimally affected our result in the first half-year. Driven primarily by the positive operating cash flow, our portfolio of assets under own management grew to EUR 21.0 billion, a further increase relative to the volume as at 31 December 2008 (EUR 20.1 billion). Ordinary income excluding interest on deposits fell just slightly short of the level in the corresponding period of the previous year at EUR 398.8 million (EUR 407.9 million), a testament to the fact that we are correct in pursuing an investment policy geared to generating stable ordinary income.
| Figures in EUR million | 2009 | 2008 | |||||
|---|---|---|---|---|---|---|---|
| 1.1.–31.3. | 1.4.–30.6. | +/- previous year |
1.1.–30.6. | +/- previous year |
1.4.–30.6. | 1.1.–30.6. | |
| Ordinary investment income 1) | 199.3 | 199.5 | +1.5% | 398.8 | -2.2% | 196.6 | 407.9 |
| Results from participation in associated companies |
0.1 | (1.6) | -147.0% | (1.5) | -137.0% | 3.5 | 4.1 |
| Realised gains/losses | 37.8 | 17.7 | 55.5 | -45.8% | (5.4) | 102.3 | |
| Impairments on investments | 50.3 | 43.1 | -3.8% | 93.4 | -28.5% | 44.8 | 130.6 |
| Unrealised gains/losses 2) | (33.7) | 120.9 | 87.2 | (3.3) | (15.1) | ||
| Investment expenses | 13.0 | 9.4 | +20.1% | 22.4 | -13.4% | 11.8 | 25.8 |
| Net investment income from assets under own management |
140.3 | 284.0 | +110.7% | 424.2 | +23.8% | 134.8 | 342.8 |
| Net investment income from funds withheld |
57.9 | 87.0 | +82.5% | 144.9 | +41.7% | 47.7 | 102.3 |
| Net investment income | 198.2 | 371.0 | +103.3% | 569.2 | +27.9% | 182.5 | 445.1 |
1) Excluding expenses on funds held and contract deposits 2
Portfolio at fair value through profit or loss and trading
Movements on bond markets led to hidden losses of EUR 19.8 million in our available-for-sale portfolio of fixedincome securities in the first half-year, compared to hidden reserves of EUR 101.7 million as at year-end 2008. This change can be attributed principally to price declines on securities issued by government and semi-governmental entities and resulted largely from the increase in yields in the USD portfolio. The balance of realised gains and losses totalled EUR 55.5 million for the first half-year, as against EUR 102.3 million in the comparable period of the previous year; this had been influenced by high realisations owing to the tactical shortening of durations in the USD portfolio. Along with impairments taken on structured products (EUR 26.2 million), the volume of write-downs totalling altogether EUR 93.4 million (EUR 130.6 million) was due in large measure (EUR 64.1 million)
As a globally operating reinsurer we are exposed to a diverse spectrum of risks. These risks can potentially have a to alternative investments; of this amount, EUR 41.9 million was attributable to private equity. Unrealised gains on our asset holdings measured at fair value through profit or loss amounted to EUR 87.2 million. This contrasted with unrealised losses of EUR 15.1 million in the corresponding period of the previous year. The improvement was associated chiefly with the derivatives embedded in ModCo reinsurance treaties.
Net investment income increased by 27.9% to EUR 569.2 million (EUR 445.1 million), assisted first and foremost by the improvement in unrealised gains and the reduced volume of write-downs. This figure includes income from interest on deposits, which at EUR 144.9 million was substantially higher than in the comparable period of the previous year (EUR 102.3 million).
considerable impact on our assets, financial position and net income. Our risk management system nevertheless
ensures that we are able to identify risks in a timely manner and maximise opportunities.
The adverse effects of the financial market crisis have prompted us to enhance and refine the tools already implemented at our company. Despite a modest improvement in the basic conditions prevailing on international capital markets in the second quarter of 2009, the environment remains uncertain. Overall, though, investments moved in a positive direction.
On account of the financial market crisis and the resulting shortage of capital throughout the worldwide insurance industry, however, demand for reinsurance capacities has grown sharply. Although the recession continues to spread, the effects on our company will likely be limited because the primary impact is on the profitability of undertakings and
Outlook
Based on our strategic orientation and the available market opportunities, we anticipate a good result for 2009 in both non-life and life/health reinsurance within the bounds of our expectations. At constant exchange rates the net premium volume is expected to grow by approximately 25%.
In non-life reinsurance the markets offer a good price level overall, although further rate increases are needed in certain segments.
Although the treaty renewals as at 1 July in the United States, when around one-third of our portfolio is renegotiated, reinforced the trend of prior renewal phases, prices did not rise to the extent that had been anticipated. Particularly in the area of property catastrophe covers, efforts to secure the expected sharp price increases were only partially successful. Sufficient capacity was for the most part available here. While the rate level in standard casualty business remained stable, price rises were obtained in the workers' compensation segment. Rates in the professional indemnity lines were also broadly unchanged, although conditions improved under treaties that had suffered losses.
We were satisfied overall with the treaty renewals in Australia and New Zealand as at 1 July. In Australia we were able
less on the fixed assets to be insured. The largest individual loss in the financial year to date was winter storm "Klaus" in January 2009.
Based on our currently available insights arrived at from a holistic analysis of the risk situation, we cannot discern any risks that could jeopardise the continued existence of our company in the short or medium term or have a significant, lasting effect on our assets, financial position or net income. Our remarks on risk management at Hannover Re contained in the Annual Report as at 31 December 2008 remain valid and provide detailed insights into organisational aspects and further risk management activities. Supplementary information on our risk management system, and in particular quantitative data on individual risks, is provided in Section 4 of the Notes to this report, "Management of technical and financial risks".
to enlarge our portfolio: in liability business the market has hardened on both the primary and reinsurance sides. In property business we pressed ahead with our strategy of relinquishing proportional covers and instead stepping up our participation in non-proportional programmes. Here too we were able to push through price increases.
All in all, it is our expectation that net premium in non-life reinsurance will show growth of around 20% by year-end. Provided the burden of catastrophe losses and major claims remains within the expected bounds of roughly 10% of net premium, we are looking to generate a very healthy profit contribution.
The basic business climate in life and health reinsurance is also positive. Here, too, the financial and economic crisis prompted stronger demand for reinsurance and hence provided growth stimuli. We shall continue to expand our involvement in the field of enhanced annuities and intend to extend our activities to the North American market during the current financial year. Further growth is also expected to derive from the segment of seniors' health business in the United States.
Owing to the acquisition of the ING life reinsurance portfolio effective 1 January 2009, net premium for the current year in life and health reinsurance is likely to grow by more than 35%. All in all, we expect the life and health reinsurance business group to deliver a very good profit contribution to total business.
On the investments side the anticipated positive cash flow generated from the technical account should – subject to stable exchange rates – result in further growth in the investment portfolios. In the area of fixed-income securities we continue to stress the high quality and diversification of the portfolio. Having moved to reduce our equity exposure to virtually zero, further volatility on stock markets can of course have only a limited effect on our investment income. We have, however, made plans to resume our investments
in equities in the future, although such a step will only be considered once the market climate is more stable.
In light of our strategic orientation and the available market opportunities in non-life and life/health reinsurance, we expect to post a good result for the full 2009 financial year. Assuming that the burden of catastrophe losses and major claims does not significantly exceed the expected level of 10% of net premium in non-life reinsurance, and as long as there are no further adverse movements on capital markets, we anticipate – allowing for the non-recurring effect from the acquisition of the ING life reinsurance portfolio – a minimum return on equity of 18% and earnings per share of at least EUR 5 for the 2009 financial year. It remains our goal to pay a dividend in the range of 35% to 40%.
as at 30 June 2009
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| Assets | 30.6. | 31.12. |
| Fixed-income securities – held to maturity | 2,963,034 | 1,475,202 |
| Fixed-income securities – loans and receivables | 1,800,906 | 1,680,857 |
| Fixed-income securities – available for sale | 13,648,753 | 14,482,832 |
| Fixed-income securities – at fair value through profit or loss | 252,414 | 254,528 |
| Equity securities – available for sale | 22,439 | 22,589 |
| Other financial assets – at fair value through profit or loss | 69,168 | 44,654 |
| Real estate | 25,265 | 25,514 |
| Investments in associated companies | 129,694 | 128,680 |
| Other invested assets | 597,441 | 784,421 |
| Short-term investments | 1,124,539 | 807,719 |
| Cash | 413,776 | 430,225 |
| Total investments and cash under own management | 21,047,429 | 20,137,221 |
| Funds held | 11,370,572 | 9,776,147 |
| Contract deposits | 524,642 | 288,782 |
| Total investments | 32,942,643 | 30,202,150 |
| Reinsurance recoverables on unpaid claims | 1,949,315 | 2,079,168 |
| Reinsurance recoverables on benefit reserve | 163,186 | 159,151 |
| Prepaid reinsurance premium | 50,107 | 29,733 |
| Reinsurance recoverables on other technical reserves | 8,193 | 9,928 |
| Deferred acquisition costs | 1,989,467 | 1,860,783 |
| Accounts receivable | 3,399,041 | 2,801,762 |
| Goodwill | 44,139 | 42,833 |
| Deferred tax assets | 602,032 | 549,146 |
| Other assets | 403,469 | 260,265 |
| Accrued interest and rent | 5,995 | 6,824 |
| 41,557,587 | 38,001,743 |
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| Liabilities | 30.6. | 31.12. |
| Loss and loss adjustment expense reserve | 17,623,202 | 16,932,069 |
| Benefit reserve | 7,564,813 | 5,913,075 |
| Unearned premium reserve | 1,767,587 | 1,333,856 |
| Other technical provisions | 163,344 | 156,996 |
| Funds held | 757,153 | 565,952 |
| Contract deposits | 5,466,944 | 5,146,424 |
| Reinsurance payable | 1,119,130 | 1,236,912 |
| Provisions for pensions | 74,958 | 72,207 |
| Taxes | 246,059 | 201,960 |
| Provision for deferred taxes | 1,404,936 | 1,371,589 |
| Other liabilities | 290,548 | 319,183 |
| Long-term debt and subordinated capital | 1,406,339 | 1,420,027 |
| Total liabilities | 37,885,013 | 34,670,250 |
| Shareholders' equity | ||
| Common shares | 120,597 | 120,597 |
| Nominal value 120,597 Conditional capital 60,299 |
||
| Additional paid-in capital | 724,562 | 724,562 |
| Common shares and additional paid-in capital | 845,159 | 845,159 |
| Cumulative other comprehensive income | ||
| Unrealised gains and losses on investments | (10,782) | 113,864 |
| Cumulative foreign currency translation adjustment | (207,028) | (247,565) |
| Other changes in cumulative other comprehensive income | 1,689 | (4,577) |
| Total other comprehensive income | (216,121) | (138,278) |
| Retained earnings | 2,542,190 | 2,123,178 |
| Shareholders' equity before minorities | 3,171,228 | 2,830,059 |
| Minority interests | 501,346 | 501,434 |
| Total shareholders' equity | 3,672,574 | 3,331,493 |
| 41,557,587 | 38,001,743 |
for the period 1 January to 30 June 2009
| Figures in EUR thousand | 2009 | 2008 | |||
|---|---|---|---|---|---|
| 1.4.–30.6. | 1.1.–30.6. | 1.4.–30.6. | 1.1.–30.6. | ||
| Gross written premium | 2,588,664 | 5,250,529 | 1,869,088 | 4,144,559 | |
| Ceded written premium | 145,608 | 366,549 | 177,157 | 434,517 | |
| Change in gross unearned premium | (40,190) | (440,151) | 53,605 | (304,151) | |
| Change in ceded unearned premium | (28,263) | 22,111 | (8,845) | 9,465 | |
| Net premium earned | 2,374,603 | 4,465,940 | 1,736,691 | 3,415,356 | |
| Ordinary investment income | 199,512 | 398,822 | 196,555 | 407,854 | |
| Profit/loss from investments in associated companies | (1,622) | (1,535) | 3,454 | 4,149 | |
| Income/expense on funds withheld and contract deposits | 87,048 | 144,931 | 47,698 | 102,300 | |
| Realised gains on investments | 35,159 | 81,086 | 37,577 | 171,353 | |
| Realised losses on investments | 17,496 | 25,624 | 42,980 | 69,054 | |
| Unrealised gains and losses on investments | 120,930 | 87,238 | (3,274) | (15,149) | |
| Total depreciation, impairments and appreciation of investments | 43,126 | 93,384 | 44,808 | 130,551 | |
| Other investment expenses | 9,394 | 22,359 | 11,754 | 25,824 | |
| Net investment income | 371,011 | 569,175 | 182,468 | 445,078 | |
| Other technical income | 1,245 | 1,763 | 1,639 | 1,776 | |
| Total revenues | 2,746,859 | 5,036,878 | 1,920,798 | 3,862,210 | |
| Claims and claims expenses | 1,676,331 | 3,154,215 | 1,140,838 | 2,304,568 | |
| Change in benefit reserve | 164,040 | 329,402 | 85,974 | 170,016 | |
| Commission and brokerage, change in deferred acquisition costs | 532,334 | 913,981 | 455,682 | 852,415 | |
| Other acquisition costs | 3,697 | 6,983 | 3,661 | 8,321 | |
| Other technical expenses | 10,323 | 17,837 | 2,500 | 5,363 | |
| Administrative expenses | 62,464 | 120,356 | 57,365 | 112,739 | |
| Total technical expenses | 2,449,189 | 4,542,774 | 1,746,020 | 3,453,422 | |
| Other income and expenses | (3,444) | 105,949 | (20,210) | (8,574) | |
| Operating profit/loss (EBIT) | 294,226 | 600,053 | 154,568 | 400,214 | |
| Interest on hybrid capital | 19,135 | 38,170 | 19,206 | 38,509 | |
| Net income before taxes | 275,091 | 561,883 | 135,362 | 361,705 | |
| Taxes | 56,500 | 124,308 | 30,948 | 98,896 | |
| Net income | 218,591 | 437,575 | 104,414 | 262,809 | |
| thereof | |||||
| Minority interest in profit and loss | 15,727 | 18,563 | 3,651 | 10,585 | |
| Group net income | 202,864 | 419,012 | 100,763 | 252,224 | |
| Earnings per share | |||||
| Earnings per share in EUR | 1.68 | 3.47 | 0.84 | 2.09 |
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |
| Net income | 437,575 | 262,809 |
| Unrealised gains and losses on investments | ||
| Gains (losses) recognised in equity | (220,070) | (528,776) |
| Transferred to the consolidated statement of income | 40,975 | 48,849 |
| Tax income (expense) | 45,836 | 53,039 |
| (133,259) | (426,888) | |
| Currency translation | ||
| Gains (losses) recognised in equity | 37,504 | (131,857) |
| Transferred to the consolidated statement of income | 168 | (3,705) |
| Tax income (expense) | 3,162 | 10,210 |
| 40,834 | (125,352) | |
| Changes from the measurement of associated companies | ||
| Gains (losses) recognised in equity | 2,382 | (1,923) |
| 2,382 | (1,923) | |
| Other changes | ||
| Gains (losses) recognised in equity | 9,832 | (633) |
| Tax income (expense) | (3,576) | 171 |
| 6,256 | (462) | |
| Total tax income (expense) | 45,422 | 63,420 |
| Income and expense recognised directly in equity after tax | (83,787) | (554,625) |
| Changes in the consolidated group | 5 | – |
| Total recognised income and expense | 353,793 | (291,816) |
| thereof | ||
| Attributable to minority interests | 12,624 | (36,372) |
| Attributable to the Group | 341,169 | (255,444) |
| Figures in EUR thousand |
Common shares |
Additional paid-in capital |
Other reserves (cumulative other comprehensive income) |
Retained earnings |
Minority interests |
Shareholders' equity |
||
|---|---|---|---|---|---|---|---|---|
| Currency translation |
Unrealised gains/ losses |
Other | ||||||
| Balance as at 1.1.2008 | 120,597 | 724,562 | (213,117) | 181,395 | 6,482 | 2,529,170 | 572,744 | 3,921,833 |
| Changes in ownership interest with no change of control status |
44 | (1,165) | (11,490) | 25,572 | 12,961 | |||
| Capital increases/additions | 39 | 39 | ||||||
| Capital repayments | (31) | (31) | ||||||
| Total income and expense recognised after tax |
(121,905) | (385,264) | (499) | 252,224 | (36,372) | (291,816) | ||
| Dividends paid | (277,373) | (40,946) | (318,319) | |||||
| Balance as at 30.6.2008 | 120,597 | 724,562 | (334,978) | (205,034) | 5,983 | 2,492,531 | 521,006 | 3,324,667 |
| Balance as at 1.1.2009 | 120,597 | 724,562 | (247,565) | 113,864 | (4,577) | 2,123,178 | 501,434 | 3,331,493 |
| Capital increases/additions | 160 | 160 | ||||||
| Capital repayments | (34) | (34) | ||||||
| Total income and expense recognised after tax |
40,537 | (124,646) | 6,266 | 419,012 | 12,624 | 353,793 | ||
| Dividends paid | (12,838) | (12,838) | ||||||
| Balance as at 30.6.2009 | 120,597 | 724,562 | (207,028) | (10,782) | 1,689 | 2,542,190 | 501,346 | 3,672,574 |
as at 30 June 2009
| Figures in EUR thousand | 2009 | 2008 | |
|---|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | ||
| I. | Cash flow from operating activities | ||
| Net income | 437,575 | 262,809 | |
| Appreciation/depreciation | 84,975 | 130,722 | |
| Net realised gains and losses on investments | (55,462) | (102,299) | |
| Net realised gains and losses on disposal of discontinued operations | 5 | – | |
| Amortisation of investments | 8,977 | (11,205) | |
| Changes in funds held | (526,228) | (1,894,326) | |
| Net changes in contract deposits | 62,564 | 1,787,572 | |
| Changes in prepaid reinsurance premium (net) | 418,070 | 294,971 | |
| Changes in tax assets/provisions for taxes | 65,053 | (52,006) | |
| Changes in benefit reserve (net) | 406,160 | 167,988 | |
| Changes in claims reserves (net) | 733,329 | 429,948 | |
| Changes in deferred acquisition costs | (74,478) | (142,663) | |
| Changes in other technical provisions | 2,560 | 4,616 | |
| Changes in clearing balances | (651,061) | (372,990) | |
| Changes in other assets and liabilities (net) | (220,439) | (14,395) | |
| Cash flow from operating activities | 691,600 | 488,742 | |
| II. | Cash flow from investing activities | ||
| Fixed-income securities – held to maturity | |||
| Maturities | 36,235 | 9,684 | |
| Purchases | (32,271) | – | |
| Fixed-income securities – loans and receivables | |||
| Maturities, sales | 70,187 | 55,725 | |
| Purchases | (68,920) | (6,783) | |
| Fixed-income securities – available for sale | |||
| Maturities, sales | 5,994,270 | 5,334,168 | |
| Purchases | (6,580,345) | (5,545,396) |
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |
| Fixed-income securities – at fair value through profit or loss | ||
| Maturities, sales | 53,303 | 10,052 |
| Purchases | (46,054) | (22,744) |
| Equity securities – available for sale | ||
| Sales | 14,993 | 720,831 |
| Purchases | (14,030) | (774,980) |
| Other financial instruments – at fair value through profit or loss | ||
| Sales | – | 19,260 |
| Purchases | (123) | (37,615) |
| Other invested assets | ||
| Sales | 3,161 | 9,886 |
| Purchases | (42,362) | (64,622) |
| Affiliated companies and participating interests | ||
| Sales | 461 | – |
| Purchases | (1,266) | (3,227) |
| Real estate | ||
| Sales | 40 | – |
| Purchases | (3,993) | – |
| Short-term investments | ||
| Changes | (161,744) | 125,523 |
| Other changes (net) | 98,483 | (18,175) |
| Cash flow from investing activities | (679,975) | (188,413) |
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |
| III. Cash flow from financing activities | ||
| Contribution from capital measures | (4,520) | (274) |
| Structural change without loss of control | – | 14,293 |
| Dividends paid | (12,838) | (318,319) |
| Proceeds from long-term debts | 28 | – |
| Repayment of long-term debts | (15,383) | (277) |
| Cash flow from financing activities | (32,713) | (304,577) |
| IV. Exchange rate differences on cash | 4,639 | (13,078) |
| Change in cash and cash equivalents (I.+II.+III.+IV.) | (16,449) | (17,326) |
| Cash and cash equivalents at the beginning of the period | 430,225 | 335,422 |
| Change in cash and cash equivalents according to cash flow statement | (16,449) | (17,326) |
| Cash and cash equivalents at the end of the period | 413,776 | 318,096 |
| Income taxes | (57,144) | (95,301) |
| Interest paid | (91,905) | (82,608) |
Hannover Re's segmental report is based on IFRS 8 "Operating Segments" and on the principles set out in German Accounting Standard No. 3 "Segment Reporting" (DRS 3) of the German Standards Council, supplemented by the requirements of DRS 3-20 "Segment Reporting of Insurance Enterprises.
The segments are shown after consolidation of internal transactions within the individual segment, but before consolidation across the segments. This is reported separately in the "Consolidation" column.
| Figures in EUR thousand | Non-life reinsurance | |||
|---|---|---|---|---|
| 2009 | 2008 | |||
| 30.6. | 31.12. | |||
| Assets | ||||
| Held to maturity | 2,553,199 | 1,262,866 | ||
| Loans and receivables | 1,492,736 | 1,418,271 | ||
| Available for sale | 9,836,322 | 11,244,214 | ||
| At fair value through profit or loss | 124,949 | 145,226 | ||
| Other invested assets | 726,208 | 871,345 | ||
| Short-term investments | 705,178 | 654,969 | ||
| Cash | 294,721 | 324,659 | ||
| Total investments and cash under own management | 15,733,313 | 15,921,550 | ||
| Funds held by ceding companies | 880,638 | 789,996 | ||
| Contract deposits | – | – | ||
| Total investments | 16,613,951 | 16,711,546 | ||
| Reinsurance recoverables on unpaid claims | 1,833,039 | 1,975,496 | ||
| Reinsurance recoverables on benefit reserve | – | – | ||
| Prepaid reinsurance premium | 46,344 | 23,582 | ||
| Reinsurance recoverables on other reserves | 8,188 | 9,813 | ||
| Deferred acquisition costs | 384,493 | 302,229 | ||
| Accounts receivable | 2,167,044 | 1,976,575 | ||
| Other assets in the segment | 1,709,811 | 1,187,502 | ||
| Total | 22,762,870 | 22,186,743 |
| Life and health reinsurance | Consolidation | Total | |||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| 30.6. | 31.12. | 30.6. | 31.12. | 30.6. | 31.12. |
| 112,378 | 43,058 | 297,457 | 169,278 | 2,963,034 | 1,475,202 |
| 150,547 | 105,019 | 157,623 | 157,567 | 1,800,906 | 1,680,857 |
| 3,326,208 | 2,646,643 | 508,662 | 614,564 | 13,671,192 | 14,505,421 |
| 91,346 | 55,409 | 105,287 | 98,547 | 321,582 | 299,182 |
| 26,192 | 67,270 | – | – | 752,400 | 938,615 |
| 379,381 | 148,189 | 39,980 | 4,561 | 1,124,539 | 807,719 |
| 119,898 | 97,315 | (843) | 8,251 | 413,776 | 430,225 |
| 4,205,950 | 3,162,903 | 1,108,166 | 1,052,768 | 21,047,429 | 20,137,221 |
| 10,492,365 | 8,988,523 | (2,431) | (2,372) | 11,370,572 | 9,776,147 |
| 524,642 | 288,782 | – | – | 524,642 | 288,782 |
| 15,222,957 | 12,440,208 | 1,105,735 | 1,050,396 | 32,942,643 | 30,202,150 |
| 116,276 | 103,672 | – | – | 1,949,315 | 2,079,168 |
| 163,186 | 159,151 | – | – | 163,186 | 159,151 |
| 3,763 | 6,151 | – | – | 50,107 | 29,733 |
| 5 | 115 | – | – | 8,193 | 9,928 |
| 1,604,974 | 1,558,554 | – | – | 1,989,467 | 1,860,783 |
| 1,231,999 | 825,477 | (2) | (290) | 3,399,041 | 2,801,762 |
| 441,716 | 336,508 | (1,095,892) | (664,942) | 1,055,635 | 859,068 |
| 18,784,876 | 15,429,836 | 9,841 | 385,164 | 41,557,587 | 38,001,743 |
| Figures in EUR thousand | Non-life reinsurance | ||
|---|---|---|---|
| 2009 | 2008 | ||
| 30.6. | 31.12. | ||
| Liabilities | |||
| Loss and loss adjustment expense reserve | 15,696,124 | 15,376,337 | |
| Benefit reserve | – | – | |
| Unearned premium reserve | 1,684,497 | 1,250,648 | |
| Other technical provisions | 116,746 | 122,923 | |
| Funds held under reinsurance contracts | 187,718 | 170,294 | |
| Contract deposits | 78,794 | 91,329 | |
| Reinsurance payable | 677,950 | 953,518 | |
| Long-term liabilities | 42,227 | 43,144 | |
| Other liabilities in the segment | 1,291,911 | 1,222,087 | |
| Total | 19,775,967 | 19,230,280 |
| Life and health reinsurance | Consolidation | Total | |||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||
| 30.6. | 31.12. | 30.6. | 31.12. | 31.12. | |||
| 1,927,078 | 1,555,732 | – | – | 17,623,202 | 16,932,069 | ||
| 7,564,813 | 5,913,075 | – | – | 7,564,813 | 5,913,075 | ||
| 83,090 | 83,208 | – | – | 1,767,587 | 1,333,856 | ||
| 46,598 | 34,073 | – | – | 163,344 | 156,996 | ||
| 571,789 | 398,039 | (2,354) | (2,381) | 757,153 | 565,952 | ||
| 5,388,150 | 5,055,095 | – | – | 5,466,944 | 5,146,424 | ||
| 441,768 | 284,223 | (588) | (829) | 1,119,130 | 1,236,912 | ||
| – | – | 1,364,112 | 1,376,883 | 1,406,339 | 1,420,027 | ||
| 1,820,118 | 1,378,233 | (1,095,528) | (635,381) | 2,016,501 | 1,964,939 | ||
| 17,843,404 | 14,701,678 | 265,642 | 738,292 | 37,885,013 | 34,670,250 |
| Figures in EUR thousand Non-life reinsurance |
||||
|---|---|---|---|---|
| 2009 | 2008 | |||
| 1.1.–30.6. | 1.1.–30.6. | |||
| Gross written premium | 3,081,463 | 2,656,218 | ||
| thereof | ||||
| From insurance business with other segments | – | – | ||
| From insurance business with external third parties | 3,081,463 | 2,656,218 | ||
| Net premium earned | 2,481,898 | 2,082,575 | ||
| Net investment income | 237,917 | 270,373 | ||
| thereof | ||||
| Deposit interest and expenses | 15,623 | 9,392 | ||
| Claims and claims expenses | 1,832,771 | 1,515,184 | ||
| Change in benefit reserve | – | – | ||
| Commission and brokerage, change in deferred acquisition costs and other technical income/expenses |
513,526 | 464,027 | ||
| Administrative expenses | 78,261 | 79,768 | ||
| Other income and expenses | 21,830 | (5,733) | ||
| Operating profit/loss (EBIT) | 317,087 | 288,236 | ||
| Interest on hybrid capital | – | – | ||
| Net income (loss) before taxes | 317,087 | 288,236 | ||
| Taxes | 77,665 | 86,447 | ||
| Net income (loss) | 239,422 | 201,789 | ||
| thereof | ||||
| Minority interest in profit or loss | 16,215 | 6,095 | ||
| Group net income (loss) | 223,207 | 195,694 |
| Life and health reinsurance | Consolidation | Total | ||||
|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 2008 |
2009 | 2008 | ||
| 1.1.–30.6. | 1.1.–30.6. | 1.1.–30.6. | 1.1.–30.6. | 1.1.–30.6. | 1.1.–30.6. | |
| 2,169,067 | 1,490,117 | (1) | (1,776) | 5,250,529 | 4,144,559 | |
| 1 | 1,776 | (1) | (1,776) | – | – | |
| 2,169,066 | 1,488,341 | – | – | 5,250,529 | 4,144,559 | |
| 1,984,042 | 1,332,781 | – | – | 4,465,940 | 3,415,356 | |
| 314,047 | 154,794 | 17,211 | 19,911 | 569,175 | 445,078 | |
| 129,310 | 92,901 | (2) | 7 | 144,931 | 102,300 | |
| 1,321,755 | 789,877 | (311) | (493) | 3,154,215 | 2,304,568 | |
| 329,402 | 170,016 | – | – | 329,402 | 170,016 | |
| 426,284 | 403,440 | (2,772) | (3,144) | 937,038 | 864,323 | |
| 43,244 | 33,674 | (1,149) | (703) | 120,356 | 112,739 | |
| 88,695 | (3,356) | (4,576) | 515 | 105,949 | (8,574) | |
| 266,099 | 87,212 | 16,867 | 24,766 | 600,053 | 400,214 | |
| – | – | 38,170 | 38,509 | 38,170 | 38,509 | |
| 266,099 | 87,212 | (21,303) | (13,743) | 561,883 | 361,705 | |
| 51,272 | 17,761 | (4,629) | (5,312) | 124,308 | 98,896 | |
| 214,827 | 69,451 | (16,674) | (8,431) | 437,575 | 262,809 | |
| 2,348 | 4,490 | – | – | 18,563 | 10,585 | |
| 212,479 | 64,961 | (16,674) | (8,431) | 419,012 | 252,224 |
The geographical breakdown shown below is based on the regional origin of the investments and gross written premium.
| Investments 1) | |||
|---|---|---|---|
| -- | -- | -- | ---------------- |
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| 30.6. | 31.12. | |
| Investments | ||
| Germany | 6,472,025 | 6,172,406 |
| United Kingdom | 1,281,391 | 1,134,915 |
| France | 1,210,040 | 1,628,884 |
| Other | 3,458,551 | 3,167,276 |
| Europe | 12,422,007 | 12,103,481 |
| USA | 6,188,926 | 5,812,077 |
| Other | 621,983 | 695,394 |
| North America | 6,810,909 | 6,507,471 |
| Asia | 445,010 | 426,485 |
| Australia | 815,945 | 664,541 |
| Australasia | 1,260,955 | 1,091,026 |
| Africa | 388,372 | 230,475 |
| Other | 165,186 | 204,768 |
| Total | 21,047,429 | 20,137,221 |
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |
| Gross written premium | ||
| Germany | 742,646 | 736,481 |
| United Kingdom | 907,373 | 703,682 |
| France | 252,031 | 203,667 |
| Other | 674,077 | 624,038 |
| Europe | 2,576,127 | 2,267,868 |
| USA | 1,457,074 | 884,548 |
| Other | 197,953 | 182,851 |
| North America | 1,655,027 | 1,067,399 |
| Asia | 409,574 | 318,197 |
| Australia | 166,362 | 205,197 |
| Australasia | 575,936 | 523,394 |
| Africa | 156,093 | 119,039 |
| Other | 287,346 | 166,859 |
| Total | 5,250,529 | 4,144,559 |
1) After elimination of internal transactions within the Group across segments
The parent company Hannover Rückversicherung AG ("Hannover Re") and its subsidiaries (collectively referred to as the "Hannover Re Group") belong to Talanx AG, which in turn is wholly owned by HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI). Hannover Re is obliged to prepare a consolidated financial statement and group management report in accordance with § 290 German Commercial Code (HGB). Furthermore, HDI is required by §§ 341 i et seq. German Commercial Code (HGB) to prepare consolidated annual accounts that include the annual financial statements of Hannover Re and its subsidiaries.
The consolidated financial statement of Hannover Re was drawn up in compliance with the International Financial Reporting Standards (IFRS) that are to be used within the European Union. This also applies to all figures provided in this report for previous periods. Since 2002 the standards adopted by the International Accounting Standards Board (IASB) have been referred to as IFRS; the standards dating from earlier years still bear the name "International Accounting Standards (IAS)". Standards are cited in our Notes accordingly; unless the Notes make explicit reference to a particular standard, both terms are used synonymously.
The consolidated interim financial report, consisting of the consolidated balance sheet, consolidated statement of income, consolidated statement of recognised income and expense, consolidated cash flow statement, consolidated statement of changes in shareholders' equity and selected explanatory notes, is presented in accordance with IAS 34 "Interim Financial Reporting". In this context, as provided for by IAS 34.41 we draw on estimates and assumptions to a greater extent than is the case with the annual financial reporting. This can have implications for items in the balance sheet and the statement of income as well as for other financial obligations. Although the estimates are always based on realistic premises, they are of course subject to uncertainties that may be reflected accordingly in the result. Losses from natural disasters and other catastrophic losses impact the result of the reporting period in which they occur. Furthermore, belatedly reported claims for major loss events can also lead to substantial fluctuations in individual quarterly results. Gains and losses on the disposal of investments are accounted for in the quarter in which the investments are sold.
The quarterly accounts of the consolidated companies included in the consolidated financial statement were drawn up as at 30 June 2009.
All standards adopted by the IASB as at 30 June 2009 with binding effect for the reporting period have been observed in the consolidated financial statement.
The revised IAS 1 (rev. 2007) "Presentation of Financial Statements" is aimed at improving users' ability to analyse and compare the information given in financial statements. Hannover Re applied the standard for the first time in the first quarter of 2009. A central element of IAS 1 (rev. 2007) is the modified presentation of the total comprehensive income of the reporting period, which is composed of the profit or loss for the said reporting period as well as other comprehensive income and expenses recognised directly in equity. The significant change in IAS 1 (rev. 2007) lies in the clear separation between changes in other comprehensive income resulting from transactions with owners in their capacity as such and non-owner changes in equity. Non-owner changes in equity must be disclosed in a separate new component of the financial statement, the consolidated statement of recognised income and expense, with only the total shown in the consolidated statement of changes in shareholders' equity. The tax effects must be disclosed separately in relation to each component of the other comprehensive income. The option – which has not been exercised by Hannover Re – continues to be available to rename individual components of the financial statement and to publish a single statement of income combining the existing consolidated statement of income and the consolidated statement of recognised income and expense.
IFRS 8 "Operating Segments"replaces the previous IAS 14 "Segment Reporting". IFRS 8 requires adoption of the management approach to reporting on the economic position of segments. Under this approach, the segmentation and the disclosures for the segments are based on the information used internally by management for evaluating segment performance and deciding on the allocation of resources. IFRS 8 was applied for the first time in the first quarter of 2009. Hannover Re concluded that it should retain the previously used system of segmentation, since it is regularly used by management to assess the various areas of business and facilitates a transparent presentation of Group net income.
In March 2009 the IASB published "Improving Disclosures about Financial Instruments – Amendments to IFRS 7". The amendments principally involve new disclosures concerning fair value measurements. The disclosures concerning fair value measurement are clarified through the adoption of a breakdown for each class of financial instruments – based on a three-level fair value hierarchy taken from US GAAP – and an extended scope of disclosure duties. The amendments must be applied to financial years beginning on or after 1 January 2009, although the provision of comparative disclosures for the previous reporting period is not required in the first year of application. Hannover Re is currently reviewing the implications of these amendments, which had not been ratified by the European Union as at the balance sheet date.
As at the balance sheet date Hannover Re did not avail itself of the facilities offered by the amendments to "IAS 39 & IFRS 7 – Reclassification of Financial Assets", which entered into force in October 2008, regarding the reclassification and measurement of selected financial instruments
In February 2008 the amendments to IAS 32 and IAS 1 "Puttable Financial Instruments and Obligations arising on Liquidation" were published. Application of the amendments is mandatory from 1 January 2009 onwards. The amendment of IAS 1 refers to revised disclosure requirements applicable to puttable financial instruments and obligations arising on liquidation. The revised version of IAS 32 permits the balance sheet classification of puttable financial instruments as equity in the future under certain conditions. Particularly given the fact that minority interests in partnerships will continue to be recognised as a financial liability in the consolidated financial statement, the amendment is of no practical significance to the consolidated financial statement.
In January 2008 the IASB published the revised versions of IFRS 3 "Business Combinations" and IAS 27 "Consolidated and Separate Financial Statements". The new provisions primarily cover the balance sheet recognition of minority interests, measurement issues in connection with successive acquisition, changes in a participating interest with or without a loss of control and adjustments to acquisition costs depending upon future events and their effects on goodwill. The revised IFRS 3 still does not apply to combinations of entities under common control. Since the amendments are to be applied prospectively to financial years beginning on or after 1 July 2009, implications for Hannover Re can only arise in connection with future acquisitions.
In January 2008 and June 2009 the IASB published the amendments to IFRS 2 "Share-based Payment – Vesting Conditions and Cancellations" and "Group Cash-settled Share-based Payment Transactions" in order to clarify a number of rules governing certain share-based payment schemes. The amendments to the standard are applicable to financial years beginning on or after 1 January 2009 and 1 January 2010 respectively. The amendment of January 2008 has no implications for Hannover Re. The possible implications of the amendment of IFRS 2 in June 2009, which had not been ratified by the European Union as at the balance sheet date, are currently under review by Hannover Re.
We would also refer to the relevant information in the consolidated financial statement as at 31 December 2008.
On 20 February 2009 Hannover Re completed the acquisition of the US ING individual life reinsurance portfolio under a reinsurance and asset purchase transaction with Scottish Re Group Limited, Hamilton, Bermuda, through its subsidiaries Hannover Life Reassurance Company of America, Orlando (HLRUS), and Hannover Life Reassurance (Ireland) Ltd., Dublin (HLRIr). Within the scope of the transaction the two aforementioned companies assumed all technical liabilities associated with this portfolio and, in return, received assets to fund the said liabilities. The reinsurance contracts were concluded effective 1 January 2009; no purchase price was paid. To this extent, the acquisition costs of the transaction consisted of the assumed liabilities.
In addition to the materialisation of the reinsurance contracts, HLRUS acquired the infrastructure and operating assets needed to administer the life reinsurance business in North America for a purchase price of EUR 12.9 million. The infrastructure mainly encompasses the IT systems for administration and quotation of the business. A portion of the workforce was consequently also taken over from the seller.
In accordance with the requirements of IFRS 3 "Business Combinations" Hannover Re recognises this acquisition as a business combination since the reinsurance contracts and the systems needed for their administration in conjunction with the assumed workforce are to be considered a separate and independent business for the purposes of IFRS 3.
The acquired business was included in the consolidated financial statement for the first time as at 1 January 2009, since the significant part of the economic risks and benefits was apportionable to Hannover Re from this date onwards when the reinsurance transactions acquired contractual force. For the purpose of first-time consolidation, assumptions and estimations based on forecasts of future cash flows were in some cases used to establish the fair values of the acquired assets and liabilities within the framework of appropriate measurements methods. The acquired business was therefore included in the consolidated financial statement on a provisional basis, using the best available information as at the balance sheet date. Fresh insights in future reporting periods may, however, necessitate adjustments. The incidental costs of the entire reinsurance and asset purchase transaction, the final amount of which has not yet been definitively determined, will amount to approximately EUR 10.0 million.
In connection with the acquisition of the life reinsurance portfolio, an intangible asset of EUR 90.1 million was carried in accordance with IFRS 4 in conjunction with the standards of US GAAP relevant to the recognition of items of the technical account; this amount represents the present value of future cash flows from the assumed reinsurance contracts (known as the "present value of future profits/PVFP" or "value of business acquired/VOBA"). The PVFP is initially recognised at fair value on the basis of generally accepted actuarial measurement methods, while in the subsequent periods scheduled amortisation is taken on the PVFP over the period of the underlying reinsurance contracts in proportion to the future premium income. In addition, the intangible asset is regularly tested for impairment.
The assets and liabilities of the acquired business at the time of initial consolidation are shown below.
| Figures in EUR thousand | 1.1.2009 |
|---|---|
| Assets | |
| Fixed-income securities – available for sale | 130,348 |
| Cash | 104,292 |
| Funds held by ceding companies | 753,714 |
| Reinsurance recoverables on benefit reserve | 26,897 |
| Deferred tax assets | 8,691 |
| PVFP | 90,052 |
| Other assets | 14,309 |
| 1,128,303 | |
| Liabilities | |
| Benefit reserve | 1,011,989 |
| Provision for deferred taxes | 11,257 |
| Other liabilities | 24,831 |
| 1,048,077 | |
| Net assets | 80,226 |
Since the net fair value of the recognised, identifiable assets, liabilities and contingent liabilities exceeds the acquisition costs of the transaction, the capital consolidation gave rise to negative goodwill of EUR 80.2 million after tax, which was recognised immediately in the statement of income as required by IFRS 3.56. As at 30 June 2009 this non-recurring effect of the transaction was recognised in the consolidated statement of income under other operating income.
The gross written premium of the acquired business amounted to EUR 408.6 million from the date of initial consolidation until the balance sheet date. A net profit of EUR 44.5 million was booked for the same period from the acquired business. This figure does not include the other operating income from the reversal of the negative goodwill.
The capital consolidation complies with the standards of IAS 27 "Consolidated and Separate Financial Statements". Subsidiaries are consolidated as soon as Hannover Re acquires a majority voting interest or de facto controlling influence. The capital consolidation is based on the revaluation method. Under the "purchase accounting" method the purchase costs of the parent company are netted with the proportionate shareholders' equity of the subsidiary at the time when it is first included in the consolidated financial statement after the revaluation of all assets and liabilities. After recognition of all acquired intangible assets that in accordance with IFRS 3 "Business Combinations" are to be accounted for separately from goodwill, the difference between the revalued shareholders' equity of the subsidiary and the purchase price is recognised as goodwill. Under IFRS 3 scheduled amortisation is not taken on goodwill. Instead, unscheduled amortisation is taken where necessary on the basis of regular impairment tests. Immaterial and negative goodwill are recognised in the statement of income in the year of their occurrence.
Companies over which Hannover Re is able to exercise a controlling influence ("associated companies") are normally consolidated "at equity" with the proportion of the shareholders' equity attributable to the Group. A controlling influence is presumed to exist if a company belonging to the Hannover Re Group directly or indirectly holds at least 20% – but no more than 50% – of the voting rights. Income from investments in associated companies is recognised separately in the consolidated statement of income.
Where minority interests in shareholders' equity exist, such interests are reported separately within Group shareholders' equity in accordance with IAS 1 "Presentation of Financial Statements". The minority interest in the result is a component of net income and is shown separately as a "thereof" note following net income. As at 30 June 2009 it amounted to EUR 18.6 million (EUR 10.6 million).
Receivables and liabilities between the companies included in the consolidated financial statement were offset against each other.
The effects of business transactions within the Group were eliminated.
With effect from 1 January 2009 Hannover Re again used the capital market to obtain underwriting capacity for catastrophe risks. The "K5" transaction, which ended as per the contractual agreement on 31 December 2008, was replaced by the successor transaction "K6". The volume of "K6" was equivalent to EUR 125.0 million as at the balance sheet date. This securitisation, which was again placed with institutional investors in North America, Europe and Asia, involves a quota share cession on worldwide natural catastrophe business as well as aviation and marine risks. As with the "K3" to "K5" transactions, Kaith Re Ltd., a special purpose entity domiciled in Bermuda, is being used for the securitisation. The planned term of the transaction runs until 31 December 2011. In addition, Hannover Re uses the special purpose entity Kaith Re Ltd. for various retrocessions of its traditional covers to institutional investors. In accordance with SIC–12 Kaith Re Ltd. is included in the consolidated financial statement.
In 2007 the Hannover Re Group transferred risks from reinsurance recoverables to the capital market. By means of this securitisation, which has a term of five years, the default risk associated with reinsurance recoverables is reduced. The portfolio of recoverables underlying the transaction has a nominal value of EUR 1.0 billion and is comprised of exposures to retrocessionaires. The securities serving as collateral are issued through the special purpose entity Merlin CDO I B.V. A payment to Hannover Re is triggered by the insolvency of one or more retrocessionaires as soon as Hannover Re's contractually defined cumulative deductible of EUR 60.0 million over the term of the contract is exceeded. As at the balance sheet date Hannover Re had purchased securitisations issued by Merlin with a nominal value of altogether EUR 33.9 million (31 December 2008: EUR 10.5 million) on the secondary market, which it holds in its asset portfolio. Hannover Re does not derive the majority of the economic benefits or risks arising out of the special purpose entity's activities through any of its business relations. Pursuant to IAS 39.9 the transaction gives rise to a derivative, the fair value of which as at 30 June 2009 was EUR 27.7 million (EUR 29.6 million) and which we recognised under other financial assets at fair value through profit or loss as at the balance sheet date.
The reserving risk is a material technical risk that derives from the underreserving of claims. Loss reserves are determined using actuarial methods, primarily based on information provided by our cedants, and supplemented as necessary by additional reserves established on the basis of our own loss assessments. Furthermore, we constitute an IBNR (incurred but not reported) reserve for losses that have already occurred but have not yet been reported to us. Annual audits performed by external actuaries and accountancy firms play an important part in assuring the quality of our own calculations with regard to the adequacy of reserve levels.
The risk of losses exceeding premiums refers to the risk that the initially calculated premiums may not suffice to make indemnification payments and meet long-term benefit commitments in the required amount. The combined ratio in non-life reinsurance is tracked over time in order to monitor the risk of losses exceeding premiums:
| Figures in % | 1H 20092) | 20082) | 20072) | 20062) | 2005 | 2004 | 20031) | 20021) | 20011) | 20001) | 19991) |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Combined ratio (non-life reinsurance) |
97.1 | 95.4 | 99.7 | 100.8 | 112.8 | 97.2 | 96.0 | 96.3 | 116.5 | 107.8 | 111.1 |
| thereof catastrophe losses 3) |
6.6 | 10.7 | 6.3 | 2.3 | 26.3 | 8.3 | 1.5 | 5.2 | 23.0 | 3.7 | 11.4 |
1) Based on figures reported in accordance with US GAAP
2) Figures from 2006 onwards in accordance with new segmentation 3) Natural catastrophes and other man-made major losses > EUR 5 million gross for the share of the Hannover Re Group as a percentage of net premium earned
In life and health reinsurance, analogously to non-life reinsurance, we similarly calculate the reserves in accordance with actuarial principles using secure biometric actuarial bases and with the aid of portfolio information provided by our clients. Biometric risks refer to all risks directly connected with the life of an insured person, such as miscalculation of mortality, life expectancy and the probability of disability. A key quantitative tool of our value-based management and risk management in the area of life and health reinsurance is the European Embedded Value (EEV). The EEV is a ratio used to evaluate life insurance and reinsurance business. It is comprised of the value of in-force business and the corresponding capital. Since the 2006 financial year the EEV has been calculated on a market-consistent basis. This Market Consistent Embedded Value (MCEV) is to be established in future on the basis of the principles of the CFO Forum published in June 2008. The MCEV for 2008 was published on our Internet website at the same time as the quarterly financial report for the first quarter of 2009.
Bad debt risks are relevant to our company because the business that we accept is not always fully retained, but instead some portions are retroceded. Hannover Re counters the default risk by carefully selecting our retrocessionaires with the aid of an interdepartmental Security Committee. The Security Committee continuously monitors the credit status of retrocessionaires and approves measures where necessary to secure receivables. Depending on the type and expected run-off duration of the reinsured business, the selection of reinsurers takes account not only of the minimum ratings of the leading rating agencies but also internal and external expert assessments. In terms of the Hannover Re Group's major companies, EUR 248.8 million (7.3 %) of our accounts receivable from reinsurance business in an amount of EUR 3,399.0 million were older than 90 days as at the balance sheet date. The average default rate over the past three years was 0.2 %.
Risks in the investment sector consist principally of market risks (share price, interest rate, real estate and currency risks as well as the credit spread risk). Credit risks are also of relevance to our company. The "value at risk" (VaR) is a vital quantitative management tool used for monitoring market price risks. Currency risks are also of considerable importance to an internationally operating reinsurance enterprise that writes a large proportion of its business in foreign currencies. These risks are, however, largely counterbalanced through rigorous adherence to the principle of matching currency coverage. Interest rate risks refer to an unfavourable change in the value of financial assets held in the portfolio due to changes in the market interest rate level. Declining market yields lead to increases and, conversely, rising market yields to decreases in the fair value of fixed-income securities portfolios. Our strategy is focused on matching cash flows on the assets and liabilities sides as closely as possible. The quantitative basis for this strategy is provided by our dynamic financial analysis model as well as a broad diversity of value at risk calculations. In addition, tightly defined tactical duration ranges are put in place, the parameters for which are directly linked to risk-carrying capacity. Share price risks derive from unfavourable changes in the value of equities and equity or index derivatives held in the portfolio. We reduce these risks through purposeful diversification across various sectors and regions.
| Portfolio | Scenario | Portfolio change based on fair value in EUR million |
|
|---|---|---|---|
| Fixed-income securities1) | Yield increase +50 basis points |
(280.4) | |
| Yield increase | +100 basis points | (548.2) | |
| Yield decrease -50 basis points |
291.1 | ||
| Yield decrease | -100 basis points | 594.5 | |
| Fair value as at 30.6.2009 | 13,648.8 | ||
| Equity securities | Share prices | -10% | (2.2) |
| Share prices | -20% | (4.5) | |
| Share prices | +10% | 2.2 | |
| Share prices | +20% | 4.5 | |
| Fair value as at 30.6.2009 | 22.4 |
Scenarios for changes in the fair value of our securities as at the balance sheet date
1) Available for sale
Credit risks may arise out of a failure to pay (interest and/or capital repayment) or a change in the credit status (rating downgrade) of issuers of securities. Regular credit assessment on the basis of our defined quality criteria is a fundamental element of risk monitoring.
| Government bonds | Securities issued by semi governmental entities |
Corporate bonds | Covered bond/ asset-backed securities |
||||||
|---|---|---|---|---|---|---|---|---|---|
| in % | in EUR million | in % | in EUR million | in % | in EUR million | in % | in EUR million | ||
| AAA | 85.2 | 4,785.0 | 58.7 | 2,863.7 | 4.3 | 214.7 | 80.7 | 2,532.7 | |
| AA | 6.1 | 342.4 | 35.9 | 1,752.4 | 19.1 | 959.2 | 12.5 | 393.4 | |
| A | 6.0 | 338.0 | 4.4 | 212.4 | 54.1 | 2,723.4 | 1.0 | 30.4 | |
| BBB | 2.4 | 137.2 | 0.7 | 36.8 | 13.7 | 687.3 | 1.1 | 35.1 | |
| < BBB | 0.3 | 14.0 | 0.3 | 13.7 | 8.8 | 445.3 | 4.7 | 148.0 | |
| Total | 100.0 | 5,616.6 | 100.0 | 4,879.0 | 100.0 | 5,029.9 | 100.0 | 3,139.6 |
1) Securities held through investment funds are recognised pro rata with their corresponding individual ratings
The liquidity risk refers to the risk that it may not be possible to sell holdings or close open positions due to the illiquidity of the markets – or to do so only with delays or price markdowns – as well as the risk that the traded volumes influence the markets in question. Regular liquidity planning and a liquid asset structure ensure that Hannover Re is able to make the necessary payments at all times. The spread of investments across the various liquidity classes is included in the reporting and controlled by limits and thresholds.
| Figures in % | Parameter as per investment guidelines |
30.6.2009 |
|---|---|---|
| Bonds (direct holdings and investment funds) | at least 50.0 | 88.8 |
| Listed equities (direct holdings and investment funds) | at most 17.5 | 0.1 |
| Real estate | at most 5.0 | 0.7 |
1) Calculated on a fair value basis
For further explanatory remarks please see the risk report on page 9f of the present interim financial report as well as our comments in the Group Annual Report 2008.
Investments are classified and measured in accordance with IAS 39 "Financial Instruments: Recognition and Measurement". Hannover Re Group classifies investments according to the following categories: held to maturity, loans and receivables, financial assets at fair value through profit or loss, held for trading and available for sale. The allocation and measurement of investments are determined by the investment intent.
Fixed-income securities classified as held to maturity as well as loans and receivables originated by the entity that are not listed on an active market or sold at short notice are measured at purchase cost – i.e. fair value as at purchase date including directly allocable transaction costs – plus amortised cost. The amortised cost derives from the difference between the nominal value and purchase cost and is spread over the time to maturity of the fixed-income securities.
Fixed-income securities classified as available for sale are measured at fair value. The difference between the fair value and amortised cost is recognised outside the statement of income until realisation. Financial assets at fair value through profit or loss and securities held for trading are measured at fair value. The difference between the fair value and amortised cost is recognised in the statement of income.
Securities whose fair value falls significantly or permanently below purchase cost are written down to current value and recognised in the statement of income.
The investments also include investments in associated companies, real estate used by third parties (investment property), short-term investments, cash and funds held. The other investments primarily consist of shares in private equity limited partnerships.
For further details we would refer to the relevant information in the consolidated financial statement as at 31 December 2008.
| Figures in EUR thousand | 2009 | 2008 | |||
|---|---|---|---|---|---|
| 30.6. | 30.6. | 31.12. | 31.12. | ||
| Cost or amortised cost1) |
Fair value | Cost or amortised cost1) |
Fair value | ||
| Held to maturity | |||||
| due in one year | 21,375 | 19,895 | 12,087 | 9,803 | |
| due after one through two years | 164,926 | 171,801 | 29,736 | 30,260 | |
| due after two through three years | 399,669 | 412,603 | 197,804 | 206,450 | |
| due after three through four years | 514,300 | 532,092 | 255,693 | 267,561 | |
| due after four through five years | 525,876 | 545,580 | 297,477 | 304,497 | |
| due after five through ten years | 1,328,008 | 1,356,768 | 673,498 | 728,460 | |
| due after ten years | 8,880 | 8,992 | 8,907 | 8,978 | |
| Total | 2,963,034 | 3,047,731 | 1,475,202 | 1,556,009 | |
| Loans and receivables | |||||
| due in one year | 197,437 | 197,497 | 71,859 | 72,140 | |
| due after one through two years | 63,355 | 64,866 | 136,024 | 136,654 | |
| due after two through three years | 39,471 | 39,961 | 82,013 | 83,086 | |
| due after three through four years | 60,367 | 61,058 | 9,898 | 9,873 | |
| due after four through five years | 166,494 | 169,984 | 198,037 | 203,531 | |
| due after five through ten years | 1,075,018 | 1,091,688 | 970,241 | 996,374 | |
| due after ten years | 198,764 | 198,764 | 212,785 | 209,757 | |
| Total | 1,800,906 | 1,823,818 | 1,680,857 | 1,711,415 | |
| Available for sale | |||||
| due in one year 2) | 3,269,431 | 3,241,662 | 3,496,170 | 3,473,225 | |
| due after one through two years | 1,870,592 | 1,908,330 | 1,947,238 | 1,966,672 | |
| due after two through three years | 1,556,611 | 1,590,726 | 1,725,197 | 1,751,528 | |
| due after three through four years | 1,497,755 | 1,527,329 | 1,217,321 | 1,239,933 | |
| due after four through five years | 2,003,714 | 2,015,692 | 1,867,138 | 1,933,328 | |
| due after five through ten years | 3,375,350 | 3,339,154 | 4,021,163 | 4,059,484 | |
| due after ten years | 1,632,739 | 1,564,175 | 1,344,802 | 1,296,606 | |
| Total | 15,206,192 | 15,187,068 | 15,619,029 | 15,720,776 | |
| Financial assets at fair value through profit or loss |
|||||
| due in one year | 75,676 | 75,507 | 68,553 | 65,907 | |
| due after one through two years | 46,235 | 46,286 | 4,788 | 4,991 | |
| due after two through three years | 15,721 | 15,568 | 71,132 | 70,476 | |
| due after three through four years | 47,302 | 48,806 | 641 | 626 | |
| due after four through five years | 12,204 | 12,204 | 56,687 | 58,560 | |
| due after five through ten years | 28,361 | 28,361 | 34,675 | 34,529 | |
| due after ten years | 25,682 | 25,682 | 23,373 | 19,439 | |
| Total | 251,181 | 252,414 | 259,849 | 254,528 |
1) Including accrued interest
2) Including short-term investments and cash
The stated maturities may in individual cases diverge from the contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
Floating-rate bonds (also known as "floaters") are shown under the maturities due in one year and constitute our interestrelated, within-the-year reinvestment risk.
Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as held to maturity as well as their fair value
| 30.6.2009 | |||||
|---|---|---|---|---|---|
| Figures in EUR thousand | Cost or amortised cost |
Unrealised gains |
losses | Accrued interest |
Fair value |
| Investments held to maturity | |||||
| Fixed-income securities | |||||
| Government debt securities of EU member states |
326,468 | 3,742 | 2,548 | 6,514 | 334,176 |
| US treasury notes | 356,062 | 38,314 | 881 | 2,859 | 396,354 |
| Other foreign government debt securities |
16,112 | 769 | – | 23 | 16,904 |
| Debt securities issued by semi-governmental entities |
693,629 | 26,191 | 3,871 | 9,842 | 725,791 |
| Corporate securities | 554,695 | 15,683 | 4,960 | 14,934 | 580,352 |
| Covered bonds/ asset-backed securities |
965,122 | 14,240 | 1,982 | 16,774 | 994,154 |
| Total | 2,912,088 | 98,939 | 14,242 | 50,946 | 3,047,731 |
| Figures in EUR thousand | Cost or amortised cost |
Unrealised gains |
losses | Accrued interest |
Fair value |
|---|---|---|---|---|---|
| Investments held to maturity | |||||
| Fixed-income securities | |||||
| Government debt securities of EU member states |
41,342 | 3,181 | – | 641 | 45,164 |
| US treasury notes | 341,902 | 64,196 | – | 2,775 | 408,873 |
| Other foreign government debt securities |
14,268 | 969 | – | 22 | 15,259 |
| Debt securities issued by semi-governmental entities |
432,412 | 21,532 | 886 | 8,797 | 461,855 |
| Corporate securities | 384,156 | 6,033 | 14,518 | 9,142 | 384,813 |
| Covered bonds/ asset-backed securities |
234,601 | 1,390 | 1,090 | 5,144 | 240,045 |
| Total | 1,448,681 | 97,301 | 16,494 | 26,521 | 1,556,009 |
| Figures in EUR thousand | Cost or amortised cost |
gains | Unrealised losses |
Accrued interest |
Fair value |
|---|---|---|---|---|---|
| Loans and receivables | |||||
| Government debt securities of EU member states |
29,452 | 1,273 | – | 203 | 30,928 |
| Debt securities issued by semi-governmental entities |
281,410 | 5,677 | – | 4,046 | 291,133 |
| Corporate securities | 639,194 | 11,885 | 4,888 | 13,256 | 659,447 |
| Covered bonds/ asset-backed securities |
562,051 | 10,897 | 1,932 | 12,895 | 583,911 |
| Other | 205,193 | – | – | 53,206 | 258,399 |
| Total | 1,717,300 | 29,732 | 6,820 | 83,606 | 1,823,818 |
| Figures in EUR thousand | Cost or amortised cost |
gains | Unrealised losses |
Accrued interest |
Fair value |
|---|---|---|---|---|---|
| Loans and receivables | |||||
| Government debt securities of EU member states |
29,410 | 1,228 | – | 407 | 31,045 |
| Debt securities issued by semi-governmental entities |
300,795 | 7,069 | 1,045 | 4,174 | 310,993 |
| Corporate securities | 545,536 | 12,509 | 3,005 | 9,410 | 564,450 |
| Covered bonds/ asset-backed securities |
527,288 | 20,094 | 6,292 | 7,916 | 549,006 |
| Other | 209,102 | – | – | 46,819 | 255,921 |
| Total | 1,612,131 | 40,900 | 10,342 | 68,726 | 1,711,415 |
Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as available for sale as well as their fair value
| 30.6.2009 | |||||
|---|---|---|---|---|---|
| Figures in EUR thousand | Cost or amortised cost |
Unrealised gains |
losses | Accrued interest |
Fair value |
| Available for sale | |||||
| Fixed-income securities | |||||
| Government debt securities of EU member states |
2,195,952 | 40,890 | 8,582 | 41,670 | 2,269,930 |
| US treasury notes | 2,049,249 | 37,337 | 13,420 | 15,077 | 2,088,243 |
| Other foreign government debt securities |
499,483 | 8,076 | 4,069 | 3,204 | 506,694 |
| Debt securities issued by semi-governmental entities |
3,756,954 | 88,268 | 14,222 | 52,742 | 3,883,742 |
| Corporate securities | 3,288,784 | 98,872 | 164,905 | 51,283 | 3,274,034 |
| Covered bonds/ asset-backed securities |
1,535,256 | 29,528 | 102,267 | 17,700 | 1,480,217 |
| From investment funds | 161,199 | 19,765 | 35,071 | – | 145,893 |
| 13,486,877 | 322,736 | 342,536 | 181,676 | 13,648,753 | |
| Equity securities | |||||
| Shares | 16,545 | 4,280 | 480 | – | 20,345 |
| From investment funds | 1,849 | 245 | – | – | 2,094 |
| 18,394 | 4,525 | 480 | – | 22,439 | |
| Short-term investments | 1,002,201 | 714 | 38 | 121,662 | 1,124,539 |
| Total | 14,507,472 | 327,975 | 343,054 | 303,338 | 14,795,731 |
Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as available for sale as well as their fair value
| 31.12.2008 | |||||
|---|---|---|---|---|---|
| Figures in EUR thousand | Cost or amortised cost |
Unrealised gains |
losses | Accrued interest |
Fair value |
| Available for sale | |||||
| Fixed-income securities | |||||
| Government debt securities of EU member states |
2,565,205 | 74,577 | 2,000 | 46,936 | 2,684,718 |
| US treasury notes | 1,831,104 | 136,650 | 7 | 15,269 | 1,983,016 |
| Other foreign government debt securities |
471,278 | 21,667 | 1,022 | 7,694 | 499,617 |
| Debt securities issued by semi-governmental entities |
3,654,452 | 156,244 | 12,446 | 61,737 | 3,859,987 |
| Corporate securities | 3,219,639 | 43,884 | 192,436 | 64,724 | 3,135,811 |
| Covered bonds/ asset-backed securities |
2,222,092 | 32,488 | 121,628 | 41,675 | 2,174,627 |
| From investment funds | 179,356 | 11,663 | 45,963 | – | 145,056 |
| 14,143,126 | 477,173 | 375,502 | 238,035 | 14,482,832 | |
| Equity securities | |||||
| Shares | 19,711 | 1,830 | 734 | – | 20,807 |
| From investment funds | 1,897 | 82 | 197 | – | 1,782 |
| 21,608 | 1,912 | 931 | – | 22,589 | |
| Short-term investments | 806,718 | 76 | – | 925 | 807,719 |
| Total | 14,971,452 | 479,161 | 376,433 | 238,960 | 15,313,140 |
Fair value of financial assets at fair value through profit or loss before and after accrued interest as well as accrued interest on such financial assets
| 30.6.2009 | |||
|---|---|---|---|
| Figures in EUR thousand | Fair value before accrued interest |
Accrued interest |
Fair value |
| Financial assets at fair value through profit or loss | |||
| Fixed-income securities | |||
| Debt securities of semi-governmental entities | 6,268 | 64 | 6,332 |
| Corporate securities | 142,915 | 635 | 143,550 |
| Covered bonds/asset-backed securities | 102,159 | 373 | 102,532 |
| 251,342 | 1,072 | 252,414 | |
| Other financial assets | |||
| Derivatives | 69,168 | – | 69,168 |
| 69,168 | – | 69,168 | |
| Total | 320,510 | 1,072 | 321,582 |
| 31.12.2008 | |||
|---|---|---|---|
| Figures in EUR thousand | Fair value before accrued interest |
Accrued interest |
Fair value |
| Financial assets at fair value through profit or loss | |||
| Fixed-income securities | |||
| Other foreign government debt securities | 2,577 | – | 2,577 |
| Debt securities of semi-governmental entities | 7,767 | 332 | 8,099 |
| Corporate securities | 176,237 | 3,730 | 179,967 |
| Covered bonds/asset-backed securities | 63,880 | 5 | 63,885 |
| 250,461 | 4,067 | 254,528 | |
| Other financial assets | |||
| Derivatives | 44,654 | – | 44,654 |
| 44,654 | – | 44,654 | |
| Total | 295,115 | 4,067 | 299,182 |
Hannover Re's portfolio contained derivative financial instruments as at the balance sheet date in the form of forward exchange contracts that were taken out chiefly to hedge cash flows from reinsurance contracts. The resulting liabilities were recognised under other liabilities. On balance, the changes in the fair value of these instruments produced a charge to investment income of EUR 15.0 million.
Certain reinsurance treaties meet criteria which require application of the prescriptions in IFRS 4.7 to 4.9 governing embedded derivatives. These accounting regulations require that derivatives embedded in reinsurance contracts be separated from the underlying insurance contract ("host contract") according to the conditions specified in IFRS 4 and IAS 39 and recognised separately at fair value in accordance with IAS 39. Fluctuations in the fair value of the derivative components are to be recognised in income in subsequent periods.
On this basis Hannover Re reported as financial assets at fair value through profit or loss technical derivatives in an amount of EUR 69.2 million as at 30 June 2009 (31 December 2008: EUR 44.7 million) that were separated from the underlying transaction and measured at fair value.
In addition, liabilities from derivatives in connection with the technical account totalling EUR 5.5 million (31 December 2008: EUR 91.2 million) were recognised under other liabilities.
Of the derivatives carried on the assets side fair values of EUR 32.0 million (31 December 2008: none) and of the derivatives recognised on the liabilities side fair values of EUR 3.3 million (31 December 2008: EUR 89.1 million) were attributable as at the balance sheet date to derivatives embedded in "modified coinsurance" and "coinsurance funds withheld" (ModCo) reinsurance treaties.
Within the scope of the accounting of ModCo reinsurance treaties, under which securities deposits are held by the ceding companies and payments rendered on the basis of the income from certain securities of the ceding company, the interest-rate risk elements are clearly and closely related to the underlying reinsurance arrangements. Embedded derivatives consequently result solely from the credit risk of the underlying securities portfolio. Hannover Re calculates the fair value of the embedded derivatives in ModCo treaties using the market information available on the valuation date on the basis of a "credit spread" method. Under this method the derivative is valued at zero on the date when the contract commences and its value then fluctuates over time according to changes in the credit spreads of the securities.
The sharp decrease in credit spreads in the second quarter gave rise to an improvement in investment income from the ModCo derivatives of EUR 122.4 million before taxes as at 30 June 2009 (30 June 2008: charge of EUR 5.9 million).
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| 30.6. | 30.6. | |
| Real estate | 745 | 701 |
| Dividends | 2,156 | 25,012 |
| Interest income on investments | 393,594 | 352,686 |
| Other investment income | 2,327 | 29,455 |
| Ordinary investment income | 398,822 | 407,854 |
| Profit or loss on shares in associated companies | (1,535) | 4,149 |
| Realised gains on investments | 81,086 | 171,353 |
| Realised losses on investments | 25,624 | 69,054 |
| Unrealised gains and losses on investments | 87,238 | (15,149) |
| Depreciation on real estate | 487 | 242 |
| Impairments/depreciation on equity securities | 2,615 | 98,644 |
| Impairments on fixed-income securities | 26,171 | 31,665 |
| Impairments on participating interests and other financial assets | 64,111 | – |
| Other investment expenses | 22,359 | 25,824 |
| Net income from assets under own management | 424,244 | 342,778 |
| Interest income on funds withheld and contract deposits | 212,542 | 123,635 |
| Interest expense on funds withheld and contract deposits | 67,611 | 21,335 |
| Total investment income | 569,175 | 445,078 |
Of the impairments totalling EUR 93.1 million, an amount of EUR 64.1 million was attributable to alternative investments. The includes impairments of EUR 41.9 million taken on private equity. Impairments of EUR 26.2 million taken on fixed-income securities related predominantly to structured products. An impairment of EUR 2.6 million was recognised on equities whose fair value had fallen significantly, i.e. by at least 20%, or for a prolonged period, i.e. at least nine months, below acquisition cost. The portfolio did not contain any overdue, unadjusted assets as at the balance sheet date since overdue securities are written down immediately.
| Figures in EUR thousand | 2009 | 2008 |
|---|---|---|
| 30.6. | 30.6. | |
| Fixed-income securities – held to maturity | 67,501 | 28,539 |
| Fixed-income securities – loans and receivables | 31,517 | 25,143 |
| Fixed-income securities – available for sale | 268,148 | 262,682 |
| Financial assets – at fair value through profit or loss | 7,429 | 2,809 |
| Other | 18,999 | 33,513 |
| Total | 393,594 | 352,686 |
The average number of staff at the companies included in the consolidated financial statement of the Hannover Re Group was 1,932 (2008 financial year: 1,790) staff.
As at the balance sheet date altogether 2,011 (1,812) staff were employed by the Hannover Re Group, with 1,002 (963) employed in Germany and 1,009 (849) working for the consolidated Group companies abroad. The number of employees working abroad for the Hannover Re Group increased by altogether 129 as at the balance sheet date as a consequence of the acquisition of the ING life reinsurance portfolio. Please see our explanatory remarks in Section 3 "Consolidated companies and consolidation principles".
Shareholders' equity is shown as a separate component of the financial statement in accordance with IAS 1 "Presentation of Financial Statements" and subject to IAS 32 "Financial Instruments: Disclosure and Presentation" in conjunction with IAS 39 "Financial Instruments: Recognition and Measurement". The change in shareholders' equity comprises not only the net income deriving from the statement of income but also the changes in the value of asset and liability items not recognised in the statement of income.
The common shares (share capital of the parent company) amount to EUR 120,597,134.00. They are divided into 120,597,134 voting and dividend-bearing registered no-par-value shares. The shares are paid in in full. Each share carries an equal voting right and an equal dividend entitlement.
Minority interests are established in accordance with the shares held by companies outside the Group in the shareholders' equity of the subsidiaries.
In addition, conditional capital of up to EUR 60,299 thousand is available. It can be used to grant shares to holders of convertible bonds and bonds with warrants as well as to holders of participating rights or participating bonds with conversion rights and warrants and has a time limit of 11 May 2011.
IAS 1 requires separate disclosure of treasury shares in shareholders' equity. By a resolution of the Annual General Meeting of Hannover Rückversicherung AG adopted on 5 May 2009, the company was authorised until 31 October 2010 to acquire treasury shares of up to 10% of the share capital existing on the date of the resolution. The company did not hold treasury shares at any time during the reporting period.
Basic and fully diluted earnings per share
| 2009 | 2008 | |||||
|---|---|---|---|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |||||
| Result (in EUR thousand) |
No. of shares |
Per share (in EUR) |
Result (in EUR thousand) |
No. of shares |
Per share (in EUR) |
|
| Group net income | 419,012 | – | – | 252,224 | – | – |
| Weighted average of issued shares |
– | 120,597,134 | – | – | 120,597,134 | – |
| Earnings per share | 419,012 | 120,597,134 | 3.47 | 252,224 | 120,597,134 | 2.09 |
Neither in the year under review nor in the previous reporting period were there any dilutive effects or other extraordinary components of income which should have been recognised or disclosed separately in the calculation of the earnings per share.
The earnings per share could potentially be diluted in future through the issue of shares or subscription rights from the conditional capital.
IAS 24 defines related parties inter alia as parent companies and subsidiaries, subsidiaries of a common parent company, associated companies, legal entities under the influence of management and the management of the company itself. In the period under review the following significant business relations existed with related parties.
With effect from the 1997 financial year onwards all new business and renewals written on the German market have been the responsibility of E+S Rück, while Hannover Re has handled foreign markets. Internal retrocession arrangements ensure that the percentage breakdown of the business applicable to the previously existing underwriting partnership is largely preserved between these companies.
Within the contractually agreed framework AmpegaGerling Asset Management GmbH performs investment and asset management services for Hannover Re and some of its subsidiaries. Assets in special funds are managed by Ampega-Gerling Investment GmbH. AmpegaGerling Immobilien Management GmbH performs services for Hannover Re within the framework of a management contract.
Companies belonging to the Talanx Group granted the Hannover Re Group insurance protection inter alia in the areas of public liability, fire, group accident and business travel collision insurance. In addition, Talanx AG billed Hannover Re and E+S Rück pro rata for the directors' and officers' (D&O) insurance of the Talanx Group. Divisions of Talanx AG also performed services for us in the areas of taxes and general administration. All transactions were effected at usual market conditions.
HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI) holds the majority interest in Hannover Re in an unchanged amount of 50.22% through Talanx AG. The Hannover Re Group provides reinsurance protection for the HDI Group.
To this extent, numerous underwriting business relations exist with related parties in Germany and abroad that are not included in Hannover Re's consolidation. This includes business both assumed and ceded at usual market conditions. Protection Reinsurance Intermediaries AG grants Hannover Re and E+S Rück a preferential position as reinsurers of ceding companies within the Talanx Group. In addition, Hannover Re and E+S Rück are able to participate in the protection covers on the retention of Group cedants and share in the protection afforded by them.
The major reinsurance relationships with related parties in the period under review are listed in the following table.
Business assumed and ceded in Germany and abroad
| Figures in EUR thousand | 2009 | ||
|---|---|---|---|
| Premium | Underwriting result |
||
| 30.6. | 30.6. | ||
| Business assumed | |||
| Non-life reinsurance | 151,240 | 3,342 | |
| Life and health reinsurance | 169,034 | 52,508 | |
| 320,274 | 55,850 | ||
| Business ceded | |||
| Non-life reinsurance | 227 | 79 | |
| Total | 320,047 | 55,771 |
Effective 31 December 2008 Hannover Re assumed the life insurance business of a related party that had previously been retroceded to a reinsurer outside the Group by exercising its right of novation. This restructuring gave rise to nonrecurring income of EUR 37.0 million, which is opposed by a technical expense of EUR 36.9 million in connection with the non-Group reinsurer.
Hannover Re has placed three subordinated debts on the European capital markets through its subsidiary Hannover Finance (Luxembourg) S.A. Hannover Re has secured by subordinated guarantee both the debt issued in 2001, the volume of which now stands at EUR 138.1 million, and the debts from financial years 2004 and 2005 in amounts of EUR 750.0 million and EUR 500.0 million respectively. For further details we would refer to the relevant information in the consolidated financial statement as at 31 December 2008.
The guarantees given by Hannover Re for the subordinated debts attach if the issuer in question fails to render payments due under the bonds. The guarantees cover the relevant bond volumes as well as interest due until the repayment dates. Given the fact that interest on the bonds is partly dependent on the capital market rates applicable at the interest payment dates (floating rates), the maximum undiscounted amounts that can be called cannot be estimated with sufficient accuracy. Hannover Re does not have any rights of recourse outside the Group with respect to the guarantee payments.
In July 2004 Hannover Re and the other shareholders sold the participation that they held through Willy Vogel Beteiligungsgesellschaft mbH in Willy Vogel AG. In order to secure the guarantees assumed under the purchase agreement, Hannover Re and the other shareholders jointly gave the purchaser a directly enforceable guarantee for a period until 8 July 2009 limited to a total amount of EUR 7.1 million. Furthermore, in the event of a call being made on the guarantee Hannover Re and the other shareholders agreed that settlement would be based upon the ratio of participatory interests.
As security for technical liabilities to our US clients, we have established a master trust in the USA. As at the balance sheet date this master trust amounted to EUR 2,330.8 million (31 December 2008: EUR 2,352.8 million). In addition, we extended further collateral to our cedants in an amount of EUR 230.9 million (31 December 2008: EUR 269.3 million) through so-called "single trust funds".
As part of our business activities we hold collateral available outside the United States in various blocked custody accounts and trust accounts, the total amount of which in relation to the Group's major companies was EUR 1,490.8 million (31 December 2008: EUR 1,388.8 million) as at the balance sheet date.
The securities held in the blocked custody accounts and trust accounts are recognised predominantly as availablefor-sale investments.
As security for our technical liabilities, various financial institutions have furnished guarantees for our company in the form of letters of credit. The total amount as at the balance sheet date was EUR 2,476.1 million (31 December 2008: EUR 2,470.9 million).
For liabilities in connection with participating interests in real estate companies and real estate transactions Hannover Re Real Estate Holdings has furnished the usual collateral under such transactions to various banks, the amount of which totalled EUR 81.2 million as at the balance sheet date (31 December 2008: EUR 85.5 million).
Outstanding capital commitments with respect to special investments exist on the part of the Group in the amount of EUR 295.8 million (31 December 2008: EUR 291.1 million). These primarily involve as yet unfulfilled payment obligations from participations entered into in private equity funds and venture capital firms.
By way of declarations dated 11 and 20 November 2008 E+S Rück participated in a counter-guarantee given by the insurance industry in a maximum amount of EUR 8.5 billion for the guarantee put up by the Federal Republic of Germany as part of a rescue package for Hypo Real Estate Holding AG, Munich, and its subsidiaries ("HRE Group"). In this connection the Federal Republic of Germany guarantees repayment of capital and interest to the German Bundesbank, which is to extend a loan to the HRE Group, as well as to the holders of newly issued debentures, through which further funds are to be made available to the HRE Group. The insurance industry assumes a portion of this guarantee amount put up by the federal government through the aforementioned counter-guarantee. The participating insurers are liable severally, but not jointly. E+S Rück's interest in this counter-guarantee is limited to a nominal amount of EUR 11.1 million (rounded). As published in the Federal Gazette, the federal guarantees were extended by one year on 17 March 2009. The counter-guarantee given by the insurance industry therefore now runs until 15 January 2010.
| 1 EUR corresponds to: | Mean rate of exchange on the balance sheet date |
Average rate of exchange | ||||||
|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |||||
| 30.6. | 31.12. | 1.1.–30.6. | 1.1.–30.6. | |||||
| AUD | 1.7370 | 2.0257 | 1.8921 | 1.6601 | ||||
| BHD | 0.5320 | 0.5312 | 0.5080 | 0.5780 | ||||
| CAD | 1.6290 | 1.7160 | 1.6182 | 1.5333 | ||||
| CNY | 9.6390 | 9.6090 | 9.2039 | 10.8217 | ||||
| GBP | 0.8523 | 0.9600 | 0.8996 | 0.7730 | ||||
| HKD | 10.9469 | 10.8323 | 10.4401 | 11.9611 | ||||
| KRW | 1,810.0000 | 1,775.0000 | 1,801.8571 | 1,511.8571 | ||||
| MYR | 4.9605 | 4.8700 | 4.8046 | 4.9524 | ||||
| SEK | 10.8240 | 10.9150 | 10.8817 | 9.4034 | ||||
| USD | 1.4125 | 1.3977 | 1.3468 | 1.5348 | ||||
| ZAR | 10.9575 | 13.1698 | 12.1207 | 11.6557 |
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.
Hannover, 27 July 2009
Executive Board
Wallin Arrago Dr. Becke
Gräber Dr. Pickel Vogel
to Hannover Rückversicherung AG, Hannover
We have reviewed the condensed consolidated interim financial statements – comprising the balance sheet, income statement, cash flow statement, statement of changes in shareholders' equity and selected explanatory notes – together with the interim Group management report of Hannover Rückversicherung AG, Hannover, for the period from 1 January to 30 June 2009, which are components of the half-yearly financial report pursuant to § 37w of the German Securities Trading Act (WpHG). The preparation of the condensed consolidated interim financial statements in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and of the interim management report for the Group in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports is the responsibility of the parent company's Board of Management. Our responsibility is to issue a review report on the condensed consolidated interim financial statements and on the interim management report for the Group based on our review.
We conducted our review of the condensed consolidated interim financial statements and the interim management report for the Group in accordance with German generally accepted standards for the review of financial statements promulgated by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer – IDW). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with moderate assurance, that the condensed consolidated interim financial statements have not been prepared, in all material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and that the interim management report for the Group has not been prepared, in all material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports. A review is limited primarily to inquiries of company personnel and analytical procedures and thus provides less assurance than an audit. Since, in accordance with our mandate, we have not performed a financial statement audit, we cannot express an audit opinion.
Based on our review, no matters have come to our attention that cause us to presume that the condensed consolidated interim financial statements have not been prepared, in all material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU or that the interim management report for the Group has not been prepared, in all material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports.
Hannover, 31 July 2009
KPMG AG Wirtschaftsprüfungsgesellschaft
Busch Jungsthöfel Wirtschaftsprüfer Wirtschaftsprüfer
Karl-Wiechert-Allee 50 30625 Hannover Germany Telephone +49 511 5604-0 Fax +49 511 5604-1188 [email protected] www.hannover-re.com
Stefan Schulz
Telephone +49 511 5604-1500 Fax +49 511 5604-1648 [email protected]
Klaus Paesler
Telephone +49 511 5604-1736 Fax +49 511 5604-1648 [email protected]
Gabriele Handrick
Telephone +49 511 5604-1502 Fax +49 511 5604-1648 [email protected]
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