Hannover Rueck SE

Earnings Release • Oct 21, 2008

News Details

Ad-hoc | 21 October 2008 09:44

Hannover Rückversicherung AG: Profit decline in the third quarter of 2008 due to turmoil on capital markets and higher-than-average burden of catastrophe losses

Hannover Rückversicherung AG / Quarter Results/Profit Warning

Release of an Ad hoc announcement according to § 15 WpHG, transmitted by
DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.

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Hannover Re Group: Profit decline as at 30 September 2008 due to sharp fall
in equity prices and above-average burden of catastrophe losses / Profit
forecast for full 2008 financial year no longer attainable / Good outlook
for reinsurance business in 2009

Hannover Re had made its profit forecast subject to the reservations that
capital markets would recover and the burden of catastrophe losses would
not significantly exceed the expected level of 10% of net premium in
non-life reinsurance. Neither of these conditions has been met in the
second half of the year.

The crisis on international capital markets has intensified still further
compared to the first half of 2008, inevitably leaving its mark on Hannover
Re's investment income. Despite the financial market crisis write-downs on
fixed-income securities – which constitute by far the bulk of the asset
portfolio – remained relatively modest; nevertheless, Hannover Re has been
impacted by the dramatic slump in equity prices.

For the first nine months of 2008 Hannover Re booked write-downs and
unrealised losses of around EUR 466 million, roughly EUR 360 million of
which was taken on equities. This contrasted with a net profit of EUR 77
million from realised gains and losses on investments. Net investment
income as at 30 September 2008 will therefore come in sharply lower. As of
30 September 2008 8% of Hannover Re’s portfolio was invested in equities.
The company reduced this exposure significantly in October. Nevertheless,
further charges will have to be taken. Assets under own management
increased as at 30 September 2008 thanks to a positive cash flow from the
technical account and the recovery of the US dollar. The return on
investment for the first nine months stood at 2%.

The burden of catastrophe losses also came in higher than anticipated.
Hurricanes 'Gustav' and 'Ike' will cost the company a total amount in the
order of EUR 250 million; Hannover Re expects the latter to produce an
insured market loss in the region of USD 15 – 20 billion. As a consequence
of these events and other major claims, the net burden of catastrophe
losses as at 30 September 2008 – at around 14% of net premium in non-life
reinsurance – is higher than the expected level of 10%.

Despite the strains discussed above Hannover Re will still report a
positive operating result (EBIT) for the first nine months of 2008. Since
losses on equities are not tax-deductible in Germany, the tax load amounts
to more than EUR 100 million. After interest and minorities Hannover Re
will post a negative Group result of some EUR 140 million. This means that
the profit target of a return on equity in excess of 15% is no longer
attainable.

Looking to further developments on the reinsurance side, the company is
cautiously optimistic. It is Hannover Re's expectation that the capital
depletion triggered by the financial market crisis – which has also made
itself felt in the insurance industry – will prompt a hardening of the
markets. This will be reflected in substantially higher rates in a number
of lines. The outcome of the 2009 renewal season is therefore expected to
be favourable. Hannover Re is very well placed to profit from these
developments.

As planned, Hannover Re will publish its figures for the first nine months
as well as the outlook for the full 2008 financial year on 5 November 2008.
21.10.2008 Financial News transmitted by DGAP

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Language: English
Issuer: Hannover Rückversicherung AG
Karl-Wiechert-Allee 50
30625 Hannover
Deutschland
Phone: +49-(0)511-5604-1736
Fax: +49-(0)511-5604-1648
E-mail: klaus.paesler@hannover-re.com
Internet: www.hannover-re.com
ISIN: DE0008402215
WKN: 840 221
Indices: MDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard), Hannover;
Freiverkehr in Berlin, München, Hamburg, Düsseldorf,
Stuttgart; Terminbörse EUREX

End of News DGAP News-Service

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