Annual Report 2003 - Hannover Re

Management report
business development
Return on equity
in %
40
30
20
10
19.3
11.3
37.6
18.0
24.8
15.9
33.8
14.0
23.9
17.1
16.8
26.0
30.0
23.4
17.1
15.7
0
1995*
1996*
1997*
1998*
1999
2000
1.8 0.7
2001
2002
2003
Consolidated net income
Pre-tax profit**
* Return on equity calculated in accordance with the German Commercial Code (HGB)
** After minority interests
Program business similarly played its part
in the Group's good overall performance: although
gross premium income contracted by
3.0%, it rose by 15.4% after exchange-rate effects
are factored out. Influenced by the changeover
to an underwriting-oriented business model,
net premiums also showed an above-average
increase of 38.8% to reach EUR 1.2 billion. The
level of retained premiums thus climbed to 46.4%
(37.8%).
Ordinary investment income declined by
2.3% in the year under review to EUR 1,094.0
million (EUR 1,119.6 million). We again benefited
from comparatively high interest on our
premium deposits although we had to take writedowns
on equities amounting to EUR 65.3 million
– thereof EUR 46.0 million in the first quarter.
Total write-downs on investments, however,
were almost EUR 100 million lower than in the
previous year. Extraordinary income was virtually
balanced. Overall, net investment income
thus grew by 15.4% to EUR 1,071.5 million (EUR
928.4 million). In step with the recovery on equity
markets, we progressively raised our equity allocation
to 6.5% (5.7%) by the end of the financial
year.
In the year under review we made a number
of significant course adjustments, including
a restructuring of our business with the HDI companies.
With effect from 1 January 2003 we no
longer place HDI's entire reinsurance volume on
the market, but merely assume the role of preferred
reinsurer. We thus continue to enjoy preferential
access to the attractive business offered
by the HDI Group, but we are able to relieve our
balance sheet of a sizeable portion of retroceded
business by only accepting the share of HDI's
reinsurance volume that we wish to carry in our
retention. As additional steps taken in the year
under review, we optimised our portfolio in the
light of long-term profitability considerations and
also scaled back specific acceptances. This initiative
– which Hannover Re has dubbed "More
from less" – is to be continued in 2004.
Last but not least, we boosted our stockholders'
equity by EUR 530 million in June of the
year under review through a combined capital
increase for cash and a contribution in kind; reduced
by the present value of future profits
(PVFP) in the amount of EUR 116.4 million, our
capital increased by EUR 413.2 million. The issuance
of 9.7 million new shares as part of the
capital increase for cash also served to enlarge
the free float by around 40%, thereby significantly
improving the liquidity of the share. Under
the capital increase for a contribution in kind
Hannover Re received Hannover Reinsurance
(Dublin) Ltd. – formerly HDI Re (Ireland) Ltd. –
against issuance of 13.7 million new shares.
Thanks to the latter's strong profitability, our
shareholders incurred only minimal dilution of
their shares as a result of the capital increase.
Strengthening of stockholders'
equity in June
through combined capital
increase for cash and
contribution in kind
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