Annual Report 2003 - Hannover Re

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Management report life and health reinsurance Development of premium income Consolidated gross premium income contracted slightly in the 2003 financial year to EUR 2.3 billion, compared to EUR 2.5 billion in the previous year. The substantial devaluation of certain foreign currencies – especially the US dollar against the euro – offset the modest premium growth (2.2%) in the original currency. The situation as regards net premiums earned was similar. These figures refer to premium income calculated in accordance with US GAAP, i.e. excluding the premium deposits for unit-linked life and annuity products. As in the previous year, we pursued a centralised retrocession policy and limited our retrocessions to peak risks in life, disability and critical illness business as well as specific quota share treaties involving new business financing. The level of retained premiums stood at 85.1% (86.9%) in 2003. The breakdown of the Hannover Life Re portfolio shifted further in the year under review towards the preferred lines of life, annuity and personal accident, which in sum now account for 80% (69%) of our total premium income. We terminated a number of health reinsurance contracts in the USA, thereby improving the line-ofbusiness mix. Key figures for life and health reinsurance Figures in EUR million 2003 +/- previous year 2002 2001 2000 1999 Gross written premiums 2 276.3 (7.9%) 2 471.5 2 371.0 2 090.5 2 220.4 Premiums deposits 257.9 0.8% 255.8 289 404 – Gross premium incl. premium deposits 2 534.2 (7.1%) 2 728.3 2 660 2 495 2 220 Net premiums earned 1 936.3 (9.6%) 2 142.3 1 740.3 1 592.3 1 485.0 Premium deposits 213.4 85.6% 115.2 129 131 – Net premiums incl. premium deposits 2 149.7 (4.8%) 2 257.5 1 869 1 723 1 485 Investment income 179.4 (33.2%) 268.4 196.8 204.4 217.4 Claims expenses 1 270.4 4.2% 1 218.7 1 066 1 209 728 Expenses for benefit reserves 297.8 (48.1%) 574.1 298.0 37.5 496.1 Commissions 414.4 (8.5%) 453.0 460.3 411.3 391.1 Own administrative expenses 44.9 (20.7%) 56.6 32.5 56.9 49.7 Other income/expenses 13.8 (60.1%) 34.5 – 52 23 Operating result (EBIT) 61.0 25.8% 48.5 50.5 35.5 26.9 Net income after tax 46.6 55.2% 30.0 23.2 53.9 21.7 Earnings per share in EUR 0.43 37.9% 0.31 0.24 0.61 0.25 Retention 85.1% 86.9% 74% 76% 67% 36
Management report life and health reinsurance Results As far as the risk-oriented portion of our acceptances is concerned, accounting for a mere 25% of our total activities, the performance of life business is determined by the mortality while the disability, health and critical illness lines are crucially dependent on the morbidity. The mortality experience varied widely in the year under review: consistently favourable mortality results in all areas of Europe, Asia (with the exception of Japan) and Australia were partially offset by a below-average mortality experience with major risks in the USA and Japan. The morbidity experience gave grounds for satisfaction in virtually all markets, with especially favourable results recorded in the United States. Traditionally accounting for the bulk of our acceptances in past years, too, 75% of the business written was attributable to financing-oriented transactions in the year under review. Critical performance factors here are the persistency of the business in force and – in the case of foreign acceptances – currency movements against the euro. The credit risk in relation to the financial stability of the client in question also plays a vital role. Although we do not assume investment and/or interest-rate risks, the speed with which financing expenditures are amortised in some cases depends on the conditions on the capital markets. These multiple risk factors are subjected to regular analysis and, where necessary and possible, adjustments are made in consultation with our clients for the purposes of a strategic coordination of interests. In the year under review there was no need to adjust our actuarial expectations in light of adverse developments. We were not affected by the difficulties facing a mid-sized Ger- man insurer which was rescued in the year under review by Protektor Lebensversicherungs-AG. In the year under review, as in previous years, one of the principles of Hannover Life Re's underwriting policy in the US market was its absolute non-acceptance of mortality- and investment-related derivative risks. Specifically, these No acceptance of take the form of guaranteed death benefits under mortality- and unit-linked annuity products in the USA. In contrast to other reinsurers, we do not believe that derivative risks investment-related such risk constellations can be reinsured; this is because no internal risk control can be exercised and long-term safeguards at acceptable market prices are lacking. Breakdown of gross premiums by line of business As at the middle of the year under review we closed our retrocession facility L4 and thus reimbursed the retroceded block of German unit-linked policies ahead of schedule. Health 20% Overall, Hannover Life Re boosted its operating profit (EBIT) by a substantial 25.8% to EUR 61.0 million in 2003. This was the best operating result in the company's history. The net income after tax climbed by 55.2% to EUR 46.6 million. Leaving aside the exceptional 2000 financial year, which was influenced by tax effects, this, too, was a record result. Earnings per share amounted to EUR 0.43 (EUR 0.31). Annuity 13% Personal accident 1% Life 66% Significantly higher operating profit (EBIT) 37
Page 1 and 2: Annual Report 2003 Highest operatin
Page 3 and 4: CONTENTS 1 Address of the Chairman
Page 5 and 6: It is my pleasant duty to report th
Page 7 and 8: All in all, then, we are in every r
Page 9 and 10: BOARDS AND OFFICERS of Hannover Re
Page 11 and 12: Boards and officers Executive Board
Page 13 and 14: The Hannover Re share The Hannover
Page 15 and 16: The Hannover Re share Last but not
Page 17 and 18: The Hannover Re share Share informa
Page 19 and 20: Strategy and self-image Strategic p
Page 21 and 22: E+S Reinsurance (Ireland) Ltd. Dubl
Page 23 and 24: Management report economic climate
Page 25 and 26: Management report business developm
Page 27 and 28: Who could have predicted such a dev
Page 29 and 30: Management report property and casu
Page 37 and 38: Management report life and health r
Page 39: Life and good health are the most v
Page 47 and 48: Management report financial reinsur
Page 49 and 50: People and businesses want to be su
Page 51 and 52: Management report program business
Page 53 and 54: Unusual risks offer unusual rewards
Page 55 and 56: Management report investments Inves
Page 57 and 58: Management report investments the p
Page 59 and 60: Management report risk report Globa
Page 61 and 62: Management report risk report revie
Page 63 and 64: Management report risk report Combi
Page 65 and 66: Management report risk report Ratin
Page 67 and 68: Management report human resources B
Page 69 and 70: Management report outlook Manager S
Page 71 and 72: Management report outlook their cov
Page 73: Management report proposal for the
Page 76 and 77: CONSOLIDATED BALANCE SHEET as at 31
Page 78 and 79: CONSOLIDATED STATEMENT OF INCOME fo
Page 80 and 81: CASH FLOW STATEMENT for the 2003 fi
Page 82 and 83: SEGMENTAL REPORT as at 31 December
Page 84 and 85: SEGMENTAL REPORT as at 31 December
Page 87 and 88: NOTES Contents 1. General accountin
Page 89 and 90: Notes general accounting principles
Page 91 and 92:
Notes consolidated companies 3. Con
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Notes consolidated companies Name a
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Notes major acquisitions Capital co
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Notes notes on the individual items
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Notes related party disclosures As
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Notes related party disclosures Mem
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Notes other notes 6.4 Mortgages and
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Notes other notes The fair values o
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Notes other notes 7.7 Currency conv
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REPORT OF THE SUPERVISORY BOARD of
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CORPORATE GOVERNANCE report Good an
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Corporate Governance report Separat
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Branch offices and subsidiaries Vir
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GLOSSARY Accumulation loss: sum of
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Glossary Fair value: price at which
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Glossary Portfolio: a) all risks as
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Glossary Surplus reinsurance: form
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Index of key terms Hannover Re shar
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YOUR OPINION matters to us Dear Rea
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STRATEGIC BUSINESS GROUPS of the Ha
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Hannover Rückversicherung AG Karl-
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Annual Report 2003 - Hannover Re

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