Annual Report 2003 - Hannover Re

Management report
outlook
insurance, too, we anticipate very good growth
prospects. The increased global demand for annuity
and life insurance products is driven by
the demographic trend and the resurgent economy
in major markets.
Further improvements
in rates and conditions
across virtually all
segments
Property and casualty reinsurance
Following the excellent performance of
property and casualty reinsurance in the year
under review, we expect to reap further fruits of
the cyclical upswing in the current year. In 2004,
our portfolio, which was substantially enlarged in
the last three renewal phases against a backdrop
of adequate rates and restrictive treaty terms
and conditions, is again superbly positioned to
profit from the continuing hard market.
In the treaty renewals as at 1 January 2004
approximately two-thirds of our treaties were
renewed. We were again able to obtain improvements
in rates and conditions across virtually
all segments or at least maintain the very good
premium level already attained. Slight premium
erosion occurred in specific segments – typically
those that had shown the strongest rate increases
over the past two years. This was especially
true of aviation fleet business, in which
we systematically scaled back our involvement.
On the other hand, we further enlarged our participation
in North American liability business –
a segment which again grew in profitability –
principally on the basis of excess of loss treaties.
Prices here continued to climb in 2004. We have
observed further highly favourable developments
in credit and surety business too, where
the rate increases obtained in the year under
review have been largely sustained in 2004.
In Germany we expect the hard market to
continue in 2004, although early signs of more
intense competition – attributable to rising reinsurance
capacities in the property lines – can
be discerned. No major changes are expected on
the primary insurance market. The need to continue
generating underwriting profits should
ensure discipline among insurers and prevent
significant softening of rates and conditions.
The other European markets also offer the
prospect of favourable developments in 2004.
In the United Kingdom, for example, we expect
the reinsurance market for liability business to
show further hardening. Double-digit percentage
increases in reinsurance rates are anticipated
for non-proportional motor business. Last
but not least, rates in property business should
remain at the present high level. In France further
improvements in rates and conditions were obtained
across large sections of the portfolio in
the renewals as at 1 January 2004. This was true,
inter alia, of motor business and general third
party liability. In property reinsurance, on the
other hand, rates declined slightly. The current
hard market climate in Italy is likely to be sustained,
and we therefore again anticipate adequate
terms and conditions in the coming year.
We see scope for further consolidation in
the North American insurance market since the
attained returns on equity are still too low to
satisfy investors. Nevertheless, the gratifying
operating profits of the 2002 and 2003 underwriting
years will probably serve to intensify
competition, especially in the property lines.
It is likely that reinsurers, too, will have to
gear up for more vigorous competition in property
business in North America, primarily due to
the relatively low claims expenditure incurred
in the year under review and its tempting effect
on certain market players. Liability business, however,
is expected to develop in quite another direction.
Ceding companies will continue to place
66