Annual Report 2003 - Hannover Re

MANAGEMENT REPORT
of Hannover Re
Economic climate
In 2003 the state of the economy around
the world was initially overshadowed by considerable
uncertainty. Following stagnation in the
first half of the year – attributable to the sharply
higher price of oil, the war on Iraq, the respiratory
disorder SARS and fears of further terrorist
attacks – a gradual economic recovery set in as
the year progressed. After several years of depressed
equity markets, this development also
breathed life into capital markets. From the third
quarter onwards the global economic climate
began to brighten. Crucial factors here were the
expansionary direction of economic policy and
especially monetary policy. Financing conditions
for business improved as a consequence of consolidation
efforts in the banking sector and rising
stock market profits.
After showing initial weakness the USA
proved to be the driver of growth in the year
under review, not least thanks to the programme
of tax cuts implemented by the Bush Administration.
This gave a considerable boost to total
economic output, exports and private consumption.
However, the tax cuts also led to a sharp rise
in U.S. government debt.
In the Eurozone, too, economic activity
gathered momentum in the second half of the
year, albeit only on a very modest scale. While
overall domestic demand remained weak, exports
picked up appreciably. The German economy
was initially flat; but overall economic output
moved upwards slightly from the middle of
the year onwards. However, it had sunk so low
in the first two quarters of 2003 that the year
as a whole recorded only zero growth. Private
consumption was also not quite on a par with
the level of the previous year. Late in the year,
however, early signs of a cyclical upswing began
to emerge. After a poor first half-year exports
gathered significant impetus in the second
half of 2003. At the end of the year a
process of economic recovery set in. Despite the
upward revaluation of the euro, even exportoriented
businesses shared in the mood of
growing optimism.
For the insurance industry the year under
review gave greater grounds for satisfaction than
2002. Results in property and casualty insurance
improved sharply in 2003 after a previous year
that had been burdened by natural hazards
losses. In property and casualty reinsurance the
so-called "hard market" with its associated favourable
terms and conditions for reinsurers was sustained.
Rates and conditions remained extremely
attractive and continued to improve – particularly
in the casualty lines.
The year under review once again witnessed
numerous natural hazards losses. Although the
number of natural catastrophes – at around 700
recorded loss events – was on a par with the
previous year, the total economic losses and the
insured losses both increased. Although only onethird
of the loss events were attributable to windstorms
and thunderstorms, they accounted for
75% of the insured natural catastrophe losses.
Insurers incurred loss expenditure of more than
USD 3 billion purely for the series of tornadoes
that struck the Midwest of the United States in
May 2003. The third quarter saw two further
major losses as a result of the hurricanes "Isabel"
and "Fabian". In addition to natural catastrophes,
2003 was notable for other loss events such as
power blackouts in the United States, the United
Kingdom and Italy – although the scale of these
losses could not be compared with the impact of
natural catastrophes.
Life and health insurance continued to
prove a stable pillar of the global insurance industry
in both the primary and reinsurance sectors.
The German insurance industry was nevertheless
tested by difficulties at a mid-sized insurer
– a test, which it passed with the transfer
of the latter's in-force business to the rescue company
Protektor Lebensversicherungs-AG. In life
(re-)insurance business the demand for products
offering individual provision for dependents and
retirement continued to grow due to the demographic
trend in most insurance markets.
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