Annual Report 2010 - Hannover Re

Business development
We are thoroughly satisfied with the development of our business
in the year under review. Market conditions for financially
strong reinsurers such as Hannover Re were good in
both non-life and life/health reinsurance. Gross premium in
total business grew to EUR 11.4 billion (EUR 10.3 billion). The
operating profit (EBIT) climbed to EUR 1.2 billion (EUR 1.1
billion), while the Group net income of EUR 748.9 million
(EUR 733.7 million) surpassed both our forecast and the
record profit reported in the previous year.
Even though a trend towards softening reinsurance conditions
could be observed in some non-life reinsurance markets, not
all lines were affected in the same way. Overall, prices were
still very much commensurate with the risks. The 2010 financial
year was impacted by the large number of (natural) catastrophe
losses; for our company too, the burden of major losses
significantly exceeded our expectations. Nevertheless, these
strains were offset by the otherwise good performance of our
non-life reinsurance portfolio. For further details of developments
in non-life reinsurance in the year under review please
see page 21 et seq.
Our second business group, life and health reinsurance, delivered
particularly vigorous growth. Its contribution to the total
premium volume now stands at 44.5%. Given the low volatility
of results we have set ourselves premium growth targets
here – unlike in non-life reinsurance. In the year under review
we achieved in full not only these goals but also our profit
targets. For detailed comments on the development of business
in life and health reinsurance please see page 36 et seq.
Gross premium by business group
We are also highly satisfied with the development of our investments.
Thanks to positive cash inflows from the technical
account and improvements in fair values, our portfolio of assets
under own management grew appreciably to EUR 25.4
billion (EUR 22.5 billion). Despite the overall decline in interest
rate levels ordinary income consequently surpassed the
comparable figure for the previous year at EUR 880.5 million
(EUR 810.5 million). Income on funds withheld and contract
deposits climbed to EUR 316.4 million (EUR 276.8 million).
The impairments of EUR 16.5 million taken on securities (excluding
real estate) were considerably lower than in the previous
year (EUR 141.3 million). Of this amount, EUR 7.7 million
(EUR 92.6 million) was attributable to alternative investments
– primarily private equity funds. Write-downs of just EUR 0.6
million (EUR 3.2 million) had to be taken on equities, while on
fixed-income assets they contracted sharply to EUR 7.9 million
(EUR 45.4 million). In view of increased fair values, the writedowns
were opposed by write-ups of EUR 24.1 million (EUR
9.3 million) on fixed-income securities written down in previous
periods as well as write-ups of EUR 3.0 million (EUR 10.8
million) on alternative investments.
The unrealised losses on our assets recognised at fair value
through profit or loss amounted to EUR 39.9 million, as
against unrealised gains of EUR 100.6 million in the previous
year. The losses derived predominantly (EUR 31.2 million)
from changes in the value of inflation swaps taken out to
hedge inflation risks associated with the loss reserves in our
technical account. Particularly in light of the attractive market
environment for fixed-income securities, we realised amounts
of altogether EUR 162.0 million (EUR 113.0 million). In the
second half of the year we began to move back into listed
equities; our equity allocation at year-end was 2.1%.
Compared to the previous year, we were again able to boost
our net investment income from assets under own management
– it totalled EUR 942.5 million (EUR 843.6 million) in the
financial year just-ended. Net investment income including
income on funds withheld and contract deposits amounted to
EUR 1.3 billion (EUR 1.1 billion).
Management report
44.5% Life and
health reinsurance
55.5% Non-life
reinsurance
Demand for reliable reinsurance protection remained strong
in the year under review. Premium income consequently grew
more vigorously than anticipated: gross premium in total business
increased by 11.2% to EUR 11.4 billion (EUR 10.3 billion).
At constant exchange rates – especially against the US
dollar – growth would have come in at 6.8%. The level of retained
premium retreated to 90.1% (92.6%). Net premium
earned climbed 7.9% to EUR 10.0 billion (EUR 9.3 billion).
Group net income for the year under review substantially exceeded
our expectations. A very good profit on ordinary activities
was assisted by a special effect associated with a decision
of the Federal Fiscal Court (BFH) which had a bearing on
our company. After the BFH had confirmed in its ruling of
Hannover Re Group annual report 2010
Business development Management report
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