Annual Report 2010 - Hannover Re

Along with the aforementioned natural disasters, one loss
event in particular attracted worldwide attention in the year
under review – namely the sinking of the “Deepwater Horizon”
drilling rig, which caused extensive environmental damage.
Particularly with regard to possible liability claims, very
many questions remain unanswered; the loss for the insurance
industry and hence also for reinsurers is therefore still difficult
to assess. The loss reserves of EUR 84.7 million that we set
aside in 2010 reflect all the actual and potential exposures for
our portfolio from this complex loss event that are known to
us at this point in time and, as things currently stand, represent
a conservative level of reserving.
Our target markets
Our business fared better than expected in the year under
review in our target markets of Germany and North America:
the premium volume remained virtually unchanged at EUR
1,754.0 million (EUR 1,737.9 million). The combined ratio
stood at 97.4% in the year under review, after 104.7% in the
previous year. The operating profit (EBIT) for the target markets
totalled EUR 300.6 million (EUR 118.8 million).
Breakdown of gross written premium in target markets
In view of the substantial major loss expenditure, the underwriting
result for non-life reinsurance contracted year-on-year
by EUR 61.2 million to EUR 82.4 million (EUR 143.5 million).
Net investment income climbed 28.1% to EUR 721.2 million
(EUR 563.2 million). The operating profit (EBIT) increased by
20.3% to EUR 879.6 million (EUR 731.4 million). Group net
income in non-life reinsurance was positively affected to the
tune of EUR 112.2 million in 2010 owing to the decision of the
Federal Fiscal Court in the aforementioned matter of additional
taxation. This amount was not split into the three segments
of target markets, specialty lines and global reinsurance.
Group net income consequently surged by a very
appreciable 22.9% to EUR 581.0 million (EUR 472.6 million).
Earnings per share amounted to EUR 4.82 (EUR 3.92).
In the following pages we report in detail on our non-life reinsurance
business group, which is split into three segments
according to the areas of responsibility on the Executive
Board: target markets, specialty lines and global reinsurance.
Germany
47.6% North
America
52.4% Germany
In the context of the planned launch of Solvency II in 2013 it
remains to be seen to what extent the regulations and reporting
duties will be reasonably proportionate to the intended
improvements in risk management. Smaller insurers, at least,
could incur considerable strains as a result of Solvency II.
With this in mind, it is our expectation that demand for reinsurance
protection will increase. Reinsurance will prove particularly
attractive as it serves to reduce the amount of required
capital and offers greater contractual flexibility
compared to other tools.
Management report
Gross written premium in non-life reinsurance
27.7% Target
markets
34.9% Global
reinsurance
37.4%
Specialty lines
The insurance industry in Germany profited from an increase
in gross domestic product. Yet after-effects of the financial and
economic crisis could also still be felt: the historically low interest
rates led to a sharp fall in interest income, which constitutes
a key pricing component in long-tail lines such as motor
liability and general liability. This prompted almost all
providers to review premiums in motor business, which particularly
in the last four years had been reduced, and impose
sometimes appreciable surcharges. What is more, the losses
incurred by property and casualty insurers in Germany
climbed by around 2.4% to EUR 43.1 billion. Major factors
here were winter storm “Xynthia”, which cost the industry
around EUR 500 million, as well as the protracted period of
Hannover Re Group annual report 2010
Non-life reinsurance Management report
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