Combined ratio (property and casualty reinsurance) 96.0% 96.3% 116.5% 107.8% 111.1%
It is my pleasant duty to report that your company has enjoyed another highly successful year. Following on from 2001, the most difficult year in our company's history, and the marked recovery already witnessed in the previous year, we succeeded in generating a new record result in 2003: despite a capital market climate that – while certainly less depressed than the year before – was by no means favourable, we achieved a hitherto unparalleled operating profit (EBIT). Even the protracted weakness of the US dollar, the currency in which roughly two-thirds of our gross premium income is booked, did not have a significantly detrimental impact on our result.
Dr. Paul Wieandt 2) Chairman of the Executive Board Hof/Saale SchmidtBank AG Deputy Chairman
2003 was a good year for the capital markets. Following three periods of heavy losses and an absolute low of 2,202 points in the first quarter, the Dax closed up again for the first time – at 3,965 points – with growth of 37.1% as at year-end. By European standards Germany was thus the frontrunner. Only the considerably smaller financial marketplace of Vienna remained also evident in the industry index CDax for insurance stocks, which closed 12.3% higher at year-end and thus recovered sharply after the previous year, despite lagging behind the aforementioned German benchmark indices. The outcome of the 2003/2004 renewal phase in property and casualty reinsurance promises a continuation of this favourable trend.
The good performance of the Hannover Re share during the past stock market year reflects the company's consistent profitability. Even in 2002 the share held its ground superbly in the face of adverse market trends and displayed exceptional stability. In 2003 the Hannover Re share moved appreciably closer to a fair valuation. The latest development in February 2004 has clearly demonstrated its potential: following publication of our profit forecasts for 2004 and 2005 the upside target has been raised significantly by numerous financial analysts.
Hannover Re has shown itself to be the most adept reinsurer at calling the cycle in our European universe, shrinking its book in soft markets while expanding aggressively during hard markets. The current hard market has been no different, with the group again making its way up the table and becoming part of the reinsurance "big league". The group has managed to retain an IFS rating in the AA- range, superior to most of its peers, which is a tribute to the way that the group manages its stringent capital base.
Number of shares as at 31 December 2003: 120,597,134 no-par-value registered shares
Strategic objectives 1. Profit target • Return on equity at least 750 basis points over and above the risk-free interest rate • Annual double-digit growth in - operating profit (EBIT) - earnings per share - operating (intrinsic) value creation (IVC)
Strategic fields of action 10. Performance Excellence • Constant improvements in leadership, the definition and communication of business policy, the quality of employees and in the management of resources and processes
Change in gross unearned premiums (345) (410 963) (121 563) (412 480)
Cash flow from operating activities 1 844 006 1 615 293 1 815 873 1 506 994
Change in cash and cash equivalents (I.+II.+III.+IV.) (285 732) (158 793) (286 710) (162 972)
Funds held under reinsurance treaties 559 333 986 831 986 831 216 185 343 819 343 819 * The figures for the commercial treatment and under the US GAAP "as-if-pooling" method are identical. ** On the need to apply the "as-if-pooling" method under US GAAP cf. p.16 et seq.
Hannover Finance (Luxembourg) S.A., 100.0 EUR 9 698 EUR 7 869 Luxembourg/Luxembourg 2)
HDI Reinsurance (Ireland) Ltd., 100.0 EUR 226 844 EUR 104 091 Dublin/Ireland
WRH Offshore High Yield Partners, L.P., 86.7 USD 48 828 USD 2 996 Wilmington/USA 1)
The capital consolidation is based upon the standards set out in SFAS 141. Under the "purchase method" of accounting, the purchase costs of the parent company are netted with the proportionate stockholders' equity of the subsidiary at the time when it is first included in the consolidated financial statement after the revaluation of all assets and liabilities. After recognition of all acquired intangible assets that in accordance with SFAS 141 are to be accounted for separately from goodwill, the difference between the revalued stockholders' equity of the subsidiary and the purchase price is recognised as goodwill. In the case of transactions between entities under common control, the assets and liabilities of the transferred entity are carried over with the book values at the transferring parent company, and no fair value or goodwill is recognised. Under SFAS 141 Para. 11 in conjunction with App. D the consolidated financial statement of the acquiring entity is to be drawn up as if the transferred entity had already been part of the consolidated group since the commencement of the financial year. In this context, transactions between the transferred entity and other group entities are to be eliminated as if they were intra-group transactions. The same applies to all previous reporting periods shown for comparative purposes ("as-if pooling" method). Immaterial and negative goodwill were booked to earnings in the year of their occurrence. Where minority interests in the stockholders' equity exist, such interests are reported separately. The minority interest in the result is deducted from the net income in the statement of income and totalled EUR 55,988 thousand (previous year: EUR 15,073 thousand) in the 2003 financial year.
Contractual maturities of the fixed-income securities in the held-to-maturity portfolio and availablefor -sale portfolio as at the balance sheet dates of 31 December 2003 and 2002
Debt securities issued by semi-governmental entities 2 873 524 34 981 17 898 2 890 607
Fixed-income securities – available-for-sale 420 128 179 164 3 173 518 1 087 029 31 947 4 290 067 20 227 212 018 9 414 098
Number of employees (excluding board members) 1 900 1 958 1 990 1 960 1 972 1 970
By a resolution of the Annual General Meeting of Hannover Rückversicherung AG adopted on 27 May 2003, the company was authorised until 31 October 2004 to acquire treasury stock of up to 10% of the capital stock existing on the date of the resolution. The company did not hold treasury stock as at
The Hannover Re Group provides reinsurance protection for the HDI Group. To this extent, numerous underwriting business relations exist with related parties in Germany and abroad which are not included in Hannover Re’s consolidation. This includes business both assumed and ceded at normal market conditions.
The waiting period for 40% of the stock options granted in 2000 first expired in the financial year. Since the current stock market price of the Hannover Re share did not reach the reference price in all four exercise periods, it was not possible to determine a concrete value for each stock option. For this reason no option rights were exercised.
The total number of stock options existing as at year-end stood at 1,673,499. The average exercise price per option amounted to EUR 24.78. Of this total number, 394,734 option rights could be exercised at an average exercise price of EUR 25.50.
In a press release dated 18 February 2004 as well as an announcement pursuant to §§ 21, 22, 24 WpHG Talanx AG provided information about the sale of an interest in Hannover Re in the amount of 20.6%, equivalent to roughly 24.8 million shares, to institutional investors. This transaction increases the free float of the Hannover Re share from 28.2% to 48.8%.
Rental income totalled EUR 15,265 thousand in the 2003 financial year.