As the past year emphatically demonstrated, it is scarcely possible to forecast the development of the capital market at the present time. With our high writedowns last year and through further write-downs in the first quarter of this year, we have, however, taken steps to avoid carrying forward any further strains into the current financial year. Combined with our low equity allocation and a high-quality portfolio of fixed-income securities, this enables us to look to the future with some degree of composure.
Dr. Erwin Möller Member of the Executive Board Hannover of HDI Haftpflichtverband der (until 24 May 2002) Deutschen Industrie V.a.G.
International roadshows and analyst seminars form part of our standard repertoire 1) Based on the German Commercial Code (HGB) 2) Based on US GAAP
We are listed in the Prime Standard of the new MDax
Earnings per share in EUR* 1.59 (0.75) 3.02 1.46 *For previous years stock split of 15 July 2002 in a ratio of 3 for 1 taken into account
Our account came under particularly heavy strain from the flooding in central Europe in August 2002, which produced a net burden before tax of EUR 69.7 million. Further significant events were the heavy rain and hail that fell in southern Germany in June, costing us EUR 10.7 million for net. These natural catastrophes will, however, generate stronger demand for catastrophe covers – accompanied by premium increases – throughout the industry and hence for our company, too.
In the years prior to 2002 Argentina had been our most important South American market, both in terms of premium volume and profitability. In light of the developments described above, however, we scaled back our involvement considerably.
In addition to the Clarendon Group, program business is also written by our US subsidiary, Insurance Corporation of Hannover (ICH). Effective 31 December 2002 we integrated ICH into the Clarendon Group in order to better bundle the Group’s activities in program business. ICH constitutes a sensible complement to Clarendon’s established business, since it writes relatively small programs run largely in its retention.
Claims trends are constantly monitored for early identification of dangerous developments the Hannover Re Group. Our corporate strategy is geared towards generating a sustained increase in the value of the company. This means that we purposefully enter into entrepreneurial risks provided the associated opportunities promise a commensurate increase in the value of the company.
Strategic risks derive primarily from an imbalance between the defined corporate strategy and the constantly fluctuating framework and the resulting conditions – an environment shaped, on the one hand, by our clients' requirements and, on the other hand, by the strategies of our competitors. Our overriding strategic objective is to generate dynamic growth as an optimally diversified and economically independent reinsurance group of above-average profitability. On the basis of this strategic objective Hannover Re's individual business groups pursue specific and inherently consistent detailed strategies. Company-wide ratios and controlling processes have been defined to monitor achievement of the strategic targets from the operating standpoint.
Hannover Re has only written business on the US market since the seventies, and even then the volumes were very modest. In the years prior to roughly 1985, comparatively few liability acceptances were written. Our exposure to asbestos -related claims and pollution damage is consequently relatively slight. As an additional factor, we have already commuted numerous existing exposed treaties, meaning that no further liability whatsoever can be incurred under such treaties in the future. Asbestos- and pollutionrelated risks therefore derive primarily from nonproportional covers in our portfolio, as a consequence of which a considerable portion of the potential risks falls within our clients' retentions.
On the basis of DRS 5–20 § 24 and AICPA Statement of Position (SOP) No. 94–6 "Disclosure of Certain Significant Risks and Uncertainties" the following table shows the net loss and loss adjustment expense reserve for the years 1993 to 2002 in the property and casualty reinsurance business group for all major reinsurance companies as well as the run-off of this reserve. This covers more than 95% of the loss reserves for the business group.
The complexity of reinsurance business and the pressure of competition in the international markets necessitate a constant readiness to learn. We use state-of-the-art teaching methods to encourage and support our staff. Programmed and structured instruction and visual aids assist individual preparation for subsequent intensive
In financial reinsurance we anticipate double-digit growth in our premium volume; net income should at least be on a par with the previous year. As in past years, however, individual transactions can have significant repercussions on the premium and result in this business group.
It is our expectation that the prevailing hard market in property and casualty reinsurance will be sustained for at least another one to two years. The capital market should also normalise during this period. Against this backdrop and in the light of the measures that we have taken, we feel wellprepared to face the future.
Change in policy benefits for life and health contracts 5.2 574 123 297 973
Funds held by ceding companies 252 479 376 714 3 329 560 3 007 960
Hannover Re is currently examining the implications of the recognition and measurement provisions of FIN 45.
In January 2003 the FASB issued FIN 46 "Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51". This Statement clarifies consolidation by business enterprises of variable interest entities. Further details are provided in section 5.1 under the heading "Securitisation of reinsurance risks".
Hannover Life Reassurance (UK) Ltd., 100.0 GBP 21 438 GBP 117 Virginia Water/United Kingdom
Hannover Finance, Inc., 100.0 USD 353 043 USD 22 349 Wilmington/USA
Harbor Specialty Insurance Company, 100.0 USD 30 729 USD 5.941 Trenton/USA
Redland Insurance Company 100.0 USD 22 874 USD 3 878 Council Bluffs/USA
Aviation Insurance Company Ltd., 25.0 ZAR 17 355 ZAR 5 453 Cape Town/South Africa4)
Summit at Southpoint Corporation, 94.2 USD 7 386 USD 64 Jacksonville/USA
Hannover Re Advanced Solutions Ltd., 52.3 EUR 578 EUR (205) Dublin/Ireland
On payment of the corresponding acquisition costs to Hannover Re a so-called "protected cell" assumes contractually defined unit-linked life reinsurance portfolios and finances the business by sourcing funds on the international capital markets. The experience account totalled EUR 194.2 million as at
Figures in EUR thousand 2002 2001 5.7 Provisions for pensions and similar liabilities
By a resolution of the Annual General Meeting of Hannover Rückversicherungs-AG adopted on 24 May 2002, the company was authorised until 31 October 2003 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 31 December 2002.
Hannover Re holds 50% of the shares in Oval Office Grundstücks GmbH, which was established in November 2002 with common stock of EUR 1.0 million.
A major success in 2002 was the placement of an unsecured and syndicated large credit line for letters of credit. The amount of USD 1.725 billion placed through the three mandated lead arrangers Bayerische Hypo- und Vereinsbank AG, BNP Paribas and Dresdner Kleinwort Wasserstein was considerably higher than the volume originally sought and secures the guarantee credit backing that is especially important for US business on a lasting basis until 31 December 2006.
Financial reinsuranceProperty and Casualty reinsurance Life and Health reinsurance Program business
STRATEGIC BUSINESS GROUPS of the Hannover Re Group hannover insurancehannover re Ad v a n c e d S o l u t i o n s®