* bonus of EUR 0.25 for 2000 ** excluding life and health reinsurance and on the basis of net premiums earned
Since the changeover to registered shares at the end of last year we have had at our disposal detailed knowledge of our shareholding structure. As a globally operating company, we consider it highly positive that more than half of our free-floating stock is held by international investors. This vindicates our strategy of addressing the broadest possible investor base with our investor relations measures. Yet there is still scope for further diversifying our shareholder base. We intend to tap into this potential in order to safeguard an appropriate market valuation of your company.
"The restructuring process changed the dependency from catastrophes to fee income. Although natural and man-made catastrophes still have a major impact on the result, the program business and block transactions generate stable fee income."
Our investment portfolio grew from EUR 9.9 billion to EUR 10.2 billion. In the spring of 2000, we used the record levels on the stock markets to realise valuation reserves and partially reorganise our equity portfolio, with the result that the profits on disposals of EUR 251 million (previous year: EUR 286 million) for the most part derive from the first half of the year. In combination with increased ordinary income, we generated net investment income of EUR 869 million (EUR 828 million) – an increase of
In Argentina court decisions placed an additional enormous strain on the situation. Judges awarded amounts of compensation on a par with US practice, causing alarm especially among reinsurers. If this trend continues, it is to be anticipated that reinsurers will withdraw entirely from this market. In this connection, the modest premium increases at the end of the year under review will scarcely have any positive implications.
At the beginning of the year under review, it appeared that most of the national economies in Asia had finally recovered from the dramatic slumps of 1998. Stimulated by exports, especially to the United States, some countries recorded double-digit growth rates. China even achieved a 30% rise in exports. Japan, on the other hand, scarcely showed any increase and posted a mere 1.9% rate of real growth.
Marine business also performed well. In contrast to many other world markets, marine cargo business in Japan was adequately priced and correspondingly profitable.
The renewal season in Korea was very sluggish at the beginning of the year under review. In this market we systematically adhered to our strategy of no longer supporting underrated treaties – especially in non-proportional property business. We counterbalanced this restraint by writing business in segments with little or no catastrophe exposure. Our approach proved justified and generated positive results with a virtually unchanged premium volume. In the course of the year additional opportunities emerged, which we shall monitor in future via a representative office which we opened in Seoul in the year under review.
Geographical breakdown of life and health reinsurance as % of consolidated gross premium income
Results were burdened especially by certain segments of South African health reinsurance, and with an operating deficit of ZAR 12 million the performance of the portfolio as a whole was therefore unsatisfactory.
Particularly gratifying was the strong increase in new life business and critical illness policies with regular premiums, which now account for almost 60% of total premiums. We acquired a number of new client relationships in this area and took over the position of market leader in the United Kingdom. A further speciality is the design and administration of annuity policies sold to private customers through the marketing channels of major banks. This singlepremium business now generates more than 40% of premium income. The claims experience in life business and with critical illness covers was again highly satisfactory, as a consequence of which Hannover Life Reassurance (UK) generated an operating profit of GBP 3 million.
We co-operate closely with brokers as well as directly with insurers and reinsurers when acquiring our business. Our goal is to reinforce our market position and in this way ensure that we share in the positive trend in reinsurance conditions in all sectors of the market. This is all the more imperative in view of the fact that the increase in the premium level has also rendered the transfer of risk components more attractive.
Total net investment income stood at EUR 869 million, a figure which surpassed the previous year's highly satisfactory result by a fur-
Reinsurance is a highly complex financial service, the success of which is crucially dependent on the expertise, motivation and dedication of our staff. In the future, therefore, it is important that we continue to be able to recruit highly qualified specialists and management staff and secure their long-term loyalty to the company. Consequently, we cultivate close contacts with a number of universities and set great store by personnel development activities.
Changes in claims reserves (net) 1 023 537 1 073 071
Due after one through five years 162 949 167 962 119 166 123 649
Projections and calculations make allowance for all foreseeable risks and are constantly adjusted in line with the latest information. Management believes that the provisions are adequate to cover the ultimate gross cost of losses and loss expenses incurred as at 31 December 2000.
Policy benefits for life and health contracts are established in accordance with the principles set out in SFAS 60. The provisions are based on the Group companies' information regarding mortality, interest and lapse rates.
Reserve as at 31 December of previous year (net) 7 880 263 6 523 195
Valuation differences arising out of property and casualty reinsurance 83 935 88 031
Projected benefit obligation at the beginning of the period 37 317 34 926
The industry benchmark is measured by the extent to which the stock market performance of the Hannover Re share exceeds or undershoots the development of the Reactions' reinsurance index in the year when the stock options are granted. For each full percentage point by which the Hannover Re share surpasses the benchmark index, the basic number of stock options increases by 10% up to a maximum of 400% of the basic number; if the share falls short of the benchmark index, the basic number decreases by 5% for each full percentage point, although by no more than 50%.
Hannover Rückversicherungs-AG Facultative Office - Canadian Branch 150 York Street, Suite 1008 Toronto, Ontario M5H 3S5
Spain HR Hannover Re, Correduría de Reaseguros, S.A. Paseo del General Martínez Campos 46 28010 Madrid
Taiwan Hannover Rückversicherungs-AG Representative Office Taipei Room A2, 12th Floor 296 Jen Ai Road, Section 4 Taipei, Taiwan R.O.C.
Economic loss: total loss incurred by the affected economy as a whole following the occurrence of a loss. The economic loss must be distinguished from the insured loss. The insured loss reflects the total amount of losses covered by the insurance industry (direct insurers and reinsurers).
Loss ratio: percentage share of loss expenditure in the ➞ retention relative to the net premiums earned.
Non-proportional reinsurance: reinsurance treaty under which the reinsurer assumes the loss expenditure in excess of a particular amount ( ➞ priority; e.g. under an excess of loss treaty). This is in contrast to ➞ proportional reinsurance.