DGAP-News: Hannover Re makes a good start to the 2015 financial year


DGAP-News: Hannover Rück SE / Key word(s): Quarter Results
Hannover Re makes a good start to the 2015 financial year

06.05.2015 / 07:00

---------------------------------------------------------------------

Press release

Hannover Re makes a good start to the 2015 financial year 

  - Group net income +20.1%: EUR 279.7 million (EUR 233.0 million)

  - Gross premium growth beats expectations: +10.3% adjusted for exchange
    rate effects

  - Investment income +15.1%: EUR 415.7 million (EUR 361.2 million)

  - Net major losses lower than planned quarterly budget at EUR 62.0
    million

  - Return on equity: 13.9%

  - Combined ratio: 95.7% (94.4%)

Hannover, 6 May 2015: The first three months of the current year passed off
very satisfactorily for Hannover Re; the Group generated a quarterly profit
of EUR 279.7 million (EUR 233.0 million). "The fact that we were able to
boost our net income by a further 20.1% compared to the previous year's
quarter can be attributed in particular to the outstanding contribution
from life and health reinsurance and another satisfactory underwriting
result in property and casualty reinsurance. Investment income also fully
lived up to our expectations", Chief Executive Officer Ulrich Wallin
stated. Given this successful start to the year, Hannover Re is confident
of achieving its profit guidance in the order of EUR 875 million for the
full 2015 financial year.

Gross premium sharply higher
Gross written premium for the Hannover Re Group increased by 21.4% as at 31
March 2015 to EUR 4.4 billion (EUR 3.6 billion). Growth thus surpassed the
expectations. At constant exchange rates gross premium would have risen by
10.3%. The level of retained premium was slightly higher than in the
comparable period at 88.6% (88.4%). Net premium earned grew by 17.8% to EUR
3.4 billion (EUR 2.9 billion); growth would have totalled 6.9% adjusted for
exchange rate effects.

Hannover Re posts pleasing quarterly profit 
The operating profit (EBIT) as at 31 March 2015 came in at EUR 429.0
million (EUR 349.6 million), comfortably beating the already good level of
the previous year. The gratifying increase of 22.7% was driven in
particular by the significantly improved result in life and health
reinsurance. Group net income consequently came in at a highly satisfactory
EUR 279.7 million (EUR 233.0 million). Earnings per share climbed to EUR
2.32 (EUR 1.93).

Good business development in property and casualty reinsurance
Competition in worldwide property and casualty reinsurance markets remains
intense, as was again evident in the treaty renewals as at 1 January 2015.
Against this backdrop, Hannover Re continues to practise discipline in
maintaining its profit-oriented underwriting policy.

Total gross premium for property and casualty reinsurance nevertheless
climbed to EUR 2.6 billion (EUR 2.1 billion) as at 31 March 2015 and thus
comfortably beat expectations. Growth was assisted by both the strong US
dollar and business opportunities with attractive, large-volume treaties.
An additional factor was a non-recurring special effect amounting to EUR 93
million in facultative reinsurance business resulting from enhanced
accounting methods for more timely booking of premiums. At constant
exchange rates the increase in gross written premium would have totalled
13.0%. If the special effect is eliminated, gross premium would still have
risen by 8% adjusted for exchange rate effects. The level of retained
premium decreased to 88.9% (91.2%), as a consequence of which net premium
earned climbed by a less marked 4.9% (currency-adjusted) to EUR 1.9 billion
(EUR 1.6 billion).

As had been the case in the corresponding period of the previous year,
major loss expenditure for Hannover Re came in below the envisaged
quarterly budget. In addition to the storm "Niklas" and a winter storm in
the United States, the crash of a German passenger jet in the French Alps
marked another tragic event for the civil aviation industry. The total net
expenditure incurred by Hannover Re from these events amounted to EUR 62.0
million (EUR 30.6 million). In accordance with the company's prudent
reserving policy, the unused portion of the major loss budget for the first
quarter was for the most part allocated to the loss reserves. The
underwriting result closed at EUR 76.6 million (EUR 87.6 million). The
combined ratio of 95.7%  (94.4%) was better than the target figure.

In view of the modestly lower underwriting result and reduced realised
gains, the operating profit (EBIT) in property and casualty reinsurance as
at 31 March 2015 decreased to EUR 255.2 million (EUR 280.5 million). Group
net income reached EUR 171.4 million (EUR 197.9 million). Earnings per
share amounted to EUR 1.42 (EUR 1.64).

Life and health reinsurance shows improved result 
The first quarter of 2015 was an exceptionally positive one for Hannover Re
in life and health reinsurance. Despite the challenges currently facing
this business group, expectations were fulfilled both in terms of
profitability and premium growth.

Accordingly, gross written premium increased by 17.6% as at 31 March 2015
to EUR 1.8 billion (EUR 1.5 billion). At constant exchange rates growth
would have amounted to 6.5%. Reflecting a higher retention, net premium
earned soared by an even more appreciable 21.0% to EUR 1.5 billion (EUR 1.3
billion); adjusted for exchange rate effects, the increase would still have
reached 9.4%.

The result in life and health reinsurance was favourably influenced by an
improved underwriting experience in the first quarter of 2015 and by a
special effect. A fee that became payable following a customer-initiated
withdrawal from a single US transaction positively affected Hannover Re's
ordinary investment income in an amount of some EUR 40 million. The
operating profit (EBIT) as at 31 March 2015 was more than double that of
the comparable period, closing at EUR 173.3 million (EUR 65.6 million).
Furthermore, the significantly increased result shows that the steps taken
to improve profitability in Australian disability business and to some
extent also in US mortality business are having an effect. Group net income
reached a pleasing EUR 127.5 million (EUR 43.4 million); earnings per share
stood at EUR 1.06 (EUR 0.36).

Very satisfactory investment income 
The investment climate was once again challenging in the period under
review due to the sustained low level of interest rates and relatively
modest risk premiums on corporate bonds.

The portfolio of investments under own management surged higher in the
first three months of the year to reach EUR 39.7 billion (31 December 2014:
EUR 36.2 billion). This can be attributed principally to the effects of
currency appreciation - especially the US dollar - against the euro,
although higher valuation reserves due to a further decline in interest
rate levels also played a part. Another very positive cash flow was also a
factor here.

Owing to the sharply higher income from fixed-income securities and real
estate as well as the special effect in life and health reinsurance,
ordinary investment income excluding interest on funds withheld and
contract deposits was clearly higher than in the previous year's quarter at
EUR 312.2 million (EUR 241.4 million). Interest on funds withheld and
contract deposits also rose to EUR 99.0 million (EUR 88.6 million)
The realised gains of EUR 45.0 million (EUR 54.1 million) were attributable
largely to regrouping activities as part of regular portfolio maintenance.
Changes in the fair values of financial assets measured at profit or loss -
the so-called ModCo derivatives and inflation swaps are included here -
totalled
EUR -10.6 million (EUR 7.4 million) in the first quarter of 2015.
Write-downs of just EUR 8.2 million (EUR 5.5 million) had to be taken in
the reporting period.

Income from assets under own management climbed by a very pleasing 16.2% as
at 31 March 2015 to EUR 316.6 million (EUR 272.5 million). The resulting
annualised return on investment (excluding effects from ModCo derivatives
and inflation swaps) stood at 3.5% and thus beat the full-year target of
3.0%. Net investment income including interest on funds withheld and
contract deposits closed higher than in the corresponding quarter at EUR
415.7 million (EUR 361.2 million).

Shareholders' equity records further very strong growth 
Hannover Re's shareholders' equity surged by a vigorous 12.9% to EUR 8.5
billion (31 December 2014: EUR 7.6 billion) on the back of strong earnings,
positive exchange rate effects and sharply higher valuation reserves. The
annualised return on equity nevertheless remained on a very good level at
13.9%
(31 December 2014: 14.7%). "As things stand today, shareholders' equity is
expected to continue growing in 2015 despite the proposed dividend of EUR
4.25 including a special dividend of EUR 1.25. The company's earnings level
therefore needs to be kept on a high level if the attractive return on
equity is to be sustained. We achieved this goal in the first quarter of
2015", Mr. Wallin emphasised. The book value per share climbed to a new
record high of EUR 70.68 (31 December 2014: EUR 62.61).

Outlook for 2015
With the results reported as at 31 March 2015 Hannover Re has taken a first
step towards accomplishment of its full-year targets. Based on constant
exchange rates, the company expects to book higher gross premium and net
income after tax in the order of EUR 875 million for the full 2015
financial year. This is conditional on major loss expenditure not
significantly exceeding the anticipated level of EUR 690 million and
assumes that there are no unforeseen adverse developments on capital
markets.

The continued challenging business environment in property and casualty
reinsurance was further underscored by the treaty renewals as at 1 April
2015, the traditional date on which business in Japan and on a smaller
scale treaties in Korea, Australia and New Zealand as well as parts of the
US property catastrophe portfolio are renewed. All in all, Hannover Re is
satisfied with the outcome of this round of renewals.

Hannover Re booked modest premium growth in its Japanese portfolio. The
company successfully maintained its good market position thanks to its
long-standing relationships with ceding companies. Although the pressure on
rates for Japanese natural catastrophe covers increased as expected, they
were still commensurate with the risks. Merely modest premium declines were
recorded in personal accident insurance and in the area of per-risk
property covers; in casualty business, on the other hand, further increases
were obtained. Market conditions in Korea were once again difficult,
prompting Hannover Re to further consolidate its portfolio here. As
anticipated, US property catastrophe business saw renewed rate erosion in
the range of 5% to 10%, although no additional softening in conditions was
observed. The premium volume in the United States rose as the company wrote
more business with a number of sizeable accounts.

In view of the favourable development in the first quarter, Hannover Re
sees further improvement in the growth prospects for property and casualty
reinsurance. Special mention should be made here of the Asia-Pacific
markets, North America and marine business as well as facultative and
structured reinsurance.

In life and health reinsurance the company expects its business momentum to
gather further pace. Growth here should be particularly evident in emerging
markets, although it will also be driven by the implementation of Solvency
II and business with longevity risks.

Hannover Re's targeted return on investment for the full financial year
remains unchanged at 3.0%. The company is not currently planning to make
any significant adjustments to the allocation of its investments to
individual asset classes.

As for the dividend, the company continues to aim for a payout ratio in the
range of 35% to 40% of its IFRS Group net income after tax. This ratio may
increase in light of capital management considerations if the company's
comfortable level of capitalisation remains unchanged.

For further information please contact:

Corporate Communications:
Karl Steinle (tel. +49 511 5604-1500, 
e-mail: karl.steinle@hannover-re.com) 

Media Relations: 
Gabriele Handrick (tel. +49 511 5604-1502, 
e-mail: gabriele.handrick@hannover-re.com)

Investor Relations: 
Julia Hartmann (tel. +49 511 5604-1529, 
e-mail: julia.hartmann@hannover-re.com) 

Please visit: www.hannover-re.com

Hannover Re, with gross premium of EUR 14.4 billion, is the third-largest
reinsurer in the world. It transacts all lines of property & casualty and
life & health reinsurance and is present on all continents with around
2,500 staff. The rating agencies most relevant to the insurance industry
have awarded Hannover Re very strong insurer financial strength ratings
(Standard & Poor's AA- "Very Strong" and A.M. Best A+ "Superior").

Please note the disclaimer:
https://www.hannover-re.com/535917

Key figures of the Hannover Re Group (IFRS basis)
<pre>

in EUR million                   Q1/2015   +/- previous  Q1/2014    2014
                                                   year
Hannover Re Group
Gross written premium             4,400.2        +21.4%   3,624.4
Net premium earned                3,431.9        +17.8%   2,912.7
Net underwriting result             (6.2)                     2.5
Net investment income               415.7        +15.1%     361.2
Operating profit (EBIT)             429.0        +22.7%     349.6
Group net income                    279.7        +20.1%     233.0
Earnings per share in EUR            2.32        +20.1%      1.93
Retention                           88.6%                   88.4%
Tax ratio                           31.1%                   19.4%
EBIT margin1)                       12.5%                   12.0%
Return on equity                    13.9%                   15.3%

in EUR million                   Q1/2015   +/- previous  Q1/2014    2014
                                                   year
Policyholders' surplus           11,185.9         +9.2%           10,239.5
Investments (excl. funds held    39,683.8         +9.5%           36,228.0
by ceding companies)
Total assets                     67,158.2        +11.1%           60,457.6
Book value per share in EUR         70.68        +12.9%              62.61

Property & Casualty reinsurance
in EUR million                   Q1/2015   +/- previous  Q1/2014    2014
                                                   year
Gross written premium             2,617.1        +24.2%   2,107.8
Net premium earned                1,882.3        +15.4%   1,631.7
Net underwriting result              76.6        -12.5%      87.6
Operating profit (EBIT)             255.2         -9.0%     280.5
Group net income                    171.4        -13.4%     197.9
Retention                           88.9%                   91.2%
Combined Ratio2)                    95.7%                   94.4%
EBIT margin1)                       13.6%                   17.2%

Life & Health reinsurance
in EUR million                   Q1/2015   +/- previous  Q1/2014    2014
                                                   year
Gross written premium             1,783.3        +17.6%   1,516.7
Net premium earned                1,549.5        +21.0%   1,281.0
Operating profit (EBIT)             173.3       +164.4%      65.6
Group net income                    127.5       +193.9%      43.4
Retention                           88.1%                   84.5%
EBIT margin1)                       11.2%                    5.1%

</pre>

1) Operating result (EBIT)/net premium earned
2) Including funds withheld



---------------------------------------------------------------------

06.05.2015 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.

The DGAP Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Media archive at www.dgap-medientreff.de and www.dgap.de

---------------------------------------------------------------------


Language:    English                                                   
Company:     Hannover Rück SE                                          
             Karl-Wiechert-Allee 50                                    
             30625 Hannover                                            
             Germany                                                   
Phone:       +49-(0)511-5604-1500                                      
Fax:         +49-(0)511-5604-1648                                      
E-mail:      info@hannover-re.com                                      
Internet:    www.hannover-re.com                                       
ISIN:        DE0008402215                                              
WKN:         840 221                                                   
Indices:     MDAX                                                      
Listed:      Regulated Market in Frankfurt (Prime Standard), Hanover;  
             Regulated Unofficial Market in Berlin, Dusseldorf,        
             Hamburg, Munich, Stuttgart; Terminbörse EUREX; Luxemburg  
 
 
End of News    DGAP News-Service  
---------------------------------------------------------------------  
353307 06.05.2015