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Non-life reinsurance

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Key figures for non-life reinsurance
in EUR million20132012
1.1. – 30.6.1.7. – 30.9.+/-
previous year
1.1. – 30.9.+/-
previous year
1.7. – 30.9.1.1. – 30.9.
Gross written premium4,097.11,859.4+2.3%5,956.4+1.0%1,817.35,897.0
Net premium earned3,403.91,689.3-1.4%5,093.2+1.5%1,714.15,017.5
Underwriting result183.659.9-15.1%243.4+43.4%70.5169.7
Net investment income363.1214.9-26.4%578.0-17.7%292.0702.1
Operating result (EBIT)549.1255.5-23.9%804.6+5.0%335.7766.0
Group net income362.1172.3-21.5%534.4+1.8%219.3524.8
Earnings per share in EUR3.001.43-21.5%4.43+1.8%1.824.35
Combined ratio 194.4%96.3%95.0%95.8%96.5%
EBIT margin 216.1%15.1% 15.8% 19.6%15.3%
Retention90.2%86.7%89.1%89.4%89.9%
Key figures for non-life reinsurance
in EUR million20132012
1.1. – 30.6.1.7. – 30.9.+/-
previous year
1.1. – 30.9.+/-
previous year
1.7. – 30.9.1.1. – 30.9.
Gross written premium4,097.11,859.4+2.3%5,956.4+1.0%1,817.35,897.0
Net premium earned3,403.91,689.3-1.4%5,093.2+1.5%1,714.15,017.5
Underwriting result183.659.9-15.1%243.4+43.4%70.5169.7
Net investment income363.1214.9-26.4%578.0-17.7%292.0702.1
Operating result (EBIT)549.1255.5-23.9%804.6+5.0%335.7766.0
Group net income362.1172.3-21.5%534.4+1.8%219.3524.8
Earnings per share in EUR3.001.43-21.5%4.43+1.8%1.824.35
Combined ratio 194.4%96.3%95.0%95.8%96.5%
EBIT margin 216.1%15.1% 15.8% 19.6%15.3%
Retention90.2%86.7%89.1%89.4%89.9%

The round of treaty renewals in non-life reinsurance as at 1 July 2013 saw increased competitive pressure in some segments even relative to the beginning of the year. US property catastrophe business was particularly heavily impacted. The sustained good results posted by primary insurerss as well as additional capacities from the market for catastrophe bonds prompted corresponding rate reductions. The rate level was nevertheless still adequate in most cases. The decrease in margins for US catastrophe covers is of limited relevance to our company, however, since our market share in this segment is disproportionately low. Although some parts of other US property business were also more competitive than in previous renewal rounds this year, we were nevertheless broadly satisfied with the development of rates. In private property business the rate increases were sustained on both the primary and reinsurance sides, hence putting this segment well on track to greater profitability. In commercial property business, too, we obtained moderate rate increases. Our premium volume in US property business grew slightly overall and is now at a historic high.

In casualty business rates improved across all lines on the primary side. This development was not, however, carried over in equal measure to the reinsurance side because clients are carrying more business in their retention on the back of good results.

We are satisfied with the outcome of the treaty renewals as at 1 July 2013 in Australia and New Zealand. The model adjustment made by the catastrophe modelling firm AIR for allied perils that had previously not been adequately factored into the pricing was integrated into the underwriting process and resulted in price mark-ups. In the aftermath of the heavy major losses recorded in 2010 and 2011, the price level last year was thoroughly attractive. Now, however, prices have come under pressure from both new and established market players, and also owing to the extensive absence of losses in the previous year. In natural catastrophe XL business rates declined slightly, although they were still on a level that enabled us to generate technically adequate margins. Casualty lines came under stronger competitive pressure than property lines. We were able to obtain our targeted pricing requirements under most reinsurance programmes. Despite adhering to a selective underwriting policy we successfully enlarged our premium volume.

The gross premium for our non-life reinsurance business group increased by a modest 1.0% relative to the corresponding period of the previous year to reach EUR 6.0 billion (EUR 5.9 billion). At constant exchange rates, especially against the US dollar, growth would have been 2.8%. The level of retained premium retreated only slightly to 89.1% (89.9%). Net premium earned climbed 1.5% to EUR 5.1 billion (EUR 5.0 billion), or 3.3% adjusted for exchange rate effects.

After the second quarter had already seen heavy major losses, the third quarter also brought a number of natural disasters and other large losses. The largest single event, hailstorm "Andreas", stemmed from our domestic market and produced an estimated market loss of at least EUR 2.5 billion. The resulting net strain for Hannover Re is EUR 64.0 million. Total major loss expenditure as at 30 September 2013 stood at EUR 446.7 million. Although this is significantly higher than the figure for the comparable period (EUR 193.0 million), the expenditure is within the bounds of our loss expectancy for the first nine months.

The underwriting result for total non-life reinsurance as at 30 September 2013 climbed to a pleasing EUR 243.4 million (EUR 169.7 million). The combined ratio for the first nine months of the current year was very favourable at 95.0% (96.5%).

The operating profit (EBIT) in non-life reinsurance rose by a pleasing 5.0% to EUR 804.6 million (EUR 766.0 million) as at 30 September 2013. Group net income totalled EUR 534.4 million (EUR 524.8 million), an increase of 1.8%. Earnings per share came in at EUR 4.43 (EUR 4.35).

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