The general environment facing the international (re)insurance industry remains challenging. The protracted low level of interest rates is making it more difficult to generate attractive investment returns. In non-life business reinsurers are also facing a significantly more competitive climate than in previous years. We nevertheless continue to see encouraging business potential in a number of areas: these include North America, Asia-Pacific markets, the countries of Central and Eastern Europe, marine lines as well as facultative business and structured reinsurance. Based on constant exchange rates, we expect stable to slightly higher gross premium volume for the Hannover Re Group in the current financial year.

An excess supply of reinsurance capacities was a dominant feature of the treaty renewals as at 1 January 2014 and continued to influence the 1 April renewals, when business in Japan is traditionally renegotiated. Further treaty renewals – on a smaller scale – take place on this date for markets in Korea as well as Australia and New Zealand.

After the appreciable rate increases of recent years in Japan following the severe earthquake of 2011, rate erosion – albeit from a high level – was observed for catastrophe covers. Prices also declined in personal accident insurance. Rates for per-risk property covers, on the other hand, remained stable; modest rate increases were obtained in casualty business. As anticipated, the premium volume for our Japanese portfolio contracted slightly. Despite this, we were able to hold our market position thank to our good long-standing relationships with our ceding companies. Treaties in Korea are increasingly shifting to a 1 January renewal date, as a consequence of which only a small part of our business there was renewed on 1 April. Faced with difficult market conditions we consolidated our portfolio here. Broadly speaking, we were satisfied with the treaty renewals in Australia and New Zealand, where we are similarly well positioned.

A small portion of US property catastrophe business was also up for renewal as at 1 April. We saw some premium erosion here as anticipated.

All in all, we expect to book a largely stable gross premium volume in non-life reinsurance for 2014. We will not make any concessions to our systematic underwriting discipline and will stand by our policy of reducing shares in areas where risks are not adequately priced. We are targeting a combined ratio of less than 96%. In terms of the EBIT margin, we are again aiming for a level of at least 10%.

In international life and health reinsurance we view the current 2014 financial year with optimism and continue to expect – depending on specific market conditions – a favourable business development. Particularly in the areas of Financial Solutions and Longevity we are seeing steadily rising demand for individually tailored reinsurance products.

Looking to Scandinavia and industrialised nations such as the United States, Japan, the United Kingdom, Germany and France, we note that the ageing population and increasing focus on reinsurance concepts designed to provide primary insurers with capital relief or optimise their solvency and liquidity position are helping to generate a consistently growing need for financially oriented reinsurance solutions as well as protection to cover the longevity risk. In emerging markets such as China, Brazil and India as well as in other countries of Southeast Asia and Africa an affluent middle class has gradually evolved in recent years. This is leading to strong demand for insurance in the area of individual provision and for products that offer financial security for the family and in retirement. New business potential is opening up on the back of this demand. In these areas we assist numerous start-up companies with customised reinsurance solutions, provided they are able to present a convincing business plan.

For our total life and health reinsurance portfolio we are looking to book organic, currency-adjusted gross premium growth in the low to mid-single-digit percentage range for the current financial year. We continue to target EBIT margins of at least 2% for Financial Solutions and Longevity business and a level of 6% for our Mortality and Morbidity business.

The expected positive cash flow that we generate from the technical account and our investments should – subject to stable exchange rates and yield levels – lead to growth in our asset portfolio. We are not currently planning to make any significant changes to the allocation of our investments to individual asset classes. The focus here is primarily on stability while maintaining an adequate risk/return ratio, thereby enabling us to respond flexibly to general developments and opportunities that may present themselves. We are targeting a return on investment of 3.2% for 2014.

In both non-life and life and health reinsurance it is our assumption that we shall accomplish our minimum IVC targets of 2% xRoCA for non-life reinsurance and 3% xRoCA for life and health reinsurance.

Assuming that the burden of major losses does not significantly exceed the expected level of EUR 670 million and that there are no downturns on capital markets, Hannover Re continues to anticipate Group net income in the order of EUR 850 million for the 2014 financial year.

Our targeted payout ratio for the dividend remains unchanged in the range of 35% to 40% of Group net income.


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