Business development

• Business continues to develop well in the third quarter
• Both business groups achieve their targets
• Premium growth as planned
• Pleasing investment income – target return generated
• On track to deliver targeted Group net income for the year

We are satisfied with the development of our business in the third quarter. Although market conditions for reinsurers – especially in property and casualty reinsurance – remain challenging on account of vigorous competition, Hannover Re’s positioning nevertheless enabled the company to achieve and in some cases surpass its targets. Both business groups and the investment portfolio contributed to very pleasing Group net income for the first nine months.

Gross written premium in total business increased by a modest 1.6% as at 30 September 2014 to EUR 10.7 billion (EUR 10.5 billion). At constant exchange rates, growth would have come in at 2.9%. We are thus within our target corridor of generating stable to slightly higher gross premium for the full financial year. The level of retained premium decreased to 87.0% (88.9%). Net premium earned consequently contracted by 1.7% to EUR 9.0 billion (EUR 9.1 billion). A reduction of 0.5% would have been booked at constant exchange rates.

Given the protracted low interest rate environment, we are highly satisfied with the development of our investments. The portfolio of assets under own management stood at EUR 35.0 billion, a level considerably higher than at the end of the previous year (31 December 2013: EUR 31.9 billion). This increase derived in part from currency translation effects associated with our USD and GBP holdings. It was also driven by the positive operating cash flow as well as a further increase in the unrealised gains in our portfolio of fixed-income securities due to declining yields and narrowing risk premiums on US corporate bonds. Despite stubbornly low interest rates, ordinary investment income (excluding interest on deposits) was slightly higher than in the previous year’s period at EUR 791.8 million (EUR 781.1 million). Interest on deposits improved to EUR 285.3 million (EUR 267.6 million).

Net realised gains on investments as at 30 September 2014 climbed to EUR 137.4 million (EUR 97.4 million), while changes in the fair value of our assets recognised at fair value through profit or loss were negative at -EUR 8.8 million (-EUR 18.8 million). The impairments taken in the period under review were once again only very minimal. Although conditions on financial markets remained challenging, income from investments under own management surpassed the level of the comparable period (EUR 785.6 million) to come in at a pleasing EUR 836.0 million.

We are thoroughly satisfied with the operating profit (EBIT) of EUR 1,090.8 million (EUR 985.8 million) as at 30 September 2014. Group net income further improved by an appreciable 10.3% on the already good performance of the previous year’s corresponding period to reach EUR 695.4 million (EUR 630.2 million). Earnings per share stood at EUR 5.77 (EUR 5.23).

Hannover Re’s equity base was again substantially boosted to EUR 7.0 billion (31 December 2013: EUR 5.9 billion) as at 30 September 2014. The book value per share rose sharply to EUR 58.01 (31 December 2013: EUR 48.83). The annualised return on equity for the first nine months was a pleasing 14.4% (31 December 2013: 15.0%).

In the third quarter we successfully placed another subordinated bond with a volume of EUR 500 million on the capital market. This new issue enabled us to take advantage of the low level of interest rates and at the same time optimise the maturity profile of our outstanding hybrid capital. The bond has a perpetual maturity with a first scheduled call option after approximately ten years. It carries a fixed coupon of 3.375% until this date.