Despite the challenging business conditions facing the international (re)insurance industry and the protracted low level of interest rates, it is Hannover Re’s expectation that even in this environment it can continue to operate with sustained success. Based on constant exchange rates, we anticipate rising gross premium income for our total business in the current financial year.

In property and casualty reinsurance we expect to book an increased premium volume – adjusted for exchange rate effects – in 2015, although we shall stand by our policy of not making any concessions to our systematic underwriting discipline and we shall continue to reduce our shares in areas where the risks are not adequately priced. With our selective underwriting approach and our concentration on existing business, we safeguard the high quality of our property and casualty reinsurance portfolio. Despite the prevailing intense competition, as a financially robust reinsurer we still see encouraging business potential in a number of segments including North America and Asia-Pacific markets as well as in facultative and structured reinsurance and in the area of agricultural risks. In the first quarter we succeeded in writing several attractive, rather large-volume new treaties, as a consequence of which we now anticipate somewhat stronger growth for the full financial year than had been the case at the end of 2014.

We are also satisfied overall with the outcome of the renewals as at 1 April. Business in Japan is traditionally renewed on this date and treaties also come up for renegotiation – albeit on a lesser scale – in the markets of Australia, New Zealand and Korea.

Although the pressure on rates for natural catastrophe covers in Japan continued to grow as expected, we nevertheless obtained prices that were commensurate with the risks. Price declines in personal accident insurance and in the area of per risk property covers were for the most part very minimal. In casualty business, on the other hand, rates moved slightly higher. By improving our position with specific core customers we were even able to book modest growth in the total gross premium volume of our Japanese portfolio in the original currency. All in all, we are satisfied with the outcome of the treaty renewals for our Japanese business; we successfully maintained our market position thanks to our good, long-term relationships with our ceding companies.

In Korea, where only a small part of our business was up for renewal, market conditions remain difficult – prompting us to further consolidate our portfolio. The treaty renewals in India proved to be more challenging than anticipated. Prices for traditional property and casualty reinsurance business declined across a broad front despite rising exposures. We responded by scaling back our involvement.

A small portion of US property catastrophe business was also up for renewal as at 1 April. We saw continued premium erosion here of between 5% and 10% as expected, although no further softening in conditions was observed. Our premium volume rose slightly owing to the fact that we wrote more business with our main clients.

Our targeted EBIT margin of at least 10% for our Property & Casualty reinsurance business group remains unchanged. We are aiming for a combined ratio of less than 96%.

In life and health reinsurance we similarly expect our business to fare well in 2015. The positive developments observed towards the close of the year just ended have been sustained, which means that the profitability of the portfolio should show further significant improvement.

The final phase of preparation for the launch of Solvency II got underway in 2015. Our own intensive preparations are now complete, and we consider ourselves well positioned for implementation on 1 January 2016.

In the areas of financial solutions and longevity we expect to see a consistent increase in demand for tailored reinsurance solutions. The ageing population in industrialised nations is ensuring a steady rise in demand for financially oriented reinsurance solutions as protection to cover the longevity risk. In financial solutions business we anticipate stronger demand for reinsurance products designed to provide capital relief which can also help to optimise a primary insurer’s solvency and liquidity position and are customised to the client’s individual needs. The constantly expanding urban middle class in emerging nations such as China, South Africa and Brazil as well as India and other countries in Southeast Asia is generating brisk demand for products that offer financial security for the family and retirement provision. This is a segment in which we expect to tap into promising business potential.

For our total life and health reinsurance portfolio we are looking to generate organic, currency-adjusted gross premium growth of between 5% and 7% coupled with improved profitability. It remains our expectation that the value of new business for 2015 will be in excess of EUR 180 million. We are targeting EBIT margins of 2% for financial solutions and longevity business and 6% for mortality and morbidity business.

With regard to our IVC targets – which we use to map economic value creation –, we anticipate at least 2% xRoCA for property and casualty reinsurance and at least 3% xRoCA for life and health reinsurance.

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 further growth in our asset portfolio. In the area of fixed-income securities our focus remains on the high quality and diversification of our 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 3.0% for 2015.

Assuming that the burden of major losses does not significantly exceed the expected level of EUR 690 million and that there are no unforeseen downturns on capital markets, Hannover Re continues to anticipate Group net income in the order of EUR 875 million for the 2015 financial year.

Hannover Re envisages a payout ratio in the range of 35% to 40% of its IFRS Group net income for the dividend in the current financial year. This figure could increase in light of capital management considerations if the company’s comfortable level of capitalisation remains unchanged.



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