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, the company anticipates growth in the range of 5% to 10% in gross premium income for its 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 the full 2015 financial year despite our systematically practised policy of selective underwriting. As a financially robust reinsurer we still see encouraging business potential in a number of segments: special mention should be made here of Asia-Pacific markets, North and Latin America as well as business with agricultural risks. The areas of facultative and structured reinsurance also offer growth prospects. In view of the very pleasing premium development in the first half-year, we are confident that full-year growth in property and casualty reinsurance will be stronger than originally forecast.

The outcome of the treaty renewals as at 1 June and 1 July was also largely positive. This is traditionally the time of year when some parts of our business in North America, agricultural risks and the portfolio in Latin America come up for renewal. This was also the main renewal season for business in Australia, which passed off very successfully for Hannover Re in view of the increased market share secured by the company. Broadly speaking, we are also satisfied with the outcome of the renewals in Latin America and the Caribbean as at 1 July as well as with the treaty conditions that were obtained. Despite significant capacities in the natural catastrophe market for proportional and non-proportional covers, our extensive product range enabled us to act on new business opportunities in Latin America and the Caribbean as well as to further diversify our portfolio. In the area of agricultural risks, too, markets around the world are competitive. We nevertheless wrote attractive new business and expanded our good position in this market segment.

In North America the pressure on rates and conditions remains undiminished due to the very good results booked by both the primary and reinsurance sectors in the absence of large losses; the rate reductions were, however, smaller than anticipated. Stronger demand driven by the improved state of the economy was the key factor here.

Despite below-average natural catastrophe expenditure and relatively modest fire losses, the renewals in US property business passed off favourably. This is in part because, in view of our very good rating, ceding companies consider us a preferred partner to whom they offer the entire spectrum of business for underwriting. Rates for non-proportional reinsurance programmes that had been spared losses saw a decline of 5%, reflecting the currently prevailing competitive climate. For loss-impacted programmes, on the other hand, rate increases running into double-digit percentages were obtained in some cases. In US property catastrophe business the pressure on prices eased compared to the previous year’s renewals. Conditions in proportional reinsurance remained largely stable. Although casualty business in the United States remains fiercely competitive, we were nevertheless able to act on attractive new opportunities – opened up, for example, by increased demand for coverage of cyber-risks. The development of our business in Canada, where we booked gratifying premium growth, was also satisfactory. Despite continued adherence to our selective underwriting policy, our overall premium volume for North America increased as at 1 July 2015.

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

In life and health reinsurance we expect further promising business opportunities in the second half of the year. Most notably, the global (re)insurance industry is focused on the impending implementation of new solvency-based prudential regimes in Europe, South Africa and parts of Asia, and this is likely to generate fresh business prospects. The regulatory solvency requirements impose more rigorous standards on insurers’ capital resources and risk management systems. As a result, our clients can be expected to take an increasingly keen interest in reinsurance concepts in the area of financial solutions. In this context, we put considerable emphasis on solutions that are individually tailored to provide capital relief and improve the solvency position of our clients.

In our assessment, longevity risks continue to offer attractive business opportunities. Hannover Re has already completed initial transactions in this area outside the United Kingdom and is confident that demand will continue to rise on the back of ongoing demographic shifts.

The markets of Asia as well as Eastern and Central Europe continue to offer interesting business prospects. A constantly expanding urban middle class is boosting demand for products that offer financial security for the family, coverage for disability and long-term care as well as retirement provision.

For the second half of 2015 our expectation of organic, currency-adjusted gross premium growth in our life and health reinsurance portfolio coupled with rising profitability remains unchanged. In addition, we continue to aim for a value of new business in excess of EUR 180 million. The target EBIT margins set for our reporting categories still apply, namely at least 2% for financial solutions and longevity business and at least 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. When it comes to the allocation of new investments resulting from cash flows and maturities, we are looking to gradually increase the shares of holdings in the category BBB- and in lower rating segments while at the same time investing proportionately more strongly in top-quality, highly liquid government bonds. The focus here remains 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.

In view of the good results for the first half-year, we are raising our guidance for Group net income in the full 2015 financial year. 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 now anticipates Group net income in the order of EUR 950 million.

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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