Hannover Re enters the new financial year in optimistic mood

Hannover Re enters the new financial year in optimistic mood

* 2008 financial year overshadowed by the financial market
crisis
* Net investment income: 278.5 million euro (1,121.7 million
euro) due to write-downs and losses realised on equities of 640.9
million euro
* Combined ratio in non-life reinsurance: 95.4% (99.7%)
* Operating profit (EBIT): 148.1 million euro (928.0 million
euro)
* Group net loss: -127.0 million euro (Group net income:
721.7 million euro) owing to negative tax effect

Hannover, 11 March 2009: At its press briefing on the annual results
Hannover Re presented the figures for the 2008 financial year. Owing
to the effects of the financial market crisis the company had to take
significant value adjustments, in particular on equity holdings. As
anticipated, therefore, Group net income after tax closed in negative
territory.

"The fact that 2008 was a lost year for our company can be attributed
entirely to the problems on the investment side. The development of
our underwriting business, on the other hand, was satisfactory", Mr.
Zeller emphasised.

2008 financial year
The gross written premium booked by the Hannover Re Group contracted
by a modest 1.7% to 8.1 billion euro (8.3 billion euro). At constant
exchange rates the premium volume would have grown by 3.9%. The level
of retained premium climbed to 89.1% (87.4%), inter alia as a
consequence of appreciable savings on the company's own protection
covers and reduced proportional cessions; net premium earned fell by
3.2% to 7.1 billion euro (7.3 billion euro).

On account of sharply lower investment income due to write-downs and
the realisation of losses on equities, the operating profit (EBIT)
plunged by 84.0% to 148.1 million euro (928.0 million euro). Group
net income slipped into negative territory at -127.0 million euro
after the record profit of 721.7 million euro in the previous year.
The result posted in the year under review was additionally impacted
by the fact that losses on equities are not tax-deductible in
Germany, as a consequence of which the company incurred a tax load of
205.6 million euro despite reporting a pre-tax profit of just
70.6 million euro. This resulted in earnings of -1.05 euro (5.98
euro) a share.

Shareholders' equity decreased by 519.0 million euro relative to the
position as at 31.12.2007 to stand at 2.8 billion euro. The
policyholders' surplus (including minority interests and hybrid
capital) totalled 4.7 billion euro after 5.3 billion euro in the
previous year.

In non-life reinsurance the year under review was notable for further
softening in market conditions, although the rate reductions proved
to be smaller than expected. "By and large, we were able to obtain
prices and conditions commensurate with the risks", Mr. Zeller
explained.

The gross premium written in the non-life reinsurance business group
contracted as anticipated by 3.9% to 5.0 billion euro (5.2 billion
euro). The decisive factors here were, first and foremost, the
restraining effects of movements in exchange rates, predominantly in
the first half of the year. At constant exchange rates - especially
against the US dollar - growth of 1.3% would have been generated. The
withdrawal from US specialty business also served to curb premium
volume. The level of retained premium rose from 85.2% to 88.9%; net
premium earned retreated by 4.9% to 4.3 billion euro (4.5 billion
euro).

In terms of major losses, the year under review witnessed a series of
significant natural catastrophes. They included, most strikingly, the
severe earthquake in the Chinese province of Sichuan, snow- and
ice-storms in China, European winter storm "Emma", hailstorms in
Germany and the two hurricane events "Gustav" and "Ike". The latter
produced a net strain of 222.1 million euro for Hannover Re's
account. Numerous other major losses were also recorded. In total,
the net burden of catastrophe losses and major claims for 2008
amounted to 457.8 million euro (285.4 million euro). This figure is
equivalent to 10.7% of net premium in non-life reinsurance and was
thus slightly above the expected level of 10%. The sharp improvement
in the combined ratio in the year under review to 95.4% - as against
99.7% in the previous year - was principally due to positive run-off
results from prior years. The reserves remained on the positive level
of the previous year.

The underwriting result in non-life reinsurance improved to
184.7 million euro after a deficit of -26.7 million euro in the
previous year. Net investment income plunged by 98.6% in the year
under review to 11.1 million euro (783.3 million euro) as a
consequence of the considerable write-downs taken on equities. The
operating profit (EBIT) generated by non-life reinsurance therefore
fell sharply to 2.3 million euro (656.7 million euro). Group net
income contracted to
-160.9 million euro (549.5 million euro), equivalent to earnings of
-1.33 euro a share.

The growth recorded in life and health reinsurance in the year under
review was less dynamic than in previous years, principally due to
the moderating effects of exchange rate movements in the first half
of 2008, but also owing to the decline in risk-oriented business in
the United Kingdom - Hannover Life Re's largest single market. "In
the medium term, though, it remains our goal to generate double-digit
growth in the original currency", Mr. Zeller stressed.

Hannover Life Re sees clear growth potential for life and annuity
insurance in light of the demographic trend in industrialised nations
and the growing urban middle class in emerging markets. While
traditional life insurance accounts were influenced by softening new
business in the year under review as part of the mortgage crisis, the
private annuity insurance segment enjoyed undiminished vitality.

Hannover Life Re appreciably strengthened its international market
position in the year under review: in the high-growth markets of
China and South Korea business operations were launched through newly
established branches in Shanghai and Seoul. In India, too, Hannover
Re has put in place a platform for building a profitable portfolio by
reaching a cooperation agreement with the leading Indian reinsurer.

"In the year under review we again transferred a portfolio of life
reinsurance to the international capital market. Under the
transaction designated "L7" we were able to convert a future earnings
stream into a current liquidity position and monetise an embedded
value of 100 million euro as at year-end 2008", Mr. Zeller noted.

Gross written premium in life and health reinsurance climbed by 1.7%
in the year under review to 3.1 billion euro (3.1 billion euro). At
constant exchange rates growth would have reached 7.9%. The level of
retained premium was reduced by a modest 1.5 percentage points to
89.3%. Net premium earned remained virtually on a par with the
previous year at 2.8 billion euro.

The abrupt fall of 47.5% in the operating profit (EBIT) to 120.7
million euro (229.8 million euro) was attributable largely to
non-recurring positive special effects in the previous year as well
as to losses incurred in the financial year from the required
fair-value measurement of assets deposited with clients.

The EBIT margin in life and health reinsurance - standing at 4.3% -
fell short of the target corridor of 6.5% to 7.5%. In light of the
aforementioned factors Group net income retreated by 58.3% to
78.3 million euro (187.7 million euro); this corresponds to earnings
of 65 cents (1.57 euro) a share.

The income from investments generated by Hannover Re was adversely
impacted in the year under review by the crisis on financial markets,
especially the marked downward slide in share prices. The development
of assets under own management, on the other hand, was gratifying:
thanks to a very positive cash flow from the technical account and
the rise of the US dollar towards the end of 2008 the portfolio grew
to 20.1 billion euro (19.8 billion euro). Owing to portfolio
regroupings into low-risk government bonds in the fourth quarter, the
ordinary income excluding deposit interest fell slightly short of the
previous year (859.0 million euro) at 829.8 million euro.

The bulk of the write-downs on securities totalling 479.9 million
euro (71.4 million euro) can be attributed to the massive slump in
share prices; a mere 96.9 million euro was taken on fixed-income
securities. The hedges entered into in the first quarter on around
one-fifth of the equity portfolio prevented a need for heavier
write-downs. Profits on the disposal of investments amounting to
379.2 million euro (244.0 million euro) were driven by the tactical
modification of durations in the US dollar portfolio undertaken in
the first quarter as well as the liquidation of the hedge on the
equity portfolio in the fourth quarter. This contrasted with realised
losses of 492.8 million euro (69.7 million euro) that were due
principally to the sharp reduction of the equity allocation in the
fourth quarter.

Reflecting the reverberations of the financial market crisis, net
investment income fell by a significant 75.2% to 278.5 million euro
(1,121.7 million euro).

In view of the negative business result, the Executive Board and
Supervisory Board will propose to the Annual General Meeting that a
dividend should not be paid. For the 2007 financial year Hannover Re
had paid a dividend of 1.80 euro and a bonus of 50 cents a share.

Outlook
Hannover Re has got off to a very good start in the new financial
year. "For our company, the crisis on financial markets is at once a
curse and a blessing", Chief Executive Officer Wilhelm Zeller
explained. "Now that the negative repercussions are behind us, we can
profit from the positive effects. We enjoyed a very pleasing treaty
renewal season as at 1.1.2009 - with prices moving higher again - in
non-life reinsurance, and thanks to our robust financial strength we
are in a position to benefit accordingly from the available business
opportunities".

The capital depletion at primary insurers as a consequence of the
financial market crisis led to stronger demand for reinsurance
protection - and hence to higher prices. Rate increases were obtained
in many markets, sometimes even running into double digit
percentages; this was especially evident in worldwide credit and
surety reinsurance, but also applied to property catastrophe business
in regions that had suffered losses. Yet rates in catastrophe
business - especially in the US market - are still not adequate. In
this segment Hannover Re anticipates further price rises at the time
of the mid-year renewals. The capital erosion at primary insurers is
also likely to stimulate demand for structured reinsurance products.

Overall, the situation in non-life reinsurance is significantly
brighter than in the previous year. In light of this climate, the
very good diversification of its portfolio and its excellent ratings,
Hannover Re is looking forward to a very favourable business
development. "We anticipate growth of 10% in net premium and a
healthy profit contribution in non-life reinsurance", Mr. Zeller
remarked. In the current financial year Hannover Re has incurred
three major losses to date: winter storm "Klaus" produced an
estimated net burden in the order of 70 million euro, while the
expenditure associated with a satellite failure is likely to remain
under 10 million euro; Hannover Re currently expects a strain of
around 15 million euro from the devastating bush fires in Australia.

The general business environment in life and health reinsurance is
similarly favourable. Here, too, the financial and economic crisis
will raise awareness of the need for individual provision among the
urban middle classes and hence provide sustained growth impetus
worldwide. Business will continue to be driven primarily by the
developed insurance markets of the United Kingdom, United States,
Germany and Australia. Over the long term, however, the company sees
considerable potential in the markets of Brazil, Russia, India, Korea
and China. Owing to the visible weakening of their solvency position,
primary insurers will find themselves compelled to adopt a
significantly more cautious risk strategy and financial policy in the
immediate future. This development will prompt stronger demand for
both risk- and financially oriented reinsurance solutions.

In January Hannover Re charted a course for further profitable growth
in life and health reinsurance. "With the acquisition of a large US
individual life reinsurance portfolio we have taken a major step
towards attainment of our global life reinsurance goals", Mr. Zeller
explained. In 2009 the transaction will not only contribute to
current income, it will also generate a positive non-recurring
effect.

In view of this acquisition - which is expected to produce a premium
volume of around 1.2 billion US dollars - Hannover Re anticipates
growth of 35% in net premium in life and health reinsurance for the
current financial year. The EBIT margin should be within the target
corridor of 6.5% to 7.5%.

For total business Hannover Re is looking to growth of 20% in net
premium earned at constant exchange rates.

Turning to investments, the expected positive cash flow that Hannover
Re generates from its technical account and asset holdings should -
subject to stable exchange rates - lead to further growth in the
investment portfolio. In the area of fixed-income securities the
focus remains on the high quality and diversification of the
portfolio. Now that Hannover Re has reduced its equity exposure to
near zero, the adverse effects of market fluctuations on its
investment income can be at most limited.

Given its strategic orientation and the available market
opportunities in non-life and life/health reinsurance, Hannover Re
anticipates a good result for the full 2009 financial year. "Provided
the burden of catastrophe losses and major claims does not
significantly exceed the expected level of 10% of net premium in
non-life reinsurance and assuming there are no further downturns on
capital markets, we expect to see - leaving aside the one-off effect
from the acquisition of the ING portfolio - a return on equity in
excess of 15 percent and earnings per share of 4.75 to 5.25 euro for
the 2009 financial year", Mr. Zeller affirmed. As for the dividend,
the company continues to aim for a payout ratio in the range of 35%
to 40%.

For further information please contact:

Press and Public Relations / Investor Relations:
Stefan Schulz (tel. +49 / 511 / 56 04-15 00,
e-mail: stefan.schulz@hannover-re.com)

Press and Public Relations:
Gabriele Handrick (tel. +49 / 511 / 56 04-15 02,
e-mail: gabriele.handrick@hannover-re.com)

Investor Relations:
Klaus Paesler (tel. +49 / 511 / 56 04-17 36,
e-mail: klaus.paesler@hannover-re.com)

Please visit: www.hannover-re.com

Hannover Re, with a gross premium of around 9 billion euro, is one of
the leading reinsurance groups in the world. It transacts all lines
of non-life and life and health reinsurance. It maintains business
relations with more than 5,000 insurance companies in about 150
countries. Its worldwide network consists of more than 100
subsidiaries, branch and representative offices in around 20
countries with a total staff of roughly 1,900. The rating agencies
most relevant to the insurance industry have awarded Hannover Re very
strong insurer financial strength ratings (Standard & Poor's AA-
"Very Strong" and A.M. Best A "Excellent").

Disclaimer:
Some of the statements in this press release may be forward-looking
statements or statements of future expectations based on currently
available information. Such statements are naturally subject to risks
and uncertainties. Factors such as the development of general
economic conditions, future market conditions, unusual catastrophic
loss events, changes in the capital markets and other circumstances
may cause the actual events or results to be materially different
from those anticipated by such statements. Hannover Re does not make
any representation or warranty, express or implied, as to the
accuracy, completeness or updated status of such statements.
Therefore, in no case whatsoever will Hannover Re and its affiliate
companies be liable to anyone for any decision made or action taken
in conjunction with the information and/or statements in this press
release or for any related damages.

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