Hannover Re reported second-quarter net income, compared with the period last year, fell by 40.4 percent, driven down by capital market and exchange rate movements.

Group net income for the quarter fell 40.5 percent to EUR100.8 million ($154.7 million) from EUR169.4 million ($260 million--a decrease of EUR68.6 million ($105.3 million). For the half-year group net was down 13.9 percent, falling to EUR252.2 million ($386.7 million).

Among other key numbers, the company mentioned that for the quarter net investment income fell 44.4 percent, dropping by EUR146 million ($224.4 million) from EUR328 million ($504 million) to EUR182.5 million ($280.5 million). For the half-year investment income at EUR445.1 million ($684 million) was down 24.1 percent.

The combined ratio for non-life in the quarter was 97.4 compared with 99.1 last year. For life and health combined ratio was 98.5 compared with 95.8 last year.

In a statement with the results, the firm said it was satisfied with development of its underwriting business in both non-life and life-health reinsurance.

But Chief Executive Officer Wilhelm Zeller said, "Nevertheless, if stock markets do not normalize, our company too will have to anticipate further write-downs in the third quarter."

He said the "protracted, difficult climate on international capital markets and the restraining effects of exchange rate movements have left an appreciable mark" on the company and it "cannot, therefore, come as any surprise that our interim result is not insignificantly lower than in the corresponding period of the previous year."

The company said operating profit (EBIT) as of June 30 had contracted by 14.4 percent year-on-year to EUR400.2 million ($614 million) from EUR467.7 million ($7l7.4 million).

Had it not been for the write-downs necessitated by turmoil on the capital markets the operating profit would have grown by 13.4 percent, the company said.

"Thanks to its conservative investment policy Hannover Re was again spared significant write-downs on fixed-income securities or subprime exposures in the second quarter," said Hannover Re.

On account of the withdrawal from specialty business and the slide in the value of foreign currencies, especially the U.S. dollar and pound sterling, the gross written premium booked by the Hannover Re Group contracted by 7.7 percent, the company said.

The reinsurer said development of non-life reinsurance was "highly satisfactory." It said while some key markets are already seeing softening price tendencies, conditions are still broadly acceptable and prices are for the most part commensurate with the risks.

"Guided by our profit-oriented underwriting policy, we focus on those segments that promise the greatest profitability and are further extending our already very good diversification--in terms of both regions and lines--through targeted underwriting," Mr. Zeller emphasized.

Hannover Re said it enlarged its market share in areas that offer attractive business opportunities, such as worldwide credit and surety reinsurance or German business.

The company said its business in other countries was doing well and it is now operating in Brazil.

After a moderate major loss incidence in the first quarter, the company said losses incurred by Hannover Re in the second quarter were also below average.

Hannover Re said its loss from the earthquake in the Chinese province of Sichuan was a modest EUR20 million ($30.6 million). In Southern Germany hailstorms and heavy rainfall in late May/early June caused considerable damage, costing the company around EUR30 million. The total net burden of major losses for the first half-year stood at EUR130 million euro.

Despite palpable softening in some non-life reinsurance lines and markets, prices and conditions are for the most part still acceptable. The treaty renewals that took place in the United States as of July 1--during which around one-third of this portfolio was renegotiated--confirmed the prevailing trend, the company said.

Special Reports /

Hannover Re Quarterly Net Down 40%

Related Stories

Recommended For You