Hannover Re Profit Falls, Hurt By Natural Disasters

Commenting on the decline, the Hanover, Germany-based reinsurer mentioned that its program business unit, Clarendon Insurance Group in New York, had results hurt by losses from Florida's unprecedented 2004 hurricane season.

Clarendon, which does extensive business in Florida, had a loss for the first time in 2004 since its acquisition by Hannover Re in 1998.

"The business group hardest hit by the natural catastrophes was program business," stated Hannover Re's executive board chairman Wilhelm Zeller, who noted a net loss of 88.5 million euros ($114 million) in 2004 for the program business, compared with profit of 42.2 million euros ($54 million) for 2003. But Mr. Zeller still expressed his "considerable satisfaction" with overall results.

In addition to Florida hurricanes, typhoons in Asia and the severe tsunami in the Indian Ocean were the major loss events in 2004, Hannover Re noted. The company said that these events?which likely constituted the costliest year for natural disasters in the insurance industry's history?resulted in a burden of 287.2 million euros ($371 million) for Hannover Re's property-casualty reinsurance, following just 51.5 million euros ($85 million) in 2003.

Despite the barrage of natural disasters around the world, Hannover Re's p-c reinsurance business still reported higher net income last year, posting 258.6 euros ($334 million) in profit for 2004, up 54.9 percent from 167.0 euros ($216 million) during 2003.

The combined ratio for p-c reinsurance business eroded slightly last year to 97, up one point compared with 2003.

"Thanks to very good rates and conditions, property-casualty reinsurance was especially able to absorb the exceptionally heavy strains associated with the four severe hurricanes and other major loss events in the year under review," Mr. Zeller said.

The Hannover p-c reinsurance business also continued to benefit from the company's "More from Less" strategy, which emphasizes replacing low-margin proportional business with more profitable nonproportional business, Mr. Zeller said. This regrouping, however, contributed to the contraction of gross premium income by 14.4 percent to 4.1 billion euros ($5.3 billion) last year.

Standard & Poor's Ratings Services said that Hannover Re's 12.5 percent return-on-equity in 2004 was below its expectation but that this shortfall is not considered material. The New York-based ratings agency said it is maintaining its "double-A-minus" ratings and a "Stable" outlook on Hannover Re's main entities.