Hannover Re: a brilliant growth

It was in 1966 that the Hannover Re saga started out. The two main shareholders were then HDI and FSV insurers, respectively based in Hannover and Bochum. It was not until 1970 that the group moved to Hannover, following the merger of HDI and FSV.
 

First known as ATR (Aktiengesellschaft für Transport und Rückversicherung) the company had expanded rapidly on the reinsurance markets over the first five years. In 1971, ATR already posted a premiums' volume of 120 million Deutsche marks (36.7 million USD) and a net profit of 600 000 DM (183 500 USD).

In 1973, a joint management with Eisen und Stahl Rückversicherung AG (E+S Re), sister company, was established. Fifteen years later, in 1988, both companies would collaborate more closely by entering into a joint underwriting agreement.

In 1976, the ATR's marine direct business portfolio was transferred to HDI. Following this move, ATR became exclusively involved in reinsurance operations. It was the moment chosen by the shareholders to rename the company: Hannover Re would, henceforth, be its new name.

The beginnings of expansion

In 1979, the group's expansion policy began with the acquisition of Insurance Corporation of Hannover (ICH), which is headquartered in Los Angeles, and that of International Insurance Company of Hannover Ltd (IICH) in London. These transactions allowed Hannover Re to enter the, American market, then fully-growing, and the London market. The activity in the United States would be reinforced in 1990 with the takeover of the Orlando 's life reinsurer, renamed Reinsurance Company of Hannover (RCH).

In 1981, the group confirmed its interest in the African markets by becoming the main shareholder of the insurer Hollandia, based in Johannesburg, from which it purchased 52% in stakes. Its establishment in South Africa provided a gateway to all English and Portuguese-speaking markets in the region. In 1981, the group confirmed its interest in the African markets by becoming the main shareholder of the insurer Hollandia, based in Johannesburg, from which it purchased 52% in stakes. Its establishment in South Africa provided a gateway to all English and Portuguese-speaking markets in the region.

Hannover Re establishment in South Africa provided a gateway to all English and Portuguese-speaking markets in the region.

A growing globalization

In the early 1990s, the 450 employees of the group underwrote a premiums' volume of 4 billion DM (2.6 billion USD), that is, 30 times as much as in 1970.

During the next ten years, the company had made a number of acquisitions in Germany and abroad. It acquired the portfolio of International Rückversichrung Hamburger in 1990 and in 1992 inaugurated a subsidiary in Ireland. In 1994, Hannover Re and E+S Re each took a 50% stake in the Australian reinsurer Hannover Life Re of Australia.

Photo credit: Hannover Re

In terms of products, Hannover Re would pave the way for securitization. The first action of its kind, would allow the transfer of natural catastrophes risks toward the financial markets. The group has so far remained one of the key players in the transfer operations of alternative risks in both life and non life insurance.

In 1994, Hannover Re listed 25% of its capital in the Frankfurt stock exchange and in that of Hannover. As of 1997, Hannover Re 's shares would be traded in the United States.

Thanks to the funds raised on the stock exchange, Hannover Re sped up its development policy. In 1995, the rise in E+S Re 's shareholding allows it to hold a majority stake, thus definitively joining both entities. The group's expansion strategy is maintained. A subsidiary was opened in Malaysia in order to increase the volume of business in Asia.

First restructuring measures

In 1996, Wilhelm Zeller was appointed CEO. The group then had a turnover exceeding 3 billion EUR (3.7 billion USD). One of Zeller 's first measures was to restructure all activities: Hannover Re was entrusted with the international business while E+S Re inherited the German market.

In 1997, in addition to the acquisition of a partial stake in the portfolio of Stockholm 's Skandia International, a symbolic step was taken in Asia with the establishment of a representation office in China.

Image provided to Microsoft by iStockphoto. Used with permission from Microsoft The decade of expansion ended with the opening of a number of subsidiaries worldwide including Mexico in 1998, Dublin, Kuala Lumpur and Hong Kong in 1999. Finally, to diversify its portfolio, Hannover Re also proceeded in 1999 to the takeover of a niche market held by Clarendon in United States which include back office activities such as run-off, claims management, legal or software consulting.

2000-2005: new reorganization

Since its creation, Hannover Re has experienced a brilliant rise. The 1990-2000 decade ended with a premiums' growth of 49% in 1999 and 24% in 2000. The year 2000 stood as the sixth consecutive year of positive results. To maintain this trend, a reorganization was envisaged, particularly in life insurance. A restructuring program was then initiated. Its completion was scheduled for January 1, 2011, time at which all the reinsurer 's life entities would be pooled under the label "Hannover Life Re".

As of 2000, the group is organized around four autonomous poles: non-life, life and health, financial reinsurance and special risks. This restructuring has enabled the group to offset the fallout pertaining to the events of September 11, 2001 and, exceptionally, make profits during the year 2001.

For the sake of specialization, the underwriting of natural catastrophes business was centralized in Bermuda while that of financial reinsurance policies went to Luxembourg.

In 2005, with the rise of takaful insurance, a subsidiary fully dedicated to this segment was set up in Bahrain under the name of Hannover Re Takaful BSC. As of 2007, all business underwritten in Arab countries was subjected to it. The accounts of this activity are done through Hannover Re AG Bahrain.

In 2005, the insurance business was shaken by catastrophic claims of unusual magnitude and frequency. Hannover Re endured this crisis but its capital was left unharmed; the reinsurer reported a total loss of 800 million EUR (947 million USD) in that financial year. Losses due to Hurricanes Katrina, Rita and Wilma set the reinsurer back more than 1 billion EUR (1.18 billion USD) free of any retrocession.

Presence in high-potential markets

Since its creation, Hannover Re has demonstrated that its ability to generate good results lies partly in its ability to quickly make profit of opportunities offered by the market and to innovate in new products, such as, financial reinsurance and securitization.

Photo credit: David CastorIn the mid-2000s, the group went ahead with a development program in high-potential emerging markets. After the Arab world, Hannover Re primarily focused its efforts on China where the authorities provided it a license, allowing it to expand its operations to life and health classes of business. But it was not until 2009 that its Shanghai subsidiary was fully authorized to underwrite all classes of business.

In 2008, the group negotiated a development agreement in India, designed to provide it with market shares, in collaboration with the state-run reinsurer GIC. The same year, subsidiaries were opened in Brazil and South Korea.

Since its creation, Hannover Re has experienced a brilliant rise. The 1990-2000 decade ended with a premiums' growth of 49% in 1999 and 24% in 2000.

Changes in the group 's leadership

In 2009, Wilhelm Zeller quit his post as head of the group after 13 years of duty. He enabled the company to enjoy a steady growth and to become the third global reinsurer. This growth, in terms of turnover, was achieved thanks to an effective strategic development and to the diversification of activities. He also managed to maintain a high profitability.

Image provided to Microsoft by iStockphoto. Used with permission from MicrosoftWilhelm Zeller was taken over by Ulrich Wallin who became the new CEO. The latter took control of a solid reinsurer at the same time when the financial crisis hit the insurance business.

Supported by the life business of USA 's ING Life, the year 2009 ended on a record profit of 730 million EUR (1 046 million USD). Hannover Re is the second most profitable reinsurer.

Hannover Re today

In 2010, Hannover Re Life has been voted best life reinsurer in the market. The group is expected to exceed 10 billion EUR (13 billion USD) in gross premiums, which is likely to consolidate its position as the third world reinsurer in 2010.

The agencies Standard & Poor's and AM Best respectively awarded Hannover Re an AA- rating (very strong) and an A rating (Excellent).

The group has 2100 employees scattered around 100 subsidiaries and representation offices. Non-life reinsurance accounted for 55.9% of the 2009 turnover, the remaining 44.1% went to life business.

The geographical distribution of earned premiums is fairly balanced with major markets like the United States (27.7%), United Kingdom (17.6%), Germany (12.8%), France (4.7% ). Asia accounts for 8.1% of the turnover and Africa for 3.5%.

Hannover Re is in 2009,

  • a turnover of 10 274.8 million EUR (14 727 million USD)
  • the third world reinsurer
  • a premiums' growth rate of 26.5%
  • a non life combined ratio of 96.6%
  • an investment income of 1 120.4 million EUR (1 605.9 million USD)
  • a net result of 731.2 million EUR (1 048 million USD)
  • total assets of 42 264.2 million EUR (60 578.5 million USD)
  • a ROE of 22.4%
  • a stock market capitalization of 3 944.7 million EUR (5 654 million USD)
  • relations with 5000 insurance companies in the world
  • business relations in 150 countries
  • 2100 employees
  • 100 subsidiaries, branches or representation offices
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