Hannover Re on Track to Make Profit Goals; Q2 Net up 2% to $193.7 Million

August 8, 2006

“Our result as at 30 June is a good basis for achieving our 2006 profit target, namely a return on equity of at least 15 percent,” stated Hannover Re’s CEO William Zeller, as he presented the German reinsurer’s interim earnings report.

Highlights of the report for the first six months of 2006 included the following:
— Return on equity 19.9 percent after tax
— Gross premium growth +12.8 percent to €5.4476 billion ($7 billion)
— Major losses in property and casualty reinsurance just 2.7 percent for net account
— Operating profit (EBIT) +29.7 percent to €449.8 million ($578 million)
— Group net income +4.2 percent to €256.6 million ($333.6 million)
— All four business groups generate satisfactory return on equity

“Market conditions in property and casualty reinsurance continue to be highly advantageous, enabling Hannover Re to generate very profitable business,” said the bulletin. “The development of life and health reinsurance business was extremely positive. The position of the financial reinsurance and specialty insurance business groups has been strengthened.”

Commenting on the prospects for its P/C reinsurance operations, Hannover Re noted that they offered the Company “further promising opportunities to write profitable business in the second quarter. The renewals as at 1 April 2006 in Japan and Korea as well as those in June/July in the United States and Australia/New Zealand passed off very successfully. Against the backdrop of a significant capacity shortage for property catastrophe business in the USA rates remained on a high level overall – and in some segments they climbed still higher.

“Increases of more than 100 percent were recorded under the reinsurance programs impacted by last year’s hurricanes. An additional factor in this favorable rate trend was the recalibration of models for natural catastrophe events to include loadings for components that had hitherto been inadequately modeled or even neglected entirely.”

“What is more, as part of our risk management policy we substantially scaled back our peak exposures – especially in the USA – and at the same time were able to maintain our premium volume roughly unchanged, thereby making our portfolio considerably more weatherproof,” Zeller stressed. The bulletin also said Hannover has “no need on balance to establish additional reserves for previous underwriting years.”

Hannover Re undertook a major reorganization of its U.S. operations earlier this year with the establishment of the Praetorian Financial Group, Inc. headed by Rodman Fox. It has taken over the ongoing business of the Clarendon Insurance Group, Inc. which is essentially in run-off.

The earnings bulletin said: “The development of the specialty insurance business group was highly gratifying, clearly demonstrating that the restructuring of specialty business in the USA is bearing fruit. While the Clarendon Insurance Group is concentrating on the professional management of terminated programs and on commodity business, the newly established Praetorian Financial Group has assumed responsibility for the specialty insurance that forms the strategic focus of this business group.

“Praetorian has now strengthened its management team and is profiting from the favorable market environment.” Zeller indicated that “all these factors constitute a promising basis for systematically enhancing the value of our specialty insurance business group.”

As indicated, Hannover Re remains confident about reaching its full year 2006 goals – “provided the major loss burden remains within the multi-year average and there are no unexpected downturns on capital markets. “While those are two big “ifs,” so far Hannover Re appears to be on track to achieve them.

The full report, additional comments and presentations may be obtained on the Company’s Website at: www.hannoverre.com.

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