Life and health reinsurance
The general environment for international life and health reinsurance remains favourable – not only in the short term but also from a medium-term perspective. Even against the backdrop of the current financial market crisis, the long-term demographic trends, heightened risk awareness among the urban middle classes, the opening up of the seniors' market and the creative design of innovative types of products should generate sustained growth stimuli, especially in key threshold countries.
In this context we believe that Hannover Life Re is very well positioned to share in these growth potentials to an above-average extent. We intend to further refine our tried and tested "Five Pillar model", with reinsurance solutions for occupational pension funds set to play an especially pivotal role in the new markets segment.
The application processes in life insurance, which were developed more than 100 years ago, are to be subjected to a thorough overhaul. The goal is to channel the purchase of life insurance policies into a process that – in common with many straightforward bank products – can be efficiently completed in a short space of time. To this end Hannover Life Re offers expert, proven models of varying levels of complexity that are enjoying growing popularity on the market.
+++ Significantly higher cession ratio expected for
mortality risks in the
United States +++
The main drivers of our business will continue to be the developed insurance markets of the United Kingdom, United States, Germany and Australia. In the long term, though, we see considerable potential in the four BRIC markets of Brazil, Russia, India and China, and in 2009 we are planning to enhance our network by opening a representative office in Beijing.
In many countries the international financial market crisis has brought about a considerable shift in life insurers' demand for reinsurance solutions and hence created – to the benefit of globally operating reinsurers with a first-class rating – a continuously growing imbalance in the dynamics of supply and demand.
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 is generating a wave of demand for both risk- and financially oriented reinsurance solutions – especially because direct access to the capital markets by way of securitisations is largely blocked.
This state of affairs is encapsulated especially succinctly in the US life market, where the insurance industry suffered marked erosion of its capital base in the course of the year under review. In this market, therefore, we expect 2009 and 2010 to bring an appreciable increase in the cession ratio for mortality risks.
Similar developments are taking place in markets such as the United Kingdom and Germany; the spotlight here is on financially oriented solutions such as realising the value of in-force business. Overall, most life reinsurers belong to the subsegment of the international financial services industry that is currently profiting from the worldwide financial market crisis and for which attractive new business opportunities are opening up on a scale that would have been considered unrealistic just a few years ago.
In life and health reinsurance we expect annual growth of 12% to 15%. Due to our purchase of a US individual life portfolio we anticipate growth of 35% for the current year. This acquisition is forecast to generate a premium volume in the order of USD 1.2 billion for 2009. As early as 2009 the acquisition of this portfolio will help to boost Group net income.
For the current financial year and beyond we are looking to an attractive EBIT margin in the range of 6.5% to 7.5% as well as a better-than-average return on the invested capital.