Hannover Re to build capital

Germany’s second- biggest reinsurer Hannover Re plans to strengthen its capital base as much as 26% by retaining earnings to tap “growth opportunities” arising from the global financial crisis, Bloomberg reports.

“We plan to strengthen our capital base to better benefit from growth opportunities in both life and non-life reinsurance,” chief executive officer Ulrich Wallin, 54, said. “Measures such as a capital increase or the issuance of additional hybrid capital aren’t being planned.”

“We could raise our capital to as much as €4bn over the mid-term without jeopardising our capital-return targets,” said Wallin. “Should we exceed €4bn, we might start to think about a share buyback.”

Lessons learned

“We have learnt our lesson from the 2005 record hurricane season and adjusted our hurricane exposure accordingly,” Wallin said. “A repetition of Hurricane Katrina wouldn’t even endanger our profit targets for this year.”

Hannover Re is expanding in trade-credit and surety reinsurance, where primary insurers are seeing higher defaults amid the global recession. “We’re growing the business selectively as we expect it to be quite profitable in the mid- to long-term,” Wallin said. Premiums in trade credit and surety may rise 29% to €440m this year. “I wouldn’t expect us to seek substantial growth beyond that,” he said.