UPDATE: Hannover Re January Renewal Rates "Broadly Stable"

Hannover Re AG (HNR1.XE), one of the five largest reinsurers worldwide, Wednesday gave a cautiously optimistic outlook for business this year, saying it was able to push for "broadly stable" rates on average in reinsurance contracts that came up for renewal in January, faring better than some competitors.

"Despite softening tendencies in the market, we achieved broadly stable rates and conditions and are therefore thoroughly satisfied with the outcome," said Chief Executive Ulrich Wallin. "In certain segments, such as offshore energy business and European motor liability, we were even able to push through price increases," Wallin said.

Hannover Re is the first among the largest reinsurers to provide guidance on business development at the first crucial date when contracts with the sector's customers, the primary insurers, are renewed.

For the whole reinsurance sector, January reinsurance renewal rates are down 5% to 10% on average depending on market, line of business and loss experience, said management board member Juergen Graeber. This estimate is in line with recent brokerage notes, such as from Aon Benfield, which noted that the market has more than enough capital and that reinsurers are lowering rates at least at the same pace as primary insurers.

Munich Re AG (MUV2.XE), the world's largest reinsurer by gross premium income, will give an outlook on its own contract renewals Thursday, along with a small set of preliminary figures for the fourth quarter and the full year. France's Scor SE (SCR.FR) will follow Feb. 10.

Traditionally, reinsurance policies for Europe and some parts of Asia are renewed Jan. 1.

Policies covering Japan and Korea are renewed April 1, and policies for parts of the U.S., Australia and Latin America are renewed July 1. Aviation policies are renewed Oct. 1.

Some large industrial companies like Siemens AG (SIE.XE) and ThyssenKrupp AG (TKA.XE) renew insurance contracts Oct 1, most industrial companies renew Jan 1.

Hannover Re said about 67% of the company's property and casualty reinsurance business came up for renewal on Jan. 1.

Rates for global large disaster policies, such as for earthquakes and floods, retreated for the most part, notably for U.S. risks. Hannover Re scaled back its business in areas where it wasn't able to push for prices it considered adequate. Overall, It reduced business volume in this segment by 15%, it said.

Still, areas that were hit by recent large losses had double-digit percentage rate increases, it said. For instance, rates for natural-disaster policies in Chile climbed by up to 40% following the devastating earthquake there in February 2010.

In Australia, rates for property and catastrophe protection were up 50% in loss-affected areas, the company said. In December and January, floods caused substantial damage in parts of Queensland, for which no estimates of the insured loss are yet available. A cyclone, Yasi, is currently heading toward Queensland's northern coast, which will likely exacerbate the previous losses.

In marine business, especially in the offshore energy sector, rates surged on the back of the "Deepwater Horizon" drilling rig accident. In aviation, prices for the most part remained stable, despite softening tendencies attributable to excess capacity in the market.

In credit reinsurance, prices declined, while they remained stable in surety reinsurance. Hannover Re noted a "considerably more competitive climate" in credit and surety reinsurance in the wake of above-average rate increases over the past two years.

Hannover Re also said it reinvested in stocks in the fourth quarter, of which it had about 2% in its investment portfolio at the end of 2010, which it plans to increase to between 3.5% and 5% by the end of 2011. Hannover Re exited stock investment at the end of 2008, by taking substantial hits on cutting the exposure, after significant losses on its investments in 2008. This caused a profit warning for 2008 and the omission of a dividend for that year. For 2010 and 2011, Hannover Re said it is on track for all targets.

Hannover Re will report fourth-quarter and 2010 earnings March 9.

-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500; ulrike.dauer@dowjones.com

(Ruediger Schoss contributed to this article.)

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