The situation on the German life insurance market was again highly challenging in the year under review. In view of the continued low level of interest rates, the uncertainty prevailing throughout the entire European Economic Area with respect to a renewed financial and currency crisis as well as the impending implementation of Solvency II, the insurance industry also came under increasing strain.

The reduction of the actuarial interest rate from the current level of 2.25% to 1.75% as proposed by the Federal Financial Supervisory Authority (BaFin) was approved and enters into force for all new contracts at the beginning of 2012. The interest rate applicable upon contract formation continues to be valid for current business, meaning – for example – that a return of 4% is still contractually guaranteed for life insurance policies taken out between 1995 and 2000. At the end of 2011, with a view to securing these obligations, life insurers for the first time implemented premium reserve increases in order to take lower interest income into account at an early stage (Zinszusatzreserven). From the reinsurance perspective, this may open up new business potential going forward for the prefinancing of such additional reserves.

The trend in new business towards single-premium products with shorter policy periods, which was still evident in 2010, declined sharply in the year under review. Policyholders displayed renewed interest in traditional, long-term life insurance products such as annuity and disability covers.

Long-term care insurance also recorded premium gains, which can be attributed to the ageing of the population. We have long been prepared for this demographic trend and are working closely together with selected primary insurers in this area so as to offer attractive new (re)insurance solutions specially designed for the seniors’ market.

Within the Hannover Re Group the German primary insurance market is traditionally served directly from Hannover by our subsidiary E+S Rückversicherung AG. Our focus here is on life and annuity insurance. We enjoy a stable customer portfolio and – with more than 40 ceding companies – can point to a good level of market penetration. Despite fierce competition in the German market, we were able to enlarge our business – especially in niche segments – and consider ourselves well positioned for the future.

We generated gross premium of EUR 304.1 million (EUR 343.0 million) in the year under review. The volume contraction can be attributed inter alia to the planned scaling back of some expiring large contracts. A favourable risk experience in mortality and annuity business helped us to show an exceptionally satisfactory result again this year.