In worldwide credit and surety reinsurance Hannover Re ranks among the market leaders. As in previous years, we concentrated exclusively on the traditional core business of the credit and surety lines.

With economic growth softening across a broad front, the number of insolvencies began to climb again. Whereas two to three years ago loss ratios were still below average, they rose in original business to a level that can be considered average over the cycle. The increase was particularly appreciable in surety business, where market consolidation began to set in either on account of declining earnings or due to overheating of the market. In the area of political risks, on the other hand, claims rates remained stable year-on-year at a good level.

On the reinsurance side there has been a significant capacity surplus since 2009 owing to the sharp improvement in claims rates. All the companies that had scaled back their exposures in 2009 and 2010 have returned to the market. Not only that, more than ten new providers have moved into the credit and surety reinsurance business over the past two years.

In view of the prevailing capacity surplus further expansion of our market share was not a priority. We maintained our position in the credit sector. Only in cases where our required margins were met did we undertake measured expansion of our portfolio. In surety reinsurance our goal was to consolidate existing positions. In contrast to the credit line, we have not continued to enlarge our volume here, as a consequence of which the proportion of surety reinsurance in our total portfolio contracted from around 42% in 2008 to 35% in 2012. In business with political risks we continued the moderate expansion of our portfolio in the year under review.

Losses incurred in the year under review, including for example the insolvency of a large pharmacy chain in Germany, had a stabilising effect and served to minimise rate erosion. There were also indications that the decline in rates, especially in credit business, has at least been halted. In some countries, such as Spain and Italy, and in certain branches of industry that are under strain, rate increases could already be observed.

All in all, we are satisfied with developments in credit and surety reinsurance and in political risks business. The premium volume grew modestly in the year under review.

The combined ratio nudged slightly higher in the 2012 financial year from 87.7% to 90.4%.