United Kingdom
In the UK life and annuity insurance market, Europe's largest reinsurance market, we continue to operate through our subsidiary HLR United Kingdom as a fullservice provider in the conventional market segment, with a focus on risk-oriented covers (protection business).
For a number of years now the UK life market has been characterised by exceptionally fierce cut-throat competition, which has carried over into the reinsurance market. Against this backdrop HLR UK pursues a conservative underwriting policy which concentrates on maintaining existing customer relationships and promotes innovative types of coverage – such as the new generation of critical illness policies with graded benefits according to the severity of the disease. We also stepped up our activities in the area of individual UK disability covers and intensified our marketing efforts in Ireland in the year under review.
When translating the financial data to our balance sheet currency (the euro), it is important to bear in mind the abrupt fall of the pound sterling, which from a 12-month perspective lost 12.3% of its value against the euro.
In light of this devaluation, the gross premium income booked by HLR UK of EUR 182.5 million (EUR 186.1 million) and the company's operating profit of EUR 19.7 million (EUR 22.8 million) are highly satisfactory. The EBIT margin stood at 17.1%.
From our Home Office in Hannover we cover the specialised UK sectors of enhanced annuities with a reduced payment period and – to an increasing extent – the reinsurance of the longevity risk associated with acceptances of existing pension funds. Both segments enjoyed vigorous growth in the year under review, in part due to new customer relationships and partly through the expansion of existing accounts. Our premium income consequently rose by 78.3% to EUR 656.9 million.
Hannover Life Re continues to be the market leader for the reinsurance of UK enhanced annuities with a reduced payment period. Their profitability in the year under review was hampered by a widening of interest rate spreads on investments furnished to one of our cedants in connection with securities deposits. It is our expectation that these losses will be largely made good by the middle of 2010.
From a holistic perspective that also takes account of the UK business placed with HLR Ireland and HLR Bermuda, our reinsurance business from the United Kingdom generated a premium of EUR 1.1 billion; of this amount, 60.3% was attributable to business written by Hannover Re, 19.9% to HLR Ireland, 16.4% to HLR UK and 3.4% to HLR Bermuda.