Bond Hannover Rück Gruppe 3.375% ( XS1109836038 ) in EUR

Hannover Rück Gruppe

99.74 % ▼

Germany

XS1109836038 ( in EUR )

3.375% per year ( payment 1 time a year)

Perpetual

Prospectus brochure of the bond Hannover Re Group XS1109836038 en EUR 3.375%, maturity Perpetual

26/06/2026 ( In 345 days )

Hannover Re is a global reinsurer providing reinsurance and insurance-related services, specializing in property & casualty, life & health, and specialty reinsurance.

The Bond issued by Hannover Rück Gruppe ( Germany ) , in EUR, with the ISIN code XS1109836038, pays a coupon of 3.375% per year.
The coupons are paid 1 time per year and the Bond maturity is Perpetual

Prospectus dated 12 September 2014

Hannover Rück SE
(a European Company (Societas Europaea SE) incorporated in Hannover,
Federal Republic of Germany)
500,000,000 Undated Subordinated Fixed to Floating Rate
Callable Bonds
ISIN XS1109836038, Common Code 110983603, WKN A13R6M
Issue price: 99.238 per cent.
Hannover Rück SE (the "Issuer") will issue on or about 15 September 2014 (the "Issue Date") 500,000,000 Undated
Subordinated Fixed to Floating Rate Callable Bonds (the "Bonds") in the denomination of 100,000 each.
The Bonds will be governed by the laws of the Federal Republic of Germany ("Germany").
The Bonds will bear interest from and including 15 September 2014 to but excluding 26 June 2025 (the "First Call Date") at a rate
of 3.375 per cent. per annum, scheduled to be paid annually in arrear on 26 June in each year, commencing on 26 June 2015.
Thereafter, unless previously redeemed, the Bonds will bear interest at a rate of 3.25 per cent. per annum above the three months
EURIBOR being the Euro-zone inter-bank offered rate for three-month Euro deposits, scheduled to be paid quarterly in arrear on
26 March, 26 June, 26 September and 26 December in each year (each a "Floating Interest Payment Date"), commencing on
26 September 2025.
Under certain circumstances described in § 4(3) of the terms and conditions of the Bonds (the "Terms and Conditions"), interest
payments on the Bonds may be deferred at the option of the Issuer or will be required to be deferred.
The Bonds have no scheduled maturity date. The Bonds may be redeemed at par plus any interest accrued and unpaid and any
outstanding Arrears of Interest (as defined in the Terms and Conditions) on the First Call Date or on any Floating Interest Payment
Date thereafter, provided that on such date the Conditions to Redemption (as defined in the Terms and Conditions) are fulfilled.
Under certain circumstances described in § 5(3) and § 5(4) of the Terms and Conditions, the Bonds may be subject to early
redemption.
The Bonds will initially be represented by a temporary global bearer bond (the "Temporary Global Bond") which will be delivered
on or prior to the Issue Date to a common depositary for Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking, société
anonyme ("Clearstream, Luxembourg"). The Temporary Global Bond will be exchangeable for interests recorded in the records
of Euroclear and Clearstream, Luxembourg in a permanent global bearer bond (the "Permanent Global Bond") not earlier than 40
days after the Issue Date, upon certification as to non-U.S. beneficial ownership.
This prospectus in respect of the Bonds (the "Prospectus") constitutes a prospectus within the meaning of Article 5.3 of Directive
2003/71/EC of the European Parliament and of the Council of 4 November 2003 (as amended, inter alia, by Directive 2010/73/EU)
(the "Prospectus Directive"). This Prospectus will be published in electronic form together with all documents incorporated by
reference on the website of the Luxembourg Stock Exchange (www.bourse.lu).
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier, Luxembourg ("CSSF") in its
capacity as competent authority under the Luxembourg Act dated 10 July 2005 relating to prospectuses for securities (Loi du 10
juillet 2005 relative aux prospectus pour valeurs mobilières, the "Luxembourg Prospectus Law"). By approving this Prospectus,
the CSSF gives no undertaking as to the economic and financial opportuneness of the transaction and the quality or solvency of
the Issuer in line with the provisions of article 7 (7) of the Luxembourg Prospectus Law. The Issuer may request CSSF to provide
competent authorities in other host Member States within the European Economic Area with a certificate of approval attesting that
the Prospectus has been drawn up in accordance with the Luxembourg Prospectus Law.
Application has been made to the Luxembourg Stock Exchange for the Bonds to be listed on the official list of the Luxembourg
Stock Exchange (the "Official List") and to be admitted to trading on the Luxembourg Stock Exchange's regulated market "Bourse
de Luxembourg", appearing on the list of regulated markets issued by the European Commission. The Luxembourg Stock
Exchange's regulated market is a regulated market for the purposes of the Directive 2004/39/EC of the European Parliament and
of the Council of 21 April 2004 on markets in financial instruments.
Sole Structuring Adviser
Commerzbank
Joint Lead Managers
Barclays
Citigroup
Commerzbank
Crédit Agricole CIB
Co-Lead Managers
BayernLB
DZ BANK AG

RESPONSIBILITY STATEMENT
The Issuer with its registered office in Germany accepts responsibility for the information contained
in this Prospectus and hereby declares that, having taken all reasonable care to ensure that such is
the case, the information contained in this Prospectus is, to the best of its knowledge, in accordance
with the facts and contains no omission likely to affect its import.
The Issuer further confirms that (i) this Prospectus contains all relevant information with respect to
the Issuer and its consolidated subsidiaries taken as a whole (the "Hannover Re Group" or the
"Group") and to the Bonds which is material in the context of the issue and the offering of the
bonds, including al relevant information which, according to the particular nature of the Issuer and
of the Bonds is necessary to enable investors and their investment advisers to make an informed
assessment of the assets and liabilities, financial position, profits and losses, and prospects of the
Issuer and the Hannover Re Group and of the rights attached to the Bonds; (i ) the statements
contained in this Prospectus relating to the Issuer, the Hannover Re Group and the Bonds are in
every material respect true and accurate and not misleading; (ii ) there are no other facts in relation
to the Issuer, the Hannover Re Group or the Bonds the omission of which would, in the context of
the issue and offering of the Bonds, make any statement in the Prospectus misleading in any
material respect; and (iv) reasonable enquiries have been made by the Issuer to ascertain such
facts and to verify the accuracy of all such information and statements.
NOTICE
No person is authorised to give any information or to make any representation other than those
contained in this Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorised by or on behalf of the Issuer or Barclays Bank PLC,
Citigroup Global Markets Limited, Commerzbank Aktiengesel schaft and Crédit Agricole Corporate
and Investment Bank (together, the "Joint Lead Managers") and BAYERISCHE LANDESBANK
and DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main (each a "Co-Lead
Manager" and together with the Joint Lead Managers, the "Managers").
This Prospectus should be read in conjunction with al documents incorporated herein by reference.
This Prospectus contains certain forward-looking statements, including statements using the words
"believes", "anticipates", "intends", "expects" or other similar terms. This applies in particular to
statements under the caption "General Information on the Issuer and the Hannover Re Group 
Business Overview" and "General Information on the Issuer and the Hannover Re Group Recent
Developments since 30 June 2014" and statements elsewhere in this Prospectus relating to, among
other things, the future financial performance, plans and expectations regarding developments in
the business of the Hannover Re Group. These forward-looking statements are subject to a number
of risks, uncertainties, assumptions and other factors that may cause the actual results, including
the financial position and profitability of the Hannover Re Group, to be materially different from or
worse than those expressed or implied by these forward-looking statements. The Issuer does not
assume any obligation to update such forward-looking statements and to adapt them to future
events or developments.
Such deviations may arise due to, without limitation, (i) changes of the general economic conditions
and competitive situation, particularly in the Hannover Re Group's core business and core markets,
(i ) performance of financial markets (particularly market volatility, liquidity and credit events), (ii )
frequency and severity of insured loss events, including from natural catastrophes, and the
development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels,
(vi) particularly in the banking business, the extent of credit defaults, (vii) interest rate levels, (vi i)
currency exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changes in laws and
regulations, including tax regulations, (x) the impact of acquisitions, including related integration
2

issues, and reorganization measures, and (xi) general competitive factors, in each case on a local,
regional, national and/or global basis. Many of these factors may be more likely to occur, or more
pronounced, as a result of terrorist activities and their consequences.
Each investor contemplating purchasing any Bonds should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer.
This Prospectus does not constitute an offer of Bonds or an invitation by or on behalf of the Issuer
or the Managers to purchase any Bonds. Neither this Prospectus nor any other information supplied
in connection with the Bonds should be considered as a recommendation by the Issuer or the
Managers to a recipient hereof and thereof that such recipient should purchase any Bonds.
This Prospectus reflects the status as of its Issue Date. The offering, sale and delivery of the Bonds
and the distribution of the Prospectus may not be taken as an implication that the information
contained herein is accurate and complete subsequent to the date hereof or that there has been no
adverse change in the financial condition of the Issuer since the date hereof.
To the extent permitted by the laws of any relevant jurisdiction, neither any Manager nor any of its
respective affiliates accepts responsibility for the accuracy and completeness of the information
contained in this Prospectus or any other document incorporated by reference. The Managers have
not independently verified any such information and accept no responsibility for the accuracy
thereof.
This Prospectus does not constitute, and may not be used for the purposes of, an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any
person to whom it is unlawful to make such offer or solicitation.
The distribution of this Prospectus and the offering, sale and delivery of the Bonds in certain
jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are
required to inform themselves about and to observe any such restrictions. For a description of the
restrictions applicable in the United States of America and the United Kingdom, see "Subscription
and Sale of the Bonds Sel ing Restrictions". In particular, the Bonds have not been and will not be
registered under the United States Securities Act of 1933 (the "Securities Act"), as amended, and
are subject to United States tax law requirements. Subject to certain exceptions, the Bonds may not
be offered, sold or delivered within the United States of America or to U.S. persons as defined in
Regulation S under the Securities Act ("Regulation S").
The legal y binding language of this Prospectus is English. Any part of the Prospectus in German
language constitutes a translation, except for the Terms and Conditions in respect of which German
is the legally binding language.
In this Prospectus al references to "", "EUR" or "Euro" are to the currency introduced at the start
of the third stage of the European economic and monetary union, and as defined in Article 2 of
Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the Euro, as amended.
IN
CONNECTION
WITH
THE
ISSUE
OF
THE
BONDS,
COMMERZBANK
AKTIENGESELLSCHAFT (THE "STABILISING MANAGER") (OR ANY PERSON ACTING ON
BEHALF OF THE STABILISING MANAGER) MAY OVER-ALLOT BONDS OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE BONDS AT A
LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO
ASSURANCE THAT THE STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF
THE STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY
STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE
PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE BONDS IS MADE AND, IF
BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF
3

30 DAYS AFTER THE ISSUE DATE OF THE BONDS AND 60 DAYS AFTER THE DATE OF THE
ALLOTMENT OF THE BONDS. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE
CONDUCTED BY THE STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF
THE STABILISING MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.

4

TABLE OF CONTENTS
RISK FACTORS .................................................................................................................................. 6
TERMS AND CONDITIONS OF THE BONDS .................................................................................. 23
GENERAL INFORMATION ON THE ISSUER AND THE HANNOVER RE GROUP ........................ 61
TAXATION ......................................................................................................................................... 74
SUBSCRIPTION AND SALE OF THE BONDS ................................................................................. 80
GENERAL INFORMATION ............................................................................................................... 82

5

RISK FACTORS
The Issuer believes that the fol owing factors may affect its ability to fulfil its obligations under the Bonds.
Factors which the Issuer believes may be material for the purpose of assessing the market risks associated
with the Bonds are also described below. Al of these factors are contingencies which may or may not occur
and the Issuer is not in a position to express a view on the likelihood or the extent of any such contingency
occurring. Additional risks not currently known to the Issuer or the Hannover Re Group that are now immaterial
may result in material risks in the future.
The Issuer believes that the factors described below represent the principal risks inherent in investing in the
Bonds, but the Issuer may be unable to pay interest, principal or other amounts on or in connection with the
Bonds for other reasons than those described below, and the Issuer does not represent that the statements
below are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this
Prospectus (including any documents incorporated by reference herein) and reach their own views prior to
making any investment decision.
Words and expressions defined in "Terms and Conditions of the Bonds" below shall have the same meanings
in this section.
Risks relating to the Issuer and the Hannover Re Group
Set out below are risks associated with the Issuer and the Hannover Re Group which may have a material
impact on its business operations and/or the level and volatility of its profitability, and therefore its ability to
perform its obligations under the Bonds, including:
Hannover Re Group's Business related risks
Business relations with primary insurers
Within the scope of its reinsurance business, the Hannover Re Group underwrites the business of primary
insurers, which means that facts and circumstances in the insurers' environment may also indirectly influence
the Hannover Re Group. These circumstances include, in particular, the risk that insurers may write less
business as a result of which a smaller volume is also reinsured , the risk that insurers may write business,
the quality of which is incorrectly assessed by the Hannover Re Group as more favourable than it actually is,
and the risk that the credit status of insurers may develop worse than the Hannover Re Group had anticipated
at the time when the reinsurance treaties in question were written. The materialisation of each of these
individual circumstances could detrimentally affect the assets, financial position and net income of the
Hannover Re Group.
Business relations with retrocessionaires and counterparty risks
The Hannover Re Group systematically uses retrocessions and protection covers to smooth results and
optimise its net income; in this context it attaches considerable importance to the quality and credit status of its
retrocessionaires. The assets, financial position and net income of the Hannover Re Group could therefore be
adversely affected if the market conditions for retrocession deteriorate to the detriment of reinsurers in the
future, if certain protection covers especial y catastrophe excess of loss covers are no longer available or if
individual retrocessionaires should become unable or unwil ing to pay.
The Hannover Re Group has monetary and securities claims under numerous transactions against
retrocessionaires, ceding companies, brokers and other debtors. An economic downturn, negative
developments of capital markets, a decline in real estate values and several other comparable influencing
factors may lead to an increased default by debtors (counterparty risk). This increased default would mean
that value adjustments above and beyond the extent already covered by provisions would have to be made on
assets of the Hannover Re Group; this could have a detrimental effect on the assets, financial position and net
income of the Hannover Re Group.
6

Risks from insurance contracts
The business conducted by the Hannover Re Group is founded on the deliberate assumption of risks through
the conclusion of insurance and reinsurance contracts. The Hannover Re Group constantly assesses and
monitors these risks and reviews their probability of occurrence. This also includes ongoing monitoring of
legal, demographic, macroeconomic and environmental developments being outside the influence of the
Hannover Re Group. As a general principle, the Hannover Re Group concludes insurance contracts only if the
premiums (including the investment income generated from these premiums) are sufficient in view of the
underlying risk and it establishes actuarially determined provisions for the occurrence of claims. If the
premiums calculated upon contract closing do not suffice to fund the resulting losses, if the premium
calculations are based on inaccurate assumptions, if the companies belonging to the Hannover Re Group fail
to (fully) identify or correctly evaluate developments, if unexpected developments occur on the claims side or if
retrocessionaires with which the Hannover Re Group has, for its part, reinsured risks default on payment, this
could detrimentally affect the assets, financial position and net income of the Hannover Re Group.
Cyclical business
Non-life reinsurance is essentially a cyclical business. The same is true to a lesser extent of life reinsurance.
This means that the business volume of the Hannover Re Group does not develop in a linear manner. In past
years the volume of reinsurance business has therefore been subject to considerable fluctuations, which can
be attributed to a broad range of factors. These factors, which cannot always be foreseen and/or influenced,
include inter alia competition among reinsurers, the frequency and scale of catastrophic events, the availability
of reinsurance capacities, the volatility of capital markets and the general economic conditions. Furthermore,
these factors have also brought about changes in treaty conditions and hence profit margins in the past. A
slowdown or decline in the business development could detrimentally affect the assets, financial position or net
income of the Hannover Re Group.
Loss of a number of key clients
At the moment, the Hannover Re Group is not materially dependent on one single client. If however the
Hannover Re Group would lose a number of its key clients, it could have a detrimental effect on the assets,
financial position and net income of the Hannover Re Group.
Competition
The competitiveness of the Hannover Re Group is influenced by numerous factors. They include, inter alia, the
Hannover Re Group's financial strength, rating, experience, local presence and reputation, the quality of its
client relationships, the type, scope and conditions of its offered products and services, the efficiency of its
receivables management as wel as its ability to respond appropriately to changing customer requirements and
the behaviour of its competitors. The Hannover Re Group constantly monitors changing customer
requirements and the behaviour of its competitors, and it adjusts its range of products and services
accordingly. Should, however, the Hannover Re Group be unable to respond appropriately to new
developments, this could detrimentally affect the assets, financial position and net income of the Hannover Re
Group.
Information by ceding companies
The Hannover Re Group systematically covers risk underwritten by primary insurers and reinsurers. In
deciding on whether such reinsurance or retrocession agreements are entered into and which technical
provisions are to be provided the Hannover Re Group relies on the provision of correct and sufficient risk
information by the respective ceding company. Should the Hannover Re Group, on the basis of incorrect or
incomplete information, wrongfully assess the covered risks, this may result in additional expenses. Even if the
Hannover Re Group would have recourse claims against the ceding company it cannot be assured that these
claims are fully valuable and enforceable. This could detrimentally affect the Hannover Re Group's assets,
financial position and net income.
Proposals for the future accounting of insurance contracts under International Financial Reporting
Standards (IFRS)
Currently, the Hannover Re Group accounts for insurance contracts in its consolidated financial statements in
accordance with US GAAP because the IFRS governing the accounting of insurance contracts (IFRS 4) does
not provide any measurement guidance for these contracts. In consequence, IFRS 4 al ows maintaining

7

previously applied accounting principles until a comprehensive IFRS on insurance accounting will be in place.
Currently, the Hannover Re Group expects a final IFRS for insurance contracts to be published by the
International Accounting Standards Board in 2017 at the earliest. It is expected that this new standard will have
to be first-time adopted by 2018 at the earliest providing comprehensive information for 2017. Based on
present information, the introduction of the new standard may lead to substantial changes in the existing
recognition and measurement methods for insurance contracts as wel as in the current IT environments and
work processes. Moreover, the envisaged changes in accounting may affect products and prices in direct
insurance and reinsurance. Furthermore, the proposals may lead to a substantial y higher volatility of the
consolidated results, which may cause higher capital costs and pressure on share prices.
Technical Provisions
The Hannover Re Group calculates the amount of technical provisions that are to be established for insured
events in accordance with relevant actuarial methods that reflect assumptions and empirical values. The level
of provisions constituted is regularly adjusted in the context of normal run-off with the aid of the latest
information available to management. The adequacy of the provisions initially constituted and subsequently
adjusted as necessary cannot be assured. In the insurance and reinsurance market this was demonstrated in
the past, for example, by claims connected with asbestos. If, on the basis of the actual future development
especial y with respect to risks that have currently not even been recognised as such or as a consequence
of the inaccurate selection or application of methods to calculate the constituted provisions, the Hannover Re
Group were to be compelled to increase the provisions or if the liabilities of the Hannover Re Group in
connection with the events that it has insured were to be higher than the constituted provisions, this could
detrimentally affect the assets, financial position and net income of the Hannover Re Group.
Asset management performance
The premiums and the capital position of the Hannover Re Group are invested to a large extent in different
types of assets. Thereby, the Hannover Re Group pursues a defined investment policy, which focuses on
required liquidity of assets, adequate issuer diversification as well as on asset liability management measures
in terms of duration, currencies and risk budgeting. It may, however, not be excluded that performance
fluctuations or inadequate decision making related to the selection of assets and the respective trading
activities or other misconducts occur (including wilful breaches of mandatory law and/or investment guidelines
of the Hannover Re Group). This could result in losses to the investment portfolio and in a divergence to the
value of the liabilities from the (re)insurance business detrimentally affecting the Hannover Re Group's assets,
financial position and net income.
Recruiting and retaining of qualified staff
The Hannover Re Group is to a significant extent dependent on qualified executives and personal. The
Hannover Re Group's success has depended and will continue to depend on recruiting and retaining qualified
employees. In the event that the Hannover Re Group experiences high rates of employee turnover, it is also
possible that the Hannover Re Group may not be able to recruit new employees from the labor market
immediately and that this may result in additional costs. The loss of qualified employees or ongoing difficulties
in the hiring of suitable employees could lead to a situation in which the Hannover Re Group cannot
successfully implement key decisions, measures and developments, which would adversely affect the
business operations of the Hannover Re Group.
Rating of the Hannover Re Group
The business result of the Hannover Re Group is influenced by its ability to acquire new insurance business at
advantageous conditions, to expand existing profitable business relationships and to raise capital on the
financial markets. Of particular significance to this ability is the evaluation of the financial strength and
creditworthiness and hence also indirectly of the competitiveness of the Hannover Re Group and its individual
companies by specialised agencies (hereinafter referred to as its "rating"). The most important rating for the
Hannover Re Group is the Insurer Financial Strength Rating, which evaluates the financial strength of the
Hannover Re Group on the basis of the factors that are relevant to policyholders and ceding companies.
These factors include, most notably, the capital adequacy, market positioning, risk management and earnings
outlook.

8

The current financial strength rating for the Issuer from Standard & Poor's Credit Market Services Europe Ltd.,
branch office Germany ("S&P") is "AA-" ("Very strong", stable outlook), while that of A.M. Best Europe - Rating
Services Limited ("A.M. Best") is "A+" ("Superior", stable outlook).1 A downgrade in the rating can have
significant adverse implications for the conditions of new and existing business, impair competitiveness and
increase the costs of financing for the Hannover Re Group. In addition, a downgrade can result in the
materialisation of new or accelerated maturity of existing liabilities that are contingent upon maintenance of a
particular rating. Each downgrade of the rating could therefore detrimentally affect the assets, financial position
and net income of the Hannover Re Group.
Risks arising from Financial Markets
Impact from stock market volatilities
In the aftermath of the historic price falls on international stock markets in 2008, many investors became more
risk-averse.
As a consequence, the Hannover Re Group has scaled back its exposure to a marginal holding (<1 per cent.)
of equity securities in 2008 and maintains such marginal holding to date. As of 31 December 2013 the total
exposure of equity securities amounts to EUR 29.0 mil ion. However, the holding of equity securities may be
increased in the future. Therefore, stock market volatility could have a detrimental effect on the assets,
financial position and net income of the Hannover Re Group.
Impact from exchange rate fluctuations
The Hannover Re Group writes (re)insurance business worldwide in numerous international currencies and
prepares annual and interim financial statements in Euros, as a consequence of which the Group is exposed
to exchange rate fluctuations. The Hannover Re Group reduces the resulting currency risks through the use of
matching currency coverage as much as possible as well as derivative financial instruments. This does not,
however, make definitive hedging possible, and an exchange rate risk, especial y with respect to the Euro/US
dollar exchange rate, consequently remains. Changes in the exchange rates used to convert a foreign
currency into Euro can therefore have a detrimental effect on the assets, financial position and net income of
the Hannover Re Group.
Impacts from interest rate fluctuations and sustained low interest rates
In past years fluctuations in the level of both short- and long-term interest rates have influenced the amount of
gains and losses on securities held among the Hannover Re Group's financial assets as well as the point in
time when such gains or losses were realised. The majority of the Hannover Re Group's holdings are invested
in fixed-income securities; the bulk of which are denominated in Euros and US dol ars. An increase in the
interest rate level could therefore reduce the market price of the financial assets. If the market price were to fal
below amortised cost for a sustained period, this could have to be written down to fair value with a charge
recognised in income which could have a detrimental effect on the assets, financial position and net income
of the Hannover Re Group.
Risks may also arise from a protracted period of low interest level in the international financial markets which
might affect the asset management performance. Should the current low level of interest rates be sustained or
decline even further, this may adversely affect the assets, financial position and net income of the Hannover
Re Group.
Additionally, the assets and liabilities of the Hannover Re Group are not necessarily matched in terms of
interest rate duration. A change in interest rates may accordingly have a detrimental effect on the economic or
general capitalization of the Group.
Impacts from credit and spread risks
Third parties that owe the Hannover Re Group companies money, securities or other assets may not pay or
perform under their obligations. These parties include the issuers whose securities the Hannover Re Group

1 The office issuing and elaborating the rating was a registered branch of S&P and A.M. Best each of which is, to the Issuer's belief, registered
in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating
agencies (see "List of registered and certified credit rating agencies" which can be accessed under www.esma.europa.eu).

9

companies hold, borrowers under loans made, trading counterparties, counterparties under swaps, credit
default and other derivative contracts, clearing agents, exchanges, clearing houses and other financial
intermediaries. In addition, with respect to secured or covered transactions, the Hannover Re Group
companies' credit risk may be exacerbated when the collateral held by those transactions cannot be realized
or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure. As a result,
defaults by one or more of these parties on their obligations to the Hannover Re Group companies due to
bankruptcy, lack of liquidity, downturns in the economy or real estate values, operational failure or other
reasons, or even rumours about potential defaults by one or more of these parties or regarding the financial
services industry generally, could lead to market value losses or defaults harming the Hannover Re Group
companies.
The Hannover Re Group companies also have exposure to a number of financial institutions and other
corporates in the form of unsecured debt instruments, derivative transactions and equity investments. There is
no assurance that losses on the market value or impairments to the carrying value of these assets would not
materially and adversely affect the Hannover Re Group's assets, financial position and net income.
Impacts from other market risks
The Hannover Re Group has a significant real estate portfolio via direct and fund investments. The market
value of these holdings is exposed to changes in real estate market prices and volatility.
Additionally, the Hannover Re Group holds exposures in private equity markets to a larger extent. Those
portfolios are also exposed to changes in market prices and volatility based on market conditions.
Most of these assets are recorded at fair value. There is no assurance that losses on the market value or
impairments to the carrying value of these assets would not materially and adversely affect the Hannover Re
Group's assets, financial position and net income.
Illiquidity of the investment portfolio
The Hannover Re Group is exposed to liquidity risks, i.e., the risk of being unable to convert investments and
other assets into cash in a timely manner in order to meet its financial obligations when they become due. It
may not be possible to sel holdings or to close open positions (or to do so only with price markdowns) due to
the il iquidity of the capital markets, in which case this could detrimentally affect the Hannover Re Group's
assets, financial position and net income.
Risks from the environment and geopolitical situation
Economic, political and other risks
The Hannover Re Group has been and may continue to be affected by the economic development of the
global economy in general and global capital markets in particular. In Europe there is an uncertainty
concerning the economic trend since the development of the global economy wil depend heavily on how the
debt crisis in the Eurozone is handled.
The further developments in the Eurozone may have a negative effect on the assets, financial position and net
income of the Hannover Re Group.
As an international y operating reinsurance group, the Hannover Re Group is active in many countries. The
Hannover Re Group is subject to the political and legal framework in each of these countries and relies to a
certain extent on the cooperation and reliability of public authorities (e.g. insurance supervisory authorities)
and local business partner (e.g. distributors). Moreover, in several markets there is a risk of political and
economic instability. There is also a general risk of detrimental changes to the regulatory and legal framework
in these jurisdictions. If any of the risks mentioned above materialises this could detrimentally affect the
Hannover Re Group's assets, financial position and net income.
Terrorist attacks and other geopolitical risks
The Hannover Re Group, as many other reinsurance companies, tried to exclude terror risks from their
insurance terms, or considerably increased the premiums for the insurance of these risks. However, the
potential of terror risks materialising could not be completely eliminated by these measures. While, on the one
hand, an exclusion of liability was not possible with respect to all insurance contracts, consequential damage

10