Forecast

Property/Casualty Primary Insurance

Premium income in the Property/Casualty Primary Insurance segment is likely to contract slightly in 2008. This expectation is based mainly on the protracted downward slide in rates for industrial business as well as our disciplined underwriting policy in this line. A minimal volume of integration-related erosion is also to be anticipated. From 2009 onwards premium income is expected to climb again – first and foremost on foreign markets. For the German HDI-Gerling companies, on the other hand, the potential for growth will likely be minimal in view of the sluggish market and likely sustained level of fierce competition. All in all, we expect profitability to rise in comparison with 2007, in spite of declining premium income.

Life Primary Insurance

In 2008 we see good prospects of our domestic companies in the Life Primary Insurance segment surpassing the premium growth of 1 to 2% forecast for the German life insurance market by the German Insurance Association (GDV). First-time recognition of BHW Lebensversicherung AG for a full financial year and the initial full consolidation of PB Lebensversicherung AG for a full financial year will also boost the premium volume. In 2009, too, the segment envisages further growth in gross written premium including savings elements of premium under unit-linked policies and an increase in profitability.

Non-Life Reinsurance

Overall, we do not regard non-life reinsurance as a growth market. On the one hand, the capital base of primary insurers has grown in recent years to facilitate the carrying of higher retentions, while on the other the hard market has now passed its peak for the time being. Nevertheless, thanks to our positioning as a multi-specialist we are still able to operate profitably even in a progressively softening market. In accordance with our strategy we do not pursue any growth targets in this segment, but are instead guided exclusively by a profit target – expressed as an increase in operating profit (EBIT) that is to be generated each year.

Life/Health Reinsurance

Given our favorable assessment of the situation in life/health reinsurance and our advantageous positioning, we are looking to double-digit growth and rising profits for this segment in 2008. In the Asian economic region the existing infrastructure is to be further expanded through the establishment of new locations. In Europe the enhanced annuities market in the United Kingdom and bancassurance business in France are highly promising areas of concentration. In the United States we anticipate further growth, inter alia through the writing of block assumption transactions as well as in Medicare supplement business for senior citizens. The newly established company in Bermuda will reinforce Hannover Life Re’s global network. We also envisage stepping up our activities in Sub-Saharan countries, in which we have identified profitable growth opportunities, from our base in South Africa.

Financial Services

The profitability of this segment is dependent, among other things, on the asset management fees typically collected in this market from other Group segments. As far as AmpegaGerling is concerned, it is our expectation that the growing impact of the merged companies following the bringing together of all staff at our Cologne location and the establishment of the new, joint business operation will increasingly make itself felt in this and the coming year. For 2008 and 2009, therefore, the segment is expected to deliver a consistently good performance.

Group as a whole

Given a further weakening in the US dollar compared to 2007, we expect to see a slight contraction in gross written premium to around EUR 19 billion. The anticipated positive cash flow from the technical account and the asset portfolio should be reflected in further improvement in the Group’s investment income. Since the anticipated changes in the profits booked by the Group segments will probably almost entirely offset each other overall, it is our expectation that Group EBIT in 2008 will be roughly on a par with 2007.

Turning to the return on equity generated by the Talanx Group, it remains our goal in the coming years to surpass the average risk-free market interest rate over the past five years for ten-year German government bonds by at least 750 basis points. With the aid of our performance management system, we are able to ensure that the individual profit targets of the Group companies/segments arrived at from our value-based management approach at least produce the return on equity defined for the Group as a whole. We are, however, confident not only of exceeding this targeted minimum return but of being able to measure ourselves against Europe’s most profitable insurance groups.

The accomplishment of these policy goals is realistic under our planning, but must remain subject to the reservation that the Group is not impacted by exceptionally large natural catastrophes or major loss events that go beyond the bounds of our planning parameters. At the same time, our profit expectations are guided by the assumption that capital markets will develop without any major disruptions.