Calm and assured, Ulrich Wallin has kept Hannover Re on a steadfast course since taking the helm last summer. But as catastrophe losses hit hard this year, will he need to start rocking the boat?

Steady as she goes. Ulrich Wallin, chief executive of the world’s fourth-largest reinsurer, might see himself as “less glamorous” than his predecessor Willi Zeller, but for him that’s as it should be.

The reinsurer is certainly doing pretty well. Its first-quarter results, released last month, show net premiums up 9.5% and the company on course to meet its infamous target of 15% return on equity (ROE) per annum, despite taking a heavy hit from the earthquake in Chile. Wallin, who took over from the rather more volatile Zeller a little over a year ago, is keen to stress that he’s all about “evolution not revolution”, and there’s plenty of evidence to back that up.

Wallin, 55, is well respected in the industry and his appointment in summer 2009 was no surprise. He was in a prime position to take over, due in part to his wide experience, responsible at the time of his appointment for specialty, direct and facultative, group protection, and insurance-linked securities.

Speaking to Global Reinsurance by phone a few days after the most recent results announcement, Wallin is true to form. With good grace, he acknowledges the differences between himself and Zeller. “Each leader is a different person,” he says. “As time goes by, there is always a feeling in any industry that we do not have as many characters in the market compared to a few years ago. But I suspect people will be saying the same thing 20 years from now.”

Wallin, who started out as a lawyer, has been at Hannover Re since he joined the underwriting department in 1986. He solidly worked his way through the ranks, taking over from Zeller in 2009, in what was widely seen as a safe appointment.

So what’s he achieved, this captain of the steady ship? In February, he saw Hannover Re become the first company to benefit from new preferential collateral rules in Florida, one of the world’s richest markets, in recognition of its commitment to the state.

Then he sealed a $500m letter of credit deal with Deutsche Bank, giving Hannover access to substantial funds, with the sole stated purpose of expanding its life business. This built on Hannover’s 2009 acquisition of ING’s life reinsurance portfolio.

Running a tight ship

But it’s not all been plain sailing. As the applause was still echoing round the corridors of the company’s stylish office building on Karl Wiechert Allee in Hannover, its underwriters were adding up large catastrophe losses from the Chile earthquake.

Claims in Chile have reached €185m ($228.29m), with a further €80m from other global catastrophes including Windstorm Xynthia in Europe.

The catastrophes meant that Hannover Re paid out almost as much in claims in the first quarter as it received in premiums globally, as the company’s combined ratio touched 99.3% for the period.

But today Zeller reckons he’s still on track to meet his annual targets – and insists this setback isn’t going to change Hannover Re’s approach. The reinsurer is generally seen as more flexible than its peers, and open to greater communication with cedants.

Wallin insists he will not be reining in his underwriters. “We want to remain flexible and responsive to requests,” Wallin says. “We probably empower our underwriters more than some of our peers do. At Hannover Re, we have a growing actuarial department that has become more involved, but we see that more as a tool. The final say and responsibility always lies with the underwriting departments.”

But that doesn’t mean he’ll be flogging reinsurance cheap. Hannover Re’s underwriters, like those at SCOR, did a good job keeping prices flat in the eye of the financial storm, while rates were dropping all around them.

But while he’s flexible with his clients, Wallin is pretty rigid in his approach to the company’s own performance. He has regularly repeated – and so far reached – the objective of 15% ROE per annum, a mantra that began under Zeller. Why such a rigid target?

It’s a “good middle ground” between dividend policy and capital policy, he says. Like any good chief exec, Wallin is keen to return earnings to shareholders – but always wants to have cash in hand so he can take advantage of opportunities as they arise – an intriguing hint that mergers and acquisitions could be on the cards.

“In order to do that, you need a buffer, because normally if you have a loss event, the capital requirements will increase, so if you don’t have [a buffer] you are somewhat hindered with regard to market opportunities.”

Don’t feed the cats

Wallin admits that taking this steady line is “getting more difficult” due to the soft market. But Hannover Re has one big advantage over its competitors: its top bosses work for less. It has a very low cost ratio compared to its immediate peers, with one observer dubbing Hannover Re a “skinny tiger rather than a fat cat”.

Although Wallin has a chuckle at the observation, he admits that management pay is lower than at other reinsurers. “If there is any complaint at all from employees, it would be on the level of salary, as we have the lowest cost ratio among the larger companies.”

Approaching his second year in charge, Wallin says he is especially proud of his role in developing Hannover Re’s life business, which has profited above expectations.

While the books show a reduction in profitability due to capital outlay used in the ING acquisition, the underlying profitability has more than doubled. More broadly, business is going well, Wallin says. “Everything outside the major losses, particularly life and investment income, was quite favourable. The overall large loss situation took over the results of the first quarter.”

He is also glad to have avoided the temptation to release prior-year reserves when Bermuda companies were doing so. But what of his competitors – does he think the use of reserve releases to improve results across the reinsurance industry has ended?

“It’s difficult to say,” he says. “There’s always the question: ‘is everything released now?’ But one also has to take into account that the loss development in 2009 on the P&C side was actually quite favourable [for reinsurers], due to the reduced economic activity and the extremely low inflation that we had in 2009. So if you look at the emergence of the losses in 2010, 2009 in contrast was positive, which creates additional room for releases.”

Looking forward, Wallin’s prediction that pricing will generally soften across most but not all lines differs slightly from that of his contemporaries, such as Swiss Re.

Swiss Re’s Americas boss Walter Bell believes that with the severity and frequency of risk, pricing will “probably have to be more reflective of what the risk reinsurers and insurers are taking on these days”.

But small differences of opinion aside, Wallin has settled into his new role well, raising no eyebrows and rocking no boats. Now he’s established, is it

time to start shaking things up? That looks unlikely. “I’ve been on the executive board for eight years and the changes I apply, and will continue to apply, are gradual and not revolutionary,” he says with characteristic diplomacy.

A hint of his plans came during Wallin’s first meeting of Hannover Re’s global management team at the end of May. The key messages contained no surprises: increase profitability, maintain certainty and keep on top of regulation.

As the choppy economic seas calm down, to be replaced by the waves of the soft market, this captain will continue on his steady course. GR