Dear friend,

We journalists often get accused (usually perfectly justifiably) of jumping to conclusions. Rare is the scribbling hack that is not able to add one and one together and come up with three as an answer.

It is to combat this natural tendency to exaggerate and speculate that we are often treated very well by very senior figures in our industry. They know that we are generally a simple lot and need things explaining so that we don’t run off and report a load of nonsense.

So we get access to top people. We sit down in boardrooms, drink lowest-common-denominator tea and coffee, eat biscuits and stare out of the window while the great and good of our sector regale us with tales of adventure on the high seas of the financial markets.

One such occasion was yesterday when Wilhelm Zeller of Hannover Re and his team came over to London for their annual analysts’ meeting, followed by an hour with a gaggle of London-based journalists.

It was a good session —we had all had plenty of time to digest the results, so Mr Zeller kindly dispensed with the usual run-through and we got stuck straight into the questions.

Mr Zeller always comes across really well at these occasions — he’s got a good sense of humour and communicates an infectious enthusiasm for his company and the way it goes about its business.

We hammered on about the state of the reinsurance and retro markets, the impact of the Florida Cat Fund reform, the Praetorian sale and Hannover’s pioneering capital market securitisations. So far, so good.

But as the hour came to a close and I asked a routine question about the company’s reserving changes, something weird happened.

I’ve just spent the last month looking at least one set of annual results every day.

It’s quite a routine, what’s happened t the top-line? the bottom line? combined ratio? Anything funny on the expense ratio? What’s the outlook? Investment income? Return on equity? And finally — prior year development — reserve releases or additions?

Bob’s your uncle, on to the next one.

Mr Zeller immediately launched into a speech about how probably 19 out of the last 20 major reinsurance failures had been down to reserving inadequacy on US Casualty business written either in the US, or worse still, in the London market.

He said that Hannover was pursuing a conservative reserving policy and had increased reserves this year, which went some way to explaining why its combined ratio was 98.4% and those of its peers were 92.6% (Munich Re) and 90.4% (Swiss Re) respectively.

I then asked by how much — say in simple terms of how many percentage points on the combined ratio, this reserve-strengthening had cost — and Mr Zeller said that “we are a very transparent company, but even we must be allowed to have a few secrets”.

This is rather like standing in the middle of a field full of Spanish fighting bulls and waving a large red rag in the air.

Hang on a minute — every other company that has reported so far this year has given this number as a matter of routine — yet you’re sitting opposite me with your very own CFO next to you and you’re saying that yours is a secret?

It’s an open invitation to speculate and sensationalise!

So here goes:

Like Robert de Niro preparing for his role in Raging Bull Is Mr Zeller saving some fat up ahead of lean soft market times ahead?

Or like the all-American blue-eyed dad in any standard US horror film, has he gone down to the cellar to find a cash-eating monster in his reserves basement, determined to violate his right to freedom and the pursuit of happiness (and perhaps eat his family pet?)

We just don’t know — it’s a secret!

So please help me out here — go to page 131 of the Hannover Re Annual report and check out the reserve triangulations and see if you can see the secret.

For me it’s a bit like staring at one of those Magic Eye pictures — it just gives me a headache.

Is it a happy secret, like discovering a 1950’s Berkshire Hathaway share certificate in a dusty drawer?

Or is it something a bit saucy, like finding out your long-departed grandfather had a secret sideline as a gigolo?

I’m only a simple soul — I thought that drinking tea, munching biscuits and asking the boss and the CFO straightforward questions was enough.

It seems I was wrong (again)!