FRANKFURT (Reuters) ? German reinsurer Hannover Re said it would use the cash freed up by the sale of U.S. unit Praetorian to assume more lucrative reinsurance risks, which could boost its 2007 returns.

Shares in the world's fourth-largest reinsurer rose after it said the sale of Praetorian to Australian insurer QBE for $800 million, or 2.1 times the unit's book value excluding goodwill, freed up about 600 million ($796.4 million) in risk capital that could be put to other uses.

The cash will allow Hannover Re to buy less of the expensive risk cover from other reinsurers and write more business in the highly profitable US property catastrophe market, Zeller said.

"The rates for this business are still very high, very attractive," he said.

"We will easily not only compensate but overcompensate" for the lost earnings from Praetorian, Hannover Re chief executive Wilhelm Zeller told an analyst conference call.

"For 2007 ... you can definitely expect an ROE (return on equity) of at least 15 percent again," Zeller added.

The company also will be able to use some of the capital for a project in Germany to be unveiled early in the new year, but it declined to give details.

"You will like it. You will love it," Zeller said.

Zeller's comments on the plans for redeploying the cash diminished the prospects of a share buyback.

"As long as we find a better use for it, we will not return it to shareholders. Should we not find a sensible use for it, a share buyback or special dividend would come under consideration," he said.

Zeller also said he expected the sale of Praetorian to have a positive effect on Hannover Re's credit ratings.

Credit rating agency Standard & Poor's currently has a "AA-" rating on Hannover Re with a negative outlook.

"I see no reason why this negative outlook should not go away pretty soon," Zeller said.