Conference Call on Interim Report 3/2008. Wilhelm Zeller, CEO Elke A. König, CFO

Transcription

1 Conference Call on Interim Report 3/2008 Wilhelm Zeller, CEO Elke A. König, CFO Hannover, 5 November 2008

2 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix DISCLAIMER This presentation does not address the investment objectives or financial situation of any particular person or legal entity. Investors should seek independent professional advice and perform their own analysis regarding the appropriateness of investing in any of our securities. While Hannover Re has endeavoured to include in this presentation information it believes to be reliable, complete and up-to-date, the company does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such information. Some of the statements in this presentation may be forward-looking statements or statements of future expectations based on currently available information. Such statements naturally are subject to risks and uncertainties. Factors such as the development of general economic conditions, future market conditions, unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the actual events or results to be materially different from those anticipated by such statements. This presentation serves information purposes only and does not constitute or form part of an offer or solicitation to acquire, subscribe to or dispose of, any of the securities of Hannover Re. Hannover Rückversicherung AG. All rights reserved. Hannover Re is the registered service mark of Hannover Rückversicherung AG.

3 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Q1-3/2008 Highlights 2008: A LOST YEAR Income statement Group EBIT impacted by capital-market crisis and catastrophe losses EUR 32.5 m. Net income negatively affected by tax charges EUR m. Non-Life Reinsurance Decrease in gross written premium (-7.6%) due to discontinuation of Specialty and f/x effects EUR 3,791.9 m. Underwriting result impacted by above-average cat. losses EUR m. Combined ratio (incl. interest on funds withheld) 103.6% Life/Health Reinsurance Gross written premium (-0.8%) depressed by f/x effects EUR 2,315.4 m. Reduced EBIT (-55.4%) due to prior year base effect and market valuation of funds withheld EUR 93.2 m. 1

4 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Q1-3/2008 Highlights 2008: A LOST YEAR (CONT'D) Balance sheet Very positive cash flow Recovery of USD in Q3/2008 with positive effect on invested assets Shareholders' equity and book value per share reflecting capital-market turmoil Disappointing RoE in m. EUR 31 Dec 07 Variance 30 Sep 08 Operating cash flow (y-o-y) % 1,195 Invested assets under own mgmt. 19, % 19,927 Shareholders' equity 3, % 2,613 - Book value per share % Return on equity (annualised) 23.5% - (6.4%) Policyholders' surplus* 5, % 4,503 2 * Shareholders' equity + minorities + hybrid capital

5 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Group figures at a glance CAPITAL MARKET TURMOIL TAKES ITS TOLL Significant write-downs on equities in m. EUR Q1-3 1H Q3 YTD Variance Gross written premium 6,426 4,145 1,961 6, % Net premium earned 5,491 3,415 1,746 5, % Net underwriting result (128) (36) (196) (232) +81.6% - Net underwriting result incl. funds withheld (136) (70) % Net investment income (75) % - From assets under own management (134) % - From funds withheld % Other income and expenses (49) (9) (97) (106) % Operating profit/loss (EBIT) (368) % Interest on hybrid capital (58) (39) (19) (58) -0.2% Net income before taxes (387) (25) % Taxes 3 (99) (16) (114) - Net income from continuing operations (403) (140) % Net income from discontinuing operations Net income (403) (140) % - Minority interest (8) % - Group net income (395) (143) % Retention 86.4% 89.5% 87.2% 88.8% Combined ratio (incl. interest on funds withheld) 99.3% 98.1% 107.8% 101.4% EBIT margin (EBIT/Net premium earned) 12.4% 11.7% (21.1%) 0.6% Tax ratio (0.5%) 27.3% (4.0%) (450.2%) Earnings per share (3.27) (1.18) 3

6 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Group figures at a glance NORMALISED EBIT DESPITE "IKE" ON SATISFYING LEVEL in m. EUR (41) 101 (13) (49) Q1-3/ U/W result Q1-3/2007 1) Ordinary inv. 2) income Inv. expenses Normalised EBIT Un-/realised gains & losses Depreciation/ impairments Other income & expenses EBIT Q1-3/2007 (34) 44 Q1-3/2008 (70) (433) (106) 33 U/W result Q1-3/2008 1) Ordinary inv. 2) income Inv. expenses Normalised EBIT Un-/realised gains & losses Depreciation/ impairments Other income & expenses EBIT Q1-3/ ) Including interest on funds withheld 2) Including profit and loss from associated companies

7 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix P/L figures at a glance UNDERWRITING RESULT IMPACTED BY "IKE" & OTHERS Net investment income hit by impairments in m. EUR Q1-3 1H Q3 YTD Variance Gross written premium 4,102 2,656 1,136 3, % Net premium earned 3,391 2,083 1,021 3, % Net underwriting result (50) 24 (155) (131) % - Net underwriting result incl. funds withheld (29) 33 (145) (112) % Net investment income (127) % - From assets under own management (137) % - From funds withheld % Other income and expenses (93) (6) (92) (98) +4.7% Operating profit/loss (EBIT) (374) (86) % Interest on hybrid capital Net income before taxes (374) (86) % Taxes (17) (86) (8) (94) % Net income from continuing operations (382) (180) % Net income from discontinued operations Net income (382) (180) % - Minority interest 56 6 (8) (2) % - Group net income (374) (178) % Retention 83.9% 89.4% 86.1% 88.4% Combined ratio (incl. interest on funds withheld) 100.9% 98.4% 114.2% 103.6% EBIT margin (EBIT/Net premium earned) 13.0% 13.8% (36.7%) (2.8%) Tax ratio 3.8% 30.0% (2.1%) (109.7%) Earnings per share (3.10) (1.48) 5

8 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Catastrophe losses 1) MAJOR LOSSES ABOVE CATASTROPHE BUDGET in m. EUR 1, ,373 1, Q1-3/2008 Large losses 2) 11% 8% 19% 4% 1% 10% 34% 2% 8% 16% 9% 5% 14% 4% 1% 7% 20% 2% 6% 14% Gross Net Catastrophe budget 3) 6 1) Claims over EUR 5 m. gross 2) As % of Non-Life premium ( adjusted to new segmentation) 3) = 5%, 2005 = 6%, = 8%, from 2008 = 10% of Non-Life net premium earned

9 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix 2008 catastrophe losses* 2008 HIT BY FREQUENCY AND SEVERITY "Ike", but also several smaller losses in m. EUR Non-Life Reinsurance Catastrophe loss Date Gross Net Snow and ice storm China 10 Jan - 15 Feb Flood Queensland Jan Flood Queensland Feb Winterstorm "Emma" 1-2 Mar Earthquake Sichuan, China 12 May Hailstorm "Hilal", Germany 28 May - 3 Jun Flood USA 28 May - 20 Jun Hailstorms Germany Jun Hurricane "Gustav" 29 Aug - 2 Sep Hurricane "Ike" 4-12 Sep Natural catastrophes Aviation/Marine claims Fraud claim Fire claims Major losses * Claims over EUR 5 m. gross

10 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix P/L figures at a glance GROSS WRITTEN PREMIUM DEPRESSED BY F/X EFFECTS Slow-down in UK mortgage market in m. EUR Q1-3 1H Q3 YTD Variance Gross written premium 2,334 1, , % Net premium earned 2,100 1, , % Net underwriting result (86) (64) (44) (108) +25.0% - Net underwriting result incl. funds withheld % Net investment income % - From assets under own management % - From funds withheld % Other income and expenses 56 (3) (2) (5) - Operating profit/loss (EBIT) % Interest on hybrid capital (0) Net income before taxes % Taxes 14 (18) (9) (26) % Net income (3) % - Minority interest % - Group net income (4) % Retention 90.5% 89.6% 88.8% 89.3% Combined ratio (incl. interest on funds withheld) 97.2% 97.8% 99.2% 98.3% EBIT margin (EBIT/Net premium earned) 9.9% 6.5% 0.8% 4.5% Tax ratio (6.6%) 20.4% 145.8% 28.4% Earnings per share (0.03)

11 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Capital markets turmoil SIGNIFICANT STEPS TAKEN TOWARD RISK REDUCTION......driven by considerations on capital and protection 250 Credit Index Financial Asset Swap Spread Euro STOXX /2006 Sale of U.S. real estate /2007 Termination of security lending /2008 Hedged equity exposure partially Q3/2007 Q4/2007 Q1/2008 Q2/2008 Q3/2008 Q4/ /2008 Further tightened issuer limits, tightened reinvestment spectrum 10/2008 Sale of unhedged equities No material ABS/MBS exposure (other than covered bonds) No "hidden" capital market or liquidity risks Built up liquidity via cash and liquid assets (EUR 4.6 bn.) No refinancing needs in 2008 and

12 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Investment income CAPITAL MARKET TURMOIL RESULTING IN WRITE-DOWNS Stable ordinary investment income in m. EUR Q1-3/2007 Variance Q1-3/2008 Ordinary investment income 1) % 632 Realised gains/losses % 77 Impairments (13) - (433) Unrealised gains/losses (trading) (3) - (33) Investment expenses 2) (41) -16.5% (34) NII from assets under own management % 209 NII from funds withheld % 162 Total investment income % ) Incl. results from associated companies 2) Incl. depreciation/impairments on real estate

13 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Investment income SIGNIFICANT EQUITY SALES IN OCTOBER Reduced risk in exchange for additional realisations Gradual stop-loss triggers were set based on capital considerations at DAX 30 reference levels of 5,000, 4,750 and 4,500 DAX 6,000 5,500 Euro STOXX 3,100 Average closing level (appr.) at 4,780 2,900 (DAX) and 2,470 (EURO STOXX) 2,700 Triggers were completely executed within the week of 8 October 5,000 4,500 2,500 2,300 Sale of ca. EUR 1 bn. equities (= unhedged parts of the portfolio) Loss of EUR 206 m. from sale in 10/2008 2,100 4,000 1,900 3,500 1,700 1 Oct 7 Oct 13 Oct 17 Oct 23 Oct 29 Oct DAX DAX (and VW with constant Beta) Euro STOXX 11

14 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Stress tests EQUITY EXPOSURE CLOSE TO ELIMINATED Portfolio Scenario as of 30 Sep Change in market value incl. hedge in m. EUR as of 31 Oct (est.) Equities* Prices -10% Equities* Prices -20% Equities* Prices -30% Fixed-income securities Yield increase +50 bps Fixed-income securities Yield decline -50 bps Unrealised gains (losses) (Available for sale) 31 Dec Sep Oct 08 (est.) Fixed income (103) (284) (307) Equities (51) Total unrealised gains (losses) 88 (277) (358) 12 * Euro STOXX 50: as of 30 September 2008

15 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix TARGET MATRIX Targets 2008 Historical data 1) Business Group Key figures 2008 Q Non-Life R/I Gross-premium growth none (7.6%) (20.1%) (5.8%) (6.7%) Combined ratio - assuming a 100% 2) 103.6% 99.7% 100.8% 110.3% net cat.-loss ratio (natural & man-made) up to 10% 14.3% 6.3% 2.3% 20.4% EBIT margin 3) 12.5% (2.8%) 14.8% 14.2% (0.0%) EBIT growth 10% (119.4%) (0.4%) n.m. (100.3%) xroca 4) 5% n.a. 3.2% 4.4% (1.9%) Life/Health R/I Gross-premium growth 12-15% 5) (0.8%) 10.4% 15.2% 11.4% EBIT margin 3) % 4.5% 8.3% 5.9% 4.1% EBIT growth 12-15% (55.4%) 65.4% 49.8% 21.4% xroca 4) 10% n.a. 28.8% 40.1% 35.7% Group Return on investments 6) 4.8% 1.4% 4.6% 5.0% 4.4% Return on equity (annualised) 11.4% 7) (6.4%) 18.2% + 5.3% 18.7% 1.9% Spread over risk free 750 bps bps 1958 bps 1469 bps -230 bps EBIT growth 10% (95.2%) 14.6% 795.0% (82.9%) Triple-10 targets Earnings per share growth 10% (124.7%) 8) 10.6% 942.7% (82.4%) Book value per share growth 10% (22.0%) 15.6% 11.4% 3.0% 13 1) Non-Life R/I: 2005 own calculation, incl. consolidation 2) Max. tolerable combined ratio = net premium earned + [(invested P/C assets * sustainable yield) pre-tax cost of capital] i.e. 100% + [(~ 307% * 3.4%) - (~ 96% * 7.3%)] = ~ 103.4% 3) EBIT/Net premium earned 4) xroca = Excess return on capital allocated = IVC/Capital allocated 5) At constant f/x rates 6) Assets under own management 7) 5-year average government-bond yield = 3.9% bps 8) Excluding one-off tax effect n.a. = not available n.m. = not meaningful

16 Outlook on 2008

17 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix GUIDANCE FOR 2008 Hannover Re Group Gross written premium (GWP) ±0% Net premium earned (NPE) ±0% Non-Life R/I (NPE) -2% L/H R/I (NPE) +5% Q4/2008: break-even result after tax attainable (provided normal catastrophe loss experience) 14

18 Appendix

19 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix OUR STRATEGIC BUSINESS GROUPS AT A GLANCE Non-Life R/I Life/Health R/I Consolidation Total in m. EUR Q1-3/2007 Q1-3/2008 Q1-3/2007 Q1-3/2008 Q1-3/2007 Q1-3/2008 Q1-3/2007 Q1-3/2008 Gross written premium 4,102 3,792 2,334 2,315 (10) (1) 6,426 6,106 Change in GWP % % % % Net premium earned 3,391 3,103 2,100 2, ,491 5,162 Net underwriting result (50) (131) (86) (108) 9 7 (128) (232) - Net underwriting result incl. funds withheld (29) (112) (70) Net investment income From assets u. own mgmt From funds withheld (0) Other income and expenses (93) (98) 56 (5) (12) (3) (49) (106) Operating profit/loss (EBIT) 442 (86) Interest on hybrid capital 0 0 (0) 0 (58) (58) (58) (58) Net income before taxes 442 (86) (31) (33) 620 (25) Taxes (17) (94) 14 (26) (114) Net income from continuing operations 425 (180) (25) (26) 623 (140) Net income from discontinued operations Net income 439 (180) (8) (26) 654 (140) - Minority interest 56 (2) Group net income 383 (178) (8) (26) 577 (143) Retention 83.9% 88.4% 90.5% 89.3% 86.4% 88.8% Combined ratio (incl. interest on funds withheld) 100.9% 103.6% 97.2% 98.3% 99.3% 101.4% EBIT margin (EBIT/Net premium earned) 13.0% (2.8%) 9.9% 4.5% 12.4% 0.6% I

20 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Tactical asset allocation CONSERVATIVE APPROACH UNCHANGED Focus on liquidity in fixed income Investment category Sep Oct 08 (est.) Fixed-income securities 81% 82% 82% 79% 81% 87% Governmentals 25% 26% 21% 19% 21% 26% Semi-governmentals 21% 20% 21% 20% 21% 21% Corporates 26% 26% 27% 26% 24% 24% Investment grade 25% 24% 25% 24% 22% 22% Non-inv. grade 1% 2% 2% 2% 2% 2% Covered Bonds/ABS/MBS 10% 10% 13% 15% 15% 15% Equities 8% 8% 10% 12% 10% 4% Listed 7% 6% 8% 10% 8% 1% Private equity* 2% 2% 2% 2% 3% 3% Real estate 1% 1% < 1% < 1% < 1% < 1% Others 3% 4% 2% 2% 2% 2% Short-term investments & cash 6% 6% 6% 6% 6% 6% Total investments under mgmt. in bn. EUR II * Without outstanding commitments of EUR m. in 2007 and EUR m. as of 30 September 2008

21 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Fixed-income portfolio OVERALL RATINGS HARDLY EFFECTED BY DOWNGRADES Slight shortening reflects shift towards liquidity 9,000 in m. EUR 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Sep 08 AAA AA A BBB <BBB Modified duration 3.6 (3.8) and average rating AA- (AA-) as of 30 Sep 2008 (31 Oct est.) III S&P financial strength rating

22 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Asset classes SUBSTANTIAL EQUITY IMPAIRMENTS Broad diversification of fixed-income sector shielded us from defaults Q1-3/2007 Q1-3/2008 in m. EUR Realised gains/losses Impairments Realised gains/losses Impairments Fixed-income securities (25) (5) 64 (77) Equities 97 (8) (9) (355) Other Total 104 (13) 77 (433) Fixed-income impairments YTD in m. EUR ABS/MBS (34.8) Lehman Brothers (17.8) Fixed Income Loan Funds (8.1) Washington Mutual (6.0) Bradford & Bingley (1.7) Other (8.8) Total (77.3) Equity impairments per currency EUR 82% USD 17% Others 1% Total 100% IV

23 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Asset allocation WELL-BALANCED PORTFOLIO Majority of ABS/MBS are covered bonds Corporates 24% Equities (incl. private equity) 10% Real estate <1% Others 2% Short-term investments & cash 6% Covered Bonds/ABS/ MBS 15% Pfandbriefe, Covered Bonds -underlying Mortgages/Real Estate 37% Prime RMBS 4% CMBS 6% CDOs 3% Subprime RMBS 1% Semi- Governments 21% EUR 19,832 m.* Governments 21% Pfandbriefe, Covered Bonds -underlying (Semi) Government 48% EUR 2,962 m.* Others (ABS of Utility, Credit Card, Car Loan) 1% Since 30 September significant reduction of equity exposure (approx. EUR 1,000 m.) Equity quota (incl. private equity) lowered to 4% (approx. 1% listed) No significant changes to covered bonds/abs/mbs allocation V * Market value as of 30 September 2008

24 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Asset allocation CORPORATE SECTOR ALLOCATION Reflects market spectrum Others 7.3% Others 1.3% Insurance 20.6% Industrials 39.1% Financials 53.6% Publicly guaranteed 6.4% Banks covering all activities 45.3% Investment banks 11.6% Special banks 14.8% EUR 4,798 m.* EUR 2,570 m.* "Financials" are held in the following currencies: EUR 63%, USD 16%, GBP 9% and others 13% VI * Market value as of 30 September 2008

25 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Asset allocation CORPORATES BY CURRENCY AND RATING Reflecting asset liability management (ALM) needs as well as market spectrum EUR Corporates USD Corporates Other Currencies Corporates BBB 18% <BBB 10% AAA 0.4% AA 18% <BBB 23% AAA 4% 4% AA 21% A 26% BBB 1.1% <BBB 0.7% AAA 18% 18% BBB 11% A 54% A 41% AA 54% EUR 2,461 m.* EUR 1,519 m.* EUR 793 m.* Broad portfolio diversification across the single-issuer spectrum USD-portfolio with better quality driven by Mastertrust requirements VII * Market value as of 30 September 2008

26 Highlights Non-Life R/I Life/Health R/I Investments Targets Outlook Appendix Asset allocation LIMITED EXPOSURE TO STRUCTURED FIXED INCOME Weight on floating rate notes Structured product in m. EUR Floater Callables/Putables CDOs 34.9 Convertibles 28.5 Cat. bonds 25.5 Other 75.2 Total CDOs 7% Other 15% Convertibles 6% Cat. bonds 5% Callables/ Putables 22% Floater 45% VIII