Hannover Re: The somewhat different reinsurer. Ulrich Wallin, Chief Executive Officer

Transcription

1 Hannover Re: The somewhat different reinsurer Ulrich Wallin, Chief Executive Officer Commerzbank, German Investment Seminar New York, 15 January 2013

2 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Agenda Facts & figures Our strategy 1. Our mission: Growing Hannover Re profitably 2. We have ambitious profit and growth targets 3. We manage risks actively 4. We are a preferred business partner 5. We strive for a stable investment income Outlook

3 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Strong results further increase Hannover Re's financial strength Aided by a benign major loss situation and favourable investment results Favourable R/Iconditions Benign major losses Challenging capital markets Non-life reinsurance premium up by 13.0% Growth in life and health reinsurance above expectation (+14.5%) Net major losses of EUR m. below budget Net investment income up by 27.1%; RoI at 4.3% Unrealised gains from inflation swaps and ModCo amount to EUR 57.2 m. Strong operating cash flow of EUR 2,144 m. supports the increase of AuM to over EUR 31.2 bn. Q1-3/2012 results GWP +13.6% NPE +13.7% Net income EUR 671 m. EPS EUR 5.56 RoE 16.4% Shareholders' equity +19.2% BVPS EUR

4 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Our mission is to grow Hannover Re profitably Within the last years we strenghthened our position continuously Premium ranking 2011 in m. USD Rank Group Country GWP NPW 1 Munich Re D 33,719 32,274 2 Swiss Re CH 28,664 22,868 3 Hannover Re D 15,664 13,921 4 Berkshire Hathaway Inc. USA 15,000 15,000 5 Lloyd's 2) GB 13,621 10,015 6 SCOR F 9,845 8,891 7 RGA Re USA 7,704 7,736 8 China Re RC 6,179 5,904 9 PartnerRe BDA 4,621 4, Korean Re ROK 4,551 3, Everest Re BDA 4,286 4, Transatlantic Re USA 4,035 3, MAPFRE RE E 3,407 2, London Re CDN 3,117 3, Assicurazioni Generali I 2,674 2,674 1) Source: A.M. Best (September 2012) 1) Net premium earned 2) Reinsurance only 2

5 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook We have grown our non-life business profitably 5-year CAGR +7.7% Gross written premium in m. EUR Cornerstones of our non-life approach Central underwriting combined with local talent is the key to our success 4,988 5,747 6,339 6,826 Secures U/W discipline Lean, efficient infrastructure Selective growth We only grow our market share in "hard" markets We have no premium-growth targets, only for earnings Distribution through brokers No appetite for acquisitions Our cycle management gets us all the business we want e 3

6 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook We have strengthened our position in life and health 5-year CAGR +12.3% Gross written premium in m. EUR 5,090 5,270 4,529 3, e * CRM = Client Relationship Management Cornerstones of our life and health approach We focus on biometric risk and financing Top 5 markets: North America (32%), UK (28%), Rest of Europe (17%), Asia (9%), Australia (8%) Top 5 markets with highest 5y-CAGR: Asia (38%), North America (27%), Latin America (22%), Africa (18%), UK (12%) Sophisticated state-of-the-art CRM* Ability to differentiate between value-creating and value-destroying clients We create long-term win-win situations (don't play zero-sum games) We do consider acquisitions But only if strategic fit/complement No strategic prices 4

7 Facts & figures 1. Our mission Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Well balanced international portfolio Strongest growth in UK and emerging markets Gross written premium (Group) in m. EUR Africa Australia 12,463 3% 20% 11,343 9,567 9,317 9,289 8,259 8,121 10,275 11,429 12,096 4% 5% 7% 11% Latin America Asia 22% 17% 10% Other European countries 20% Germany 50% Great Britain 26% North America US GAAP (Great Britain listed in other European countries), as from 2004 IFRS 5

8 Facts & figures 1. Our mission Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook We seek to be one of the most profitable reinsurer Our minimum target is 750 bps above risk free Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank avg. RoE Rank Hannover Re 23.1% 1 (4.1%) % % % % 1 Peer 6, Bermuda, non-life Peer 8, US, life and health Peer 3, France, composite Peer 4, Bermuda, composite Peer 1, Germany, composite Peer 7, Bermuda, non-life Peer 5, US, non-life Peer 2, Switzerland, composite Peer 9, US, non-life 22.0% 2 7.3% 2 9.3% % 2 0.2% % % 9 6.5% % % % % % 6 8.9% % % 6 7.5% % % 3 1.1% % % 4 (7.6%) % % 5 6.5% % % 5 3.1% 6 9.4% % 4 (0.4%) % 3 9.9% 7 (1.3%) 8 7.7% % 8 4.8% 5 9.9% 7 7.1% 8 4.9% 5 7.5% % 7 (3.3%) 8 2.3% % % 3 5.1% 9 3.6% 10 (31.8%) % 9 5.8% 9 (4.4%) 9 (4.8%) 10 List shows the Top 10 of the Global Reinsurance Index (GloRe) with more than 50% reinsurance business Data based on company data, own calculation 6

9 Facts & figures 1. Our mission Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Accelerated increase in book value per share Book value per share, paid dividends in EUR CAGR 11.5% CAGR 17.7% Q1-3/2012 Book value per share Paid dividends (cumulative since 1994) 2003 US GAAP, as from 2004 IFRS As at 31 December 7

10 Facts & figures 1. Our mission Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Selective growth Premium growth driven by profitability Different lines with different cycles 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% GWP Profitability 2012 Latin America + Credit & Surety + Aviation +/- Motor Germany +/- US Casualty - Marine +/- US Cat +/- 0%

11 Facts & figures 1. Our mission Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Hannover Re remains the absolute cost leader Our overhead ratio is less than half of the industry average Administrative expense ratio 1) Lean, efficient infrastructure with no non-life underwriting authority in USA 7.4% High exposure to broker biz in non-life to be able to execute strict cycle management No unbundled services Lead positions in carefully selected areas 3.2% 3.1% 3.2% 2.8% 2.6% No attempt to offer everything to everyone, but rather concentrate on market segments in which we have a particular expertise e Peer average 2011 Own calculation 1) Administrative expenses + other technical expenses (in % of net premium earned) 2) Munich Re, SCOR, Swiss Re, Transatlantic Re, PartnerRe, Everest Re 2) Be competitive Have a better choice of business and better access to niches Be profitable 9

12 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook We manage risks actively Our capital model is the cornerstone of Hannover Re We manage our risk exposure to achieve a positive net income with a probability of 90% We ensure that the probability of an economic as well as IFRS capital loss does not exceed 0.03% Use of retrocession Conservative reserving Stringent U/W discipline 10

13 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook How do we calculate the capital margin......for our underwriters and our investment decisions Risk capital X MRC / NPE Capital margin = above risk-free + Admin. expenses (pre-tax) = Capital margin above risk-free (pre-tax) Non-life 55.0% reinsurance 4,785 X 9.1 / 6,800 = 6.40% + 2.9% = 9.30% Life and health reinsurance Asset management 27.5% 2,393 X 9.1 / 5,000 = 4.35% + 2.9% = 7.25% AUM 17.5% 1,523 X 9.1 / 30,000 = 0.46% 11

14 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook MtCR translates our economic targets into IFRS NPE + Economic revaluation - MRC = MtCR Net premium earned Discount effect on non-life net loss reserves (% of NPE) Minimum Return on Capital spread (% of NPE) Maximum tolerable Combined Ratio 100% + 4.4% - 6.4% = 98.0% At an MtCR of ~98% we earn 900 bps above risk free 12

15 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Exposure management supported by capital management Risk budget allocated to NatCat* 30% as % of economic capital Internal capital model sets the tone 25% 20% Stringent allocation of capital to NatCat exposed business is key to reduce volatility of earnings 15% 10% 5% Well established retrocession strategy and efficient NatCat management led to lower net major losses in % * On a stand-alone basis, i.e. before diversification with other risks 13

16 Effective capital requirement 32% diversification Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Diversification reduces capital requirements by a third Capitalisation ratio 160% Risk capital for the 99.97% VaR (according to economic capital model) in m. EUR 8,759 1, ,048 2,563 2,029 3,048 5,485 Non-life reinsurance Life and health reinsurance Assets Credit Operational HR Group required capital HR Group available economic capital As at December 2011 The risk categories have been adapted to the Solvency II requirements Calculation according to economic valuation principles 14

17 Effective capital requirement 50% diversification Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Diversification reduces capital requirements by 50% Non-life business group Risk capital for the 99.5% VaR (according to economic capital model) in m. EUR , , , North America Germany Marine Aviation Credit, surety & pol. risks Structured R/I & ILS UK, London market & direct Global treaty Gobal cat. XL Global facultative Total non-life R/I As at December 2011 Calculation according to economic valuation principles 15

18 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Mutual beneficial relationships with our customers Loyal and long-term oriented, consistent approach to CRM Preferred business partner USA: Flaspöhler surveys 2010/2011 Strategic approach to enhance our clients' commercial success through the services we provide We add value to both contracting parties with our broad scope of standard or tailored solutions Among the top three according to brokers and clients Germany: Imug Survey Germany % of our customers have a positive or very positive impression of Hannover Re CRM Strategy Account executives concept Training for clients Client feedback Austria and Switzerland: Imug Survey and 97 points by clients from Switzerland and Austria (on an ascending scale from 0-100) Credit, Surety and Political Risks: Hagstotz survey 2011 Overall customer satisfaction at "very high level" 16

19 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Our rating makes us a strong partner Standard & Poor's A.M. Best Insurance Day AA- "Very strong" Outlook: stable (19 June 2012) A+ "Superior" Outlook: stable (5 September 2012) Reinsurer of the year 2012 (5 September 2012) Being a highly-rated counterpart is a major ingredient of the recipe 17

20 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Numerous benefits of an above-average rating We have a better showing of business than the average player Not excluded from virtually any business/access to all lines of business We enjoy a highly diversified, high quality book of business We are on virtually all broker lists, with cedents often demanding specific R/Is We get very high allocations when we quote for business >90% vs. some 50% for a Bermuda start-up We create lower capital charges for our cedents "AA" range S&P capital charge on reinsurance recoverables = 0.8% ("A" = 1.4%, BBB = 3.1%) As an above-average rated R/I, we "minimise" our cedents' cost of capital Our cost of financing in the capital markets is lower Hybrid bonds trade at tighter spreads Better conditions for LoCs and credit lines We might not (yet) get paid extra for our better rating on a contract level, but other advantages are significant 18

21 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner Stable investment income Outlook We aim for stable investment income Main facts of our approach Our risk taking is weighted towards reinsurance rather than investment risks The structure of our investments is guided by the requirements of our technical liabilities We have a prudent investment philosophy Our portfolio is guided by basic principles of broad diversification across a wide variety of asset classes and issuers We strive for risk-free interest rates plus the cost of capital 19

22 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner Stable investment income Outlook Positive operating cash flow continues to support asset growth Assets under own management increased by 55% in 5 years Operating cash flow in m. EUR Assets under own management in m. EUR 25,411 28,431 31,188 2, ,144 20,137 22,507 1,752 1, , Q1-3/ Q1-3/2012 Q1 Q2 Q3 Q4 20

23 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner Stable investment income Outlook Net investment income increased by 27% in 2012 Net investment income in m. EUR 1,209 Ordinary investment income grew significantly since 2009 despite yields under pressure; supported by increase in assets and reallocation into credits Target yield of 3.5% outperformed with 4.3% despite high cash flow being invested at lower rates Q1-3/2008 Q1-3/2009 Q1-3/2010 Q1-3/2011 Q1-3/2012 Total return at 7.6% even significant higher (incl. HTM, L&R) driven by valuation reserves Net investment income excl. funds withheld Funds withheld 21

24 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner Stable investment income Outlook Solid and relatively high quality fixed-income portfolio......in the light of challenging capital market environment Fixed-income book by rating in XY Fixed-income book by country in XY BBB 13% <BBB 3% AAA 32% Australia 8% Asia 5% Rest of world 7% Germany 20% A 21% USA 24% UK 9% France 7% AA 30% No material exposure in Southern Europe and Ireland Rest of Europe 16% Fixed-income book diversified per rating, country, region and issuer Values as at 30 September 2012 GIIPS 4% 22

25 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner Stable investment income Outlook Small exposure in GIIPS (3.1% of AuM) Major part in coporates and covereds Total investment in GIIPS Semi-/Governments in GIIPS in m. EUR Governments 9.5% Semi- Goverments 0.4% Portugal 20 Spain 36 Covered Bonds 53.2% Corporates 36.9% Greece 0 Italy 18 Ireland 24 EUR 985 m. EUR 98 m. 23

26 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook New Guidance for 2012 Hannover Re Group Gross written premium (GWP) 1) +8% - +9% Non-life reinsurance 1) ~ +8% - +9% Life and health reinsurance 1)2) ~ +8% - +9% Return on investment 3)4) > 3.5% Group net income 3) > EUR 800 m. Dividend pay-out ratio 5) 35% - 40% 1) At unchanged f/x rates 2) Organic growth 3) Subject to no major distortions in capital markets and/or major losses in 2012 not exceeding EUR 560 m. 4) Excluding effects from inflation swaps 5) Related to group net income according to IFRS 24

27 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Guidance for 2013 Hannover Re Group Gross written premium (GWP) 1) ~ +5% Non-life reinsurance 1) ~ +3% - +5% Life and health reinsurance 1)2) ~ +5% - +7% Return on investment 3)4) ~ 3.4% Group net income 3) ~ EUR 800 m. Dividend pay-out ratio 5) 35% - 40% 1) At unchanged f/x rates 2) Organic growth 3) Subject to no major distortions in capital markets and/or major losses in 2013 not exceeding approx. EUR 625 m. 4) Excluding effects from inflation swaps 5) Related to group net income according to IFRS 25

28 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Our Investor Relations team Karl Steinle General Manager Corporate Communications Tel: Julia Hartmann IR Manager Corporate Communications Tel: Axel Bock Deputy IR Manager Corporate Communications Tel: Hannover Rückversicherung AG Karl-Wiechert-Allee Hannover

29 Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook 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.