Hannover Re: the somewhat different reinsurer

Transcription

1 Hannover Re: the somewhat different reinsurer September 2015

2 Content Overview Hannover Re Group Property & Casualty reinsurance Life & Health reinsurance Investment management Risk management Capital management Results Q2/ Outlook I VI Appendix

3 Key facts about Hannover Re Today 18 Feb 2004 Second Public Offering Majority shareholder: 50.2% held by Talanx AG* More than 100 subsidiaries, branches and representative offices on all 5 continents 30 Nov 1994 Initial Public Offering Total staff of roughly 2,500 employees 1990 Life & Health reinsurance as a strategic growth segment More than 5,000 insurance clients in about 150 countries 1966 Foundation by HDI as a subsidiary Property & Casualty reinsurance * Majority shareholder HDI V.a.G. 1

4 Unique group structure supports our business model Majority owner, but operational and financial independence Talanx AG* Free float 50.2% 49.8% 64.8% 8 German primary insurer >100 subsidiaries, branch/rep. offices in ~20 countries German business International business * Majority shareholder HDI V.a.G. 2

5 Executive Board of Hannover Rück SE Ulrich Wallin Chairman Business Opportunity Management, Compliance, Controlling, Human Resources Management, Internal Auditing, Risk Management, Corporate Development, Corporate Communications Claude Chèvre Dr. Klaus Miller Roland Vogel Dr. Michael Pickel Sven Althoff Jürgen Gräber Life & Health Reinsurance Africa, Asia, Australia/New Zealand, Latin America, Western and Southern Europe, Longevity Solutions Life & Health Reinsurance United Kingdom/ Ireland, North America, Northern, Eastern and Central Europe Finance and Accounting, Information Technology, Investment and Collateral Management, Facility Management Group Legal Services, Run-Off Solutions, Target Markets in Property & Casualty Reinsurance: North America, Continental Europe From left: Claude Chèvre, Dr. Klaus Miller, Ulrich Wallin, Roland Vogel, Dr. Michael Pickel, Sven Althoff, Jürgen Gräber Specialty Lines Worldwide Marine, Aviation, Credit, Surety and Political Risks, United Kingdom, Ireland, London Market and Direct Business, Facultative Reinsurance Global Reinsurance: Worldwide Treaty Reinsurance, Cat XL, Structured Reinsurance and Insurance-Linked Securities, Coordination of Property & Casualty Business Group, Quotations, Retrocessions 3

6 We are among the top reinsurers in the world Premium ranking 2013 in m. USD Rank Group Country GWP NPW 1 Munich Re DE 38,333 36,638 2 Swiss Re CH 32,934 30,478 3 Hannover Re DE 19,225 16,833 4 Lloyd's 2) UK 15,614 11,329 5 SCOR FR 14,116 12,570 6 Berkshire Hathaway Inc. US 12,776 12,776 7 RGA US 8,573 8,254 8 China Re CN 7,936 7,523 9 Korean Re KR 5,623 3, PartnerRe BM 5,562 5, Everest Re BM 5,219 5, Great West Lifeco CA 4,206 4, Transatlantic Holdings US 3,423 3, MAPFRE RE ES 2,524 2, General Insurance Corporation of India IN 2,377 2,139 1) 1) Source: A.M. Best (September 2014) 1) Net premium earned 2) Reinsurance only 4

7 Continued growth of both business groups 2014: +2.9%; 5-year CAGR +6.9% Gross written premium in m. EUR 13,774 13,963 14,362 10,275 11,429 12,096 44% 44% 45% 45% 45% 44% 55% 55% 56% 56% 56% 55% Property & Casualty reinsurance Life & Health reinsurance 5

8 Well balanced international portfolio Gross written premium (Group) in m. EUR Africa Australia Latin America Asia Other European countries Germany United Kingdom 9,317 9,289 8,259 8,121 10,275 11,429 12,096 13,774 13,963 14,362 3% 3% 4% 2% 6% 4% 6% 14% 15% 14% 16% 17% 9% 17% 43% 28% 1) 2) North America ) Japan 1% 2) CEE and Russia 1% 6

9 Hannover Re is one of the most profitable reinsurers Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank avg. RoE Rank Hannover Re 18.2% % % % % % 1 Peer 9, Bermuda, Property & Casualty Peer 5, Bermuda, Property & Casualty Peer 1, Switzerland, Composite Peer 2, Germany, Composite Peer 8, US, Life & Health Peer 7, France, Composite Peer 4, US, Property & Casualty Peer 6, Bermuda, Composite Peer 3, US, Property & Casualty 18.1% 2 (2.4%) % % % % 2 9.9% 7 (1.3%) % % % % 3 3.6% % % % % % % 5 3.1% % % % % % % 2 9.9% 8 6.5% % % % 6 7.5% 4 9.1% % 6 9.6% 8 9.5% 7 7.1% 8 4.9% % 4 9.4% 9 9.4% 9 9.2% % 4 (7.6%) % 1 9.7% % 2 9.2% 9 5.8% 9 (5.0%) 9 6.5% % 7 1.9% % 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 7

10 We maintained our competitive advantage on admin. expenses Administrative expense ratio* 3.2% 2.8% 2.6% 2.8% 3.0% Own calculation * Administrative expenses + other technical expenses (in % of net premium earned) 8

11 Accelerated value creation since year CAGR: +12.1% Increase of book value and accumulated paid dividends in EUR Book value per share Paid dividends (cumulative since 1994) As at 31 December 9

12 Shareholders' equity increased by 28.2% Driven by strong earnings and growing valuation reserves Policyholders' surplus in m. EUR Change in shareholders' equity in m. EUR 10,239 8,947 8,768 1,986 6,987 1, ,338 1, ,233 2, , ,551 7,551 4,509 4,971 6,032 5, Shareholders' equity Non-controlling interests Hybrid Shareholders' equity Net income Dividends paid Change in unrealised gains/ losses Currency translation and other Shareholders' equity

13 A superior and highly profitable reinsurer... Hannover Re's business case Top rating (S&P: AA-) ensures attractive new business Strong market positioning one of the leading reinsurers worldwide Generates noticeably higher profitability on 5-year average in comparison with our peer competitors Lean structures which lead to the lowest administrative expense ratio compared to our peer group De-risking and diversification measures taken to lower earnings volatility aiming to consistently produce attractive dividends Effective cycle management, selective and disciplined underwriting in Property & Casualty reinsurance Increasing profitability of our countercyclical Life & Health business... with a somewhat different approach 11

14 Our strategy: long-term success in a competitive business Our overriding target: profit and value creation Profitable growth Premium growth on a long-term basis above market average Minimum return on equity of at least 900 bps above risk free Achieve a profit in excess of the cost of capital (IVC, based on our ECM*) Profit and value creation Capital management Cost leadership Capital management in the light of distributable excess capital to achieve attractive RoE A sufficient equity buffer enables us to act on available and profitable business at all times Lower management expenses Competitive advantage compared to peers Deliver a profit that is above average for the sector Providing our clients with competitive terms Shareholder value Share price to outperform weighted Global Reinsurance Index (ISIN: DE 000 SLA 1GR 2) over a 3-year rolling period Consistently paying a dividend that is attractive to our shareholders * Economic Capital Model 12

15 Performance promise to our customers and shareholders Our value proposition to our customers Capital protection and capital management Earnings protection in all lines of business Supporting underwriting of new business opportunities Supporting product development and pricing Strong balance sheet and strong rating Long-term consistent approach of our underwriting policy Long-term relationship with clients Our profit targets to our shareholders Return on equity 900 bps above risk free * Return on investment 3.0% Earnings per share growth 6.5% Value creation per share 7.5% * After tax; 5-year rolling average of 10-year German government-bond rate ( risk-free ) 13

16 Our mission: identify risks and assess them correctly Sustainability at Hannover Re Governance and dialogue Regular reporting on our sustainability performance We seek an active and continuous dialogue with stakeholders Sustainability Product responsibility Employees Environment and society Our investment policy strives to generate a commensurate RoI, while take ESG criteria into account (e.g. UN Global Compact) Our product offerings are geared to the market and clients needs, with a focus on new economic, social and ecological risks We pay special attention to the professional and personal growth of our employees and seek to offer best possible framework conditions We focus on reducing on CO2 emissions associated with our business activities Our social involvement concentrated on the areas of research, learning, art and voluntary social engagement of our staff 2011 Implementation of a sustainability strategy 2012 Implementation of an Environmental Mgmt. System Certification according to DIN EN ISO Annual reporting according to Global Reporting Initiative Prime rating according to oekom research 2014 Hannover Re becomes member in the FTSE4Good index series 14

17 Present on all continents Europe America Spain Madrid Ireland Dublin United Kingdom London France Paris Germany Hannover Italy Milan Sweden Stockholm Asia Canada Toronto Bahrain Manama USA Charlotte Chicago Denver New York Orlando Bermuda Hamilton Mexico Mexico City Colombia Bogotá Brazil Rio de Janeiro Africa South Africa Johannesburg Australia Australia Sydney South Korea Seoul Japan Tokyo Taiwan Taipei China Hong Kong Shanghai India Mumbai Malaysia Kuala Lumpur Property & Casualty reinsurance Life & Health reinsurance Property & Casualty and Life & Health reinsurance 15

18 HR share outperforms indices over a 3-year rolling period Performance vs. indices Performance comparison (incl. reinvested dividends) 240% 220% 200% 180% 160% +125% +94% +69% 140% 120% 100% 80% 60% Hannover Re Global Reinsurance Index HDAX 16

19 How do we calculate our return targets? Our pricing is based 900 bps above risk free Risk capital X Factor Net income / (1 - tax) EBIT bps risk free Equity 6,900 X ( ) 724 / (1-0.24) 953 Minorities 700 X ( ) 74 / (1-0.24) 97 Hybrid 1,700 X 470 / (1-0.0) 80 Valuation adj. 800 Total 10, ,130 MRC (EBIT / risk capital) 11.2% Risk free - 1.6% Minimum Return on Capital (MRC) spread 9.6% As at September 2014; risk capital, net income and EBIT: figures in m. EUR 17

20 How do we calculate the capital margin for our underwriters and our investment decisions? Capital margin Risk MRC capital X / NPE = above risk-free + (pre-tax) Admin. and other = expenses* Total margin above risk-free (pre-tax) P&C 52.5% reinsurance 5,315 X 9.9% / 6,900 = 7.6% + 3.9% = 11.5% L&H reinsurance 24.0% 2,430 X 8.7% / 5,500 = 3.8% + 4.2% = 8.0% AuM Investment management 23.5% 2,380 X 9.9% / 35,200 = 0.67% % = 0.78% As at September 2014; risk capital and net premium earned: figures in m. EUR * E.g. expenses for the company as a whole 18

21 Reduced earnings volatility since 2009 Record EPS in 2014 Operating profit (EBIT) in m. EUR ,142 1, ,394 1,229 1, Earnings per share (EPS) in EUR (1.05)

22 Dividend payment of EUR EUR 1.25 special dividend Initiation of capital management activities Dividend per share in EUR Payout ratio: [ - ] [37%] [38%] [ - ] [35%] [37%] [42%] [42%] [40%] [52%] ,00 0, Dividend per share Special dividend per share 20

23 Yearly Total Shareholder Return (TSR) of 11.9% Value creation since IPO in m. EUR % Market capitalisation as of date 7,523 9,041 - Market capitalisation at IPO (Nov 1994) 1,084 1,084 + Dividend payments 2,649 3,162 - Capital increases (1996, 1997, 2001, 2003) Value creation since IPO 8,278 10,

24 Strategic RoE target well exceeded Strong 5-year track record, new target of 900 bps above risk free as at 2015 Return on Equity: yearly Return on Equity: average 18.2% 15.4% 15.0% 14.7% 12.8% 12.5% 12.1% 11.5% 11.3% 10.7% 15.2% 11.7% 13.8% 13.9% 12.3% 12.8% Actual Minimum target 750 bps above risk free* Minimum target 900 bps above risk free* 5-year Ø year Ø year Ø * After tax; 5-year rolling average of 10-year government-bond rate 22

25 We are somewhat different Property & Casualty reinsurance Central U/W Our strategic contribution from P&C Distribution Cycle mgmt. Reserving Central underwriting with local talent is key to our success Secures consistent underwriting decisions Effective cycle management and focus on profitability Selective growth: increase market share in hard markets only No pressure to grow due to low administrative expense ratio Above-average profitability due to stringent underwriting approach with focus on bottom line Conservative reserve policy led to build-up of reserve redundancies over the last years Further strengthening of the confidence level of our P&C reserves may be limited due to IFRS accounting constraints Positive effect on C/R Distribution channels Flexible cost base due to relatively higher share of business written via brokers (~2/3) We are a preferred business partner 23

26 Strategy contribution of the P&C business group Be among world's most profitable R/I & steer volatility in line with our profit targets Our value proposition to our customers Tailor-made solutions Comprehensive range of products which can be tailored to our customers needs Solution driven Constant monitoring of markets to identify trends and classes of business that show specific potential for the future Flexible organisation Utilisation of all distribution channels, i.e. direct as well as via intermediaries Fair and available Short lines of communication towards customers enabling speedy delivery of solutions Our profit contribution xroca* 2% EBIT margin 10% Combined ratio 96% * xroca= excess Return on Capital Allocated 24

27 Our Property & Casualty reinsurance business divisions Target markets North America* Continental Europe* GWP split 2014 Specialty lines worldwide Marine Aviation Global R/I 35% Target markets 33% Credit, surety and political risks UK, Ireland, London market and direct Facultative R/I Global R/I Worldwide Treaty R/I* Cat XL Structured R/I and ILS Specialty lines worldwide 32% * All lines of business except those stated separately 25

28 Roughly 2/3 of our business is written via brokers Breakdown of treaties by volume Breakdown of business written Nonproportional 36% Direct business 36% Proportional 64% Broker business 64% GWP 2014: EUR 7,903 m. (2013: EUR 7,818 m.) 26

29 Property & Casualty reinsurance: selective growth GWP split by line of business in m. EUR GWP split by regions 2014 Cat XL Structured R/I and ILS 7,717 7,818 7,903 5% 5% 4% 10% 8% 12% Latin America 7% Africa 4% Australia 2% North America 25% Worldwide Treaty R/I* 18% 19% 19% Marine Aviation UK, Ireland, London market and direct Credit, surety and pol. risks Facultative R/I Continental Europe* North America* 4% 5% 8% 8% 10% 18% 15% 4% 5% 7% 7% 11% 19% 15% 3% 5% 5% 7% 12% 18% 15% Asia 16% Other Europ. countries 20% Germany 13% United Kingdom 13% * All lines of business except those stated separately

30 Moderate premium growth due to strict U/W discipline EBIT up by 12.2% and EBIT margin well above target Gross written premium in m. EUR EBIT/EBIT margin in m. EUR 6,339 6,826 CAGR: 5.7% 7,718 7,818 7, % 10.1% 15.9% 15.5% , % 1, EBIT EBIT margin 28

31 Effective cycle management at work US casualty total inforce premium development in m. USD 1,029 1, Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Inforce premium as at 1 January U/Y perspective 29

32 Selective growth Premium growth driven by profitability Different lines with different cycles 140% GWP Profitability US Casualty + Motor Germany + Marine + 120% 100% + X Aviation +/- Credit and surety + US Cat +/- Latin America + 80%

33 At an MtCR of ~96% we earn 900 bps above risk free NPE + Economic revaluation - Capital margin = MtCR Net premium earned Discount effect on P&C net loss reserves (% of NPE) Capital margin above risk free (pre-tax) + - = Maximum tolerable Combined Ratio 2015: 100% + 3.8% - 7.6% = 96.3% 2014: 100% + 3.0% - 7.1% = 95.9% 2013: 100% + 3.6% - 7.5% = 96.1% 2012: 100% + 4.4% - 6.4% = 98.0% As at March

34 MtCR varies substantially by line of business 2015 Net premium earned (100%) North America* + Economic revaluation - Capital margin = MtCR 7.8% 8.6% 99.2% Continental Europe* 2.7% 8.2% 94.4% Marine 2.9% 11.6% 91.3% Aviation 5.8% 6.5% 99.3% Credit, surety and political risks 4.9% 8.0% 96.9% UK, Ireland, London market and direct 6.3% 7.5% 98.7% Facultative R/I 4.2% 7.3% 96.9% Worldwide Treaty R/I* 1.6% 7.0% 94.7% Cat XL 2.6% 20.4% 82.2% Structured R/I and ILS 0.8% 1.9% 98.9% Total Property & Casualty R/I 3.8% 7.6% 96.3% As at March 2015 * All lines of Property & Casualty reinsurance except those stated separately 32

35 Overall portfolio outperforms the MtCR Aviation impacted by high claims burden Combined Ratio 2014 vs. MtCR Target markets Specialty lines worldwide North America* Continental Europe* Marine Aviation Credit, surety and political risks UK, Ireland, London market and direct Facultative R/I 91.8% 93.1% 67.2% 112.1% 92.2% 110.3% 103.9% Global R/I Worldwide Treaty R/I* Cat XL Structured R/I and ILS 39.3% 98.5% 94.1% Total 94.7% Combined Ratio MtCR 0% 20% 40% 60% 80% 100% 120% 140% 160% MtCR = Maximum tolerable Combined Ratio * All lines of Property & Casualty reinsurance except those stated separately 33

36 Improving reserve adequacy compared to peer group Conservative reserving policy leads to build-up of reserve redundancies Reserve adequacy as a percentage of total reserves 10.0% 9.0% 8.5% 9.1% 9.4% 8.2% 4.8% 4.5% 7.4% 6.0% 5.4% 3.7% 8.6% 6.0% 3.8% 7.5% 4.8% 8.1% 6.1% 5.5% 5.0% 3.9% 2.5% 3.8% Hannover Re Peer 1 Peer 2 Peer 3 Source: Bank of America Merrill Lynch Global Research; European peers 34

37 Review of internal reserve studies by Towers Watson show increasing redundancies * For the HR Group, over the last 5 years, on average 3.1%p of the net earned loss ratio for P&C business is due to net reserve redundancy increases in m. EUR Year Redundancy Increase redundancy Effect on loss ratio P&C premium (net earned) % 5, % 5, , % 5, , % 6, , % 6, total average , % 6,061 * Redundancy of loss and loss adjustment expense reserve for its non-life insurance business against held IFRS reserves, before tax and minority participations. Towers Watson reviewed these estimates - more details shown in slide V (appendix) No change in reserving policy in

38 We are somewhat different Life & Health reinsurance Responsive We are committed to responsiveness and time to market Rapid decision-making processes In-depth knowledge of local markets Our strategic Flexible We are a highly flexible business partner Tailor-made services and solutions Ability to anticipate market and client demands contribution from L&H Efficient We foster an efficient organisational set-up 900 experts in 19 countries Highly empowered staff Undogmatic We have an undogmatic approach Entrepreneurial spirit Appetite to innovate industry solutions We offer small company flexibility with a large company balance sheet 36

39 Strategy contribution of the L&H business group We have ambitious profit and growth targets Our value proposition to our customers Financial solutions Tailored reinsurance structures for efficient capital or liquidity management Risk solutions Competitive terms, capacity and reinsurance solutions for all types of technical risks Reinsurance services Improvement of sales and underwriting processes Our profit contribution VNB EUR 180 m. EBIT margins Financial solutions/longevity 2% Mortality/Morbidity 6% xroca* 3% * xroca= excess Return on Capital Allocated 37

40 We expand our presence by a strong focus Our current set of solutions Traditional life & health reinsurance Financing Longevity Regulatory & accounting optimisation Our focus 1 High growth markets 1 2 Companies in transition 3 Alternative distribution channels 4 Underserved consumers 5 Hard-to-quantify risks Reinsurance universe Positive economic value expected 38

41 We are a decentralised, solution-oriented organisation with client-oriented offices Madrid Dublin London Paris Hannover Milan Stockholm Manama Toronto Charlotte Denver New York Orlando Hamilton Mexico City Seoul Tokyo Taipei Hong Kong Shanghai Mumbai Johannesburg Sydney Kuala Lumpur Automated U/W systems R&D technology Financial solutions Risk assessment Health (re-) insurance Biometric research Longevity solutions Expert networks 39

42 We have well defined reporting categories Financial solutions Profitability is less likely to be affected by the underlying biometric risks Transactions which include components to provide alternative means of accessing capital Risk solutions Profitability depends largely on the underlying biometric risks Mortality The risk of paying more death benefits than expected Morbidity The risk of experiencing a higher claims burden from traditional health, critical illness, long-term care, and disability covers Longevity The risk of paying annuities and pensions longer than expected 40

43 Life & Health reinsurance: a well diversified portfolio GWP split by reporting categories in m. EUR GWP split by regions Morbidity 6,058 13% 6,459 Latin Africa 6,145 America 3% 14% 18% 4% Australia North 12% America 30% Mortality 47% 46% 46% Asia 14% Longevity Financial solutions 15% 15% 16% 25% 25% 20% Other Europ. countries 11% Germany 4% United Kingdom 22% 41

44 We have a successful track record Gross written premium in m. EUR EBIT/EBIT margin in m. EUR CAGR: 6.1% 6,058 6,145 6,459 5,090 5, % 4.5% 5.1% 4.9% 2.8% EBIT EBIT margin 42

45 We have a successful MCEV development Value of New Business in m. EUR Value in Force in m. EUR 448 2,568 Target: EUR 180 m. 2,131 1,941 2, , Market Consistent Embedded Value in m. EUR Intrinsic Value Creation (IVC), xroca in m. EUR 4,275 3,675 3,066 3,134 2, % % (31) (1.3%) 8.4% 7.5% IVC xroca 43

46 Continued positive cash flow AuM increased by 13.7% helped by lower yields and strengthening of USD Operating cash flow in m. EUR Assets under own management (AuM) in m. EUR 36,228 2,523 2,637 31,874 31,875 1, , , ,411 28, Q1 Q2 Q3 Q4 44

47 Investment result fulfils the expectation Increase in total investments helped by lower yields and strengthening of USD Total investments in m. EUR Investment income in m. EUR 52,146 46,625 46,219 38,047 12,636 41,683 13,342 14,751 14,343 15, ,411 28,341 31,874 31,875 36, ,046 1,300 1,054 1, Funds withheld and contract deposits Assets under own management Income and expenses on funds withheld and contract deposits Net income from assets under own management 45

48 Asset allocation rather stable Slight increase in governments and high yielding bonds at expense of covereds Tactical asset allocation 1) Investment category H/2015 Fixed-income securities 90% 92% 90% 90% 89% - Governments 19% 19% 19% 21% 23% - Semi-governments 23% 23% 20% 19% 19% - Corporates 31% 33% 36% 36% 36% Investment grade 29% 30% 33% 33% 32% Non-investment grade 3) 3% 3% 3% 3% 4% - Pfandbriefe, Covered Bonds, ABS 16% 17% 15% 14% 12% Equities 2% 2% 2% 2% 2% - Listed <1% <1% <1% < 1 % < 1 % - Private Equity 2% 2% 2% 2% 2% Real estate/real estate funds 2% 2% 4% 4% 4% Others 3) <1% 1% 1% 1% 1% Short-term investments & cash 5% 3% 4% 4% 4% Total balance sheet values in bn. EUR ) Economic view based on market values without outstanding commitments for Private Equity and Alternative Real Estate as well as fixed-income investments of EUR m. (EUR m.) as at 30 June ) Of which Pfandbriefe and Covered Bonds = 80.6% 3) Reallocation of High Yield Funds from Others to Corporates Non-investment grade retrospective from 2011 onwards 2) 46

49 Allocation reflects reinsurance liabilities More than 80% of fixed-income book in A and better Governments Semigovernments Corporates Pfandbriefe, Covered Bonds, ABS Short-term investments, cash AAA 70.9% 59.7% 1.6% 64.0% % AA 15.0% 35.7% 15.2% 14.9% % A 9.3% 2.8% 42.9% 10.5% % BBB 3.7% 1.4% 33.1% 6.0% % <BBB 1.0% 0.4% 7.2% 4.7% - 3.9% Total 100.0% 100.0% 100.0% 100.0% % Germany 13.6% 42.2% 4.7% 25.0% 21.5% 17.7% UK 7.9% 3.1% 8.0% 9.6% 4.4% 7.1% France 3.4% 3.2% 6.7% 6.6% 0.6% 4.9% GIIPS 2.0% 0.9% 4.1% 12.7% 0.0% 3.9% Rest of Europe 7.9% 20.8% 17.9% 22.1% 3.9% 16.0% USA 49.3% 7.5% 36.0% 5.2% 22.2% 29.0% Australia 3.6% 7.8% 8.0% 10.4% 9.7% 7.3% Asia 8.1% 3.0% 4.7% 0.0% 27.3% 5.5% Rest of World 4.1% 11.5% 9.9% 8.4% 10.3% 8.6% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Total b/s values in bn. EUR 8,539 6,760 13,062 4,563 1,434 34,359 Total As at 30 June

50 Currency allocation matches liability profile of balance sheet Active asset/liability management ensures durational match to a large extent Currency split of investments GBP 8.8% AUD 5.4% CAD 2.7% 6.6 Others 5.7% Modified duration of portfolio 5.2 EUR 33.7% Modified duration of fixedincome mainly congruent with liabilities GBP s higher modified duration predominantly due to life business Modified duration USD 43.7% Modified duration as at 30 June 2015:

51 Active management of credit risk High level of diversification; Portion of banks stays stable Corporate allocation in m. EUR Total bank exposure* EUR 3,657 m. 8,949 31% 69% 10,583 27% 73% 11,453 26% 74% 13,245 27% 73% 13,587 27% 12% 9% 73% 26% Others GBP USD 52% EUR 4% 22% 50% 23% <BBB BBB A AA AAA 1 % 17% 83% Others Tier II Senior 12% 25% 21% 19% 2% 8% 8% 5% By currency By rating By seniority By country Rest of World Asia/ Australia USA Rest of Europe GIIPS FR UK DE H/2015 Non-Banks Banks * Ökonomische Darstellung basierend auf Marktwerten per 30. Juni

52 Unchanged small exposure in Southern Europe and Ireland* Merely 0.6% of total assets under own management Asset allocation in m. EUR Spain 126 Portugal 26 Ireland % Italy 65 Greece 0 Total assets under own management EUR 234 m. Economic view based on market value as at 30 June 2015 * Investments in governments and semi-governments 50

53 Stress tests on assets under own management unchanged focus on interest and spread developments Portfolio Scenario Change in market value in m. EUR Changes in OCI before tax in m. EUR Equity (listed and private equity) -10% % Yield curves +50 bps bps -1,507-1,303 Credit spreads +50% As at 30 June

54 Market sensitivity of inflation hedges Inflation Linked Bonds held as inflation hedges with volume of EUR 1,436 m. (thereof 348 m. EUR European HICP; 1,088 m. EUR US-American CPI) Average time to maturity 5.7 years (thereof 6.2 years EUR; 5.5 years USD) Average hedged inflation level of 1.47% EUR and 2.14% USD p.a. OCI effects of the inflation component YTD EUR +3.6 m. (thereof +6.2 m. EUR; -2.6 m. EUR of USD) Sensitivity to inflation risk: in m. EUR Change in market value of the inflation component through OCI Inflation expectation*: +100 BP +83 Inflation expectation*: -100 BP -78 Inflation expectation*: +400 BP +358 * CPI - Consumer Price Index (US inflation index) HICP - Harmonised Indices of Consumer Prices (EU inflation index; actually traded is the sub-index HICP ex tobacco) 52

55 Overview Hannover Re Group Property & Casualty R/I Life & Health R/I Investment mgmt. Risk mgmt. Capital mgmt. Q2/2015 Outlook Appendix Several levels of protection provide more NatCat capacity and thus creates additional earnings at a defined risk appetite Agg. XL ~ EUR 117 m. Div. cat swaps max. ~ EUR 118 m. ~ EUR 2.4 bn. Eurus III ~ EUR 100 m. Whole Account ~ EUR 250 m. K-Cession securitisation ~ EUR 345 m. + expected premium Group EBIT EUR 1.5 bn. Policyholders' surplus (shareholders' equity, non-controlling interest, hybrid capital) 2014: EUR 10.2 bn. As at February

56 Overview Hannover Re Group Property & Casualty R/I Life & Health R/I Investment mgmt. Risk mgmt. Capital mgmt. Q2/2015 Outlook Appendix Ensuring the quality of our portfolio Our quotation process in Property & Casualty reinsurance Step 1: Step 2: Step 3: Calculation of the loss expectancy Cost estimation Calculation of the cost of capital Historical loss and exposure analysis Future inflation Changes in the quality of underlying risks Changes in the quantity of underlying risks Commissions Broker fees Internal administration Level of capital allocation determined by volatility of the business covered and contribution to diversification Expected return on equity Capital structure Discounting of future cash flows 54

57 Overview Hannover Re Group Property & Casualty R/I Life & Health R/I Investment mgmt. Risk mgmt. Capital mgmt. Q2/2015 Outlook Appendix Equity Substitutes We pioneered securitisations (transfer of risks into capital markets) In 1994 Hannover Re pioneered the first securitisation of natural catastrophe risks (Kover) followed by further transactions (K2 to K6) In 1998 Hannover Re started with the first-ever transfer of acquisition costs from life reinsurance business to the capital market, referred to as "L" deals (L1 to L7) On-going transactions in m. Extreme mortality cover (Q4/14) ~ USD 160 6) K-Cession (Q1/15) USD 400 3) Eurus III (Q3/12) EUR 100 1) 1) Transfer of natural perils (P&C) 2) Portfolio-linked swap (P&C) 3) Portfolio-linked securitisation (P&C) 4) Aggregate XL cover (P&C) 5) Credit-linked floating rate note 6) Indexed-linked swap (L&H) Expired transactions in m. Kover (Q1/94) USD 85 1) K2 (Q4/96) USD 150 2) L1 (Q1/98) DEM 100 L2 (Q2/99) DEM 250 L3 (Q4/99) EUR 50 L4 (Q4/00) EUR 200 K3 (Q2/02) USD 230 3) L5 (Q4/02) EUR 300 C1 (Q1/05) USD 225 3) L6 (Q1/06) EUR 100 K5 (Q1/06) USD 540 3) Eurus I (Q3/06) USD 150 3) Kepler (Q1/07) USD 200 4) Merlin (Q1/07) EUR 95 5) L7 (Q1/09) EUR 100 K6 (Q1/09) USD 335 3) Eurus II (Q3/09) EUR 150 1) 55

58 Overview Hannover Re Group Property & Casualty R/I Life & Health R/I Investment mgmt. Risk mgmt. Capital mgmt. Q2/2015 Outlook Appendix The risk is manageable Stress tests, after retrocessions for natural catastrophes Effect on forecast net income after tax in m. EUR Windstorm Europe Windstorm US Windstorm Japan Earthquake Japan Earthquake California Earthquake Australia 100-year loss (227.8) (251.0) 250-year loss (415.2) (440.0) 100-year loss (393.1) (541.7) 250-year loss (630.6) (778.1) 100-year loss (241.1) (172.2) 250-year loss (292.0) (250.1) 100-year loss (263.4) (254.3) 250-year loss (490.8) (520.8) 100-year loss (271.9) (303.5) 250-year loss (461.1) (503.1) 100-year loss (166.5) (172.7) 250-year loss (369.1) (449.7) in m. EUR Limit 2014 Threshold 2014 All natural catastrophe risks* Actual utilisation (July 2014) 200-year aggregate annual loss 1,480 1,332 1,147 * Loss relative to the underwriting result 56

59 Our capital structure consists not only of equity Use of hybrids, securitisations etc. lowers cost of capital and levers RoE Equity capital is by far the most expensive Therefore, we make optimal use of equity substitutes, e.g. hybrid capital Type Nominal amount Issue date First call date Maturity Coupon rate Undated subordinated bond Format: PerpNC10,8 ISIN: XS Dated subordinated bond Format: 30,6NC10,6 ISIN: XS Dated subordinated bond Format: 30NC10 ISIN: XS EUR 500 m Perpetual EUR 500 m EUR 500 m Until first call date: 3.375% p.a. and thereafter 3.25% p.a. above 3 months EURIBOR Until first call date: 5.00% p.a. and thereafter 4.30% p.a. above 3 months EURIBOR First 10 years: 5.75% p.a. and thereafter 4.235% p.a. above 3 months EURIBOR Conventional reinsurance/retrocession on an opportunistic basis (i.e. use of other reinsurers' capital) Securitisations, capital market transactions Competitive advantage through low cost of capital (WACC) 57

60 Financial strength ratings Group S&P A.M. Best General Reinsurance Corp. AA+ 2) A++ Hannover Re AA- A+ Munich Re AA- A+ Swiss Re AA- A+ Everest Re A+ A+ Lloyd's A+ A 1) SCOR A+ 1) A Transatlantic Re A+ A 1) XL Re A+ A PartnerRe A+ 3) A 2) As at 1 September ) Positive outlook 2) Under review with negative implications 3) Negative outlook 58

61 An above-average rating has numerous benefits although we might not (yet) get paid for it 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 59

62 Hannover Re Group has comfortable capital position Capital adequacy ratio: 160% Risk capital for the 99.97% VaR (according to economic capital model) in m. EUR Property & Casualty 5,023 Life & Health 3,327 Market 5,142 Counterparty default 756 Operational 595 HR Group required capital before tax 9,157 5,687 14,844 Deferred taxes 1,370 38% diversification Effective capital requirement HR Group required capital after tax 7,787 HR Group available economic capital 12,444 As at December

63 Hannover Re is well diversified within each risk category and has a well balanced asset and liability portfolio Risk capital for the 99.5% VaR (according to economic capital model) in m. EUR Underwriting risk property and casualty Premium (incl. catastrophe) Reserve Underwriting risk property and casualty 3,101 2, % 1,907 3,986 Underwriting risk life and health Mortality Longevity Morbidity and disability Lapse Underwriting risk life and health 1,907 1,448 1, ,750 48% 736 3,657 Market risk Credit and spread Interest rate Foreign exchange Equity Real estate Market risk 3,522 2, % 2, ,657 As at December 2014 Capital requirement Diversification 0 1, ,000 3,000 4,000 5,000 6,000 61

64 Hannover Re is well capitalised Available capital significantly exceeds required capital Solvency margin 1) 69.5% 68.3% 72.9% 71.7% 82.4% Capital Adequacy Ratio 99.97% VaR 154.9% 159.7% 170.0% 161.6% 159.8% 2) 2) Capital Adequacy Ratio 99.5% VaR 336.1% 302.5% 335.2% 330.2% 285.9% Debt/equity ratio 3) 36.5% 30.9% 33.3% 34.3% 24.1% Interest coverage 4) 13.8x 8.5x 13.3x 9.7x 15.3x 5) Reserve/premium ratio 275.1% 292.7% 268.4% 270.6% 295.7% 1) (Shareholders equity + non-controlling interests + hybrid)/net premium earned 2) According to our internal model 3) Debt/(Stockholders' equity + non-controlling interests) 4) EBIT/Interest on hybrid capital 5) Net reserves/net premium earned (group) 62

65 Solvency II: Hannover Re is prepared to comply Internal capital model approved by BaFin Solvency II Pillar I Quantitative requirements Capital requirements (SCR/MCR*) Own funds (solvency balance sheet) Standard model and internal model Pillar II Qualitative requirements Internal controls, risk management and key functions Internal risk assessment Supervisory review procedure Hannover Re Pillar III Disclosure requirements to the regulator and the public with the goal of market transparency and market discipline Hannover Re has received approval for its partial internal capital model. Internal and external risk quantification is therefore largely consistent. * SCR = Solvency Capital Requirement; MCR = Minimum Capital Requirement Hannover Re has long had in place an internal control system, the necessary key functions and extensive risk management. Additional requirements arising out of Solvency II have been implemented progressively in recent years. We support our clients in their preparations for Solvency II through the flexible design of our products and by sharing experiences. 63

66 20% increase in net profits 2015 Group net income guidance increased to ~EUR 950 m. Group Gross written premium: EUR 8,587 m. (+21.5%) Net premium earned: EUR 7,019 m. (+20.2%) EBIT: EUR 789 m. Group net income: EUR 532 m. RoE: 14.0% Book value per share: EUR Shareholders equity: EUR 7,673 m. GWP f/x-adjusted growth (+ 9.5%) above expectation Strong increase in Group net income (+19.7%), driven by favourable underwriting result in P&C and increased investment returns RoE remains well above our minimum target Shareholders equity up by 1.6%, despite dividend payment in Q2/2015 Property & Casualty R/I EBIT: EUR 584 m. Good profitability (EBIT margin of 15.0%) driven by favourable underwriting result (C/R of 95.4%) Net major losses of EUR 197 m. (5.1% of NPE) below budget F/x-adjusted growth of 10.0% driven by a number of larger individual transactions from Asia and US Life & Health R/I EBIT: EUR 200 m. Favourable f/x-adjusted growth of 8.9% mainly from Longevity, Australia and Emerging Markets Significantly increased operating profit (+29.2%) Technical result from US mortality and French branch below expectation Investments NII: EUR 799 m. RoI from AuM: 3.3% RoI well above full-year target of 3.0% Higher ordinary investment income supported by one-off effect in L&H reinsurance and strong USD Assets under own management increased by 3.2% 64

67 Strong operating profit fuelled by both business groups Strong increase in premiums and earnings Group figures in m. EUR Q2/2014 Q2/2015 1H/2014 1H/2015 Gross written premium 3,440 4,186 7,065 8,587 Net premium earned 2,927 3,588 5,839 7,019 Net underwriting result 12 (34) 14 (40) - Incl. funds withheld Net investment income From assets under own mgmt From funds withheld Other income and expenses (24) 11 (38) 31 Operating profit/loss (EBIT) YTD GWP f/x-adjusted growth of 9.5% NPE f/x-adjusted growth of 8.3% Satisfactory EBIT margin of 11.2% Normalised tax ratio; tax refund in Q2/2015 offsets slightly inflated tax ratio in Q1/2015 Interest on hybrid capital (21) (23) (49) (48) Net income before taxes Taxes (93) (58) (156) (184) Net income Non-controlling interests Group net income Retention 87.1% 88.0% 87.7% 88.3% EBIT margin (EBIT/Net premium earned) 11.4% 10.0% 11.7% 11.2% Tax ratio 29.8% 17.4% 24.5% 24.9% Earnings per share (in EUR)

68 Favourable underwriting result in a competitive environment Attractive top line growth despite continued selective underwriting approach Property & Casualty R/I in m. EUR Q2/2014 Q2/2015 1H/2014 1H/2015 Gross written premium 1,970 2,355 4,078 4,972 Net premium earned 1,739 2,012 3,370 3,894 YTD GWP f/x-adjusted growth +10.0% mainly from Specialty lines, US, Asia as well as agro Net underwriting result incl. funds withheld Combined ratio incl. interest on funds withheld % 95.0% 95.0% 95.4% Major losses of EUR 197 m. (5.1% of NPE) below budget of EUR 294 m. for 1H/2015 Conservative reserving policy unchanged Net investment income from assets under own management Other income and expenses (24) 4 (36) (12) Operating profit/loss (EBIT) Tax ratio 34.6% 18.0% 28.5% 24.3% Favourable development of ordinary investment income Improved other income and expenses driven by positive currency effects EBIT margin of 15.0% (1H/2014: 15.5%) well above target 20.3% growth in Group net income Group net income Earnings per share (in EUR)

69 Major losses below budget for 1H/2015 Natural and man-made catastrophe losses 1) 2,373 1,730 in m. EUR 1, H/2015 Natural and man-made catastrophe losses in % of Property & Casualty premium 2) 34% 2% 8% 13% 5% 14% 25% 9% 9% 7% 6% 20% 2% 6% 11% 5% 12% 16% 7% 8% 6% 5% Gross Net Expected net catastrophe losses 1) Up to 2011 claims over EUR 5 m. gross, from 2012 onwards claims over EUR 10 m. gross 2) adjusted to new segmentation 67

70 Benign large loss experience in 1H/2015 from NatCat High level of man-made large losses Catastrophe losses* in m. EUR Date Gross Net Winter storm, USA Feb Cyclone "Marcia", Australia 20 Feb Storm "Niklas", Germany, Switzerland, Austria 31 Mar - 1 Apr Storm, Australia Apr Natural catastrophes Aviation claims Marine claims Property claim Major losses * Natural catastrophes and other major losses in excess of EUR 10 m. gross 68

71 Increased profitability of our Life & Health business Attractive premium growth and significantly improved earnings Life and health R/I in m. EUR Q2/2014 Q2/2015 1H/2014 1H/2015 Gross written premium 1,470 1,831 2,987 3,615 Net premium earned 1,188 1,575 2,469 3,125 YTD GWP f/x-adjusted growth +8.9%, mainly from Emerging markets, Australia and Longevity BATs Net underwriting result incl. funds withheld 22 (36) 22 (24) Technical result from US mortality and French branch below expectation Net investment income from assets under own management Other income and expenses 0 8 (1) 44 Operating profit/loss (EBIT) EBIT margin 7.5% 1.7% 6.3% 6.4% Tax ratio 18.3% 17.6% 18.8% 26.6% Group net income Earnings per share (in EUR) Ordinary investment income higher due to positive one-off from termination fee Improved other income and expenses driven by positive currency effects EBIT margins: Financial solutions : 24.9% 17.1% excluding one-off from termination fee, (target 2.0%) Longevity: 3.5% (target 2.0%) Mortality/Morbidity: 2.7% (target 6.0%) 26.2% growth in Group net income 69

72 Investment income well above expectations Rise in ordinary inv. income more than offsets decrease in (un-)realised result in m. EUR Q2/2014 Q2/2015 1H/2014 1H/2015 RoI Ordinary investment income* % Realised gains/losses % Impairments/appreciations & depreciations Change in fair value of financial instruments (through P&L) Unrealised gains/losses of investments (5) (7) (10) (15) -0.1% (2) 0.0% Investment expenses (22) (28) (50) (52) -0.3% NII from assets under own mgmt % NII from funds withheld Total net investment income Dec Jun 15 On Balance-sheet 1,724 1,434 YTD Significant rise in ordinary investment income due to higher results from fixed-income securities, real estate and one-off effect from L&H business as well as f/x-effects Realisations slightly down also impacted by termination of inflation swaps Change in fair value of financial instruments driven by ModCo derivatives Valuation reserves lower than yearend levels due to increasing yields thereof Fixed income AFS 1, Off Balance-sheet thereof Fixed income HTM, L&R Total 2,282 1,925 * Incl. results from associated companies 70

73 Target Matrix 2015 Targets mostly achieved Business group Key figures Strategic targets for H/2015 Group Return on investment 1) 3.0% 3.4 % Return on equity 2) 10.2% 14.0% Earnings per share growth (y-o-y) 6.5% 19.7% Value creation per share 3) 7.5% n.a. Property & Casualty R/I Gross premium growth 3% - 5% 4) 10.0% Combined ratio 96% 5) 95.4% EBIT margin 6) 10% 15.0% xroca 7) 2% n.a. Life & Health R/I Gross premium growth 5% - 7% 8) 8.9% Value of New Business (VNB) EUR 180 m. n.a. EBIT margin 6) Financial Solutions/longevity business 2% 13.2% EBIT margin 6) mortality and morbidity business 6% 2.7% xroca 7) 3% n.a. 1) Excl. inflation swaps and ModCo 2) After tax; target: 900 bps above 5-year rolling average of 10-year German government-bond rate ("risk free") 3) Growth of book value + paid dividend 4) At unchanged f/x-rates; multi-year average 5) Incl. expected net major losses of EUR 690 m. 6) EBIT/net premium earned 7) Excess return on the allocated economic capital 8) At unchanged f/x-rates; multi-year average; organic growth only 71

74 Our strategic business groups at a glance 1H/2015 vs. 1H/2014 Property & Casualty R/I Life & Health R/I Total in m. EUR 1H/2014 1H/2015 Δ 1H/2014 1H/2015 Δ 1H/2014 1H/2015 Δ Gross written premium 4,078 4, % 2,987 3, % 7,065 8, % Net premium earned 3,370 3, % 2,469 3, % 5,839 7, % Net underwriting result % (144) (211) +46.7% 14 (40) - Net underwritung result incl. funds withheld % 22 (24) % Net investment income % % % From assets under own management % % % From funds withheld % % % Other income and expenses (36) (12) -65.7% (1) 44 - (38) 31 - Operating profit/loss (EBIT) % % % Interest on hybrid capital 0 (0) - (0) 0 - (49) (48) -0.8% Net income before taxes % % % Taxes (148) (142) -4.6% (29) (53) +82.5% (156) (184) +18.3% Net income % % % Non-controlling interest % % % Group net income % % % Retention 91.1% 89.6% 83.1% 86.5% 87.7% 88.3% Combined ratio (incl. interest on funds withheld) 95.0% 95.4% 99.1% 100.8% 96.8% 97.8% EBIT margin (EBIT / Net premium earned) 15.5% 15.0% 6.3% 6.4% 11.7% 11.2% Tax ratio 28.5% 24.3% 18.8% 26.6% 24.5% 24.9% Earnings per share (in EUR)

75 Our strategic business groups at a glance Q2 stand-alone Property & Casualty R/I Life & Health R/I Total in m. EUR Q2/2014 Q2/2015 Δ Q2/2014 Q2/2015 Δ Q2/2014 Q2/2015 Δ Gross written premium 1,970 2, % 1,470 1, % 3,440 4, % Net premium earned 1,739 2, % 1,188 1, % 2,927 3, % Net underwriting result % (59) (128) - 12 (34) - Net underwritung result incl. funds withheld % 22 (36) % Net investment income % % % From assets under own management % % % From funds withheld % % % Other income and expenses (24) (24) 11 - Operating profit/loss (EBIT) % % % Interest on hybrid capital 0 (0) - (0) 0 - (21) (23) - Net income before taxes % % % Taxes (83) (59) - (16) (5) - (93) (58) - Net income % % % Non-controlling interest Group net income % % % Retention 91.1% 90.3% 81.7 % 85.0 % 87.1% 88.0% Combined ratio (incl. interest on funds withheld) 95.6% 95.0% 98.1 % % 96.6% 98.2% EBIT margin (EBIT / Net premium earned) 13.8% 16.3% 7.5 % 1.7 % 11.4% 10.0% Tax ratio 34.6% 18.0% 18.3 % 17.6 % 29.8% 17.4% Earnings per share (in EUR)

76 Overview Hannover Re Group Property & Casualty R/I Life & Health R/I Investment mgmt. Risk mgmt. Capital mgmt. Q2/2015 Outlook Appendix Increased new guidance for 2015 Group net income guidance up from ~EUR 875m. to ~EUR 950m. Hannover Re Group Gross written premium 5% - 10% premium growth at unchanged f/x-rates Return on investment 1) 2) ~ 3.0% Group net income 1) ~ EUR 950 m. Dividend payout ratio 3) 35% - 40% (The ratio may increase in light of capital management considerations) 1) Subject to no major distortions in capital markets and/or major losses in 2015 not exceeding the major loss budget of EUR 690 m. 2) Excluding effects from derivatives (ModCo/inflation swaps) 3) Relative to Group net income according to IFRS 74

77 Overview Hannover Re Group Property & Casualty R/I Life & Health R/I Investment mgmt. Risk mgmt. Capital mgmt. Q2/2015 Outlook Appendix Overall profitability expected for Property & Casualty R/I Financial Year 2015e Target markets Specialty lines worldwide Global R/I Lines of business Volume 1) Profitability 2) North America 3) + Continental Europe 3) +/- Marine ++ Aviation Credit, surety and political risks + UK, Ireland, London market and direct +/- Facultative R/I +/- Worldwide Treaty R/I 3) +/- Cat XL +/- Structured R/I and ILS + - 1) In EUR; premium growth supported by strengthening of foreign currencies 2) ++ = well above CoC; + = above CoC; +/- = CoC earned; - = below Cost of Capital (CoC) 3) All lines of business except those stated separately 75