Hannover Re - The somewhat different reinsurer Dr. Klaus Miller Member of the Executive Board Barclays Capital, Global Financial Services Conference New York, 11 September 212
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Agenda Good start into 212 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
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Favourable results of Hannover Re's business 1H/212 strong results largely unaffected by one-off effects Favourable R/Iconditions Benign major losses Volatile capital markets Premium increase in non-life reinsurance (+15.1%) Accelerated growth in life and health reinsurance (+12.4%) Net major losses of EUR 132.4 m. below budget Net investment income up by 5.4%; RoI at 3.8% Results of inflation swaps and ModCo derivatives largely neutral at 1H/212 but volatile quarterly Increase in assets under own management to EUR 3.3 bn. mainly resulting from positive cash flow 1H/212 results GWP +14.% NPE +13.1% Net income EUR 45 m. EPS EUR 3.36 RoE 15.5% Shareholders' equity +1.1% BVPS EUR 45.37 1
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Dedicated to a clear strategy 2. We have ambitious profit and growth targets 3. We manage risks actively 1. Growing Hannover Re profitably 4. We are a preferred business partner 5. We strive for a stable investment income 2
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 strengthened our position continuously Premium ranking 211 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, 15, 5 Lloyd's 2) GB 13,621 1,15 6 SCOR F 9,845 8,891 7 RGA Re USA 7,74 7,736 8 China Re RC 6,179 5,94 9 PartnerRe BDA 4,621 4,474 1 Korean Re ROK 4,551 3,43 11 Everest Re BDA 4,286 4,19 12 Transatlantic Re USA 4,35 3,86 13 MAPFRE RE E 3,47 2,311 14 London Re CDN 3,117 3,57 15 Assicurazioni Generali I 2,674 2,674 1) Source: A.M. Best (September 212) 1) Net premium earned 2) Reinsurance only 3
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% 8. 7. 6. 5. 4. Gross written premium 6,339 5,747 5,19 4,988 37% 39% 6,826 in m. EUR Cornerstones of our non-life approach Central underwriting combined with local talent is the key to our success Secures U/W discipline Lean, efficient infrastructure 44% Selective growth 45% 44% We only grow our market share in "hard" markets 3. 2. 63% 61% 56% We have no premium-growth targets, only for earnings 55% 56% Distribution through brokers 1. No appetite for acquisitions 27 28 29 21 211 212e Our cycle management gets us all the business we want 4
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/health 5-year CAGR +12.3% Gross written premium in m. EUR Cornerstones of our life/health approach 6. 5. 4,529 5,9 5,27 We focus on biometric risk and financing 1 key markets = 87% of our business; 5 main clients = 8% of our portfolio 4. 3. 3,83 3,134 37% 39% Sophisticated state-of-the-art Client 44% Relationship 45% Management (CRM) 44% Ability to differentiate between value-creating and value-destroying clients 2. 1. 63% 61% 56% We create long-term win-win situations (don't play zero-sum games) 55% 56% We do consider acquisitions But only if strategic fit/complement 27 28 29 21 211 212e No strategic prices 5
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook We developed our business and improved diversification Gross written premium in m. EUR 12,96 1. 9,317 8. 8,32 26% 44% 25% 6. 4. 2. 2,135 6% 3,67 11% 89% 75% 74% 56% 94% 199 1995 2 25 211 Non-life reinsurance Life and health reinsurance 6
Facts & figures 1. Our mission 2. 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 75 bps above risk free 27 28 29 21 211 27-211 Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank avg. RoE Rank Hannover Re 23.1% 1 (4.1%) 9 22.4% 2 18.2% 1 12.8% 1 14.5% 1 Peer 1, Germany, composite Peer 2, Switzerland, composite Peer 3, France, composite Peer 4, Bermuda, composite Peer 5, US, non-life Peer 6, Bermuda, non-life Peer 7, Bermuda, non-life Peer 8, US, life and health Peer 9, US, non-life 14.9% 5 6.5% 3 11.8% 5 1.7% 5 3.1% 6 9.4% 6 13.3% 7 (3.3%) 8 2.3% 1 3.6% 1 9.6% 3 5.1% 9 13.8% 6 8.9% 1 1.2% 6 1.1% 6 7.5% 4 1.1% 4 17.7% 3 1.1% 6 25.9% 1 11.5% 4 (7.6%) 1 9.7% 5 1.8% 8 4.8% 5 9.9% 7 7.1% 8 4.9% 5 7.5% 8 22.% 2 7.3% 2 9.3% 8 14.7% 2.2% 7 1.7% 2 15.6% 4 (.4%) 7 14.6% 3 9.9% 7 (1.3%) 8 7.7% 7 1.3% 9 6.5% 3 12.6% 4 12.9% 3 1.7% 2 1.6% 3 3.6% 1 (31.8%) 1 2.7% 9 5.8% 9 (4.4%) 9 (4.8%) 1 List shows the Top 1 of the Global Reinsurance Index (GloRe) with more than 5% reinsurance business Data based on company data, own calculation 7
Facts & figures 1. Our mission 2. 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 5 1y CAGR: 1.% 5y CAGR: 12.6% 5.97 57.1 15.88 13.58 4 3 2 1 21.99 4.78 17.21 4.78 17.9 5.63 19.57 6.58 2.93 7.58 21.57 31.61 7.58 24.3 9.18 27.77 11.48 23.47 11.48 3.8 37.39 41.22 21 22 23 24 25 26 27 28 29 21 211 Book value per share Paid dividends (cumulative since 1994) 21-23 US GAAP, as from 24 IFRS As at 31 December 8
Facts & figures 1. Our mission 2. 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 2 % 18 % 16 % 14 % 12 % 1 % 8 % 6 % 4 % GWP Profitability Latin America + Credit & Surety + Aviation +/- Motor Germany +/- US Casualty - Marine +/- US Cat +/- 2 % % 28 29 21 211 9
Facts & figures 1. Our mission 2. 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) 7.4% Lean, efficient infrastructure with no non-life underwriting authority in USA High exposure to broker biz in non-life to be able to execute strict cycle management No unbundled services Lead positions only in carefully selected areas 3.1% 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 Be competitive 27 28 29 21 211 212e Peer average 211 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) Have a better choice of business and better access to niches Be profitable 1
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 9% We ensure that the probability of an economic as well as IFRS capital loss does not exceed.3% We ensure that our reserving level is conservative Use of retrocession Conservative reserving Stringent U/W discipline 11
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Capital allocation follows internal model requirements......as well as management decisions The target capital to be allocated includes IFRS equity, hybrid capital and valuation reserves (economic valuation differences to IFRS valuation) According to the risk profiles of the underlying business our internal capital model defines the capital allocation: Approximation: 5% non-life U/W / 25% life and health U/W / 25% asset management The allocated capital earns minimum the risk-free return The Minimum Return on Capital (MRC) in excess of risk free is a weighted average of requirements on IFRS-equity, hybrid capital and valuation reserves Targets are calculated based on allocated capital and MRC in relation to an underlying business: For non-life and life and health U/W: GWP capital margin above risk free For asset management: AuM RoI above risk free The target C/R translates our economic targets into the IFRS accounting world At a target C/R of ~98.% non-life U/W contributes to achieve our economic targets Target C/R = (NPE + economic revaluation minimum return on economic capital) / NPE 12
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* as % of economic capital 3% 25% 2% Internal capital model sets the tone Stringent allocation of capital to NatCat exposed business is key to reduce volatility of earnings Well established retrocession strategy and efficient NatCat management led to lower net major losses in 211 15% 1% 21 211 212 * on a stand-alone basis, i.e. before diversification with other risks 13
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 16% Risk capital for the 99.97% VaR (according to economic capital model) in m. EUR 9. 8,759 8. 7. 6. 1,992 569 49 8,48 2,563 32% diversification 5. 2,29 4. 3. 2. 3,48 5,485 Effective capital requirement 1. Non-life reinsurance Life and health reinsurance As at December 211 The risk categories have been adapted to the Solvency II requirements Calculation according to economic valuation principles Assets Credit Operational HR Group required capital HR Group available economic capital 14
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Diversification reduces capital requirements by 5% Non-life business group Risk capital for the 99.5% VaR (according to economic capital model) in m. EUR 3.5 263 3,29 3. 2.5 2. 662 14 185 39 45 1,644 5% diversification 1.5 1. 5 527 49 186 24 1,645 Effective capital requirement 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 211 Calculation according to economic valuation principles 15
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 21 / 211 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 21 96% 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 211 1 and 97 points by clients from Switzerland and Austria (on an ascending scale from - 1) Credit, Surety and Political Risks: Hagstotz survey 211 Overall customer satisfaction at "very high level" 16
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Unique group structure supports our business model Majority owner, but operational and financial independence Talanx AG* Free float 5.2% 49.8% 63.7% 8 German mutuals 36.2% >1 subsidiaries, branch/rep. offices in ~2 countries German business International business * 1% owned by HDI V.a.G. 17
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 LOGO AA- "Very strong" Outlook: stable (19 June 212) A+ "Superior" Outlook: stable (5 September 212) Reinsurer of the year 212 (5 September 212) Being a highly-rated counterpart is a major ingredient of the recipe 18
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 coupled with our CRM-approach 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 >9% vs. some 5% for a Bermuda start-up We create lower capital charges for our cedents "AA" range S&P capital charge on reinsurance recoverables =.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 19
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. 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 2
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Constant positive operating cash flow supports asset growth Assets under own management increased by 5% in 5 years Operating cash flow in m. EUR Assets under own management in m. EUR 3. 2,523 3. 25,411 28,341 3,282 523 24. 22,57 2. 1,459 264 1,752 518 1,681 267 75 1,345 18. 2,137 1. 76 542 628 822 68 12. 267 45 6. 259 737 23 424 336 473 28 29 21 211 212 28 29 21 211 1H/212 Q1 Q2 Q3 Q4 21
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Net investment income has grown by 9 % (CAGR4y) 6 Net investment income 569 551 445 145 151 673 161 in m. EUR 79 156 Ordinary investment income grew significantly since 29 despite deteriorating yields; supported by increase in assets Target yield of 3.5% outperformed despite high cash flow being invested at lower rates 4 12 512 553 2 343 424 4 1H/28 1H/29 1H/21 1H/211 1H/212 Net investment income excl. funds withheld Funds withheld 22
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Solid and relatively high quality fixed income portfolio...... in the light of unstable capital market environment No material exposure in Southern Europe and Ireland Fixed-income book diversified per rating, country, region and issuer Fixed-income book by rating Fixed-income book by country BBB 13% <BBB 3% AAA 32% Australia 8% Asia 5% Rest of world 7% Germany 2% A 22% AA 31% USA 24% Rest of Europe 16% UK 9% France 7% GIIPS 4% Total fixed-income book: EUR 27.3 bn. Values as at 3 June 212 23
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Due to asset-liability matching 3.6 % exposure in GIPPS Major part in corporates and covereds Total investment in GIPPS in % Semi-/Govermentals in GIPPS in m. EUR Governments 13 Semi- Govermentals <1 Portugal 17 Ireland 27 Covereds 51 Corporates 35 Spain 89 Greece Italy 17 EUR 1.1 bn. EUR 151 m. Economic view based on market value as at 3 June 212 24
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Continuously reduced share of bank exposure Unchanged focus on conservative title selection Corporate sector allocation in m. EUR 9,936 by currencies 2,982 8,6 17% Others 31% 6% GBP 6,288 32% 33% USD 5,11 39% 44% 69% 44% EUR 61% 56% 68% 3 Jun 12 29 21 211 3 Jun 12 Non Banks Banks Economic view based on market value as at 3 June 212 25
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Guidance for 212 Hannover Re Group Gross written premium (GWP) 1).~ +5% - +7% Non-life reinsurance 1)......~ +5% - +7% Life and health reinsurance 1)2)....~ +5% - +7% Return on investment 3).........~ 3.5% Dividend pay-out ratio 4).. 35% - 4% 1) At unchanged f/x rates 2) Organic growth 3) Subject to no major distortions in capital markets; excluding effects from inflation swaps 4) Related to group net income according to IFRS 26
Facts & figures 1. Our mission 2. Ambitious targets 3. Manage risks 4. Preferred partner 5. Stable investment income Outlook Our Investor Relations team Hannover Rückversicherung AG Karl-Wiechert-Allee 5 3625 Hannover, Germany www.hannover-re.com http://hannover-re.ir-portal.com Karl Steinle Julia Hartmann General Manager IR Manager Corporate Communications Corporate Communications +49 511 564-15 +49 511 564-1529 karl.steinle@hannover-re.com julia.hartmann@hannover-re.com Louise Camilleri-Wolter Deputy IR Manager Corporate Communications +49 511 564-1341 louise.camilleri-wolter@hannover-re.com
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.