DZ Bank Equity Conference Dr Immo Querner, CFO 17 November 2014
Talanx - Key Investment Highlights Global insurance group with leading market positions and strong German roots Leading and successful B2B insurer Focus on long-term increase in value by sustainable and profitable growth Dedication to focus on insurance rather than market risks Commitment to continuously fulfill a AA capital requirement by Standard & Poor s Target to achieve Group net income of at least 700m in 2014. Target for at least 700m in 2015 despite material increase in large-loss budget Dedication to pay-out 35-45% of IFRS earnings to shareholders 2
I II Talanx in a nutshell Outlook and targets Appendix 3
Talanx in a nutshell A global insurance player Location overview in Primary and in Reinsurance 2000 2013 GWP split (Primary/Reinsurance): 44% / 56% Employees (Germany/abroad): 4,539 / 1,511 GWP split (Primary/Reinsurance): 53% / 47% Employees (Germany/abroad): 11,302 / 10,227 Countries with local presence Branch / office location Primary Insurance Branch / office location Reinsurance Global networks in Industrial Lines and Reinsurance. Leading positions in retail target markets 4
Talanx in a nutshell Among the leading European insurance groups Top 10 German insurers Top 10 European insurers German insurers by global GWP (2013, bn) European insurers by global GWP (2013, bn) Allianz 103.4 Allianz 103.4 Munich Re 51.1 AXA 85.5 28.2 Generali 66.1 R+V 12.8 Munich Re 51.1 Debeka 1 9.3 Zurich 39.1 Vk Bayern 7.2 Prudential 2 36.0 HUK 1 5.6 28.2 Signal Iduna 1 5.5 CNP 27.7 Gothaer 1 4.2 Crédit Agricole 26.4 W&W 3.9 Aviva 26.0 1 Figure of 2012 2 Gross premiums earned Source: SNL Financial, annual reports Listed insurers Third-largest German insurance group with leading position in Europe and strong roots in Germany 5
Talanx in a nutshell - Shareholders and divisions Free float 14.5 % 1 V.a.G. 79.0 % 6.5 % Industrial Lines Retail Germany Retail International Reinsurance Lead insurer of choice Extremely strong home market position, i.e. lead mandates with most German DAX companies and strong position with German Mittelstand Bluechip client base in Europe Highly effective network of distribution partners Market leader in bancassurance Market leader in employee affinity business Leading provider of corporate pension solutions Focused exposure to CEE and LatAm (#2 insurer in Poland 2, #6 in Brazilian motor 3 ) Attractive rates of organic growth Experienced underwriter in motor Focused M&A track record Non-Life Life/Health Hannover Re world #3 reinsurer by GWP 4 Well diversified between life/non-life and geographically Consistently amongst sector leaders on profitability 5 Superior underwriting know-how 1 Including employee shares 2 Combined ranking based on November 2013 data of Polish regulator as per local GAAP 3 According to Siscorp based on local GAAP 4 Based on A.M. Best ranking (September 2012) 5 Based on S&P ranking by average RoE 2002-2010 and also number 1 by average RoE as per KPMG 2012 Integrated insurance group with leading market positions in all segments 6
Talanx in a nutshell Strategic group pillars Focus of the Group is on long-term increase in value by sustainable and profitable growth and vigorous implementation of our B2B-expertise Profit target Capital management Risk management Growth target Human resource policy RoE 1 > TOP20 European insurers RoE 1 risk-free interest rate 2 +750bps Fulfill S&P AA capital requirement Efficient use of available financing instruments Generate positive annual earnings with a probability of 90% Sufficient capital to withstand at least an aggregated 3,000-year shock 50% of primary GWP from foreign operations Selective profitable growth in Retail Germany and Reinsurance Continuous development and promotion of own workforce Individual responsibility and entrepreneurial spirit Investment risk 50% 1 In accordance with IFRS 2 Risk-free rate is defined as the 5-year rolling average of the 10-year German government bond yield Group and divisional strategies define goals and actions to be taken 7
Talanx in a nutshell - Industrial Lines Key figures Share in 2013 group GWP 1 2013 geographic split (GWP) Key financials ( m) FY2013 9M 2013 9M 2014 Change 17% 46% Gross written premium 3,835 3,128 3,213 +3% Net premium earned 1,744 1,345 1,401 +4% Net underwriting result (43) (93) (66) n/m Net investment income 240 167 209 +25% 83% 54% Germany International Operating result (EBIT) 129 50 125 +148% Combined ratio (net) 2 in % 102.4 106.9 104.7 (2.2 pts) Return on Equity in % 5.1 2.0 5.8 +3.8 pts Recent trends GWP slightly down in Q3 2014 by -1.8%, while growing by 2.7% y/y in first 9 months 2014 (curr.-adj: +3.8%) Sustainable growth resulting from international activities, incl. Northern America and Asia Pacific Self-retention in 9M 2014 at 50.5% (9M 2013: 45.7%) - well on track to reach the FY2014 target of ca. 50%, despite 115m reinstatement premium ( 74m in Q3 2014 alone) Reinstatement premium also negatively impact the expense ratio (Q3 2014 effect of ~3%pts) and loss ratio. Key driver of the loss ratio are significant large losses, e.g. flood in Michigan (USA) and various man-made losses, such as a major industrial explosion near Bremen 1 Based on total GWP adjusted for 50.2% share in Hannover Re 2 Including income from interest on deposits Talanx is a leading European industrial lines insurer with global ambitions 8
Talanx in a nutshell - Retail Germany Key figures Share in 2013 group GWP 1 2013 business mix (GWP) Key financials ( m) FY2013 9M 2013 9M 2014 Change Recent trends 32% 22% 78% Life Non-life Gross written premium 6,954 5,196 5,079 (2%) Net premium earned 5,605 4,036 3,917 (3%) Net underwriting result (1,515) (1,130) (1,264) n/m Net investment income 1,786 1,319 1,430 +8% Operating result (EBIT) 161 111 119 +7% Combined ratio (net) 2 in % 102.4 101.6 101.7 +0.1 pts Return on Equity in % 3.0 3.2 3.6 +0.4 pts In line with targets, slight reduction in GWP, primarily reflecting a decline in traditional life business and a profitabilisation of the motor line Loss ratio close to normalized level, while cost ratio impacted by additional pre-seasonal service capacities Decline in underwriting results largely due to higher RfB contribution on the back of higher realised capital gains to finance ZZR ~75% of anticipated 2014 ZZR allocation booked (forecast of ~ 355m for FY2014; FY 2013: 313m, both according to HGB). Total ZZR stock expected to rise to ~ 1.1bn-level until year-end 2014 Higher ordinary capital gains contribute to profit growth 1 Based on total GWP adjusted for 50.2% share in Hannover Re 2 Including interest income on funds withheld and contract deposits; net, property/casualty only Strong German retail insurance business more than 80% from B2B distribution channels (2013) 9
Talanx in a nutshell - Retail International Key figures Share in 2013 group GWP 1 19% 34% 2013 business split (GWP) 2013 geographic split (GWP) 21% Key financials ( m) FY2013 9M 2013 9M 2014 Change Gross written premium 4,220 3,133 3,307 +6% Net premium earned 3,513 2,597 2,820 +9% 66% 28% 51% Net underwriting result 32 23 (6) n/m Net investment income 284 214 241 +13% Operating result (EBIT) 185 157 164 +4% Non-Life Life CEE/CIS 2 LatAm 2 Western Europe 2 Combined ratio (net) in % 95.8 95.8 96.5 +0.7 pts Return on Equity in % 5.9 7.2 7.2 - Recent trends 9M 2014 GWP growth of 5.5% (curr.-adj.:+10.0%), while currency-effects slighly fading out: Q3 2014 growing strong at 7.1% (+8.5%) Brazil and Mexico gaining significant growth momentum in Q3 2014 Slight increase in segment CoR in Q3 2014 by 1%pt. due to a severe bus accident insured by Warta (effect on segment CoR of 0.4%pts) and currency-effect (1.4%pts; compensated in other result ) Turkey continues its positive trend (9M 2014 EBIT: 1.9m), Mexico and TU Europa with CoRs well below the 100%-level Increase in asset base and higher interest rates in Brazil support improvement in investment income 1 Based on total GWP adjusted for 50.2% stake in Hannover Re 2 CEE/CIS including Turkey and Russia; LatAm including Mexico; Western Europe including Italy, Austria, Liechtenstein and Luxembourg Focus on major growth markets in Latin America and CEE 10
Talanx in a nutshell - Reinsurance Key figures Share in 2013 group GWP 1 GWP development (total, bn) 32% 13.8 14.0 12.1 Non-Life Life / Health Key financials ( m) FY2013 9M 2013 9M 2014 FY2013 9M 2013 9M 2014 Gross written premium 7,818 5,956 6,060 6,145 4,582 4,644 Net premium earned 6,866 5,093 5,104 5,360 4,024 3,861 Recent trends Non-Life 2011 2012 2013 9M 2014 GWP up by 1.7%y/y (adj. for currency effects: +3.2%) with growth effects mainly from China and Southeast Asia. NPE +0.2% y/y (curr.-adj.:+1.5%) Large losses of 242m (4.7% of NPE) below budget ( 491m for 9M 2014) Conservative loss reserving policy maintained for the large loss budget Net investment income increased despite the low yield environment. Other income and expenses influenced by positive currency effects in particular in Q3 2014 EBIT margin 2 of 17.0% (9M 2013: 16.3%) is well above target Net investment income 811 599 666 610 460 461 Operating result (EBIT) 1,097 833 868 139 164 237 Comb.Ratio 2 in % Return on Equity in % Life / Health 94.9 FY2013 15.9 95.0 95.3 Reinsurance 9M 2013 15.2 9M 2014 GWP: +1.4% (+2.6% adj. for currency effects), mainly from Australia and Longevity BATs Technical result improved significantly due to normalised result from Australian disability business Net investment income at expected level, minor negative impact from ModCo derivatives Other income improved due to f/x effects Strong increase in EBIT1 by ~45% 9M 2014 EBIT margins1 in financial solutions/longevity business as well as in mortality and morbidity business ahead of targets 1 Based on total GWP adjusted for 50.2% share in Hannover Re 2 EBIT and EBIT margins reflect a Talanx Group view - - 9M 2014 15.4 - Hannover Re is one of the largest and most profitable reinsurers globally 11
Talanx in a nutshell Sources for growth Industrial Lines International growth Increase retention Retail Germany Lever successful bancassurance Elimination of cost disadvantages Retail International Growth in selected emerging markets Role-out of best practise examples Reinsurance Efficient cycle management Expansion into emerging markets 12
I II Talanx in a nutshell Outlook and targets Appendix 13
Outlook for Talanx Group 2014 1 Gross written premium 2 +2-3% Return on investment 3.4% Group net income 700m Return on equity 9-10% Dividend payout ratio 35-45% target range 1 The outlook is subject to a thorough assessment of the protracted low interest rate environment and of the Life Insurance Reform Act ( LIRA ) impact on German retail activities 2 On divisional level, Talanx expects gross written premium growth of +3-5% in Industrial Lines, -(1-2)% in Retail Germany, +4-8% in Retail International and a flat to low single-digit growth rate in Reinsurance Targets are subject to no large losses exceeding budget (cat), no turbulences on capital markets (capital), and no material currency fluctuations (currency) 14
IV Targets for Talanx Group 2015 1 Gross written premium 2 +1-3% Return on investment > 3.0% Group net income 700m Return on equity ~ 9% Dividend payout ratio 35-45% target range 1 The targets are based on an increased large loss budget of 290m (from 185m) in Primary Insurance 2 On divisional level, Talanx expects gross written premium growth of +1-3% in Industrial Lines, unchanged premium in Retail Germany, +6-8% in Retail International and a flat to low single-digit growth rate in Reinsurance Targets are subject to no large losses exceeding budget (cat), no turbulences on capital markets (capital), and no material currency fluctuations (currency) 15
I II Talanx in a nutshell Outlook and targets Appendix 16
Appendix - FY2013 target achievement Return on Investment 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 3.7% 11.8% 4.2% 4.0% 4.3% 2009 2010 2011 2012 2013 2013 Outlook Rol > 3.5% Return on Equity 4.5% 10.0% 10.0% 4.0% 2009 2010 2011 2012 2013 target ROE 10.6% GWP growth in bn 30.0 25.0 20.0 15.0 10.0 5.0 0.0 in mn 900 800 700 600 500 400 300 200 100 0 +10.1% +9.3% +3.6% 2009 2010 2011 2012 2013 2013 Outlook GWP growth 4% Net income and Payout 485 216 515 +12.6% ( 1.05 p.s.) 626 +5.6% ( 1.20 p.s. 3 ) 750 2009 2010 2011 2012 2013 2013 Outlook RoE 750 bps + risk-free 1 2013 Outlook Net income ~ 700m; pay-out ratio 35-45% 2 1 Risk-free rate is defined as the 5-year rolling average of the 10-year German government bond yield (ROE target 2013: 9.8%) 2 pay-out ratio 2013: 39.8% (2012: 42.1%) Note: figures restated on the base of IAS8; 2013 Outlook reflects increased targets as presented in Aug 2013 17
Appendix 9M 2014 results Key financials Summary of 9M 2014 m, IFRS 9M 2014 9M 2013 Change Gross written premium 21,732 21,380 +2 % Net premium earned 17,131 17,103 +0 % Net underwriting result (1,353) (1,228) n/m Net investment income 2,996 2,814 +6 % Operating result (EBIT) 1,444 1,376 +5 % Net income after minorities 530 528 +0 % Key ratios 9M 2014 9M 2013 Change Combined ratio non-life insurance and reinsurance 97.7% 97.6% 0.1%pts Return on investment 4.0% 4.0% 0.0%pts Balance sheet 9M 2014 FY2013 Change Investments under own management 94,053 86,310 +9 % Goodwill 1,108 1,105 +0 % Total assets 144,845 132,793 +9 % Technical provisions 99,643 91,717 +9 % Total shareholders' equity 12,562 11,124 +13 % Shareholders' equity 7,937 7,127 +11 % Comments GWP growth in line with 2014 Outlook, still dampened by currency effects. All segments apart from Retail Germany with positive growth Slightly lower growth in net premium earned reflects lower self-retention in Life&Health Reinsurance while self-retention ratio in Industrial Lines is up by 5%pts Return on investment at 4.0%, well above the 2014 Outlook 9M 2014 net income ( 530m) exceeds 9M 2013 level, even before adjusting for the base effect of partial disposal of SwissLife stake (~ 100m) Shareholders equity up to 7,937m, or 31.40 per share. Solvency I ratio up to 240.5% (FY2013: 210.2%) Note: numbers adjusted on the basis of IAS8 Bottom-line result slightly ahead of 9M 2013 18
Appendix - Large losses 1 in 9M 2014 ( m, net) Snowstorm, Japan Earthquake, Chile Storm, USA February 2014 April 2014 June 2014 Primary insurance 0.8 Reinsurance 10.2 6.1 8.1 Talanx Group 10.2 6.9 8.1 Net burden from large losses of overall 501m in 9M 2014 (9M 2013: 668m) Storm Ela, Germany, Belgium, France Hail, Canada Flood, USA June 2014 August 2014 August 2014 48.8 30.0 43.9 11.5 92.7 11.5 30.0 Q3 net burden of 113m in Primary and 138m in Reinsurance Total NatCat Aviation Credit Transport Fire/Property Other Total other large losses Total large losses Impact on Combined Ratio 79.6 7.5 161.4 10.0 178.9 258.5 6.1% pts 79.8 126.4 36.0 162.4 242.2 4.7% pts 159.4 133.9 197.4 10.0 341.3 500.7 5.4% pts Primary Insurance affected by significant amount of man-made losses in Industrial Lines Reinsurance mainly impacted by aviation loss, but very well within large loss budget Total large losses (9M 2013) 220.8 446.7 667.5 1 definition large loss : in excess of 10m gross in either Primary insurance or Reinsurance 19
Appendix - Solvency capital position Solvency I capital position ( bn) 202% 225% 210% 241% 9.4 8.4 8.2 6.8 3.4 3.7 3.9 3.9 Comments Talanx has extensive experience in innovative capital management As of 30 September 2014, available funds include 1.6bn of subordinated debt 2 Goodwill of 1.1bn as of 30 September 2014 (relative to shareholders equity excl. minorities of 7.9bn) 2011 2012 2013 9M 2014 Available funds Solvency capital requirements Solvency I margin 1 1 Talanx Group based on the solvency of HDI V.a.G. (HDI V.a.G. is the relevant legal entity for the calculation of group solvency from a regulatory perspective) 2 1.6bn of the Group s total subordinated debt ( 2.7bn) are eligible for Solvency I capital (after accounting for minority interest and capped by regulatory thresholds) Solid solvency and high-quality capital with relatively low goodwill supporting optimal balance sheet strength 20
Appendix - Rating overview Current financial strength ratings rating of Talanx Primary Group Standard & Poor s A. M. Best last update Grade Outlook Grade Outlook 30/06/14 16/05/14 Anchor rating a+ Business Risk Profile Financial Risk Profile Modifiers Modifiers Strong Very Strong Neutral Talanx Group 1 - - A Stable IICRA 4 ) Intermediate Risk Capital & Earnings Very Strong ERM Strong Talanx Primary Group 2 A+ Stable - - last update 30/06/14 22/05/14 Competitive Position Strong Risk Position Intermediate Risk Management & Governance Satisfactory Hannover Re subgroup 3 AA Stable A+ Stable Risk Position Strong Liquidity Exceptional 1 The designation used by A. M. Best for the Group is Talanx AG and its leading non-life direct insurance operation and its leading life insurance operation 2 This rating applies to the core members of Talanx Primary Group (the subgroup of primary insurers in Talanx Group) 3 This rating applies to Hannover Re and its major core companies. The Hannover Re subgroup corresponds to the Talanx Reinsurance segment 4 Insurance Industry and Country Risk Assessment Financial strength underpinned by S&P and A.M. Best ratings 21
Appendix - Focus on insurance risk Risk components of Talanx Group 1 Comments 1% 8% 16% 38% 37% Other risk Operational risk Further life risk Non-life risk 2 Market risk 3 Total market risk of 37%, of solvency capital requirements, which is comfortably below the 50% limit Risk capacity priority for insurance risk Non-life is the dominating insurance risk category, comprising premium and reserve risk, NatCat and counterparty default risk Equities ~1% of investments under own management GIIPS sovereign exposure 1.7% of total assets (9M 2014) Talanx Group 1 Figures show approximate risk categorisation, in terms of solvency capital requirements, of the Talanx Group after minorities, after tax, post diversification effects as of 2013 2 Includes premium and reserve risk (non-life), net NatCat and counterparty default risk 3 Refers to the combined effects from market developments on assets and liabilities Market risk sensitivity (limited to less than 50% of solvency capital requirement) is deliberately low 22
Appendix B2B distribution as a key differentiator Linkage between different Group segments Excellence in B2B2C channels 1 Industrial Lines Retail Germany Bancassurance Brazil B2B2C Automotive Core value proposition: B2B competence Retail Industrial Brokers B2B2C Retail International Reinsurance Employee affinity business 1 Samples of clients/partners Superior service of corporate relationships lies at heart of our value proposition 23
Appendix - HDI V.a.G. history and structure Overview V.a.G. History HDI V.a.G. is a mutual insurance company and majority-owner of the holding company Talanx AG The organisational setup reflects the historic roots of HDI, an association of important companies of the German industry that offers mutual insurance cover Approx. 0.8m members of HDI V.a.G. Alignment of interests of HDI V.a.G. and Talanx Group through - Providing efficient and reliable insurance to mutual members at market rates, often syndicate-based - Same decision makers: Mr Haas, Dr Hinsch, Dr Querner - HDI V.a.G. has no other investments besides Talanx and is interested to further strengthen and enable Talanx to provide stable insurance capacity to industrial clients - Talanx and HDI V.a.G. committed to capital market oriented dividend policy 1903 1953 1966 1991 1994 1998 2001 2006 2012 2014 Foundation as Haftpflichtverband der deutschen Eisen- und Stahlindustrie in Frankfurt Companies of all industry sectors are able to contract insurance with HDI V.a.G. Foundation of Hannover Rückversicherungs AG Diversification into life insurance IPO of Hannover Rückversicherung AG Renaming of HDI Beteiligungs AG to Talanx AG Start transfer of insurance business from HDI V.a.G. to individual entities Acquisition of Gerling insurance group by Talanx AG IPO of Talanx AG Listing at Warsaw Stock Exchange 24
Talanx Investor Relations Financial Calendar 23 March 2015 Annual Report 2014 7 May 2015 AGM 2015 11 May 2015 Interim Report Q1 2015 12 August 2015 Interim Report 6M 2015 12 November 2015 Interim Report 9M 2015 Contact Talanx AG Riethorst 2 30659 Hannover Germany ir@talanx.com Carsten Werle, CFA Phone: +49 511 3747 2231 carsten.werle@talanx.com Marcus Sander, CFA Phone: +49 511 3747 2368 marcus.sander@talanx.com Wiebke Erler Phone: +49 511 3747 2435 wiebke.erler@talanx.com Christian Marx Phone: +49 511 3747 2291 christian.marx@talanx.com 25
Disclaimer This presentation contains forward-looking statements which are based on certain assumptions, expectations and opinions of the management of Talanx AG (the "Company") or cited from third-party sources. These statements are, therefore, subject to certain known or unknown risks and uncertainties. A variety of factors, many of which are beyond the Company s control, affect the Company s business activities, business strategy, results, performance and achievements. Should one or more of these factors or risks or uncertainties materialize, actual results, performance or achievements of the Company may vary materially from those expressed or implied as being expected, anticipated, intended, planned, believed, sought, estimated or projected in the relevant forward-looking statement. The Company does not guarantee that the assumptions underlying such forward-looking statements are free from errors nor does the Company accept any responsibility for the actual occurrence of the forecasted developments. The Company neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by the Company as being accurate. Presentations of the company usually contain supplemental financial measures (e.g., return on investment, return on equity, gross/net combined ratios, solvency ratios) which the Company believes to be useful performance measures but which are not recognised as measures under International Financial Reporting Standards, as adopted by the European Union ("IFRS"). Therefore, such measures should be viewed as supplemental to, but not as substitute for, balance sheet, statement of income or cash flow statement data determined in accordance with IFRS. Since not all companies define such measures in the same way, the respective measures may not be comparable to similarly-titled measures used by other companies. This presentation is dated as of 13 November 2014. Neither the delivery of this presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. This material is being delivered in conjunction with an oral presentation by the Company and should not be taken out of context. 26