Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — WestLB Deutschland Conference 2006
34 slides from Hannover Rueck's conference presentation, Nov 16, 2006
Slide 1: Knowing our profit drivers and sustaining profitable growth
Knowing our profit drivers and sustaining profitable growth Jürgen Gräber Member of the Executive Board WestLB Deutschland Conference 2006 ® Frankfurt, 16 November 2006 hannover re
Slide 2: Disclaimer
Overview Profit drivers Growth 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 invest
Slide 3: League table (premium): among the top reinsurers in the world
Overview Overview Profit drivers Growth Outlook League table (premium) WE ARE AMONG THE TOP REINSURERS IN THE WORLD (2005 figures in million USD1)) Rank Group Country GWP NPW 1 Munich Re D 26,482 22,606 2 Swiss Re CH 23,151 21,229 3 Berkshire Hathaway2) USA 12,486 11,646 4 Hannover Re D 11,452 9,166
Slide 4: Top line: strong premium growth
Overview Overview Profit drivers Growth Outlook Top line STRONG PREMIUM GROWTH Our CAGR is significantly greater than that of the total reinsurance market 12,500 in m. EUR 12,463 11,507 11,343 10,000 Reinsurance market: 9,567 9,669 Æ CAGR 6.6% 13.0% 8,320 7,688 8,156 7,739 CAGR 7,575 7,500 6,706 6,4
Slide 5: Operating cash flow
Overview Overview Profit drivers Growth Outlook Operating cash flow CONSTANTLY POSITIVE. . . . . .despite occasional volatility in earnings 2.500 in m. EUR 2.000 1,844 1,638 1,615 1,554 1.500 1,166 1.000 682 500 0 -500 (456) 1999 2000 2001 2002 2003 2004 2005 ® hannover re 3
Slide 6: Profitability: minimum target overachieved
Overview Overview Profit drivers Growth Outlook Profitability OVER TEN YEARS MINIMUM TARGET OVERACHIEVED Despite "WTC" and "KRW" 18.0% 18% 17.1% 17.1% 15.9% 15.7% 14.3% 13.9% 14.0% 13.8% 13.5% 13.1% 12.7% 12.5% 12.3% 12.8% 12.2% 12.1% 11.5% 11.7% 9% 1.9% 0.7% 0% 5 02 03 04 05 96 98 99 00 01 97 -0 20
Slide 7: Earnings per share
Overview Overview Profit drivers Growth Outlook Earnings per share 1) "KRW" DISRUPTS PROFIT TREND Long-term upward trend remains intact 4.937) in EUR 3.856) 3.56 3.60 3,5 3.24 3.03 3 2.525) 2.75 2.61 4.13 2,5 2.37 2.29 2.35 2.32 2.14 2 1.94 1,5 1.15 1.01 1.04 1 0.89 0.92 0,5 0.41 0.11 0 1996 3) 1997
Slide 8: RoE league table
Overview Overview Profit drivers Growth Outlook RoE league table HNR1 CONSISTENTLY AMONG MOST PROFITABLE REINSURERS 2001 2002 2003 2004 20051) 2001 - 2005 Company avg.- RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank Rank RoE Renaissance Re 18% 1 26% 1 31% 1 5% 10 (11%) 9 14% 1 Hannover Re 1% 3 16% 3 1
Slide 9: Our view on risk, return and growth in a nutshell
Overview Overview Profit drivers Growth Outlook Our view on risk, return and growth in a nutshell HANNOVER RE'S PHILOSOPHY: FOCUS ON PROFITABILITY. . . . . .at a pre-defined level of risk Æ Our aim: Being one of the best (= most profitable) reinsurers • Profitability targets only, no volume targets
Slide 10: Risk appetite
Overview Overview Profit drivers Growth Outlook Risk appetite WE LIKE RISK BUT AT RISK ADEQUATE PRICES Æ We like risk but pricing and terms and conditions must adequately reflect the exposure • Growth in attractive market environment only Æ We are a dedicated P/C-catastrophe writer • But: Catastroph
Slide 11: Key profit drivers
Overview Profit Profit drivers drivers Growth Outlook KEY PROFIT DRIVERS 8 important determinants to safeguard our profitability targets 1) Optimal diversification 2) Consistent cycle management 3) Efficient capital management 4) Proactive rating & security management 5) Prudent investment managemen
Slide 12: Diversification: world's most diversified reinsurer
Overview Profit Profit drivers drivers Growth Outlook 1) Diversification FROM A MERE P/C R/I TO THE WORLD'S MOST DIVERSIFIED R/I 1990 2005 Life/Health R/I 6% Specialty Insurance 18% Property/ Casualty R/I 48% Financial R/I 9% Life/Health R/I Property/ 25% Casualty R/I 94% Total GWP: Total GWP: EUR 1
Slide 13: Diversification: our portfolio structure
Overview Profit Profit drivers drivers Growth Outlook 1) Diversification OUR PORTFOLIO STRUCTURE A reflection of the world R/I market, slightly biased towards Germany 2005 Latin Africa America Asia 2% 2% 4% Germany Australia 13% 4% Other European countries North 30% America 45% Total GWP EUR 9,669 m
Slide 14: Diversification at work
Overview Profit Profit drivers drivers Growth Outlook 1) Diversification DIVERSIFICATION* AT WORK Earnings from all business groups balance the portfolio 500 in m. EUR 280 400 355 42 89 300 267 38 43 99 200 40 47 30 271 49 100 11 154 167 18 49 46 60 0 23 4 (2) (76) (91) (62) -100 (27) -200 2001 2002
Slide 15: Cycle management: market share gains in hard markets only
Overview Profit Profit drivers drivers Growth Outlook 2) Cycle management MARKET SHARE GAINS IN "HARD" MARKETS ONLY We grow our book when others commit new money to R/I market in m. EUR Post 9/11: 6,000 Market share increased 140,000 from 3.3% to 4.2% 120,000 5,000 Post hurricane "Andrew": Market sh
Slide 16: Capital management: capital structure
Overview Profit Profit drivers drivers Growth Outlook 3) Capital management OUR CAPITAL STRUCTURE CONSISTS NOT ONLY OF EQUITY Use of hybrids, securitisations etc. lowers cost of capital, increases RoE Æ Our risk modelling (risk-based capital) determines our capital basis Æ Equity capital is by far t
Slide 17: Capital management: steady increase supports financial strength and rating
Overview Profit Profit drivers drivers Growth Outlook 3) Capital management STEADY INCREASE SUPPORTS FIN'L STRENGTH & RATING Intelligent combination of equity, hybrid capital & minorities in m. EUR 5,000 4,893 3) 4,596 936 4,1722) 938 4,000 1) 3,680 500 1,116 500 784 2,959 611 3,000 531 557 492 819
Slide 18: Rating & security management: benefits of above-average rating
Overview Profit Profit drivers drivers Growth Outlook 4) Rating & security management NUMEROUS BENEFITS OF AN ABOVE-AVERAGE RATING Æ 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
Slide 19: Investment management: strategic asset allocation
Overview Profit Profit drivers drivers Growth Outlook 5) Investment management STRATEGIC ASSET ALLOCATION Efficient frontier determined by sophisticated ALM model High Each point represents an asset allocation Efficient frontier Current allocation Return Return Risk-minimal allocation Low Risk Low R
Slide 20: Administrative-expense management: cost leader
Overview Profit Profit drivers drivers Growth Outlook 6) Administrative-expense management 1) HANNOVER RE IS THE COST LEADER Lowest overhead facilitates profit and growth 5,0 % 5.7% 4,5 % P/C R/I: 2.3% L/H R/I: 2.6% Fin R/I: 0.7% 4,0 % Specialty: 10.3% 3,5 % 3.4% 3.0% 3.0% 3,0 % 2.8% 2.6% 2,5 % 2001
Slide 21: Risk-management strategy: capital protection
Overview Profit Profit drivers drivers Growth Outlook 8) Structured risk management RISK-MANAGEMENT STRATEGY: CAPITAL PROTECTION Æ Our risk management is meant to Approaches to • protect our capital risk management • stabilise and optimise results • allow us to profit fully from hard markets (e.g. a
Slide 22: Group risk management allows optimal use of capital
Overview Profit Profit drivers drivers Growth Outlook 8) Structured risk management GROUP RISK MANAGEMENT ALLOWS OPTIMAL USE OF CAPITAL Æ For years centralised approach for • reserve monitoring • risk modelling (especially natural catastrophes) • aggregate control • Dynamic Financial Analysis Æ Sinc
Slide 23: Protections safeguard our capital base
Overview Profit Profit drivers drivers Growth Outlook 8) Structured risk management PROTECTIONS SAFEGUARD OUR CAPITAL BASE Goal: No dependencies Swaps EBIT ex P/C R/I Cat.-Bond Structured Traditional XL protections P/C business group EBIT K5 Q/S securitisation Capital Policyholders' (incl. surplus h
Slide 24: Profitability and growth are correlated
Overview Profit drivers Growth Growth Outlook PROFITABILITY AND GROWTH ARE CORRELATED Æ Within the last 40 years Hannover Re has grown to one of the largest and most profitable reinsurers worldwide • 10-year CAGR net premium earned: 13.0% • 10-year average return on equity: 13.8% Æ Active cycle mana
Slide 25: Group gross and net written premium
Overview Profit drivers Growth Growth Outlook Group gross and net written premium STRONG PREMIUM GROWTH IN HARD MARKET YEARS 12,500 in m. EUR 12,463 16.1% 11,507 11,343 CAGR 8.2% 10,000 9,567 9,669 CAGR 8,320 8,156 7,688 7,739 7,575 7,500 6,706 6,496 5,210 5,000 4,505 3,960 4,180 3,272 3,338 3,549 2
Slide 26: Property and casualty: premium development after 1984
Overview Profit drivers Growth Growth Outlook Property and casualty business PREMIUM DEVELOPMENT AFTER THE YEAR 1984 We only grow largely into the hard market 800% 700% hard 1) hard hard 600% soft soft 500% 400% 300% 200% 100% 00 01 02 03 04 05 91 92 93 94 95 96 97 98 99 84 85 86 87 88 89 90 20 20 2
Slide 27: Worldwide markets still very stable
Overview Profit drivers Growth Growth Outlook Property and casualty business WORLDWIDE MARKETS STILL VERY STABLE North America: Western Europe: Strong, but soft Stable, slight CEE: landing deterioration Growing fast Asia: Stable South America: Stable World : Altogether stable ® hannover re 25
Slide 28: The circumstances overall very good
Overview Profit drivers Growth Growth Outlook Property and casualty business THE CIRCUMSTANCES OVERALL VERY GOOD Many growth opportunities still exist 1) Geographical area Market share in % State of market Growth opportunities? Stable to slight Western Europe 5.2% Yes, core clients deterioration Nor
Slide 29: Life/Health R/I: from low down to a premier league player
Overview Profit drivers Growth Growth Outlook Life/Health R/I FROM LOW DOWN TO A PREMIER LEAGUE PLAYER We do expect significant premium growth in coming years (12 - 15% per annum) in m. EUR 2,728 2,733 2.800 2,660 2,494 2,534 2,488 2.100 1,403 1.400 700 142 0 19911) 1998 1) 2000 2) 20012) 2002 2) 20
Slide 30: Investments: growing invested assets boost investment income
Overview Profit drivers Growth Growth Outlook Investments GROWING INVESTED ASSETS BOOSTS INVESTMENT INCOME We expect rising volumes and investment income going forward Total investments Investment income ´ CAGR: +9.3% 27,526 1200 1,124 25,168 1,071 1,080 24,000 22,031 8,447 1000 946 928 343 22,000 2
Slide 31: Outlook
Outlook ® hannover re
Slide 32: Guidance for 2006
Overview Profit drivers Growth Outlook Outlook GUIDANCE FOR 2006 Gross written premium (calendar year) Æ Group1) ~ 5% • Property/Casualty R/I + 2 - 4% • Life/Health R/I + 12 - 15% • Financial R/I > 10% • Specialty Insurance ± 0% Æ Group RoE well above 15% Æ Earnings per share ~ EUR 4.00 Æ Dividend p
Slide 33: Further information
Overview Profit drivers Growth Outlook FURTHER INFORMATION Æ For further company information please contact our IR-team or get a copy of our group presentation from our website! ® hannover re
Slide 34: Our investor relations team
Overview Profit drivers Growth Outlook OUR INVESTOR RELATIONS TEAM Hannover Re Karl-Wiechert-Allee 50 30165 Hannover, Germany Tel. + 49/5 11/56 04 - 0 (Switchboard) Fax: + 49/5 11/56 04 - 16 48 (direct line) Eric Schuh Gabriele Bödeker Associate Director Senior IR Manager Corporate Communications Co