Hannover Rueck Se · XETR:HNR1
Hannover Rueck — Hannover Re — FY2019 Earnings Presentation
36 slides from Hannover Rueck's earnings presentation, Mar 11, 2020
Slide 1: Beyond risk sharing – we team up to create opportunities
Beyond risk sharing – we team up to create opportunities Press Conference Annual Results 2019 Hannover, 11 March 2020
Slide 2: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 14 4 Investments 17 5 Solvency II reporting as at 31 December 2019 20 6 Outlook 2020 23 7 Appendix 27 2 Press Conference
Slide 3: Double-digit growth in earnings and premium
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Double-digit growth in earnings and premium Improved RoE well above target, despite 20% increase in shareholders’ equity GWP F/x-adj. +15.2% NPE F/x-adj. +11.8% EBIT Group net income 22,598 19,176 19,730 1,853 1,284 17,289 1,597 1,059 +17.8% +14.1% +16.1%
Slide 4: Increased dividend reflects strong earnings power
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Increased dividend reflects strong earnings power Higher retention of profits enables us to fund future growth Dividend per share in EUR 63% 60% 52% 51% 52% 50% 43% 40% Payout ratio ordinary dividend: 35 - 45% 44% 38% 42% 43% 40% 10.65 37% 37% 37% 36% 9.7
Slide 5: Strong operating cash flow fuels growth of AuM (+12.9%)
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Strong operating cash flow fuels growth of AuM (+12.9%) AuM growth supported by increase in valuation reserves and currency translation Operating cash flow in m. EUR Assets under own management (AuM) in m. EUR 47,629 41,793 42,197 39,347 40,057 3,105 2,50
Slide 6: Shareholders' equity up by 20.0%
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Shareholders' equity up by 20.0% Driven by net income and asset valuation Policyholders' surplus in m. EUR Change in shareholders' equity in m. EUR 13,589 159 10,528 941 1,284 2,234 11,231 11,035 8,777 (633) 10,779 826 10,267 1,491 1,492 1,493 1,490 743 7
Slide 7: Return on Equity significantly exceeds target
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Return on Equity significantly exceeds target 2019 is the 11th consecutive year with double-digit RoE Return on Equity: yearly Return on Equity: average 9,652 8,533 8,763 8,653 7,810 14.7% 14.1% 13.7% 13.3% 13.5% 13.0% 12.2% 4.5% 3.8% 10.9% 11.4% 2.8% 4.0
Slide 8: Remarkable premium and earnings growth
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Remarkable premium and earnings growth Improved result from Life & Health and favourable investment income Group figures in m. EUR Q4/2018 Q4/2019 Δ 2018 2019 Δ Gross written premium 4,184 5,204 +24.4% 19,176 22,598 +17.8% Net premium earned 4,515 5,338 +
Slide 9: Target Matrix 2019
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Target Matrix 2019 Almost all targets achieved or exceeded Business group Key figures Strategic targets for 2019 2019 Group Return on investment 1) ≥ 2.8% 3.4% Return on equity 2) ≥ 9.3% 13.3% Earnings per share growth (y-o-y) ≥ 5% 21.2% Economic value cr
Slide 10: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 14 4 Investments 17 5 Solvency II reporting as at 31 December 2019 20 6 Outlook 2020 23 7 Appendix 27 10 Press Conference
Slide 11: Strong growth based on improving reinsurance market environment
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | Strong growth based on improving reinsurance market environment Satisfactory results despite large losses exceeding budget Property & Casualty R/I in m. EUR Q4/2018 Q4/2019 2018 2019 YTD Gross written premium 2,318 3,128 11,976 14,781 • G
Slide 12: Large losses exceed budget by EUR 81 million
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | Large losses exceed budget by EUR 81 million Natural and man-made catastrophe losses1) in m. EUR 1,790 1,730 1,722 Gross Net 1,497 Large loss budget (net) 1,127 981 956 863 846 850 724 714 662 662 578 573 627 559 426 478 291 240 2009 2010
Slide 13: Large losses above budget due to frequency of man-made losses
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | Large losses above budget due to frequency of man-made losses Large losses from natural catastrophes in line with expectations Catastrophe losses 1) in m. EUR Date Gross Net Flood, Australia 26 Jan - 7 Feb 37.1 27.5 Storm / flood, USA 12
Slide 14: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 14 4 Investments 17 5 Solvency II reporting as at 31 December 2019 20 6 Outlook 2020 23 7 Appendix 27 14 Press Conference
Slide 15: Strong earnings contribution from Life & Health reinsurance
| 1 | 2 | 3 Life & Health reinsurance | 4 | 5 | 6 | 7 | Strong earnings contribution from Life & Health reinsurance US mortality performance better than expected Life & Health R/I in m. EUR Q4/2018 Q4/2019 2018 2019 YTD Gross written premium 1,865 2,076 7,200 7,816 • GWP f/x-adjusted +6.7%, mainly f
Slide 16: Value of New Business well above target
| 1 | 2 | 3 Life & Health reinsurance | 4 | 5 | 6 | 7 | Value of New Business well above target Driven by Financial Solutions and Longevity business Value of New Business development in m. EUR 893 663 543 448 364 309 290 Target ≥ EUR 220 m. 1) 1) 1) 2) 2) 2) 2) 2013 2014 2015 2016 2017 2018 2019 1)
Slide 17: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 14 4 Investments 17 5 Solvency II reporting as at 31 December 2019 20 6 Outlook 2020 23 7 Appendix 27 17 Press Conference
Slide 18: Very pleasing outperformance of RoI target
| 1 | 2 | 3 | 4 Investments | 5 | 6 | 7 | Very pleasing outperformance of RoI target Realisations driven by successful real estate transactions and one-off in L&H in m. EUR Q4/2018 Q4/2019 2018 2019 RoI YTD Ordinary investment income1) 333 356 1,327 1,407 3.1% • Rise in ordinary income from fixed-in
Slide 19: Ordinary investment income well supported by alternative asset classes
| 1 | 2 | 3 | 4 Investments | 5 | 6 | 7 | Ordinary investment income well supported by alternative asset classes Credit profile slightly more offensive with increased share in Emerging Markets Asset allocation1) Ordinary income split Investment category 2015 2016 2017 2018 2019 Short-term Fixed-inco
Slide 20: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 14 4 Investments 17 5 Solvency II reporting as at 31 December 2019 20 6 Outlook 2020 23 7 Appendix 27 20 Press Conference
Slide 21: Group capital position remains comfortable
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2019 | 6 | 7 | Group capital position remains comfortable Growth in own funds exceeds SCR growth, driven also by hybrid bond issuance in Q4 Solvency II1) Solvency II2) Internal Metrics 31.12.2018 31.12.2019 31.12.2019 in m. EUR Available Ec
Slide 22: Improving capital adequacy ratio
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2019 | 6 | 7 | Improving capital adequacy ratio Strong growth supported by excellent operating earnings Development of the (regulatory) capital adequacy ratio • 2018: Decrease in solvency ratio mainly due to higher 260% 246% 252% capital re
Slide 23: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 14 4 Investments 17 5 Solvency II reporting as at 31 December 2019 20 6 Outlook 2020 23 7 Appendix 27 23 Press Conference
Slide 24: Overall profitability above margin requirements in Property & Casualty
| 1 | 2 | 3 | 4 | 5 | 6 Outlook 2020 | 7 | Overall profitability above margin requirements in Property & Casualty Financial year 2020 Reporting categories Volume1) Profitability 2) North America3) + Latin America, Iberian Peninsula and Agricultural Risks 3) + Germany, Switzerland, Austria and Italy3
Slide 25: Profitability at or above cost of capital in all reporting categories
| 1 | 2 | 3 | 4 | 5 | 6 Outlook 2020 | 7 | Profitability at or above cost of capital in all reporting categories Financial year 2020 Reporting categories Volume1) Profitability2) Financial solutions ++ Longevity + Mortality +/- Morbidity +/- 1) In EUR, development in original currencies can be diffe
Slide 26: Guidance for 2020
| 1 | 2 | 3 | 4 | 5 | 6 Outlook 2020 | 7 | Guidance for 2020 Hannover Re Group • Gross written premium1) ~ 5% growth • Return on investment2) 3) ~ 2.7% • Group net income2) ~ EUR 1.2 bn. • Ordinary dividend payout ratio4) 35% - 45% • Special dividend additional payout if profit target is reached and
Slide 27: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 14 4 Investments 17 5 Solvency II reporting as at 31 December 2019 20 6 Outlook 2020 23 7 Appendix 27 27 Press Conference
Slide 28: Our business groups at a glance 2019 vs. 2018
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Our business groups at a glance 2019 vs. 2018 Property & Casualty R/I Life & Health R/I Total in m. EUR 2018 2019 Δ 2018 2019 Δ 2018 2019 Δ Gross written premium 11,976 14,781 +23.4% 7,200 7,816 +8.6% 19,176 22,598 +17.8% Net premium earned 10,804 12,798 +18.5%
Slide 29: Our business groups at a glance Q4/2019 vs. Q4/2018
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Our business groups at a glance Q4/2019 vs. Q4/2018 Property & Casualty R/I Life & Health R/I Total in m. EUR Q4/2018 Q4/2019 Δ Q4/2018 Q4/2019 Δ Q4/2018 Q4/2019 Δ Gross written premium 2,318 3,128 +34.9% 1,865 2,076 +11.3% 4,184 5,204 +24.4% Net premium earned
Slide 30: Well balanced international portfolio growth
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Well balanced international portfolio growth Gross written premium in m. EUR Africa 22,598 2.5% 5.5% Australia 19,176 4.7% 17,791 17,069 16.8% 16,354 Latin America 13,963 14,362 13,774 16.0% Asia 12,096 11,429 4.1% 6.6% Other European countries 4.3% 6.2% 8.4% 1
Slide 31: Property & Casualty reinsurance: diversified growth
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Property & Casualty reinsurance: diversified growth 5-year CAGR: +13.3% GWP split by line of business in m. EUR Gross written premium split by regions Catastrophe XL (Cat XL) 14,781 Latin Africa 4% America 2% Aviation and Marine 4% Australia 4% 5% 3% Credit, Su
Slide 32: Life & Health reinsurance: worldwide portfolio
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Life & Health reinsurance: worldwide portfolio 5-year CAGR: +3.9% GWP split by reporting categories in m. EUR Gross written premium split by regions 7,731 7,816 Africa Germany Latin 3% 7,149 7,200 3% 7,080 America North Morbidity 18% 6% America 29% 27% 23% 24%
Slide 33: Stress tests on assets under own management
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Stress tests on assets under own management Focus on credit and real assets risks Change in market Change in OCI before Portfolio Scenario value tax in m. EUR in m. EUR -10% -121 -121 Equity (listed and private equity) -20% -241 -241 +50 bps -1,202 -1,141 Fixed
Slide 34: High-quality fixed income book well balanced
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | High-quality fixed income book well balanced Geographical allocation mainly in accordance with our broad business diversification Pfandbriefe, Short-term Semi- Governments Corporates Covered bonds, investments, Total governments ABS cash AAA 73% 53% 1% 58% - 44
Slide 35: Currency allocation matches liability profile of balance sheet
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Currency allocation matches liability profile of balance sheet Duration-neutral strategy continued with slightly longer neutral point Currency split of investments • Modified duration of fixed-income mainly congruent with liabilities and currencies Others 10% •
Slide 36: Disclaimer
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | 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