Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — FY2004 Earnings Presentation
56 slides from Hannover Rueck's earnings presentation, Mar 30, 2005
Slide 1: Welcome to Hannover Re's Analysts' Meeting
Welcome to Hannover Re's Analysts' Meeting London, 30 March 2005 ® hannover re
Slide 2: 2004 Highlights: Group
2004 HIGHLIGHTS: Group Æ Premium growth in Euro dampened by forex effects and Highlights cycle management ("More from less") Premium growth Diversification • Gross (in original currencies) -15.7% (-11.1%) Admin.-expense ratio ROE • Net (in original currencies) -7.1% (almost flat) EPS Key figures Æ M
Slide 3: 2004 Highlights: Strategic Business Groups
2004 HIGHLIGHTS: Strategic Business Groups Æ Property/Casualty R/I: • Reduction in gross premiums (forex, restructuring of HDI R/I, "More from less") but Highlights - increase in net income: + 54.9% Premium growth - despite record cat. losses: C/R only 97.0% Diversification Æ Life/Health R/I: • EBIT
Slide 4: 2004 Highlights: Balance sheet
2004 HIGHLIGHTS: Balance sheet Æ Investments, stockholders' equity and policyholders' surplus up Highlights Æ Reinsurance recoverables down Premium growth Diversification Admin.-expense ratio ROE 31 Dec 03 Variance 31 Dec 04 EPS in m. € Key figures Invested assets1) 22,031 +12.3% 24,736 Strat. Biz G
Slide 5: Premium Growth: Steady increase of retention reflects cycle
PREMIUM GROWTH: Steady increase of retention reflects cycle 13.000 in m. € 12,463 100 % 12.000 11,507 Highlights 11,343 77.6% Premium growth 11.000 80 % 71.9% Diversification 10.000 65.3% 9,567 Admin.-expense ratio 63.7% 61.7% ROE 9.000 60 % 8,320 8,156 EPS 8.000 7,688 7,575 Key figures Strat. Biz G
Slide 6: Our Strategic Business Groups: Consolidation in FinRe, growth in L/H
OUR STRATEGIC BUSINESS GROUPS: Consolidation in FinRe, growth in L/H 2003 2004 Highlights Premium growth Program Property/ Program Property/ Business Casualty R/I Business Diversification Casualty R/I 23% 42% 22% Admin.-expense ratio 43% ROE EPS Key figures Strat. Biz Groups - Property/Casualty R/I
Slide 7: Geographic Diversification: Mirrors the world R/I market
GEOGRAPHIC DIVERSIFICATION: Mirrors the world R/I market 2003 2004 Highlights Latin Latin Africa Asia America Premium growth America Asia 2% 3% Africa 2% Germany 1% Germany 3% Diversification Australia 3% 13% 3% 16% Australia Admin.-expense ratio 4% ROE EPS Key figures Other Other Strat. Biz Groups
Slide 8: Administrative-Expense Ratios: Hannover Re's are lowest
ADMINISTRATIVE-EXPENSE RATIOS1): Hannover Re's are lowest 5,0 % Highlights Premium growth 4.5% 4,5 % Diversification Admin.-expense ratio P/C R/I: 2.6% L/H R/I: 2.8% ROE 4,0 % Fin R/I: 0.5% Prog Biz: 8.7% EPS Key figures 3.5% Strat. Biz Groups 3,5 % 3.4% - Property/Casualty R/I - Life/Health R/I 3.1
Slide 9: Return on Equity: Minimum target exceeded in a difficult year
RETURN ON EQUITY: Minimum target exceeded in a difficult year 26.0% 18% 17.1% Highlights 15.7% Premium growth 14.4% Diversification 13.5% Admin.-expense ratio 12.6% 12.3% 12.2% 12.1% 12.5% 12.5% ROE EPS Key figures 9% Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I - Financial R/I - Prog
Slide 10: ROE Peer Review: HNR1 one of the highest in the industry
ROE PEER REVIEW: HNR1 one of the highest in the industry 2000 2001 2002 2003 20041) 2000 - 2004 Company Ø- RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank Rank RoE Highlights Renaissance Re 20% 2 18% 1 26% 1 31% 1 7% 10 20% 1 Premium growth Diversification Hannover Re 26% 1 1% 3 16% 3 18% 4 13% 6 14% 2
Slide 11: Earnings per Share: 2004 target missed due to hurricanes
EARNINGS PER SHARE1): 2004 target missed due to hurricanes inin€ € 3.56 3,5 3.24 Highlights 3.03 3 Premium growth 2.75 4.13 2.61 2.56 Diversification 2.525) 2,5 2.35 2.37 Admin.-expense ratio 2.29 2.14 ROE 1.94 2 EPS Key figures 1,5 Strat. Biz Groups 1.15 - Property/Casualty R/I 1.01 1.04 1 0.89 0.9
Slide 12: Key Figures
KEY FIGURES 2003 2004 in m. € Total Q1-3 Q4 Total Variance Gross written premiums 11,343 7,179 2,387 9,567 -15.7% Highlights Premium growth Net premiums earned 8,156 5,438 2,137 7,575 -7.1% Diversification Net underwriting result (235) (245) (155) (399) +70.2% Admin.-expense ratio - Net underwriting
Slide 13: Our Strategic Business Units: Four solid legs to stand on
OUR STRATEGIC BUSINESS UNITS: Four solid legs to stand on ® hannover re Highlights Premium growth Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE ® EPS hannover re hannover life re ® hannover re hannover insurance
Slide 14: Property/Casualty R/I: Increased retention in line with the cycle
PROPERTY/CASUALTY R/I: Increased retention in line with the cycle in m. € 6,020 6.000 100 % 85.6% 90 % Highlights Premium growth 80 % 4,938 72.2% 5.000 Diversification 4,787 70 % Admin.-expense ratio 64.0% 67.8% ROE 62.7% 60 % 4,100 EPS 4.000 50 % Key figures 3,502 3,500 3,472 40 % Strat. Biz Groups
Slide 15: Geographic Development: HDI effect well noticeable
GEOGRAPHIC DEVELOPMENT: "HDI effect" well noticeable 2003 2004 Latin Latin Highlights America Australia America Australia Premium growth Africa 3% 3% Germany Africa 3 % 2% Germany Asia 3% 3% 12% Diversification 21% Asia 6% 7% Admin.-expense ratio ROE Great Britain EPS 13 % Key figures Strat. Biz Gro
Slide 16: Lines of Business: Relatively unchanged
LINES OF BUSINESS: Relatively unchanged 2003 2004 Highlights Misc. Misc. Premium growth 9% 10% Casualty/ Diversification Casualty/ Motor Motor Admin.-expense ratio 36% 35% ROE Marine/ Marine/ Aviation Aviation EPS 20% 18% Key figures Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I - Fina
Slide 17: P/C Results: Sharply increased net income despite cat. losses
P/C RESULTS: Sharply increased net income despite cat. losses 2003 2004 in m. € Total Q1-3 Q4 Total Variance Highlights Gross written premiums 4,787 3,190 910 4,100 -14.4% Premium growth Net premiums earned 3,500 2,470 1,002 3,472 -0.8% Diversification Admin.-expense ratio Net underwriting result 14
Slide 18: 2004 Catastrophe Losses: Property/Casualty R/I
2004 CATASTROPHE LOSSES1): Property/Casualty R/I 1,775 in m. € 665 Highlights Premium growth Diversification 497 472 Admin.-expense ratio 449 ROE 370 EPS 341 Key figures 287 240 225 Strat. Biz Groups - Property/Casualty R/I 164 - Life/Health R/I 84 83 55 62 60 69 60 - Financial R/I 16 28 - Program B
Slide 19: 2004 Catastrophe Losses: Property/Casualty R/I
2004 CATASTROPHE LOSSES1): Property/Casualty R/I in m. € Economic Insured Property/Casualty R/I Catastrophe loss/Date Losses 2) Gross Net Hurricane Charley 9 - 14 Aug 17.6 6.3 39.0 33.7 Highlights 24 Aug - Premium growth Hurricane Frances 6.9 3.9 77.3 46.1 9 Sep Diversification Hurricane Ivan 2 - 24
Slide 20: Life/Health R/I
LIFE/HEALTH R/I ® hannover re Highlights Premium growth Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE EPS hannover re ® hannover life re ® hannover re hannover insurance Advanced Solutions® Key figures Strat. Biz
Slide 21: Retention further increased
RETENTION further increased in m. € 2.800 100 % 2,727 90.2% 2,660 86.9% 85.1% Highlights 1) 2561) 2,534 2,488 Premium growth 2,494 73.7% 289 2,471 80 % 2.400 75.6% Diversification 2,371 2581) 2,276 3111) 1) Admin.-expense ratio 404 2,142 ROE 2,177 60 % 2,091 EPS 2.000 1,936 1,956 Key figures Strat.
Slide 22: Geographic Development: US-health business further reduced
GEOGRAPHIC DEVELOPMENT: US-health business further reduced 2003 2004 Highlights Latin Africa Asia Latin Africa Asia Premium growth 3% 3% America 4% America Australia 4% Diversification 1% 2% 9% Australia North Other North Admin.-expense ratio 11% America European America ROE 36% 30% countries EPS 8%
Slide 23: Results: EBIT rises by almost 50%
RESULTS: EBIT rises by almost 50% 2003 2004 in m. € Total Q1-3 Q4 Total Variance Gross written premiums 2,276 1,497 679 2,177 -4.4% Highlights Premium growth Net premiums earned 1,936 1,373 584 1,956 +1.0% Diversification Net underwriting result (105) (84) (53) (137) +31.4% Admin.-expense ratio - Ne
Slide 24: VIF grows steadily
VIF grows steadily 2002 2003 2004 in m. € Highlights Hannover Life Re Germany (E+S Rück) 227 214 271 Premium growth Diversification Hannover Life Re Africa 9 9 15 Admin.-expense ratio Hannover Life Re America 170 196 167 ROE Hannover Life Re Australasia 79 97 94 EPS Hannover Life Re UK 62 73 97 Key
Slide 25: VIF: Unchanged assumptions and methodology
VIF: Unchanged assumptions and methodology Highlights 2003 2004 Premium growth Diversification Risk discount Risk discount Admin.-expense ratio Currency Risk free rate* rate Risk free rate* rate ROE AUD 5.6% 9.3% 5.3% 9.3% EPS Key figures EUR 4.3% 7.8% 3.7% 7.3% Strat. Biz Groups GBP 4.8% 8.5% 4.5%
Slide 26: VIF: Moderate sensitivity regarding changed assumptions
VIF: Moderate sensitivity regarding changed assumptions Interest VIF Mortality/Morbidity Lapsation rate in m. € 2004 + 10% -10% +10% -10% -100 bps Highlights Premium growth Hannover Life Re International 583 (67) 67 (18) 19 37 Diversification Hannover Life Re Germany Admin.-expense ratio 271 (19) 18
Slide 27: Financial R/I
FINANCIAL R/I ® hannover re Highlights Premium growth Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE ® EPS hannover re hannover life re ® hannover re hannover insurance Advanced Solutions® Key figures Strat. Biz G
Slide 28: Premium Development back to normal
PREMIUM DEVELOPMENT back to normal in m. € 1,800 1,741 1,633 Highlights 1,600 1,563 Premium growth Diversification 1,400 Admin.-expense ratio 1,280 1,211 1,243 1,205 ROE 1,182 1,200 EPS Key figures Strat. Biz Groups 1,000 - Property/Casualty R/I 870 801 - Life/Health R/I ,800 - Financial R/I - Progr
Slide 29: Geographic Development: US business still dominant
GEOGRAPHIC DEVELOPMENT: US business still dominant 2003 2004 Highlights Other Other European European Premium growth Asia Asia countries countries 2% 1% Diversification 6% 2% Admin.-expense ratio ROE EPS Key figures Strat. Biz Groups Germany Germany 21% 32% - Property/Casualty R/I - Life/Health R/I
Slide 30: Does Finite R/I Have a Future? Yes, it does.
DOES FINITE R/I HAVE A FUTURE? Yes, it does. Æ We are not (yet) part of any investigation in the U.S. Highlights Æ We entered into Financial R/I more than 25 years ago Premium growth Æ Our underwriting guidelines prohibit, among other things, Diversification Admin.-expense ratio • Conclusion of cont
Slide 31: Fin Re Results: Back to normal, too
FIN RE RESULTS: Back to normal, too 2003 2004 in m. € Total Q1-3 Q4 Total Variance Gross written premiums 1,633 884 297 1,182 -27.6% Highlights Premium growth Net premiums earned 1,563 798 406 1,205 -22.9% Diversification Net underwriting result (291) (142) (89) (231) -20.6% Admin.-expense ratio - N
Slide 32: Program Business
PROGRAM BUSINESS ® hannover re Highlights Premium growth Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE ® EPS hannover re hannover life re ® hannover re hannover insurance Advanced Solutions® Key figures Strat. Bi
Slide 33: Premium Development: Focus on sustainable business
PREMIUM DEVELOPMENT: Focus on sustainable business 3.200 100 % in m. € 2,729 2,647 Highlights 2,457 80 % Premium growth 2.400 Diversification 2,108 Admin.-expense ratio 1,974 60 % ROE EPS 1.600 46.4% Key figures 40.3% 37.8% 40 % Strat. Biz Groups 1,156 943 - Property/Casualty R/I 27.4% 833 - Life/He
Slide 34: 'Export' of Program Business continues at slow pace
'EXPORT' OF PROGRAM BUSINESS continues at slow pace 2003 2004 Highlights Africa Africa Premium growth Europe 1% 2% Europe Diversification 9% 11% Admin.-expense ratio ROE EPS Key figures Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I - Financial R/I - Program Business Investments USA USA
Slide 35: Prog Business Results: Hurricanes take their toll
PROG BUSINESS RESULTS: Hurricanes take their toll 2003 2004 in m. € Total Q1-3 Q4 Total Variance Highlights Gross written premiums 2,647 1,608 500 2,108 -20.3% Premium growth Net premiums earned 1,156 798 145 943 -18.4% Diversification Admin.-expense ratio Net underwriting result 20 (91) (44) (136)
Slide 36: 2004 Catastrophe Losses: Program Business
2004 CATASTROPHE LOSSES1): Program Business in m. € Economic Insured Program Business Highlights Catastrophe loss/Date Losses 2) Gross Net Premium growth Hurricane Charley 9 - 14 Aug 17.6 6.3 128.4 45.1 Diversification Admin.-expense ratio 24 Aug - Hurricane Frances 6.9 3.9 108.9 15.4 ROE 9 Sep EPS
Slide 37: Investment Income again very gratifying
INVESTMENT INCOME again very gratifying 2004 in m. € 2003 Q1-3 Q4 Total Variance Highlights Ordinary investment income 1,094 742 295 1,037 -5.2% - From assets under own management 584 450 154 604 +3.5% Premium growth - From funds withheld 510 292 140 433 -15.3% Diversification Realized gains/losses
Slide 38: Tactical Asset Allocation: Equity ratio slightly increased
TACTICAL ASSET ALLOCATION: Equity ratio slightly increased Asset class 2000 2001 2002 2003 2004 Highlights Bonds 67% 72% 75% 81% 81% Premium growth • Government 27% 32% 25% 25% 25% Diversification • Semi-Governments 20% 21% 20% Admin.-expense ratio ROE • Corporates 32% 33% 20% 26% 26% EPS Investment
Slide 39: Fixed Income Portfolio: More than 90% A and better
FIXED INCOME PORTFOLIO: More than 90% "A" and better* in m. € 7,000 Highlights 6,000 Premium growth Diversification 5,000 Admin.-expense ratio ROE 4,000 EPS Key figures 3,000 Strat. Biz Groups - Property/Casualty R/I 2,000 - Life/Health R/I 1,000 - Financial R/I - Program Business ,0 Investments 200
Slide 40: Stress Tests: Focus on fixed-income securities
STRESS TESTS: Focus on fixed-income securities Change in market value Highlights Portfolio Scenario Premium growth in m. € Diversification Equities* Stock price -10% -111 Admin.-expense ratio ROE EPS Equities* Stock price -20% -222 Key figures Strat. Biz Groups Equities* Stock price -30% -332 - Prop
Slide 41: All Strategic Business Units at a glance
ALL STRATEGIC BUSINESS UNITS at a glance Property/Casualty Life/Health Financial Program Total R/I R/I R/I Business in m. € 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 Highlights Gross written premiums 4,787 4,100 2,276 2,177 1,633 1,182 2,647 2,108 11,343 9,567 Premium growth Change in GWP -
Slide 42: R/I Recoverables: Further reduced
R/I RECOVERABLES: Further reduced in m. € 8.000 31 Dec 2004 Highlights 6,759 Premium growth NR 6,180 <BBB AAA 3% Diversification 6.000 BBB 3% 8% Admin.-expense ratio 5% 4,804 ROE 4,397 4,376 4,335 4,163 EPS 4.000 Key figures Strat. Biz Groups - Property/Casualty R/I 2.000 - Life/Health R/I - Financi
Slide 43: R/I Recoverables: Low default risk
R/I RECOVERABLES: Low default risk 2004 2003 P/C R/I L/H R/I Fin R/I Program Total Highlights in m. € Premium growth Diversification Recoverables 4,438 1.493 90 508 2.082 4,173 Admin.-expense ratio ROE Collateralized (incl. EPS funds withheld, LOCs 2,191 515 90 508 794 1.907 Key figures or deposits)
Slide 44: Paid Claims as expected
PAID CLAIMS as expected Reporting year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 in m. € Loss and loss adjustment Highlights expense reserve 3,736 3,958 4,305 4,849 5,002 5,696 6,162 6,868 5,846 6,585 7,338 (as per balance sheet) Premium growth Diversification + 1 years* 686 841 822 797
Slide 45: Net Loss Reserves: Business as usual
NET LOSS RESERVES: Business as usual Reporting year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 in m. € End of year 3,736 3,958 4,305 4,849 5,002 5,696 6,162 6,868 5,846 6,585 7,338 Highlights + 1 years* 3,476 4,110 4,339 4,485 5,322 5,885 6,265 6,819 5,668 6,320 Premium growth Diversific
Slide 46: A&E-Reserves: Highest survival ratio in the industry
A&E-RESERVES: Highest survival ratio in the industry Highlights Premium growth 2003 2003 Diversification Single loss Single loss Add. reserves Survival ratio Add. reserves Survival ratio Admin.-expense ratio reserves reserves in m. € in years in m. € in years in m. € in m. € ROE EPS A&E losses 28.1
Slide 47: Target Matrix
TARGET MATRIX Target Historical data Business Group Key figures 2004 2003 2002 Property/Casualty R/I Gross-premium growth - (14.4%) (20.5%) 21.9% Combined ratio - assuming a ≤ 100% 1) 97.0%9 96.0% 96.3% Highlights net cat-loss ratio (natural & man-made) up to 5% 8.3% 1.5% 5.2% Premium growth EBIT gr
Slide 48: WTC Losses still (more than) sufficiently reserved
WTC LOSSES still (more than) sufficiently reserved USD 1.3 bn. 100% Highlights Premium growth 75% Diversification Admin.-expense ratio ROE EPS 50% Key figures Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I 25% - Financial R/I - Program Business Investments 0% Recoverables 01 02 4 03 01
Slide 49: Pay-back of WTC Loss completed
PAY-BACK OF WTC LOSS completed Gross u/w result (before admin. exp.) Pay-back Highlights Gross excess Premium growth in m. USD WTC Loss* Q4/2001 2002 2003 2004 Total (deficit) Diversification Aviation/Marine Admin.-expense ratio ROE - treaty 546 4 326 234 190 754 209 EPS - facultative 23 10 42 28 17
Slide 50: 2004 Cat. Business profitable, despite the hurricanes
2004 CAT. BUSINESS profitable, despite the hurricanes Highlights Gross premiums 2004 Premium growth Diversification – Non-prop. prop. cat. € 305 m. Admin.-expense ratio ROE – Non-prop. per Risk * € 100 m. EPS Key figures – Proportional cat. * € 70 m. € 475 m. Strat. Biz Groups - Property/Casualty R/
Slide 51: Outlook for 2005 & 2006
Outlook for 2005 & 2006 ® hannover re
Slide 52: P/C Outlook for 2005
P/C OUTLOOK* for 2005 Highlights Æ On an underwriting-year basis Premium growth Diversification • 2005 will be as good as 2004 (see conference call on 2005 renewals) Admin.-expense ratio ROE Æ On a calendar-year basis EPS Key figures • 2005 will be (significantly) better than 2004 Strat. Biz Groups
Slide 53: P/C Time Lag between u/w year & calendar year
P/C TIME LAG between u/w year & calendar year HR US professional liability portfolio, where 50% of the u/w year premium is earned in C/Y 1 40% " C/Y 2 Highlights Premium growth 10% " C/Y 3 Diversification C a le nd a r ye a rs 2002 2003 2004 2005 2006 2007 Admin.-expense ratio ROE EPS 2001 Key figur
Slide 54: Guidance for 2005
GUIDANCE* for 2005 Æ Property/Casualty R/I: Double-digit earnings growth Highlights Æ Life/Health R/I: (Significant) double-digit premium & Premium growth earnings growth Diversification Admin.-expense ratio Æ Financial R/I: Low double-digit premium & ROE EPS earnings reduction Key figures Strat. Bi
Slide 55: Outlook for 2006
OUTLOOK* for 2006 Æ Property/Casualty R/I: No top-line growth targets, up to low double-digit net earnings growth Highlights Premium growth Diversification Æ Life/Health R/I: Double-digit premium & net earnings growth Admin.-expense ratio ROE Æ Financial R/I: Premium & net earnings at 2005 levels EP
Slide 56: Financial Calendar
FINANCIAL CALENDAR 9 February 2005 Conference Call on 2005 Renewals Highlights Premium growth 29 March 2005 Press Conference on 2004 Annual Results Diversification Admin.-expense ratio ROE 30 March 2005 Frankfurt Analysts' Meeting EPS Key figures 30 March 2005 London Analysts' Meeting Strat. Biz Gro