Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — AIFA Midwinter Insurance Conference 2006
39 slides from Hannover Rueck's conference presentation, Mar 7, 2006
Slide 1: Hannover Re – The somewhat different reinsurer
Hannover Re – The somewhat different reinsurer Specialty Insurance – Introducing Praetorian Wilhelm Zeller Chairman of the Executive Board AIFA Midwinter Insurance Conference ® Scottsdale, 7 March 2006 hannover re
Slide 2: Disclaimer
Hannover Re PC Renewals Praetorian 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 in
Slide 3: League table (premium): among the top reinsurers in the world
Hannover Re Hannover Re PC Renewals Praetorian Outlook League table (premium) WE ARE AMONG THE TOP REINSURERS IN THE WORLD (2004 figures in million USD1)) Rank Group Country GWP NPW 1 Munich Re D 30,558 26,408 2 Swiss Re CH 28,047 25,789 3 Berkshire Hathaway2) USA 13,085 11,816 4 Hannover Re D 13,05
Slide 4: Unique group structure
Hannover Re Hannover Re PC Renewals Praetorian Outlook UNIQUE GROUP STRUCTURE Majority owner, but operational and financial independence Talanx AG* Free Float 50.2% 49.8% hannover re ® 55.8% 8 German 42.7% Mutuals >100 Subsidiaries, e+s rück Branch/Rep. Offices in 18 countries Others 1.5% German Bus
Slide 5: Significant premium growth
Hannover Re Hannover Re PC Renewals Praetorian Outlook Top line SIGNIFICANT PREMIUM GROWTH . . . in m. EUR 12,463 12,500 11,507 11,343 10,000 9,567 8,320 8,156 7,688 7,575 7,500 6,706 6,496 5,210 5,000 4,505 4,180 3,960 3,272 3,338 3,549 3,067 2,550 2,569 2,500 ,0 1995 1) 1996 1) 1997 1) 1998 2) 199
Slide 6: Earnings per share grew even stronger
Hannover Re Hannover Re PC Renewals Praetorian Outlook Bottom line 1) . . . BUT EARNINGS PER SHARE GREW EVEN STRONGER 4.096) in EUR 3.56 3,5 3.24 3.03 3 2.75 4.13 5) 2.61 2.52 2,5 2.37 2.56 2.29 2.35 2.14 1.94 2 1,5 1.15 1.01 1.04 1 0.89 0.92 0.81 0.63 0,5 0.11 0 1995 3) 1996 3) 1997 3) 1998 3) 1999
Slide 7: Minimum ROE target exceeded in 8 out of 10 years
Hannover Re Hannover Re PC Renewals Praetorian Outlook Profitability MINIMUM ROE TARGET EXCEEDED IN 8 OUT OF 10 YEARS 26.0% 18.0% 18% 17.1% 17.1% 15.9% 15.7% 14.8% 14.8% 14.3% 14.0% 13.9% 13.2% 13.5% 13.1% 12.7% 12.5% 12.3% 12.2% 12.1% 12.5% 11.3% 9% 0.7% 0% 4 95 96 97 98 99 00 01 02 03 04 -0 19 19
Slide 8: League table (RoE): consistently among most profitable companies
Hannover Re Hannover Re PC Renewals Praetorian Outlook League table (RoE) HNR1 CONSISTENTLY AMONG MOST PROFITABLE COMPANIES Again: "Volume is vanity, profit is sanity." 2000 2001 2002 2003 2004 2000 - 2004 Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank Ø - RoE Rank Renaissance Re 20% 2 18% 1 2
Slide 9: Share price performance: benchmark clearly outperformed
Hannover Re Hannover Re PC Renewals Praetorian Outlook Share price performance (since 2002, i.e. after 9/11) BENCHMARK CLEARLY OUTPERFORMED Well above the Global R/I Index 180% 140% 100% 60% 20% J 4 O 02 J 03 O 05 06 J 02 J 05 Ap 3 S 03 M 04 A 02 Se 4 No 4 J 4 A 5 A 3 F 02 Fe 05 N 03 A 02 M 04 A 05
Slide 10: The somewhat different reinsurer
Hannover Re Hannover Re PC Renewals Praetorian Outlook THE SOMEWHAT DIFFERENT REINSURER Hannover Re Group Æ Focus on profitability, not on premium, league tables or market share • We have no premium growth targets, only for earnings Æ Diversification • Four (largely) uncorrelated business groups red
Slide 11: The somewhat different reinsurer: Property/Casualty Reinsurance
Hannover Re Hannover Re PC Renewals Praetorian Outlook THE SOMEWHAT DIFFERENT REINSURER Property/Casualty Reinsurance Æ Centralized underwriting approach • Secures U/W discipline and opportunistic cycle management • Lean, efficient infrastructure with no U/W authority in London or U.S. Æ Cycle manag
Slide 12: The somewhat different reinsurer: Life/Health Reinsurance
Hannover Re Hannover Re PC Renewals Praetorian Outlook THE SOMEWHAT DIFFERENT REINSURER Life/Health Reinsurance Æ Focus, focus, focus • 10 key markets = 95% of our business; 50 main treaties = 65% of our portfolio • 3 main products stand for 75% of our total business – Financing R/I – Block assumpti
Slide 13: Financial Reinsurance, Specialty Insurance
Hannover Re Hannover Re PC Renewals Praetorian Outlook THE SOMEWHAT DIFFERENT REINSURER Financial Reinsurance, Specialty Insurance Financial R/I Æ We entered into FinRe more than 25 years ago Æ Distribution through own P/C network as well as through specialty brokers Æ Our internal rules prohibit •
Slide 14: P/C Renewals
alent P/C Renewals hannover re’
Slide 15: P/C renewals: peak of hard market extended/enhanced
Hannover Re PC Renewals PC Renewals Praetorian Outlook P/C RENEWALS: PEAK OF HARD MARKET EXTENDED/ENHANCED Æ After 6 consecutive years (2000 - 2005) of rate increases • U.S. property cat. XL rates pushed to all-time high • Softening of rates in other segments largely prevented Æ We anticipate more c
Slide 16: Guidance for 2006
Hannover Re PC Renewals Praetorian Outlook Outlook GUIDANCE FOR 2006 Gross written premium (calendar year) Æ Hannover Re Group + 0 - 5% • Property/Casualty R/I flat • Life/Health R/I + 12 - 15% • Financial Reinsurance double digit increase • Specialty Insurance approx. - 10% Æ Group RoE at least 15%
Slide 17: The Way Ahead – Introducing: Praetorian Financial Group, Inc.
The Way Ahead – Introducing: Praetorian Financial Group, Inc. ® hannover re
Slide 18: Four strong legs to stand on
Hannover Re PC Renewals Praetorian Praetorian Outlook FOUR STRONG LEGS TO STAND ON ® hannover re Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Specialty Insurance ® hannover re hannover life re ® hannover re hannover insurance Advanced Solutions® E+S Rück, Hannover Life
Slide 19: Specialty Insurance
Hannover Re PC Renewals Praetorian Praetorian Outlook SPECIALTY INSURANCE ® hannover re Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Specialty Insurance ® hannover re hannover life re ® hannover re hannover insurance Advanced Solutions® E+S Rück, Hannover Life Re Afric
Slide 20: Hannover Re's specialty insurance strategy
Hannover Re PC Renewals Praetorian Praetorian Outlook HANNOVER RE'S SPECIALTY INSURANCE STRATEGY Æ Strategic objective • Niche and non-standard risks • Maximize gross underwriting profit Æ Distribution channel • Independent MGAs – Identify the best – Be the preferred provider – Safeguard mutual prof
Slide 21: Clarendon Insurance Group
Hannover Re PC Renewals Praetorian Praetorian Outlook CLARENDON INSURANCE GROUP The largest program writer in the U.S. Hannover Re Hannover Finance, Inc. (HFI) Clarendon Insurance Group Clarendon National Insurance Company Insurance Corporation Redland Insurance Clarendon Select Clarendon America Ha
Slide 22: Clarendon restructuring progressing step by step
Hannover Re PC Renewals Praetorian Praetorian Outlook CLARENDON RESTRUCTURING PROGESSING STEP BY STEP Æ So far: "Virtual separation" into specialty and commodity business • Business was re-underwritten in 2002, ongoing emphasis on specialty business Æ Some organisational measures underscored the "vi
Slide 23: Hannover Re's U.S. specialty business after reorganization
Hannover Re PC Renewals Praetorian Praetorian Outlook HANNOVER RE'S U.S. SPECIALTY BUSINESS After reorganization Hannover Re Specialty business: GPW = USD 1.6 bn. NPE = USD 0.6 bn. Hannover Finance, Inc. HFI (HFI) Commodity business Clarendon Insurance Praetorian Financial Group Clarendon Insurance
Slide 24: Legal and physical separation
Hannover Re PC Renewals Praetorian Praetorian Outlook LEGAL AND PHYSICAL SEPARATION Clarendon retains commodity biz., Praetorian focuses on select specialty biz. Æ Regulatory approval received by all three required authorities (New Jersey, Illinois, and California) for separation • Clarendon to cont
Slide 25: Praetorian pro forma: very attractive portfolio
Hannover Re PC Renewals Praetorian Praetorian Outlook PRAETORIAN PRO FORMA: VERY ATTRACTIVE PORTFOLIO 2005 Æ No legacy issues A.M. Best rating A- Æ A running start Shareholders' equity USD 0.5 bn. Total assets USD 3.5 bn. GWP USD 1,552 m. NPE USD 585 m. U/W result USD 103 m. Retention ratio 40.8% Co
Slide 26: Praetorian - The new breed of specialty insurer
Hannover Re PC Renewals Praetorian Praetorian Outlook PRAETORIAN - THE NEW BREED OF SPECIALTY INSURER ® hannover re 22
Slide 27: What makes Praetorian the new breed?
Hannover Re PC Renewals Praetorian Praetorian Outlook WHAT MAKES PRAETORIAN “THE NEW BREED”? Æ Entrepreneurial culture Æ Quick response to market conditions Æ Producer partnerships Æ Breadth of reach and experience Æ Agility Poised to capitalize on market opportunities ® hannover re 23
Slide 28: What's going on in the market?
Hannover Re PC Renewals Praetorian Praetorian Outlook Praetorian - The new breed of specialty insurer WHAT’S GOING ON IN THE MARKET? Æ Property • Catastrophe-exposed property market dislocation (south east and gulf states) • Excess & surplus lines opportunities • Addressing Insurance To Value on all
Slide 29: What makes us special? Platform
Hannover Re PC Renewals Praetorian Praetorian Outlook Praetorian - The new breed of specialty insurer WHAT MAKES US SPECIAL? Platform Æ Nimble Æ Flexible Æ Capable Unencumbered by extensive infrastructure Sturdy at the base, flexible on top ® hannover re 25
Slide 30: What makes us special? Business
Hannover Re PC Renewals Praetorian Praetorian Outlook Praetorian - The new breed of specialty insurer WHAT MAKES US SPECIAL? Business Æ Selective Fronting 12.7% Workers Æ Balanced comp. 17.3% Property 6.3% 8.3% Æ Well diversified Personal auto 12.2% Commercial auto 21.5% Multi-line 12.3% Commercial
Slide 31: What makes us special? People
Hannover Re PC Renewals Praetorian Praetorian Outlook Praetorian - The new breed of specialty insurer WHAT MAKES US SPECIAL? People Æ Experienced • Senior management boasts an average of 20 years industry experience each Æ Relentless innovation Æ Ability to recruit People will make a difference ® ha
Slide 32: What makes us special? Capital
Hannover Re PC Renewals Praetorian Praetorian Outlook Praetorian - The new breed of specialty insurer WHAT MAKES US SPECIAL? Capital Æ Strong Æ Stable Æ Unencumbered USD 0.5 billion in shareholders' equity ® hannover re 28
Slide 33: Competitive advantages of the new platform
Hannover Re PC Renewals Praetorian Praetorian Outlook Praetorian - The new breed of specialty insurer COMPETITIVE ADVANTAGES OF THE NEW PLATFORM Æ Build on successful specialty business strategy and market leader position Æ Specialty book of business to be largely retained Æ Strong market relationsh
Slide 34: Praetorian, Clarendon, Hannover Re: Outlook
Praetorian, Clarendon, Hannover Re: Outlook ® hannover re
Slide 35: Praetorian outlook in line with group targets
Hannover Re PC Renewals Praetorian Outlook Outlook PRAETORIAN OUTLOOK IN LINE WITH GROUP TARGETS Æ Premium to grow, both on gross and net basis Æ SOX-compliance to be achieved by Q3/2006 Æ Profitability opens up various options for the future of Praetorian • Praetorian to provide sufficient profitab
Slide 36: Old Clarendon structure was value-destroying
Hannover Re PC Renewals Praetorian Outlook Outlook OLD CLARENDON STRUCTURE WAS VALUE-DESTROYING Clarendon Insurance Group Commodity business Specialty business • Run-off of some 200 • Non-standard/niche activities discontinued programs • Sustainable profitability • Commodity/standard business • Diff
Slide 37: Break-up of Clarendon maximises value
Hannover Re PC Renewals Praetorian Outlook Outlook BREAK-UP OF CLARENDON MAXIMISES VALUE Clarendon Insurance Group Praetorian Financial Group Commodity business Specialty business • Run-off of some 200 • Non-standard/niche activities discontinued programs • Sustainable profitability • Commodity/stan
Slide 38: Financial calendar
Hannover Re PC Renewals Praetorian Outlook FINANCIAL CALENDAR 23 March 2006 Press Conference on 2005 Annual Results 24 March 2006 Analysts' Conference, Frankfurt, London 12 May 2006 Interim Report 1/2006 12 May 2006 Annual General Meeting 23 June 2006 Investors' Day, London 8 August 2006 Interim Rep
Slide 39: Our investor relations team
Hannover Re PC Renewals Praetorian 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 Communication
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