Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — Q1 2007 Earnings Presentation
31 slides from Hannover Rueck's earnings presentation, May 3, 2007
Slide 1: Conference Call on Interim Report 1/2007
Conference Call on Interim Report 1/2007 Hannover, 3 May 2007
Slide 2: Q1/2007 Highlights
Highlights Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Q1/2007 HIGHLIGHTS Æ Group • Strong group net income (+16.8%) EUR 123.5 m. • NII from assets under own mgmt. strongly increased (+12.2%) EUR 208.3 m. • Return on equity (annualised) 16.6% Æ Non-Life Reinsurance • Top
Slide 3: Q1/2007 Highlights (cont'd)
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Q1/2007 HIGHLIGHTS (CONT'D) Æ Cash flow impacted by one-off effects Æ Nearly unchanged invested assets Æ Shareholders' equity > EUR 3.0 bn. for the first time • Book value per share reflecting value creation 31 Dec 06 Variance
Slide 4: Group figures at a glance: Strong group net income
Highlights Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Group figures at a glance STRONG GROUP NET INCOME in m. EUR Q1/2006 Variance Q1/2007 Gross written premium 2,658 -9.4% 2,408 Net premium earned 1,794 -3.2% 1,737 Net underwriting result (29) +206.0% (89) - Net underw
Slide 5: Non-Life R/I P/L figures at a glance
Highlights Non-Life R/I Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix P/L figures at a glance DECREASING EBIT NOT SURPRISING "Kyrill" noticeably effects underwriting result and minority interest in m. EUR Q1/2006 Variance Q1/2007 Gross written premium 2,052 -18.9% 1,664 Net premium e
Slide 6: Combined ratio: Tribute to Kyrill
Highlights Non-Life R/I Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Combined ratio TRIBUTE TO "KYRILL" ,140 in % ,130 ,120 112.8 105.2 ,110 96.0 98.4 2.0 ,100 97.2 26.3 2.7 7.9 1.7 8.3 8.0 ,90 ,80 ,70 ,60 95.3% ,50 94.4 95.7 88.9 86.5 87.3 "normalised" ,40 C/R1) ,30 ,20 ,10 ,0 2003
Slide 7: Catastrophe losses: Only 3 major losses in Q1/2007
Highlights Non-Life R/I Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Catastrophe losses 1) ONLY 3 MAJOR LOSSES IN Q1/2007. . . . . .but with a big impact 2,095 in m. EUR 1,775 1,029 665 497 472 449 370 341 313 240 287 225 235 224 164 175 173 174 102 126 121 107 103 175 83 60 87 69 1
Slide 8: 2007 catastrophe losses: Kyrill a sizeable loss
Highlights Non-Life R/I Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix 2007 catastrophe losses* KYRILL A SIZEABLE LOSS, ESPECIALLY IN GERMANY in m. EUR Non-Life R/I Catastrophe loss/Date Gross Net Storm Hanno/Per 13 - 15 Jan 6.2 6.0 Storm Kyrill 18 - 19 Jan 206.4 156.5 2 Natural catas
Slide 9: Life/Health R/I P/L figures at a glance
Highlights Non-Life R/I Life/Health R/I Life/Health R/I Investments Outlook EEV Appendix P/L figures at a glance ORGANIC GROWTH OF TOP AND BOTTOM LINE EBIT return well above target, helped by one-off in Q1 in m. EUR Q1/2006 Variance Q1/2007 Gross written premium 606 +22.8% 744 Net premium earned 526
Slide 10: Investment income
Highlights Non-Life R/I Life/Health R/I Investments Investments Outlook EEV Appendix Investment income ORDINARY INV. INCOME DRIVEN BY HIGHER INTEREST RATES in m. EUR Q1/2006 Variance Q1/2007 Ordinary investment income1) 187 +4.6% 196 Realised gains/losses 8 +253.9% 29 Impairments -4 -94.2% 0 Unreali
Slide 11: Target matrix
Highlights Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix TARGET MATRIX 2007 Historical data Business Group Key figures Target Q1 2006 2005 2004 Non-Life R/I Gross-premium growth none (18.9%) (6.8%) (6.6%) (17.1%) 1) Combined ratio - assuming a ≤ 100% 105.2% 100.7% 110.6% 1
Slide 12: Outlook on 2007
alent Outlook on 2007 hannover re
Slide 13: Guidance for 2007
Highlights Non-Life R/I Life/Health R/I Investments Outlook Outlook EEV Appendix GUIDANCE FOR 2007 Gross written premium (calendar year) Æ Hannover Re Group (GWP) -5% to -10% • Non-Life R/I (NPE) flat • L/H R/I (NPE) Info !!! +12% to 15% Æ Group RoE ≥ 15% Æ Dividend pay-out ratio 35% to 40% 2007 wil
Slide 14: 2006 European Embedded Value
2006 European Embedded Value
Slide 15: European Embedded Value Highlights
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix EUROPEAN EMBEDDED VALUE HIGHLIGHTS Æ First time Market Consistent Embedded Value (MCEV) disclosed Æ Strong development to EUR 1.5 bn. after tax (+16.3%) Æ Excellent improvement of operating EV earnings after tax: • EUR 185.6 m.
Slide 16: Strong development of EEV in 2006
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix STRONG DEVELOPMENT OF EEV IN 2006 2005 Variance 2006 in m. EUR (restated*) Free surplus 615.8 -26.1% 454.8 Required capital 410.2 +68.7% 692.0 Cost of capital (39.9) +20.8% (48.2) Shareholders' net worth before consolidation 98
Slide 17: Shows excellent EEV growth in 2006
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Analysis of change SHOWS EXCELLENT EEV GROWTH IN 2006 1) 20052) Variance 2006 in m. EUR EEV Beginning of year 1,272.6 +3.2% 1,313.1 3) Initial adjustments (59.1) -88.0% (7.1) EEV Restated beginning of year 1,213.4 +7.6% 1,305.9
Slide 18: Operating EV earnings: Taking EEV to next level
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Operating EV earnings 1) TAKING EEV TO NEXT LEVEL 20052) Variance 2006 in m. EUR Expected return on shareholders' net worth 22.5 -41.3% 13.2 Release of profit of existing business 59.9 -19.9% 48.0 Value of New Business 84.7 -24
Slide 19: Present Value of Future Profits: Broad diversification
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Present Value of Future Profits (PVFP)* BROAD DIVERSIFICATION REDUCING RISK Domestic Foreign Total in m. EUR operations operations Life/annuities 568.6 344.8 913.4 Health/PA 48.8 28.6 77.4 Total 617.4 373.4 990.9 Risk treaties
Slide 20: Embedded Value not Recognised in IFRS equity
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Embedded Value not Recognised* PVFP PUSHING UP EV NOT RECOGNISED IN IFRS EQUITY Not recognised in Not recognised in balance sheet: 1400 EUR 290.9 m. in m. EUR balance sheet: EUR 199.9 m. 1200 380.6 1000 398.8 1,518.3 800 1,305.
Slide 21: Appendix
alent Appendix hannover re
Slide 22: Annual results 2006 revisited
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix Group figures ANNUAL RESULTS 2006 REVISITED After reorganisation of business segments Non-Life R/I Life/Health R/I Consolidation Total in m. EUR 2006 2006 2006 2006 Gross written premium 6,496 2,794 0 9,289 Change in G
Slide 23: Our strategic business groups at a glance
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix OUR STRATEGIC BUSINESS GROUPS AT A GLANCE Non-Life Life/Health Consolidation Total R/I R/I in m. EUR Q1/2006 Q1/2007 Q1/2006 Q1/2007 Q1/2006 Q1/2007 Q1/2006 Q1/2007 Gross written premium 2,052 1,664 606 744 0 0 2,658 2
Slide 24: Tactical asset allocation
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix Tactical asset allocation NO MATERIAL EXPOSURE TO TROUBLED SECTORS Investment category 2003 2004 2005 2006 31 Mar 07 Fixed income securities 81% 81% 82% 82% 81 % • Governmentals 25% 25% 26% 21% 20 % • Semi-governmental
Slide 25: Fixed-income portfolio: High quality, low duration
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix Fixed-income portfolio HIGH QUALITY SUPPORTED BY LOW DURATION in m. EUR 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2003 2004 2005 2006 31 Mar 07 AAA AA A BBB <BBB Modified duration as of 31 Mar 2007: 3.9 (2006: 4.0) S
Slide 26: Stress tests
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix Stress tests HANNOVER RE'S PORTFOLIO IS VERY ROBUST Change in market value Portfolio Scenario in m. EUR Equities* Prices -10% -161 Equities* Prices -20% -322 Equities* Prices -30% -483 Fixed-income securities Yield inc
Slide 27: EEV: Some highlights
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix EEV SOME HIGHLIGHTS* After Before consolidation consolidation Domestic Foreign Total Total in m. EUR & as percentage of restated EEV 2005 operations operations EEV 2005 (restated) 1,169.3 704.4 1,873.7 1,305.9 100.0% 1
Slide 28: EEV - Value of New Business
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix EEV - Value of New Business* HIGH LEVEL OF FINANCING BUSINESS SETTING AMOUNT OF VNB Before minorities Domestic Foreign Total in m. EUR operations operations Profit/Loss on new business during year (107.8) (13.3) (121.1
Slide 29: EEV - Margins
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix EEV - Margins NEW BUSINESS MARGINS AS GOOD AS PLANNED1) Some further expansion possible Before minorities Domestic Foreign Total in m. EUR operations operations Value of New Business (basic) 31.5 32.7 64.2 New Business
Slide 30: Sensitivities of Value of New Business
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix EEV SENSITIVITIES OF VALUE OF NEW BUSINESS1) Before minorities Domestic Foreign Total in m. EUR operations operations Value of New Business (basic) 31.5 32.7 64.2 Sensitivities to economic assumptions Discount rate +10
Slide 31: Sensitivities of the European Embedded Value
Highlights Non-Life R/I Life/Health R/I Investments Outlook EEV Appendix Appendix EEV SENSITIVITIES OF THE EUROPEAN EMBEDDED VALUE1) Before consolidation/Minorities Domestic Foreign Total in m. EUR operations operations EEV (basic) 1,277.3 812.2 2,089.5 Sensitivities to economic assumptions Discount