Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — Investor Day (March 2006)
45 slides from Hannover Rueck's investor day presentation, Mar 24, 2006
Slide 1: Welcome to Hannover Re's Analysts' Meeting
Welcome to Hannover Re's Analysts' Meeting 0 ® London, 24 March 2006 hannover re
Slide 2: 2005 Highlights
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook 2005 HIGHLIGHTS Æ A difficult year with light and shadow • Risk management (protection of capital) proved robust, despite failure of cat. models • No earnings improvement through reserve releases • Standard & Poor's (AA
Slide 3: 2005 Highlights (cont'd)
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook 2005 HIGHLIGHTS (CONT'D) Æ Continuous strong operating cash flow fuels growth of invested assets Æ Capital position further strengthened despite unprecedented cat. losses • Capital-market transactions: Perpetual bond (E
Slide 4: Development of premium (gross, net) and retention
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Development of premium (gross, net) and retention INCREASED RETENTION MIRRORS QUALITY 13.000 in m. EUR 100 % 12,463 12.000 11,507 11,343 80.3% 11.000 77.6% 80 % 71.9% 10.000 65.3% 9,567 9,669 61.7% 9.000 60 % 8,156 8.00
Slide 5: Diversification by Business Groups
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Diversification by Business Groups STRONGEST GROWTH IN P/C AND L/H R/I 2004 2005 Specialty Specialty Insurance Insurance Property/ 18% 22% Property/ Casualty R/I 43% Casualty R/I 48% Financial R/I 9% Financial R/I 12% L
Slide 6: Earnings per share
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Earnings per share1) "KRW" DISRUPTS PROFIT TREND Long-term upward trend remains intact 4.937) 3.856) in EUR 3.56 3.60 3,5 3.24 3.03 3 2.75 5) 2.61 4.13 2.52 2.37 2,5 2.29 2.35 2.32 2.14 1.94 2 1,5 1.15 1.01 1.04 1 0.89
Slide 7: Return on equity
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Return on equity OVER TEN YEARS MINIMUM TARGET OVERACHIEVED Despite WTC and "KRW" 18.0% 26.0% 18% 17.1% 17.1% 15.9% 15.7% 14.3% 14.0% 13.9% 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%
Slide 8: RoE league table
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook RoE league table HNR1 CONSISTENTLY AMONG MOST PROFITABLE REINSURERS 2001 2002 2003 2004 20051) 2001 - 2005 Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank Ø - RoE Rank Renaissance Re 18% 1 26% 1 31% 1 5% 10 (11%) 9
Slide 9: Group figures at a glance
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Group figures at a glance UNSATISFACTORY, BUT NO LOSS OF CAPITAL 2004 2005 in m. EUR Total Q1-3 Q4 Total Variance Gross written premium 9,567 7,336 2,332 9,669 +1.1% Net premium earned 7,575 5,597 2,142 7,739 +2.2% Net
Slide 10: Property/Casualty Reinsurance
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook PROPERTY/CASUALTY REINSURANCE ® 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 Rü
Slide 11: Development of premium (gross, net) and retention
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Development of premium (gross, net) and retention 2005 INCREASE ALSO DUE TO DEVELOPMENT AFTER "KRW" Further increased retention in m. EUR 6,020 6000 100 % 84.4% 90 % 83.0% 80 % 4,938 72.2% 5000 4,787 4,717 70 % 67.8% 4,211 60 % 62
Slide 12: Geographical diversification
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Geographical diversification GROWTH IN PROPERTY AND MARINE AFTER HURRICANES. . . . . . is mirrored geographically in North America and UK 2004 2005 Latin Latin Australia America Australia America Africa Africa 2% 2% 2% 3% Germany
Slide 13: Diversification by lines of business
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Diversification by lines of business UNABATED GROWTH IN CASUALTY/MOTOR Other LoBs stable 2004 2005 Misc. Misc. 10% 9% Casualty/ Motor Casualty/ 35% Marine/ Motor Marine/ Aviation 40% Aviation 17% 18% Property Property 34% 37% Tota
Slide 14: Key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Key figures CONSIDERING THE CIRCUMSTANCES STILL SATISFACTORY 2004 2005 in m. EUR Total Q1-3 Q4 Total Variance Gross written premium 4,211 3,650 1,067 4,717 +12.0% Net premium earned 3,456 2,825 1,095 3,920 +13.4% Net underwriting
Slide 15: Catastrophe losses
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Catastrophe losses 1) "KRW" BEATS ALL RECORDS in m. EUR 1,775 2,095 1,029 800 700 665 600 497 500 472 449 400 370 341 287 300 235 240 225 175 173 164 200 105 102 95 103 175 149 83 69 126 60 100 62 60 28 16 0 1996 1997 1998 1999 20
Slide 16: 2005 catastrophe losses
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook 2005 catastrophe losses 1) NOT ONLY NATURAL CATASTROPHES Risk management: EUR 1.3 bn. relief, good security in m. EUR Property/Casualty R/I Specialty Insurance Catastrophe loss/Date Gross Net Gross Net Winterstorm Erwin/Gudrun 7 -
Slide 17: R/I recoverables
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook R/I recoverables INCREASE AS A RESULT OF "KRW" AND FX EFFECTS Already down compared to Q3/2005 8.000 in m. EUR 2005 6,759 NR* AAA <BBB 6% 6,180 1% 12% 6.000 BBB 3% 4,739 4,397 4,163 4.000 2.000 AA A 33% 45% 0 01 02 03 04 05 20 20
Slide 18: Combined ratio
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Combined ratio FUNDAMENTAL PROFITABILTY OF BUSINESS FURTHER IMPROVED ,140 in % ,130 ,120 116.6 112.8 ,110 96.0 22.2 20.3 ,100 96.3 97.2 1.7 ,90 6.4 8.3 6.0 ,80 ,70 ,60 92.5% ,50 94.4 94.3 89.9 88.9 86.5 "normalised" ,40 C/R* ,30 ,
Slide 19: Life/Health Reinsurance
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook LIFE/HEALTH REINSURANCE ® 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, Ha
Slide 20: The "rising star"
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook The "rising star" GROWTH ABOVE PLAN Retention increasing further 2.800 in m. EUR 100 % 2,727 92.8% 2,733 90.2% 2,660 86.9% 256 85.1% 2,488 308 289 2,534 2,471 2,425 80 % 2.400 74.0% 2,371 258 311 2,258 2,276 2,142 2,177 60 % 2.000
Slide 21: Geographic diversification
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Geographic diversification ENHANCED ANNUITIES IN UK ARE BACK AGAIN U.S. health business further reduced 2004 2005 Latin Latin Asia America Asia America Africa 3% 2% 4% 2% North Africa North 3% 4% America America Australia 28% 30%
Slide 22: Key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Key figures "GREEN LIGHTS" EVERYWHERE Strong growth of top and bottom line 2004 2005 in m. EUR Total Q1-3 Q4 Total Variance Gross written premium 2,177 1,755 670 2,425 +11.4% Net premium earned 1,956 1,655 603 2,258 +15.4% Net und
Slide 23: Financial Reinsurance
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook FINANCIAL REINSURANCE ® 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, Hann
Slide 24: Development of premium (gross, net) and retention
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Development of premium (gross, net) and retention ROCK-BOTTOM REACHED Downward trend should reverse in m. EUR 95.2% 94.3% 1,800 100% 1,741 93.3% 1,600 1,563 1,633 90.6% 76.4% 80% 1,400 1,280 1,211 1,243 1,206 1,200 1,183 60% 1,000
Slide 25: Geographic diversification
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Geographic diversification U.S. BUSINESS LOSING ITS DOMINANCE European emerging markets becoming more important 2004 2005 Other Other Asia European Asia countries 1% European 2% 2% countries 15% Germany 32% Germany North America 3
Slide 26: Key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Key figures STILL SOLID NUMBERS DESPITE DECREASING PREMIUM 2004 2005 in m. EUR Total Q1-3 Q4 Total Variance Gross written premium 1,183 688 237 924 -21.9% Net premium earned 1,206 565 269 834 -30.9% Net underwriting result (228) (
Slide 27: Specialty Insurance
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Specialty Ins. Investments 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
Slide 28: Development of premium (gross, net) and retention
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Specialty Ins. Investments Outlook Development of premium (gross, net) and retention FOCUS ON SUSTAINABLE BUSINESS Growth in core business through Praetorian 3.200 100 % in m. EUR 2,729 2,647 2,457 80 % 2.400 2,121 1,774 60 % 1.600 46.4% 40.6% 40.1%
Slide 29: Key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Specialty Ins. Investments Outlook Key figures TURNAROUND ACCOMPLISHED. . . . . .despite impact of hurricanes 2004 2005 in m. EUR Total Q1-3 Q4 Total Variance Gross written premium 2,121 1,336 438 1,774 -16.4% Net premium earned 955 565 178 743 -22.2
Slide 30: Praetorian pro forma: very attractive portfolio
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Specialty Ins. Investments Outlook PRAETORIAN PRO FORMA: VERY ATTRACTIVE PORTFOLIO 2005 Æ No legacy issues Ratings A+ (S&P), A- (Best) 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 res
Slide 31: Investment income
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Investments Outlook Investment income STRONG GROWTH OF ORDINARY INCOME Increase of investments overcompensating yield decrease 2004 2005 in m. EUR Total Q1-3 Q4 Total Variance Investment income (from assets under own mgmt.) 607 481 194 67
Slide 32: Target matrix
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook TARGET MATRIX Historical data Business Group Key figures Target 2005 2004 2003 2002 Property/Casualty R/I Gross-premium growth none 12.0% (12.0%) (20.5%) 21.9% 1) Combined ratio - assuming a ≤ 100% 112.8% 97.2% 96.0% 96
Slide 33: Outlook for 2006
Outlook for 2006 ® hannover re
Slide 34: Property/Casualty Reinsurance: peak of hard market moved forward
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Outlook Property/Casualty Reinsurance PEAK OF HARD MARKET MOVED FORWARD/RAISED 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 segmen
Slide 35: Guidance for 2006
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Outlook GUIDANCE FOR 2006 Gross written premium (calendar year) Æ Group + 0 - 5% • Property/Casualty R/I flat • Life/Health R/I + 12 - 15% • Financial R/I > 10% • Specialty Insurance flat Æ Group RoE at least 15% Æ Dividend pay-ou
Slide 36: Appendix
alent Appendix hannover re’
Slide 37: All strategic business groups at a glance
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook ALL STRATEGIC BUSINESS GROUPS AT A GLANCE Property/Casualty Life/Health Financial Specialty Consolidation Total R/I R/I R/I Insurance in m. EUR 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 Gross written premium 4,21
Slide 38: Policyholders' surplus
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Policyholders' surplus STEADY INCREASE SUPPORTS FIN'L STRENGTH & RATING Intelligent combination of equity, hybrid capital & minorities in m. EUR 5,000 4,5964) 4,1723) 938 4,000 2) 3,680 1,116 500 1) 784 2,8971) 2,959 3,000 531 557
Slide 39: Tactical asset allocation
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Tactical asset allocation ALMOST UNCHANGED Strategic Tactical asset allocation Investment category allocation 2001 2002 2003 2004 2005 Fixed-income securities ≥ 50% 72% 75% 81% 81% 82% • Governmentals * 32% 26% 25% 25% 26% • Semi-
Slide 40: Fixed-income portfolio
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Fixed-income portfolio HIGH QUALITY - MORE THAN 90% RATED "A" AND BETTER in m. EUR 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 AAA AA A BBB <BBB Modified duration as of 31 Dec 2005: 4.1 (2004: 3.2) ® * S&P
Slide 41: Stress tests
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Stress tests FIXED-INCOME SECURITIES ARE KEY DRIVER Change in market value Portfolio Scenario in m. EUR Equities* Prices -10% -121 Equities* Prices -20% -243 Equities* Prices -30% -364 Fixed-income securities Yield increase +50 bp
Slide 42: R/I recoverables
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook R/I recoverables MORE THAN A THIRD COLLATERALISED 2005 Consoli- 2004 P/C R/I L/H R/I Fin R/I Specialty Total in m. EUR dation Recoverables 4,173 2,177 112 142 2,754 (427)* 4,758 Collateralized (incl. funds withheld, LOCs 1,907 499
Slide 43: Securitisation: the "K5" transaction
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Securitisation THE "K5" TRANSACTION Æ ~ USD 370 m. off-balance-sheet capital Estimated K5 premium split for 2006 Æ Q/S R/I, fully collateralised, indemnity-based Canada Japan Property cat. Northern 2% 4% Europe 50% • ~ 30% of our
Slide 44: Net loss reserves
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Net loss reserves UNCHANGED CONSERVATIVE RESERVING - Calendar year - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 in m. EUR Loss and loss adjustment expense reserve 3,958 4,305 4,849 5,002 5,696 6,162 6,868 5,846 6,585 7
Slide 45: Net loss reserves
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Net loss reserves* UNCHANGED CONSERVATIVE RESERVING - Calendar year - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 in m. EUR End of year 3,958 4,305 4,849 5,002 5,696 6,162 6,868 5,846 6,585 7,338 9,908 + 1 year 4,110 4,