Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — FY2018 Earnings Presentation
42 slides from Hannover Rueck's earnings presentation, Mar 7, 2019
Slide 1: Hannover Re's Analysts' Conference Annual Results 2018
Hannover Re's Analysts' Conference Annual Results 2018 London, 7 March 2019
Slide 2: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 16 4 Investments 19 5 Solvency II reporting as at 31 December 2018 22 6 Outlook 2019 28 7 Appendix 33 2 Hannover Re's Analysts' Conference
Slide 3: Favourable results enable increased dividend per share proposal of EUR 5.25
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Favourable results enable increased dividend per share proposal of EUR 5.25 RoE well above target, despite impact from recaptures in L&H GWP F/x-adj. +11.6% NPE F/x-adj. +14.5% EBIT Group net income 17,791 19,176 15,632 17,289 1,597 1,364 959 1,059 +7.8%
Slide 4: Increased ordinary dividend reflects strong earnings power
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Increased ordinary dividend reflects strong earnings power Payout: EUR 3.75 ordinary dividend + EUR 1.50 special dividend per share Dividend per share in EUR 63% 60% 52% 50% 51% 43% 44% 43% 42% 40% Payout ratio ordinary dividend: 35 - 45% 37% 35% 40% 37%
Slide 5: Continued positive operating cash flow
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Continued positive operating cash flow AuM +5.3%; strengthening of USD offsets decrease in valuation reserves Operating cash flow in m. EUR Assets under own management (AuM) in m. EUR 41,793 42,197 40,057 39,347 36,228 3,105 1,305 2,331 2,225 1,931 674 51
Slide 6: Shareholders' equity increased by 2.9%
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Shareholders' equity increased by 2.9% Dividend payment more than covered by earnings Policyholders' surplus in m. EUR Change in shareholders' equity in m. EUR 11,231 11,035 10,779 10,239 10,267 1,491 1,493 1,492 1,059 1,490 743 1,986 765 265 8,777 758 8,
Slide 7: Return on Equity exceeds target by a clear margin over past 10 years
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Return on Equity exceeds target by a clear margin over past 10 years 2018 shows the 10th consecutive year with double-digit RoE Return on Equity: yearly Return on Equity: average 8,533 8,763 8,653 7,810 6,720 14.7% 14.7% 15.0% 13.7% 13.4% 13.3% 12.2% 4.0%
Slide 8: Hannover Re is one of the most profitable reinsurers
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Hannover Re is one of the most profitable reinsurers No. 1 position in 2018 and on 5-year average RoE 2014 2015 2016 2017 2018 2014 - 2018 Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank avg. RoE Rank Hannover Re 14.7% 2 14.7% 1 13.7% 1 10.9% 2 12.2%
Slide 9: Double-digit growth in net income outperforming favourable top line growth
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | Double-digit growth in net income outperforming favourable top line growth Group figures in m. EUR Q4/2017 Q4/2018 Δ 2017 2018 Δ Gross written premium 4,307 4,184 -2.9% 17,791 19,176 +7.8% Net premium earned 4,090 4,515 +10.4% 15,632 17,289 +10.6% Net und
Slide 10: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 16 4 Investments 19 5 Solvency II reporting as at 31 December 2018 22 6 Outlook 2019 28 7 Appendix 33 10 Hannover Re's Analysts' Conference
Slide 11: Good profitability supported by underwriting and investment result
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | Good profitability supported by underwriting and investment result Strong growth from tailor-made Structured R/I Property & Casualty R/I in m. EUR Q4/2017 Q4/2018 2017 2018 YTD Gross written premium 2,512 2,318 10,711 11,976 • GWP f/x-adj
Slide 12: Large losses incurred slightly above budget
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | Large losses incurred slightly above budget Natural and man-made catastrophe losses1) in m. EUR 1,730 1,790 1,722 Gross Net Large loss budget (net) 1,127 981 863 846 850 724 714 662 662 578 559 573 627 478 426 291 240 2009 2010 2011 2012
Slide 13: Accumulation of events led to significant large-loss burden
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | Accumulation of events led to significant large-loss burden both from natural catastrophes … Catastrophe losses 1) in m. EUR Date Gross Net Storm "Friederike", Europe 17 - 18 Jan 49.5 24.3 Earthquake, Papua New Guinea 25 - 26 Feb 22.1 12.
Slide 14: …and large man-made losses
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | …and large man-made losses Catastrophe losses 1) in m. EUR Date Gross Net 16 Natural catastrophes 1,437.4 609.1 6 Property claims 111.3 90.5 1 Marine claim 54.4 31.2 1 Casualty claim 16.4 16.4 5 Credit claims 102.5 102.5 13 Man-made losse
Slide 15: High loss burden pushes Combined Ratio slightly above target
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | High loss burden pushes Combined Ratio slightly above target 2018: Combined Ratio vs. Target Combined Ratio EBIT margin Target North America 1) 102.5% 12.8% markets Continental Europe 1) 97.1% 12.7% Marine 9.9% 104.9% Aviation 84.4% 28.3%
Slide 16: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 16 4 Investments 19 5 Solvency II reporting as at 31 December 2018 22 6 Outlook 2019 28 7 Appendix 33 16 Hannover Re's Analysts' Conference
Slide 17: EBIT growth target achieved due to favourable underlying profitability
| 1 | 2 | 3 Life & Health reinsurance | 4 | 5 | 6 | 7 | EBIT growth target achieved due to favourable underlying profitability Negative impact from recapture charges partly offset by release of expense reserve Life & Health R/I in m. EUR Q4/2017 Q4/2018 2017 2018 YTD Gross written premium 1,795 1,86
Slide 18: Value of New Business well above target
| 1 | 2 | 3 Life & Health reinsurance | 4 | 5 | 6 | 7 | Value of New Business well above target Value of New Business development in m. EUR 893 543 448 364 309 290 Target ≥ EUR 220 m. 1) 1) 1) 2) 2) 2) 2013 2014 2015 2016 2017 2018 1) Based on MCEV principles and post-tax reporting (in 2015 cost of
Slide 19: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 16 4 Investments 19 5 Solvency II reporting as at 31 December 2018 22 6 Outlook 2019 28 7 Appendix 33 19 Hannover Re's Analysts' Conference
Slide 20: Strategy implementation supports outperformance of ROI target
| 1 | 2 | 3 | 4 Investments | 5 | 6 | 7 | Strategy implementation supports outperformance of ROI target Realised gains down but still contribute to yield in m. EUR Q4/2017 Q4/2018 2017 2018 RoI YTD Ordinary investment income1) 352 333 1,305 1,327 3.2% • Rise in ordinary income from FIS compensates f
Slide 21: Ordinary income again supported by alternative asset classes
| 1 | 2 | 3 | 4 Investments | 5 | 6 | 7 | Ordinary income again supported by alternative asset classes Contribution from Government bonds slightly recovering due to higher US rates Asset allocation1) Ordinary income split Investment category 2014 2015 2016 2017 2018 Fixed-income securities 90% 87% 8
Slide 22: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 16 4 Investments 19 5 Solvency II reporting as at 31 December 2018 22 6 Outlook 2019 28 7 Appendix 33 22 Hannover Re's Analysts' Conference
Slide 23: Group capital position remains comfortable
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2018 | 6 | 7 | Group capital position remains comfortable Capital adequacy ratio well above targets Solvency II 1) Solvency II 2) Internal Metrics 31.12.2017 31.12.2018 31.12.2018 in m. EUR Available Economic Capital / 12,296 12,616 13,323
Slide 24: Capital efficiency supported by high diversification
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2018 | 6 | 7 | Capital efficiency supported by high diversification Details of Solvency II capital requirements Risk capital for the 99.5% VaR (according to internal economic capital model) in m. EUR Property & Casualty 3,819 Life & Health
Slide 25: Solvency II capital sufficiency remains above target
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2018 | 6 | 7 | Solvency II capital sufficiency remains above target Despite significant changes in economic environment Development of the capital adequacy ratio (regulatory view) • 2017: Increase in solvency ratio due to application of ful
Slide 26: High-quality capital base
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2018 | 6 | 7 | High-quality capital base Own funds largely dominated by Tier 1 capital supplemented by hybrid capital Reconciliation (IFRS Shareholders’ equity/Solvency II own funds) in m. EUR as at 31 Dec 18 4,055 1,719 12,616 1,412 1% 686
Slide 27: Target Matrix 2018: All group targets achieved
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2018 | 6 | 7 | Target Matrix 2018 All group targets achieved Business group Key figures Targets for 2018 Actual Group Return on investment 1) ≥ 2.7% 3.2% Return on equity 2) ≥ 9.4% 12.2% Earnings per share growth (y-o-y) ≥ 5% 10.5% Economic
Slide 28: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 16 4 Investments 19 5 Solvency II reporting as at 31 December 2018 22 6 Outlook 2019 28 7 Appendix 33 28 Hannover Re's Analysts' Conference
Slide 29: Overall profitability above margin requirement
| 1 | 2 | 3 | 4 | 5 | 6 Outlook 2019 | 7 | Overall profitability above margin requirement Property & Casualty reinsurance: financial year 2019 Lines of business Volume1) Profitability 2) North America3) + Target markets Continental Europe 3) + Marine + Aviation - Specialty lines worldwide Credit, su
Slide 30: L&H business expects improving profitability in 2019
| 1 | 2 | 3 | 4 | 5 | 6 Outlook 2019 | 7 | L&H business expects improving profitability in 2019 Driven by inforce management actions in mortality risk solutions Reporting categories Volume1) Profitability 2) Financial solutions Financial solutions ++ Longevity +/- Risk solutions Mortality +/- Morbid
Slide 31: Guidance for 2019
| 1 | 2 | 3 | 4 | 5 | 6 Outlook 2019 | 7 | Guidance for 2019 Hannover Re Group • Gross written premium1) growth within a single-digit percentage range • Return on investment2) 3) at least 2.8% • Group net income2) in the region of EUR 1.1 bn. • Ordinary dividend payout ratio4) 35% - 45% • Special di
Slide 32: Creating value through reinsurance is our strategic driver
| 1 | 2 | 3 | 4 | 5 | 6 Outlook 2019 | 7 | Creating value through reinsurance is our strategic driver P&C reinsurance L&H reinsurance Investments • Market growth in line with or slightly • We enjoy excellent profitability on • AuM are expected to rise further below primary P&C market our US Financia
Slide 33: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 10 3 Life & Health reinsurance 16 4 Investments 19 5 Solvency II reporting as at 31 December 2018 22 6 Outlook 2019 28 7 Appendix 33 33 Hannover Re's Analysts' Conference
Slide 34: Our strategic business groups at a glance 2018 vs. 2017
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Our strategic business groups at a glance 2018 vs. 2017 Property & Casualty R/I Life & Health R/I Total in m. EUR 2017 2018 Δ 2017 2018 Δ 2017 2018 Δ Gross written premium 10,711 11,976 +11.8% 7,080 7,200 +1.7% 17,791 19,176 +7.8% Net premium earned 9,159 10,80
Slide 35: Our strategic business groups at a glance Q4/2018 vs. Q4/2017
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Our strategic business groups at a glance Q4/2018 vs. Q4/2017 Property & Casualty R/I Life & Health R/I Total in m. EUR Q4/2017 Q4/2018 Δ Q4/2017 Q4/2018 Δ Q4/2017 Q4/2018 Δ Gross written premium 2,512 2,318 -7.7% 1,795 1,865 +3.9% 4,307 4,184 -2.9% Net premium
Slide 36: Well balanced international portfolio growth
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Well balanced international portfolio growth Gross written premium in m. EUR 19,176 Africa 17,791 3% 17,069 16,354 7% Australia 5% 13,963 14,362 15% Latin America 13,774 11,429 12,096 Asia 17% 10,275 Other European countries 6% 13% Germany United Kingdom 34% No
Slide 37: Property & Casualty reinsurance: selective growth
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Property & Casualty reinsurance: selective growth 5-year CAGR: +8.9% GWP split by line of business in m. EUR Gross written premium split by regions Latin Cat XL 11,976 Africa 4% America 3% Australia 4% 2% Structured R/I 10,711 5% and ILS 3% Germany North Worldw
Slide 38: Life & Health reinsurance: worldwide portfolio
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Life & Health reinsurance: worldwide portfolio 5-year CAGR: +3.2% GWP split by reporting categories in m. EUR Gross written premium split by regions 7,731 Africa 7,200 Latin Germany 3% 7,149 7,080 America 3% 18% North Morbidity 6,459 5% America 23% 24% 27% 28%
Slide 39: Stress tests on assets under own management
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Appendix | Stress tests on assets under own management Unchanged focus on yields and credit spreads; reduced relevance of equities Change in market Change in OCI before Portfolio Scenario value tax in m. EUR in m. EUR -10% -93 -93 Equity (listed and private equity) -20% -
Slide 40: 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 77% 61% 1% 61% - 48
Slide 41: 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 Currency split of investments • Modified duration of fixed-income mainly congruent with liabilities and currencies Others CAD 8% • GBP’s higher modified duration
Slide 42: 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