Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — FY2017 Earnings Presentation
39 slides from Hannover Rueck's earnings presentation, Mar 13, 2018
Slide 1: Welcome to Hannover Re's Analysts' Conference
Welcome to Hannover Re's Analysts' Conference Annual Results 2017 Frankfurt, 13 March 2018
Slide 2: Satisfactory result despite exceptionally high NatCat losses
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Satisfactory result despite exceptionally high NatCat losses RoE at 10.9% exceeds target GWP in m. NPE in m. EBIT in m. Group net income in m. 17,791 1,689 16,354 15,632 1,364 1,171 +8.8% 14,410 +8.5% 959
Slide 3: Continued positive operating cash flow
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Continued positive operating cash flow AuM -4.2% driven by strengthening of the Euro and higher dividend payment Operating cash flow in m. EUR Assets under own management (AuM) in m. EUR 41,793 40,057 39,3
Slide 4: Shareholders' equity down reflecting strong Euro
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Shareholders' equity down reflecting strong Euro ... ... and increased dividend payout Policyholders' surplus in m. EUR Change in shareholders' equity in m. EUR 11,231 10,779 10,239 10,267 1,491 1,492 959
Slide 5: RoE target outperformed again
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix RoE target outperformed again ... ... in a year with sizeable insured market losses Return on Equity: yearly Return on Equity: average 8,533 +2.7% 8,763 7,810 5,960 6,720 15.0% 14.7% 14.7% 13.7% 13.8% 13.4
Slide 6: Increased payout ratio allows stable dividends
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Increased payout ratio allows stable dividends Payout: EUR 3.50 ordinary dividend + EUR 1.50 special dividend per share Dividend per share in EUR Payout ratio: [0%] [35%] [37%] [42%] [43%] [40%] [52%] [50%
Slide 7: Hannover Re is one of the most profitable reinsurers
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Hannover Re is one of the most profitable reinsurers No.1 position regained 2013 2014 2015 2016 2017 2013 - 2017 Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank avg. RoE Rank Hannover Re 15.0% 3 14.7%
Slide 8: Pleasing Group net income despite exceptional NatCat events
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Pleasing Group net income despite exceptional NatCat events Lower tax ratio due to nearly tax-free disposal of listed equities in Q3 Group figures in m. EUR Q4/2016 Q4/2017 2016 2017 Gross written premium
Slide 9: EBIT margin of 12.2% despite high level of NatCat losses
Group Property Property & Casualty CasualtyR/I R/I Life & Health R/I Investments Solvency II Outlook Appendix EBIT margin of 12.2% despite high level of NatCat losses Aided by strong investment income and positive underwriting result Property & Casualty R/I in m. EUR Q4/2016 Q4/2017 2016 2017 YTD
Slide 10: Major losses sharply in excess of large loss budget
Group Property Property & Casualty CasualtyR/I R/I Life & Health R/I Investments Solvency II Outlook Appendix Major losses sharply in excess of large loss budget Natural and man-made catastrophe losses* in m. EUR 1,730 1,790 1,127 981 863 846 672 662 724 559 714 662 578 478 573 627 458 426 291 240 2
Slide 11: Accumulation of events led to losses
Group Property Property & Casualty CasualtyR/I R/I Life & Health R/I Investments Solvency II Outlook Appendix Accumulation of events led to losses ... ... about EUR 300 m. higher than large loss budget Catastrophe losses* in m. EUR Date Gross Net Storm / Tornados, USA 18 - 21 Jan 12.4 9.9 Wildfires,
Slide 12: Combined Ratio slightly above MtCR
Group Property Property & Casualty CasualtyR/I R/I Life & Health R/I Investments Solvency II Outlook Appendix Combined Ratio slightly above MtCR Positive development of reserves led to exceptional aviation result EBIT 2017: Combined Ratio vs. MtCR margin Target North America* 111.3% 11.4% markets Co
Slide 13: Good underlying profitability in Life & Health
Group Property & Casualty R/I Life Life & Health Health R/I R/I Investments Solvency II Outlook Appendix Good underlying profitability in Life & Health Result affected by legacy US mortality business Life & Health R/I in m. EUR Q4/2016 Q4/2017 2016 2017 YTD GWP f/x-adj. +1.4%, reduced premium volu
Slide 14: Value of New Business above target
Group Property & Casualty R/I Life Life & Health Health R/I R/I Investments Solvency II Outlook Appendix Value of New Business above target Value of New Business development in m. EUR 893 543 448 364 309 Target ≥ EUR 220 m. 2013 1) 2014 1) 2015 1) 2016 2) 2017 2) 1) Based on MCEV principles and post
Slide 15: Ordinary investment income increased by 11.5%
Group Property & Casualty R/I Life & Health R/I Investments Investments Solvency II Outlook Appendix Ordinary investment income increased by 11.5% Realisations boost strong result even further in m. EUR Q4/2016 Q4/2017 2016 2017 RoI YTD Ordinary investment income* 317 352 1,171 1,305 3.2% Strong r
Slide 16: Ordinary income supported by less liquid asset classes
Group Property & Casualty R/I Life & Health R/I Investments Investments Solvency II Outlook Appendix Ordinary income supported by less liquid asset classes Real estate and Private Equity boost ordinary income beyond target return Ordinary income split EUR 1,305 m. Asset allocation Investment categor
Slide 17: Barbell strategy targets achieved
Group Property & Casualty R/I Life & Health R/I Investments Investments Solvency II Outlook Appendix Barbell strategy targets achieved Returns from liquidation of Listed Equity initially invested in government bonds Asset allocation 1) Investment category 2013 2014 2015 2016 2017 Fixed-income securi
Slide 18: Solvency II reporting as at 31 December 2017
Solvency II reporting as at 31 December 2017
Slide 19: Capital position even more comfortable due to OpRisk approval
Group Property & Casualty R/I Life & Health R/I Investments Solvency Solvency IIII Outlook Appendix Capital position even more comfortable due to OpRisk approval Capital adequacy above targets Internal Solvency II 1) Solvency II 2) Metrics 31.12.2017 31.12.2016 in m. EUR 31.12.2017 Available Economi
Slide 20: Capital efficiency supported by high diversification
Group Property & Casualty R/I Life & Health R/I Investments Solvency Solvency IIII Outlook Appendix 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 & Casu
Slide 21: Solvency II capital sufficiency further improved
Group Property & Casualty R/I Life & Health R/I Investments Solvency Solvency IIII Outlook Appendix Solvency II capital sufficiency further improved Despite significant changes in economic environment Development of the capital adequacy ratio (regulatory view) 2016: Overall increase in 260% 230% a
Slide 22: High-quality capital base
Group Property & Casualty R/I Life & Health R/I Investments Solvency Solvency IIII Outlook Appendix 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 17 3,981
Slide 23: Target Matrix 2017
Group Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Target Matrix 2017 Achievement of profit targets impacted by high NatCat frequency Strategic targets Business group Key figures 2017 for 2017 1) Group Return on investment >2.7% 3.8% Return on equity 2) ≥9
Slide 24: Outlook 2018
somewhat diyerent Outlook 2018 hannover re”
Slide 25: Overall profitability above margin requirements
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Outlook Appendix Overall profitability above margin requirements Property & Casualty reinsurance: financial year 2018 Lines of business Volume1) Profitability2) Target North America3) + markets Continental Europe 3) + Ma
Slide 26: Good underlying profitability in L&H business
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Outlook Appendix Good underlying profitability in L&H business Further strains from legacy US mortality business expected in 2018 Reporting categories Volume1) Profitability2) Financial solutions Financial solutions ++ L
Slide 27: Guidance for 2018
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Outlook Appendix Guidance for 2018 Hannover Re Group Gross written premium1) single-digit percentage growth Return on investment2) 3) 2.7% Group net income2) more than EUR 1 bn. Dividend payout ratio4) 35% - 40%
Slide 28: Rationale for our short- and medium-term outlook
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Outlook Appendix Rationale for our short- and medium-term outlook Property & Casualty R/I: Positioned to outperform Improved rates should support C/R target ≤96% without the need to reduce confidence level of the loss
Slide 29: Appendix
somewhat diyerent Appendix hannover re”
Slide 30: Our strategic business groups at a glance
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Our strategic business groups at a glance 2017 vs. 2016 Property & Casualty R/I Life & Health R/I Total in m. EUR 2016 2017 Δ 2016 2017 Δ 2016 2017 Δ Gross written premium 9,205 10,711 +16.4% 7,149 7,08
Slide 31: Our strategic business groups at a glance (Q4)
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Our strategic business groups at a glance Q4 stand-alone Property & Casualty R/I Life & Health R/I Total in m. EUR Q4/2016 Q4/2017 Δ Q4/2016 Q4/2017 Δ Q4/2016 Q4/2017 Δ Gross written premium 2,084 2,512
Slide 32: Well balanced international portfolio growth
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Well balanced international portfolio growth Gross written premium (Group) in m. EUR 17,791 Africa 17,069 3% 16,354 6% 5% Australia 13,963 14,362 13,774 14% 1) Latin America 12,096 11,429 17% 2) 10,275
Slide 33: Property & Casualty reinsurance: selective growth
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Property & Casualty reinsurance: selective growth 3-year CAGR: +10.7% GWP split by line of business in m. EUR GWP split by regions 10,711 Cat XL 3% Latin Africa Australia 4% 3% 9,338 9,205 America 2% St
Slide 34: Life & Health reinsurance: a well diversified portfolio
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Life & Health reinsurance: a well diversified portfolio 3-year CAGR: 3.1% GWP split by reporting categories in m. EUR GWP split by regions 7,731 Germany Africa Latin 3% 7,149 18% 7,080 3% America 18% 5%
Slide 35: Stress tests on assets under own management
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Stress tests on assets under own management Unchanged focus on yields and spreads; reduced relevance of Equity investments Change in market value Change in OCI before tax Portfolio Scenario in m. EUR in
Slide 36: Fixed-income book well balanced
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Fixed-income book well balanced Geographical allocation mainly in accordance with our business diversification Pfandbriefe, Short-term Semi- Governments Corporates Covered bonds, investments, Total gove
Slide 37: Currency allocation matches liability profile of balance sheet
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Appendix Currency allocation matches liability profile of balance sheet Duration-neutral strategy applied Currency split of investments Modified duration of fixed- Others CAD 7.3% income mainly congruent with
Slide 38: Disclaimer
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook 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 ow
Slide 39: Our Investor Relations team
Group Property & Casualty R/I Life & Health R/I Investments Solvency II Outlook Appendix Our Investor Relations team Karl Steinle Julia Hartmann Axel Bock General Manager Senior IR Manager IR Manager Corporate Communications Corporate Communications Corporate Communications Tel: +49 511 5604 - 1500