Hannover Rueck Se · XETR:HNR1
Hannover Rueck — Hannover Re — Corporate Update (February 2014)
36 slides from Hannover Rueck's corporate update, Feb 6, 2014
Slide 1: 1 Jan 2014 Non-Life Treaty Renewals
1 Jan 2014 Non-Life Treaty Renewals Hannover, 6 February 2014
Slide 2: Important note
R/I markets Our approach Our portfolio Outlook Appendix Important note Unless otherwise stated, the renewals part of the presentation is based on Underwriting-Year (U/Y) figures. This basis is only remotely comparable with Financial-Year (FY) figures, which are the basis of quarterly and annual ac
Slide 3: Reinsurance markets
somewhat diyerent Reinsurance markets hannover re’
Slide 4: Competition was even more intense than expected
R/I markets markets Our approach Our portfolio Outlook Appendix Competition was even more intense than expected Reinsurance market highlights Market situation: Resulting in: Strong capital position of reinsurers and primary insurers Rates overall deteriorated Benign large loss situation in 201
Slide 5: Our approach
somewhat diyerent Our approach hannover re’
Slide 6: Going into the renewal season, our U/W got a clear guidance
R/I markets Our Our approach approach Our portfolio Outlook Appendix Going into the renewal season, our U/W got a clear guidance Focus on bottom line, not on top line No market-share gains for the sake of it Don’t underwrite below minimum margin requirements Don’t accept changed terms & cond
Slide 7: Competitive markets required high technical discipline
R/I markets Our Our approach approach Our portfolio Outlook Appendix Competitive markets required high technical discipline Profitability-orientated U/W approach is key Superior rating enabled us to sustain high-quality business mix We kept capital allocation unchanged and did not increase our w
Slide 8: Lower costs becoming a more important competitive advantage
R/I markets Our Our approach approach Our portfolio Outlook Appendix Lower costs becoming a more important competitive advantage Administrative costs are the lowest in the industry Administrative expense ratio1) 7.2% 3.2% 3.1% 3.2% 2.8% 2.6% 2008 2009 2010 2011 2012 Peer average 2012 2) Own calculat
Slide 9: Time lag between U/Y and financial year
R/I markets Our Our approach approach Our portfolio Outlook Appendix Time lag between U/Y and financial year 2014 financial year governed by 2012, 2013 and 2014 U/Y rate quality Premium distribution Financial years 2011 2012 2013 2014 2015 2016 10% 2014 40% 50% U/W years 10% 2013 50% 40% 10% 2012 50
Slide 10: Our portfolio
somewhat diyerent Our portfolio hannover re’
Slide 11: 65% of treaty reinsurance renewed January 2014
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix 65% of treaty reinsurance (R/I) renewed 1 January 2014 Equates to 52% of the total non-life premium Estimated premium income U/Y 2013 in m. EUR Structured R/I & ILS 638 7.000 Global facultative 858 business 3,913 (65%) 6.000 6.000
Slide 12: Development differs significantly by line of business
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Development differs significantly by line of business Premium volume reduced by 2% Non-life reinsurance 1/1/2013 1/1/2014 Division Business centre Premium1) Variance Premium1) North America2) 558 +5% 584 Target markets 2) Germany
Slide 13: Modest price decreases on our broadly diversified book
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Modest price decreases on our broadly diversified book Realised price changes at a risk-adjusted level Non-proportional 1/1/2013 1/1/2014 Division Business centre Total premium1) Total premium1) XL price changes North America2) 34
Slide 14: Conditions for Hannover Re remarkably stable
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Conditions for Hannover Re remarkably stable Proportional1) Non-proportional2) 100% 100% 50% 50% 0% 0% -50% -50% -100% -100% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13
Slide 15: Selected U/W led to slight decrease in volume
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Selected U/W led to slight decrease in volume Underwriting discipline was essential Total treaty R/I in m. EUR Change of Hannover Re shares: -2.9% Other changes (price & volume): +3.8% 6,028 5,947 6.000 -520 401 38 4.500 3,913 3,8
Slide 16: North America: favourable market conditions led to growing premium
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Favourable underlying market conditions led to growing premium North America in m. EUR Some underlying premium increases because of improving US economy in share: +2.0% in price & volume: +5.5% US Property: improvements in
Slide 17: We kept our excellent position in the second largest R/I market
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix We kept our excellent position in the second largest R/I market Stable volume at stable rates despite higher retentions of large groups Germany in m. EUR Improvement in rates following large NatCat losses, in share: -8.2% but
Slide 18: Profitable growth with focus on selected segments (Marine)
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Profitable growth (+5%) with focus on selected segments Continued to be a major market leader for marine XL Marine (incl. offshore energy) in m. EUR Flattish pricing in primary insurance in share: -0.2% (cargo and hull) in p
Slide 19: Extremely soft market (Aviation)
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Extremely soft market Aviation in m. EUR Very low large loss experience for some years in share: -3.7% produced favourable profitability in price & volume: -4.1% 345 More selective underwriting led to reduction in 323 320
Slide 20: Maintained our position as an important lead market
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Maintained our position as an important lead market Premium reduction due to lower reinsurance purchase Credit, surety & pol. risks in m. EUR Showing nearly 100% in share: -7.7% in price & volume: +3.4% Credit 700 604 • St
Slide 21: Measures taken show our selective underwriting approach
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Measures taken show our selective underwriting approach Profitability of the book has been strengthened UK, London market & direct in m. EUR Discontinuation of larger proportional accounts in share: -0.3% (particularly in moto
Slide 22: Largely stable volume in heterogeneous markets
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Largely stable volume in heterogeneous markets Large volume will be renewed later Global treaty in m. EUR Mature markets show reduced volume in all in share: 0.0% in price & volume: +1.7% • Sufficient supply of capacity led
Slide 23: Global softening of reinsurance rates
R/I markets Our approach Our Our portfolio portfolio Outlook Appendix Global softening of reinsurance rates Alternative capital accelerated rate reductions Global catastrophe XL in m. EUR Excellent rating limited further premium decrease in share: -0.8% from competitive pressure in price & vol
Slide 24: Outlook
Outlook Financial-year figures
Slide 25: Overall largely stable portfolio with continued good quality
R/I markets Our approach Our portfolio Outlook Outlook Appendix Overall largely stable portfolio with continued good quality Development of non-life reinsurance lines of business (FY 2014e) Lines of business Volume1) Profitability2) Target North America3) + markets Germany3) +/- Marine (incl. energy
Slide 26: Guidance for 2014
R/I markets Our approach Our portfolio Outlook Outlook Appendix Guidance for 2014 Major loss budget of EUR 670 m. Hannover Re Group Gross written premium1) flat to low single-digit growth rate Return on investment2) ~ 3.2% Group net income3) ~ EUR 850 m. Dividend pay-out ratio4) 35% - 40% 1)
Slide 27: Rationale for the 2014 profit guidance
R/I markets Our approach Our portfolio Outlook Outlook Appendix Rationale for the 2014 profit guidance Net income ~ EUR 850 m. We expect that our life and health result will improve significantly Further strengthening of the confidence level of our non-life reserves may be limited due to IFRS accoun
Slide 28: Disclaimer
R/I markets Our approach Our portfolio 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 own analysis regarding the appropri
Slide 29: Appendix
somewhat diyerent Appendix hannover re’
Slide 30: Non-renewal of some large treaties with marginal profitability
R/I markets Our approach Our portfolio Outlook Appendix Appendix Non-renewal of some large treaties with marginal profitability Treaty R/I - proportional in m. EUR Change of Hannover Re shares: -3.7% 4.000 3,942 Other changes (price & volume): +5.0% 3,914 -321 259 33 3.000 2,653 2,625 2,333 -1% 2.00
Slide 31: Volume decrease in line with rate development
R/I markets Our approach Our portfolio Outlook Appendix Appendix Volume decrease in line with rate development Treaty R/I - non-proportional in m. EUR 2.500 Change of Hannover Re shares: -1.0% Change in price: -3.8% 2,085 Change in volume: +5.2% 2,033 2.000 -199 142 5 1.500 1,259 1,207 1,060 -4% ren
Slide 32: Improvement in non-proportional business
R/I markets Our approach Our portfolio Outlook Appendix Appendix Improvement in non-proportional business Germany Proportional1) Non-proportional2) 100% 100% 50% 50% 0% 0% -50% -50% -100% -100% 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0
Slide 33: Heterogeneous rate development in different markets
R/I markets Our approach Our portfolio Outlook Appendix Appendix Heterogeneous rate development in different markets Marine (incl. offshore energy) Non-proportional Comparison of Rate on Line (RoL) 100% 100% 80% 50% 60% 0% 40% -50% 20% -100% 0% 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 1
Slide 34: Further rate deterioration
R/I markets Our approach Our portfolio Outlook Appendix Appendix Further rate deterioration Aviation RoL index in % 140 13.1 12.5 120 100 9.5 80 7.5 7.5 7.0 6.5 6.5 6.3 5.8 6.1 5.8 5.6 5.4 60 5.0 4.6 4.7 4.1 3.7 40 3.1 2.5 2.3 20 0 Assessment of market developments derived from the Hannover Re Aviat
Slide 35: Satisfactory development
R/I markets Our approach Our portfolio Outlook Appendix Appendix Satisfactory development Global treaty Proportional1) Non-proportional2) 100% 100% 50% 50% 0% 0% -50% -50% -100% -100% 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 05 06 07
Slide 36: RoL reflects benign NatCat loss year & new capital sources
R/I markets Our approach Our portfolio Outlook Appendix Appendix RoL reflects benign NatCat loss year & new capital sources Global catastrophe XL Comparison of Rate on Line (RoL) 100% 100% 80% 50% 60% 0% 40% -50% 20% -100% 0% 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14 Net change (im