Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — DrKW German Investment Seminar 2006
31 slides from Hannover Rueck's conference presentation, Jan 10, 2006
Slide 1: Hannover Re - The somewhat different reinsurer
Hannover Re - The somewhat different reinsurer Wilhelm Zeller Chairman of the Executive Board DrKW – German Investment Seminar 2006 0 ® New York, 10 January 2006 hannover re
Slide 2: Disclaimer
HR Overview S'what Different Profit Drivers Hurricanes 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 appropria
Slide 3: League table (premiums)
HR Overview S'what Different Profit Drivers Hurricanes League table (premiums) WE ARE AMONG THE TOP REINSURERS IN THE WORLD (2004 figures in million USD1)) Rank Group Country GWP NPW 1 Munich Re D 30,558 26,408 2 Swiss Re CH 28,047 25,789 3 Berkshire Hathaway2) USA 13,085 11,816 4 Hannover Re D 13,0
Slide 4: Profitability: minimum ROE target exceeded
HR Overview S'what Different Profit Drivers Hurricanes Profitability MINIMUM ROE TARGET EXCEEDED IN 8 OUT OF 10 YEARS 26.0% 18.0% 18% 17.1% 17.1% 15.9% 15.7% 14.8% 14.8% 14.3% 14.0% 13.9% 13.2% 13.5% 13.1% 12.7% 12.5% 12.3% 12.2% 12.1% 12.5% 11.3% 9% 0.7% 0% 4 95 96 97 98 99 00 01 02 03 04 -0 19 19
Slide 5: League table (RoE)
HR Overview S'what Different Profit Drivers Hurricanes League table (RoE) HNR1 CONSISTENTLY AMONG MOST PROFITABLE COMPANIES Again: "Volume is vanity, profit is sanity." 2000 2001 2002 2003 2004 2000 - 2004 Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank Ø - RoE Rank Renaissance Re 20% 2 18% 1 2
Slide 6: The somewhat different reinsurer: Hannover Re Group
HR Overview S'what Different Profit Drivers Hurricanes THE SOMEWHAT DIFFERENT REINSURER Hannover Re Group Æ Focus on profitability, not on premium, league tables or market share • We have no growth targets for premiums, only for earnings Æ Diversification • Four (largely) uncorrelated business group
Slide 7: The somewhat different reinsurer: Property/Casualty Reinsurance
HR Overview S'what Different Profit Drivers Hurricanes THE SOMEWHAT DIFFERENT REINSURER Property/Casualty Reinsurance Æ Centralized underwriting approach • Secures u/w discipline and opportunistic cycle management • Lean, efficient infrastructure with no u/w authority in London or U.S. Æ Cycle manag
Slide 8: The somewhat different reinsurer: Life/Health Reinsurance
HR Overview S'what Different Profit Drivers Hurricanes THE SOMEWHAT DIFFERENT REINSURER Life/Health Reinsurance Æ Focus, focus, focus • 10 key markets = 95% of our business; 50 main treaties = 65% of our portfolio • 3 main products stand for 75 % of our total business – Financing R/I – Block assumpt
Slide 9: Financial Reinsurance, Specialty Insurance
HR Overview S'what Different Profit Drivers Hurricanes THE SOMEWHAT DIFFERENT REINSURER Financial Reinsurance, Specialty Insurance Financial/Finite R/I Æ We entered into FinRe more than 25 years ago Æ Distribution through own P/C network as well as through specialty brokers Æ Our internal rules proh
Slide 10: Key profit drivers
HR Overview S'what Different Profit Drivers Hurricanes KEY PROFIT DRIVERS 7 important determinants to safeguard our profitability targets 1) Optimal diversification 2) Consistent cycle management 3) Efficient capital management 4) Proactive rating & security management 5) Prudent investment manageme
Slide 11: Diversification: from P/C reinsurer to most diversified
HR Overview S'what Different Profit Drivers Hurricanes Diversification FROM A MERE P/C R/I TO THE WORLD'S MOST DIVERSIFIED R/I 1990 2004 Life/Health R/I 6% Specialty Insurance 22% Property/ Casualty R/I 43% Financial R/I 12% Property/ Life/Health R/I Casualty R/I 23% 94% Total GWP: Total GWP: € 1,38
Slide 12: Diversification: our portfolio structure
HR Overview S'what Different Profit Drivers Hurricanes Diversification OUR PORTFOLIO STRUCTURE A reflection of the world R/I market, slightly biased towards Germany 2004 Latin America Africa Asia 3% 2% 3% Germany Australia 13% 4% Other European countries 25% North America 50% Total GWP € 9,567 m. ®
Slide 13: Diversification at work
HR Overview S'what Different Profit Drivers Hurricanes Diversification DIVERSIFICATION* AT WORK Earnings from all business groups balance the portfolio in m. € 400 365 3 355 350 41 42 309 -2.6% -10.1% 300 54 267 +149.6% 89 +473.2% 99 250 43 +10.2% +7.4% 200 40 +55.2% 50 47 267 +143.2% -56.9% 30 +8.3
Slide 14: Diversification reduces capital requirements by ~50%
HR Overview S'what Different Profit Drivers Hurricanes Diversification REDUCES CAPITAL REQUIREMENTS BY ~50% Due to lower charges for non-P/C business and low intragroup correlation 1,00 12% 6% 14% 18% 22% 16% 0,50 100% 10% 83% 75% 67% 56% 53% 48% 45% 0,00 P/C R/I P/C R/I and P/C R/I and P/C R/I, P/C
Slide 15: Cycle management: market share gains in hard markets only
HR Overview S'what Different Profit Drivers Hurricanes Cycle management MARKET SHARE GAINS IN "HARD" MARKETS ONLY We grow our book when others commit new money to R/I market (BDA start-ups) in m. € Post 9/11: 6,000 Market share increased 140,000 from 3.3% to 4.2% 120,000 5,000 Post hurricane "Andrew
Slide 16: Capital management: risk-based capital
HR Overview S'what Different Profit Drivers Hurricanes Capital management RISK-BASED CAPITAL IS THE STARTING POINT Excess capital necessary for higher ratings comes on top Æ We would prefer to run our business on basis of risk-based capital (RBC)1): ~ 63% ~ 50% ~ 43% ~ 27% ~ 13% P/C R/I 2) L/H R/I F
Slide 17: Capital management: capital structure
HR Overview S'what Different Profit Drivers Hurricanes Capital management OUR CAPITAL STRUCTURE CONSISTS NOT ONLY OF EQUITY Use of hybrids, securitizations etc. lowers cost of capital, increases RoE Æ Our risk modelling (risk-based capital) determines our capital basis Æ Equity capital is by far the
Slide 18: Rating & security management: policyholders' surplus
HR Overview S'what Different Profit Drivers Hurricanes Rating & security management STEADY INCREASE OF POLICYHOLDERS' SURPLUS Has sustainably improved Hannover Re's security and supported our rating in m. € 5,000 4,5184) 4,1723) 4,000 865 2) 3,680 1,116 500 784 3,000 2,8971) 531 545 2,400 492 917 2,
Slide 19: Financial strength ratings
HR Overview S'what Different Profit Drivers Hurricanes Rating & security management FINANCIAL STRENGTH RATINGS 1) Hannover Re has improved its relative position over recent years Group S&P A.M. Best Fitch Moody's Berkshire Hathaway AAA A++ AAA 2) Aaa Swiss Re AA 5) A+ 5) AA+5) Aa2 5) Hannover Re AA-
Slide 20: Rating & security management: retrocessions
HR Overview S'what Different Profit Drivers Hurricanes Rating & security management RETROCESSIONS We always aim to protect our capital Æ Our retrocessions are meant to Approaches to • protect our capital risk management • stabilise and optimise results • allow us to profit fully from hard markets (e
Slide 21: Investment management: tactical asset allocation
HR Overview S'what Different Profit Drivers Hurricanes Investment management TACTICAL ASSET ALLOCATION Can differ significantly from strategic allocation due to our short- to mid-term view Strategic Tactical Asset Allocation Asset class Allocation 2001 2002 2003 2004 30 Sep 05 Bonds ≥ 50% 72% 75% 81
Slide 22: Administrative-expense management: cost leader
HR Overview S'what Different Profit Drivers Hurricanes Administrative-expense management1) HANNOVER RE IS THE COST LEADER Lowest overhead ratios in the industry 5,0 % 5.2% 4,5 % P/C R/I: 2.6% L/H R/I: 2.8% Fin R/I: 0.5% 4,0 % Specialty: 8.7% 3,5 % 3.5% 3.4% 3.1% 3,0 % 2.8% 2.6% 2,5 % 2) 2000 2001 20
Slide 23: Tax planning
HR Overview S'what Different Profit Drivers Hurricanes Tax planning TAXES ARE ANOTHER POWERFUL PROFIT DRIVER Low corporate tax rates in Bermuda and Ireland reduce Hannover Re's tax bill 45,0 % 40% 40,0 % 35% 35,0 % 30% 30% 30,0 % 28% 25,0 % 20,0 % 15,0 % 12.5% 10% 10,0 % 5% 5,0 % 0% 0,0 % Germany US
Slide 24: Challenges and chances in the wake of the hurricanes
Challenges and chances in the wake of the hurricanes ® hannover re
Slide 25: Hurricane highlights
HR Overview S'what Different Profit Drivers Hurricanes HURRICANE HIGHLIGHTS Katrina is the costliest insured loss in history Æ Losses hit both cat and HR group per-risk markets Market loss net loss Katrina > 50 bn. USD 330 m. EUR* • Historic events for marine Rita 6-10 bn. USD 140 m. EUR* Æ Reinsura
Slide 26: A preliminary snapshot at 1/1 renewals
HR Overview S'what Different Profit Drivers Hurricanes A PRELIMINARY SNAPSHOT AT 1/1 RENEWALS (1) Property/Casualty Æ Property Cat. Æ Specialty Casualty US • Loss-hit US: increases up to 100% • Professional Liability (incl. D&O) • Loss-free US: small increases – Ceding commissions down 3 – 5% – HR c
Slide 27: Renewal snapshots (cont'd)
HR Overview S'what Different Profit Drivers Hurricanes RENEWAL SNAPSHOTS (CONT'D) (2) Life/Health R/I (4) Specialty Insurance • Unchanged strategy • Emphasis on hard-to-place risks • Double-digit growth (not fitting u/w criteria of standard market), of top-and bottom-line de-emphasize/discontinue co
Slide 28: Outlook on 2006
HR Overview S'what Different Profit Drivers Hurricanes OUTLOOK ON 2006 Æ Property cat.: There's more to come – • Full KRW effect not in the books yet at all firms • Model recalibration not to be limited to SE wind exposures ¬ effects on CA/New Madrid earthquake, N. European wind, Japanese exposures
Slide 29: Further information
HR Overview S'what Different Profit Drivers Hurricanes FURTHER INFORMATION Æ For further company information please contact our IR team or get a copy of our group presentation from our website! ® hannover re
Slide 30: Financial calendar
HR Overview S'what Different Profit Drivers Hurricanes FINANCIAL CALENDAR 7 February 2006 Conference Call on 2006 Renewals 23 March 2006 Press Conference on 2005 Annual Results 23 March 2006 Frankfurt Analysts' Meeting 12 May 2006 Interim Report 1/2006 12 May 2006 Annual General Meeting 8 August 200
Slide 31: Our investor relations team
HR Overview S'what Different Profit Drivers Hurricanes OUR INVESTOR RELATIONS TEAM Hannover Re Karl-Wiechert-Allee 50 30165 Hannover, Germany Tel. + 49/5 11/56 04 - 0 (Switchboard) Fax: + 49/5 11/56 04 - 16 48 (direct line) Eric Schuh Gabriele Bödeker Associate Director Senior IR Manager Corporate C