Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — Conference Presentation (July 2003)
27 slides from Hannover Rueck's conference presentation, Jul 25, 2003
Slide 1: Financial R/I Strategy
Financial R/I Strategy Jürgen Gräber Executive Board Member & Chief Operating Officer Non-Life Reinsurance hannover re A dvance d S olution s
Slide 2: hannover re
hannover re A dvance d S olution s
Slide 3: Terminology: A mixed bag
TERMINOLOGOY: A mixed bag HR's balance sheet Reserving policy ons Retrocession mgmt. ati ritiz Hannover Life Re ecu S - Stochastic banker Ris ks - VIF olu Financial R/I ecct tiioonn prrootte tion t eeeet p s shh ccee - Strategy lla ann s - Products Ba Ba - US business - Outlook 91 hannover re A dvan
Slide 4: Financial R/I: A known product
FINANCIAL R/I: A known product HR's balance sheet Risk solution spectrum* Reserving policy Capital markets Retrocession mgmt. Traditional Hannover Life Re - Stochastic banker Captive ML/MY Bonds Portfolio transfer Weather derivatives CatEPuts (contingent Blended Fin R/I Insurance linked Whole accoun
Slide 5: Areas of "Art": Manifold alternatives
AREAS OF "ART": Manifold alternatives HR's balance sheet à Alternative risks: Reserving policy • Non-insurance risks, such as capital market risks, political and Retrocession mgmt. fortuitous risks, performance risks, weather risks, etc. Hannover Life Re à Alternative structures: - Stochastic banker
Slide 6: Product Range: Three alternatives
PRODUCT RANGE: Three alternatives à Aggregate Excess of Loss contracts HR's balance sheet • Accident year approach Reserving policy • Multi-line Retrocession mgmt. • Multi-year Hannover Life Re • Recognition of investment return - Stochastic banker à Spread Loss contracts • Low frequency, high sever
Slide 7: All Financial R/I contracts create off balance sheet capital
ALL FINANCIAL R/I CONTRACTS create off balance sheet capital Aggregate X/L Spread Loss HR's balance sheet Reserving policy Retrocession mgmt. Hannover Life Re - Stochastic banker - VIF Surplus Relief Financial R/I - Strategy Cession = 40% Solvency margin = Surplus/Net premium - Products 1,000 = 40%
Slide 8: Hannover Re's Position: Doing things differently
HANNOVER RE'S POSITION: Doing things differently Market Hannover Re's position position HR's balance sheet Emergence of time and Hannover Re invents the T and D Late seventies distance contracts contracts in Lloyd's Reserving policy Hannover Re provides coverage in From 1984 onwards Spread Loss cove
Slide 9: Off-balance sheet capital is most competitive
OFF-BALANCE SHEET CAPITAL1) is most competitive Capital Profit HR's balance sheet requirement 2) requirement 2) Reserving policy Catastrophe business 250% 25% Retrocession mgmt. Non-proportional business 100% 10% Hannover Life Re Mixed book, - Stochastic banker 50% 5% proportional and non-proportion
Slide 10: Better economic substance than on balance sheet financing
BETTER ECONOMIC SUBSTANCE than "on balance sheet" financing HR's balance sheet à Catastrophe exposed business ≅ High yield bonds, equity (CCC) Reserving policy Retrocession mgmt. à Non-proportional business ≅ Surplus debentures, equity (BBB) Hannover Life Re à Mixed exposures, prop. - Stochastic ban
Slide 11: Balance sheets and P/L accounts at our disposal?
BALANCE SHEETS AND P/L ACCOUNTS at our disposal? (1) Changes the standard deviation? (2) Replaces hard and hybrid capital? HR's balance sheet 0.4 Reserving policy 0.35 Retrocession mgmt. Densitiy 0.3 Hannover Life Re - Stochastic banker 0.25 Average - VIF 0.2 Financial R/I 0.15 Mezzanine Senior debt
Slide 12: Financial R/I: Friend or foe?
FINANCIAL R/I: Friend or foe? Fin R/I HR's balance sheet à Is a competitive product to traditional reinsurance Reserving policy • It competes favourably on low and high layer cat. covers Retrocession mgmt. • It assists to retain higher structured retention Hannover Life Re • It is constraint wheneve
Slide 13: Strategic Mandate: Disproportionately high profits
STRATEGIC MANDATE: Disproportionately high profits HR's balance sheet (...) By providing solutions which are geared to the individually required degree of risk transfer, Hannover Re Advanced Solutions will Reserving policy play an instrumental role in shaping the development of this market Retrocess
Slide 14: Advanced Solutions' Strategy: Clearly communicated
ADVANCED SOLUTIONS' STRATEGY: Clearly communicated (1) Strategic orientation HR's balance sheet à Fin R/I is a threat to the traditional P/C market; we translate this threat into opportunities Reserving policy à We want to shape the Fin R/I market Retrocession mgmt. as one of the top 3 world-class p
Slide 15: Underwriting Approach: Consequently profit driven
UNDERWRITING APPROACH: Consequently profit driven HR's balance sheet Reserving policy à We are striving to achieve a present value margin on Retrocession mgmt. earned premiums above 4% Hannover Life Re - Stochastic banker à Based on an RBC allocation of 10%, the present value margin - VIF translates
Slide 16: Our Clients: Solvent insurers and reinsurers
OUR CLIENTS: Solvent insurers and reinsurers with a long-term rather than a short-term view HR's balance sheet à More than 4/5's of a portfolio conducted with (re-)insurers Reserving policy awarded an S&P rating of A or higher Retrocession mgmt. à Most of our clients are market leaders in their busi
Slide 17: Geographic Development: USA dominance reduced
GEOGRAPHIC DEVELOPMENT: USA dominance reduced 2002 2001 HR's balance sheet Other Asia Latin America European Africa Australia Africa Reserving policy 2% 2% countries 3% 1% 2% 3% Other Retrocession mgmt. European Germany 3% countries Hannover Life Re 19% - Stochastic banker - VIF North America Financ
Slide 18: Distribution Channels: Fitting well into the group's strategy
DISTRIBUTION CHANNELS: Fitting well into the group's strategy HR's balance sheet à The close co-operation with the group‘s P/C division eases and accelerates access to clients Reserving policy Retrocession mgmt. à Actuarial standards in Advanced Solutions team use latest Hannover Life Re P/C modelli
Slide 19: RBC Requirements: Well embedded in Hannover Re's and S&P's approach
RBC REQUIREMENTS: Well embedded in Hannover Re's and S&P's RBC approach RBC requirements (in % of NPE): HR's balance sheet 1) Reserving policy HR S&P Retrocession mgmt. Business group % EUR % EUR Hannover Life Re Property/Casualty ~ 40% ~ 1,400 ~ 55% ~ 1,925 - Stochastic banker Life/Health < 10% < 2
Slide 20: Outperformance measured and achieved
OUTPERFORMANCE measured and achieved Expected returns Capital Profit HR's balance sheet 1) 1) on requirement requirement capital required Reserving policy Catastrophe business 250% 25% Retrocession mgmt. Hannover Life Re Non-proportional business 100% 10% - Stochastic banker Mixed book, proportional
Slide 21: Margins rise again
MARGINS rise again HR's balance sheet à Risk free deposit accounting transactions Reserving policy Retrocession mgmt. • From 1% to 2% Hannover Life Re à Low risk Surplus Relief - Stochastic banker • From 1.5% up to 4% and more - VIF Financial R/I à Higher risk (25% of traditional) - Strategy • Follo
Slide 22: Our World-wide Infrastructure: Well-built
OUR WORLD-WIDE INFRASTRUCTURE: Well-built Ireland: Hannover Re Advanced Solution HR's balance sheet Malaysia: HR Malaysian Branch (4 integrated group Guernsey: HR Guernsey PCC preferred by SE-Asian clients companies) established 1999 Reserving policy Retrocession mgmt. Germany: HR home office USA: R
Slide 23: Advanced Solutions: The best of two worlds
ADVANCED SOLUTIONS: The best of two worlds HR's balance sheet Reserving policy 71.8% 50.1% HDI Hannover Re E+S Rück Retrocession mgmt. 100% 100% 100% Hannover Life Re HDI Hannover Hannover Re E+S - Stochastic banker Reinsurance (Guernsey) Reinsurance Reinsurance (Ireland) Ltd. (Ireland) Ltd. PCC Ltd
Slide 24: Advanced Solutions: The best of two worlds
ADVANCED SOLUTIONS: The best of two worlds HR's balance sheet 72.0% 50.1% Reserving policy HDI Hannover Re E+S Rück 100% ASG Retrocession mgmt. 100% 100% Hannover Life Re HDI Hannover Hannover Re E+S - Stochastic banker Reinsurance Reinsurance (Guernsey) Reinsurance (Ireland) Ltd. (Ireland) Ltd. PCC
Slide 25: A Unique Setup in Hannover Re's strategy
A UNIQUE SETUP in Hannover Re's strategy HR's balance sheet Reserving policy à We know the value drivers and the value destroying products Retrocession mgmt. • Low risk area only Hannover Life Re • No LPT, movie financing, financial guarantees - Stochastic banker - VIF à The customers are well-known
Slide 26: Fin R/I Advanced Solutions
R/I Fin is s tion olu d S nce va Ad hannover re A dvance d S olution s
Slide 27: A Registered Trademark
A REGISTERED TRADEMARK HR's balance sheet Reserving policy Retrocession mgmt. Hannover Life Re - Stochastic banker - VIF Financial R/I - Strategy - Products - US business - Outlook 114 hannover re A dvance d S olution s