Barclays Capital 10th Global Financials Conference, New York

Transcription

Hannover Re The somewhat different reinsurer
Dr. Klaus Miller
Member of the Executive Board
Barclays Capital, Global Financial Services Conference
New York, 11 September 2012
Facts & figures | 1. Our mission | 2. Ambitious targets | 3. Manage risks | 4. Preferred partner | 5. Stable investment income | Outlook |
Agenda

Good start into 2012

Our strategy
1. Our mission: Growing Hannover Re profitably
2. We have ambitious profit and growth targets
3. We manage risks actively
4. We are a preferred business partner
5. We strive for a stable investment income

Outlook
Favourable results of Hannover Re's business
1H/2012 strong results largely unaffected by one-off effects
Favourable
R/Iconditions

Premium increase in non-life
reinsurance (+15.1%)

Accelerated growth in
life and health reinsurance
(+12.4%)

Benign
major losses
Volatile
capital
markets
1
Net major losses of EUR 132.4 m.
below budget

Net investment income up
by 5.4%; RoI at 3.8%

Results of inflation swaps and
ModCo derivatives largely neutral
at 1H/2012 but volatile quarterly

Increase in assets under own
management to EUR 30.3 bn.
mainly resulting from positive
cash flow
1H/2012 results
GWP
+14.0%
NPE
+13.1%
Net income
EUR 405 m.
EPS
EUR 3.36
RoE
15.5%
Shareholders' equity
BVPS
+10.1%
EUR 45.37
Dedicated to a clear strategy
2. We have
ambitious profit
and growth targets
3. We manage
risks actively
4. We are a
preferred
business
partner
1. Growing
Hannover Re
profitably
5. We strive for a stable
investment income
2
Our mission is to grow Hannover Re profitably
Within the last years we strengthened our position continuously
Premium ranking 2011 in m. USD
Rank Group
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Munich Re
Swiss Re
Hannover Re
Berkshire Hathaway Inc.
Lloyd's2)
SCOR
RGA Re
China Re
PartnerRe
Korean Re
Everest Re
Transatlantic Re
MAPFRE RE
London Re
Assicurazioni Generali
Source: A.M. Best (September 2012)
1) Net premium earned
2) Reinsurance only
3
Country
D
CH
D
USA
GB
F
USA
RC
BDA
ROK
BDA
USA
E
CDN
I
GWP
NPW
33,719
28,664
15,664
15,000
13,621
9,845
7,704
6,179
4,621
4,551
4,286
4,035
3,407
3,117
2,674
32,274
22,868
13,9211)
15,000
10,015
8,891
7,736
5,904
4,474
3,043
4,109
3,860
2,311
3,057
2,674
We have grown our non-life business profitably
5-year CAGR +7.7%
Gross written premium
in m. EUR
8.000
Cornerstones of our non-life approach

6,826
7.000
6,339
• Secures U/W discipline
5,747
6.000
5,190
5.000
• Lean, efficient infrastructure
4,988
44%
37%
4.000
Central underwriting combined with local
talent is the key to our success

44%
45%
Selective growth
• We only grow our market share in "hard"
markets
39%
• We have no premium-growth targets, only for
earnings
3.000
2.000
56%
63%
61%
1.000
0
2007
4
2008
2009
2010
2011
2012e
55%

Distribution through brokers

No appetite for acquisitions
56%
• Our cycle management gets us all the
business we want
We have strengthened our position in life/health
5-year CAGR +12.3%
in m. EUR
6.000
5,090
Cornerstones of our life/health approach

We focus on biometric risk and financing

10 key markets = 87% of our business;
50 main clients = 80% of our portfolio

44%
Sophisticated state-of-the-art Client
Relationship45%
Management (CRM)
5,270
5.000
4,529
4.000
3,083
3.000
44%
3,134
37%
• Ability to differentiate between value-creating
and value-destroying clients
39%
• We create long-term win-win situations (don't
play zero-sum games)
2.000
56%
63%
1.000
61%

55%
56%
We do consider acquisitions
• But only if strategic fit/complement
• No strategic prices
0
2007
5
2008
2009
2010
2011
2012e
We developed our business and improved diversification
in m. EUR
12,096
10.000
9,317
44%
8,320
26%
8.000
25%
6.000
4.000
2.000
2,135
3,067
11%
6%
89%
75%
74%
2000
2005
56%
94%
0
1990
Non-life reinsurance
6
1995
Life and health reinsurance
2011
We seek to be one of the most profitable reinsurer
Our minimum target is 750 bps above risk free
2007
Company
Hannover Re
Peer 1, Germany,
composite
Peer 2, Switzerland,
composite
Peer 3, France,
composite
Peer 4, Bermuda,
composite
Peer 5, US,
non-life
Peer 6, Bermuda,
non-life
Peer 7, Bermuda,
non-life
Peer 8, US,
life and health
Peer 9, US,
non-life
RoE
2008
Rank
RoE
2009
Rank
RoE
2010
Rank
RoE
Rank
RoE
2007 - 2011
Rank avg. RoE Rank
23.1%
1
(4.1% )
9
22.4%
2
18.2%
1
12.8%
1
14.5%
1
14.9%
5
6.5%
3
11.8%
5
10.7%
5
3.1%
6
9.4%
6
13.3%
7
(3.3%)
8
2.3%
10
3.6%
10
9.6%
3
5.1%
9
13.8%
6
8.9%
1
10.2%
6
10.1%
6
7.5%
4
10.1%
4
17.7%
3
1.1%
6
25.9%
1
11.5%
4
(7.6%)
10
9.7%
5
10.8%
8
4.8%
5
9.9%
7
7.1%
8
4.9%
5
7.5%
8
22.0%
2
7.3%
2
9.3%
8
14.7%
2
0.2%
7
10.7%
2
15.6%
4
(0.4%)
7
14.6%
3
9.9%
7
(1.3%)
8
7.7%
7
10.3%
9
6.5%
3
12.6%
4
12.9%
3
10.7%
2
10.6%
3
3.6%
10
(31.8%)
10
2.7%
9
5.8%
9
(4.4%)
9
(4.8%)
10
List shows the Top 10 of the Global Reinsurance Index (GloRe) with more than 50% reinsurance business
Data based on company data, own calculation
7
2011
Accelerated increase in book value per share
Book value per share, paid dividends
in EUR
57.10
10y CAGR: 10.0%
5y CAGR: 12.6%
50.97
50
15.88
13.58
40
11.48
31.61
30
21.99
20
4.78
10
4.78
5.63
6.58
7.58
9.18
11.48
7.58
41.22
37.39
17.21
17.90
19.57
20.93
21.57
2001
2002
2003
2004
2005
24.03
27.77
30.80
23.47
0
Book value per share
Paid dividends (cumulative since 1994)
2001 - 2003 US GAAP, as from 2004 IFRS
As at 31 December
8
2006
2007
2008
2009
2010
2011
Selective growth
Premium growth driven by profitability
Different lines with different cycles
GWP
200 %
Profitability
Latin America
+
Credit & Surety
+
Aviation
+/-
120 %
Motor Germany
+/-
100
100 %
%
US Casualty
180 %
160 %
140 %
80 %
-
Marine
+/-
US Cat
+/-
60 %
40 %
20 %
0%
2008
9
2009
2010
2011
Hannover Re remains the absolute cost leader
Our overhead ratio is less than half of the industry average
Administrative expense ratio1)

Lean, efficient infrastructure with no
non-life underwriting authority in USA

High exposure to broker biz in non-life to be
able to execute strict cycle management

No unbundled services

Lead positions only in carefully selected
areas

No attempt to offer everything to everyone,
but rather concentrate on market segments
in which we have a particular expertise
7.4%
0
0
0
3.1%
3.2%
3.1%
3.2%
2.8%
0
2.6%
0
 Be competitive
0
2007
2008
2009
2010
2011
2012e
Peer 2)
average
2011
Own calculation
1) Administrative expenses + other technical expenses (in % of net premium earned)
2) Munich Re, SCOR, Swiss Re, Transatlantic Re, PartnerRe, Everest Re
10
 Have a better choice of business and
better access to niches
 Be profitable
We manage risks actively

Our capital model is the cornerstone of Hannover Re

We manage our risk exposure to achieve a positive net income with a probability
of 90%

We ensure that the probability of an economic as well as IFRS capital loss does
not exceed 0.03%

We ensure that our reserving level is conservative
Use of retrocession
11
Conservative reserving
Stringent U/W discipline
Capital allocation follows internal model requirements. . .
. . .as well as management decisions

The target capital to be allocated includes IFRS equity, hybrid capital and
valuation reserves (economic valuation differences to IFRS valuation)

According to the risk profiles of the underlying business our internal capital model
defines the capital allocation:
• Approximation: 50% non-life U/W / 25% life and health U/W / 25% asset management

The allocated capital earns minimum the risk-free return

The Minimum Return on Capital (MRC) in excess of risk free is a weighted
average of requirements on IFRS-equity, hybrid capital and valuation reserves

Targets are calculated based on allocated capital and MRC in relation to an
underlying business:
• For non-life and life and health U/W: GWP  capital margin above risk free
• For asset management: AuM  RoI above risk free

The target C/R translates our economic targets into the IFRS accounting world
• At a target C/R of ~98.0% non-life U/W contributes to achieve our economic targets
• Target C/R = (NPE + economic revaluation – minimum return on economic capital) / NPE
12
Exposure management supported by capital management
Risk budget allocated to NatCat*
as % of economic capital
30%

Internal capital model sets the tone

Stringent allocation of capital to NatCat
exposed business is key to reduce
volatility of earnings

Well established retrocession strategy and
efficient NatCat management led to lower
net major losses in 2011
25%
20%
15%
10%
2010
2011
* on a stand-alone basis, i.e. before diversification with other risks
13
2012
Diversification reduces capital requirements by a third
Capitalisation ratio 160%
Risk capital for the 99.97% VaR (according to economic capital model)
in m. EUR
8,759
409
569
8.000
8,048
1,992
7.000
2,563
6.000
32%
diversification
9.000
2,029
4.000
3,048
5,485
3.000
2.000
Effective
capital
requirement
5.000
1.000
0
Non-life
reinsurance
Life and health
reinsurance
Assets
As at December 2011
The risk categories have been adapted to the Solvency II requirements
Calculation according to economic valuation principles
14
Credit
Operational
HR Group
required capital
HR Group
available
economic capital
Diversification reduces capital requirements by 50%
Non-life business group
Risk capital for the 99.5% VaR (according to economic capital model)
3.500
in m. EUR
263
3,290
309
2.500
662
104
1,644
185
2.000
50%
diversification
405
3.000
186
409
1.000
1,645
527
500
0
North
Germany
America
Marine
Aviation
As at December 2011
Calculation according to economic valuation principles
15
Credit, Structured
UK,
surety & R/I & ILS London
pol. risks
market &
direct
Global
treaty
Gobal cat. Global
Total
XL
facultative non-life
R/I
Effective
capital
requirement
240
1.500
Mutual beneficial relationships with our customers
loyal and long-term oriented, consistent approach to CRM
Preferred business partner
USA: Flaspöhler surveys 2010 / 2011


Strategic approach to enhance our clients'
commercial success through the services
we provide
Among the top three according to brokers and
clients
Germany: Imug Survey Germany 2010

We add value to both contracting parties with
our broad scope of standard or tailored
solutions
CRM Strategy

Account executives concept

Training for clients

Client feedback

Austria and Switzerland:
Imug Survey 2011

100 and 97 points by clients from Switzerland
and Austria (on an ascending scale from 0 - 100)
Credit, Surety and Political Risks:
Hagstotz survey 2011

16
96% of our customers have a positive or very
positive impression of Hannover Re.
Overall customer satisfaction at "very high level"
Unique group structure supports our business model
Majority owner, but operational and financial independence
Talanx AG*
50.2%
Free float
49.8%
63.7%
8 German
mutuals
>100 subsidiaries,
branch/rep. offices
in ~20 countries
36.2%
German business
* 100% owned by HDI V.a.G.
17
International business
Our rating makes us a strong partner
Standard & Poor's
A.M. Best
Insurance Day
LOGO

AA"Very strong"
Outlook: stable
A+
"Superior"
Outlook: stable
(19 June 2012)
(5 September 2012)
Reinsurer of the year
2012
(5 September 2012)
Being a highly-rated counterpart is a major ingredient of the recipe
18
Numerous benefits
of an above-average rating coupled with our CRM-approach

We have a better showing of business than the average player
• Not excluded from virtually any business/access to all lines of business
• We enjoy a highly diversified, high quality book of business

We are on virtually all broker lists, with cedents often demanding specific R/Is

We get very high allocations when we quote for business
• >90% vs. some 50% for a Bermuda start-up

We create lower capital charges for our cedents
• "AA" range S&P capital charge on reinsurance recoverables = 0.8%
("A" = 1.4%, BBB = 3.1%)
• As an above-average rated R/I, we "minimise" our cedents' cost of capital

Our cost of financing in the capital markets is lower
• Hybrid bonds trade at tighter spreads
• Better conditions for LoCs and credit lines
We might not (yet) get paid extra for our better rating on a
contract level, but other advantages are significant

19
We aim for stable investment income
Main facts of our approach

Our risk taking is weighted towards reinsurance rather than investment risks

The structure of our investments is guided by the requirements of our technical
liabilities

We have a prudent investment philosophy

Our portfolio is guided by basic principles of broad diversification across a wide
variety of asset classes and issuers

We strive for risk-free interest rates plus the cost of capital
20
Constant positive operating cash flow supports asset growth
Assets under own management increased by 50% in 5 years
Operating cash flow
Assets under own management
in m. EUR
3.000
in m. EUR
30,282
30.000
28,341
2,523
25,411
523
24.000
22,507
20,137
2.000
1,752
1,459
1,681
267
518
18.000
705
1,345
264
628
1.000
608
542
822
706
267
6.000
450
737
259
230
424
473
336
0
0
2008
Q1
21
12.000
2009
Q2
2010
Q3
2011
Q4
2012
2008
2009
2010
2011
1H/2012
Net investment income has grown by 9 % (CAGR4y)
in m. EUR  Ordinary investment income grew
Net investment income
significantly since 2009 despite
deteriorating yields; supported by increase
in assets
709
673
156
600
569
145
445
400
161
551

151
102
553
512
200
424
400
1H/2009
1H/2010
343
0
1H/2008
1H/2011
Net investment income excl. funds withheld
22
1H/2012
Funds withheld
Target yield of 3.5% outperformed despite
high cash flow being invested at lower
rates
Solid and relatively high quality fixed income portfolio...
... in the light of unstable capital market environment

No material exposure in Southern Europe and Ireland

Fixed-income book diversified per rating, country, region and issuer
Fixed-income book by country
Fixed-income book by rating
BBB
13%
<BBB
3%
AAA
32%
Asia
5%
Rest of
world
7%
Australia
8%
UK
9%
A
22%
USA
24%
Rest of
Europe
16%
AA
31%
Total fixed-income book:
EUR 27.3 bn.
Values as at 30 June 2012
23
Germany
20%
France
7%
GIIPS
4%
Due to asset-liability matching 3.6 % exposure in GIPPS
Major part in corporates and covereds
in % Semi-/Govermentals in GIPPS
Total investment in GIPPS
in m. EUR
Portugal
17
Governments
13
SemiGovermentals
<1
Ireland
27
Covereds
51
Spain
89
Corporates
35
Italy
17
Greece
0
EUR 1.1 bn.
Economic view based on market value as at 30 June 2012
24
EUR 151 m.
Continuously reduced share of bank exposure
Unchanged focus on conservative title selection
Corporate sector allocation
in m. EUR
9,936
8,600
000
by currencies
2,982
17%
31%
32%
6,288
Others
6%
GBP
33%
USD
44%
EUR
000
5,011
44%
39%
000
69%
68%
30 Jun 12
56%
000
61%
0
2009
Non Banks
2010
2011
Banks
Economic view based on market value as at 30 June 2012
25
30 Jun 12
Guidance for 2012
Hannover Re Group

Gross written premium (GWP)1) ……………………………………….~ +5% - +7%
•
Non-life reinsurance1) ……………………………………………………...…...~ +5% - +7%
•
Life and health reinsurance1)2)……………………………………………..…..~ +5% - +7%

Return on investment3) ……………………...………….........…....................~ 3.5%

Dividend pay-out ratio4) ………………………………………………….. 35% - 40%
1) At unchanged f/x rates
2) Organic growth
3) Subject to no major distortions in capital markets; excluding effects from inflation swaps
4) Related to group net income according to IFRS
26
Our Investor Relations team
Hannover Rückversicherung AG
Karl-Wiechert-Allee 50
30625 Hannover, Germany
www.hannover-re.com
http://hannover-re.ir-portal.com
Karl Steinle
Julia Hartmann
General Manager
Corporate Communications
IR Manager
 +49 511 5604-1500
 +49 511 5604-1529
 [email protected]
Louise Camilleri-Wolter
Deputy IR Manager
 +49 511 5604-1341
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 investing in any of our securities.
While Hannover Re has endeavoured to include in this presentation information it believes to be reliable,
complete and up-to-date, the company does not make any representation or warranty, express or implied,
as to the accuracy, completeness or updated status of such information.
Some of the statements in this presentation may be forward-looking statements or statements of future
expectations based on currently available information. Such statements naturally are subject to risks and
uncertainties. Factors such as the development of general economic conditions, future market conditions,
unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the
actual events or results to be materially different from those anticipated by such statements.
This presentation serves information purposes only and does not constitute or form part of an offer or
solicitation to acquire, subscribe to or dispose of, any of the securities of Hannover Re.
© Hannover Rückversicherung AG. All rights reserved.
Hannover Re is the registered service mark of Hannover Rückversicherung AG.

Barclays Capital 10th Global Financials Conference, New York

Transcription

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