Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — Q1 2006 Earnings Presentation
33 slides from Hannover Rueck's earnings presentation, May 12, 2006
Slide 1: Conference Call on Interim Report 1/2006
Conference Call on Interim Report 1/2006 ® Hannover, 12 May 2006 hannover re
Slide 2: Q1/2006 Highlights
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Q1/2006 HIGHLIGHTS Æ Group fully on track to meet all goals for 2006 • Very pleasing overall result, all business groups contributing earnings above CoC • Ordinary investment income extremely strong Æ P/C Reinsurance wi
Slide 3: Q1/2006 Highlights (cont'd)
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Q1/2006 HIGHLIGHTS (CONT'D) Æ Strong operating cash flow reflects excellent quality of business Æ Shareholders' equity continues to grow, despite hike in bond yields 31 Dec 05 Variance 31 Mar 06 in m. EUR Operating cash
Slide 4: Group figures at a glance
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Group figures at a glance SOLID START INTO 2006 in m. EUR Q1/2005 Variance Q1/2006 Gross written premium 2,617 +8.9% 2,849 Net premium earned 1,781 +12.2% 1,998 Net underwriting result (41) -85.0% (6) - Net underwriting
Slide 5: Property/Casualty R/I key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Key figures EBIT SHOWS QUALITY OF BUSINESS in m. EUR Q1/2005 Variance Q1/2006 Gross written premium 1,335 +6.2% 1,419 Net premium earned 851 +19.2% 1,015 Net underwriting result 27 -45.4% 15 Net investment income 85 +33.1% 113 - F
Slide 6: Catastrophe losses
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Catastrophe losses 1) MODERATE LOSSES IN Q1/2006 in m. EUR 1,775 2,095 1,029 800 700 665 600 500 497 472 449 400 370 341 287 235 300 240 225 175 173 164 200 103 105 102 175 81 69 126 149 83 60 100 60 44 40 28 0 1997 1998 1999 2000
Slide 7: 2006 catastrophe losses
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook 2006 catastrophe losses* MAN-MADE LOSSES PREVAIL in m. EUR Property/Casualty R/I Catastrophe loss Gross Net Cyclone Larry 11.1 9.1 1 Satellite claim 10.4 10.4 1 Marine claim 7.1 5.2 1 Fire claim 15.3 15.3 4 Major losses 43.9 40.0
Slide 8: Life/Health R/I key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Key figures EARNINGS GROWTH EXPECTED TO ACCELERATE in m. EUR Q1/2005 Variance Q1/2006 Gross written premium 541 +11.9% 606 Net premium earned 508 +3.4% 526 Net underwriting result (33) +4.2% (34) - Net underwriting result incl. fu
Slide 9: Financial R/I key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Key figures TURNAROUND IN PREMIUM GROWTH in m. EUR Q1/2005 Variance Q1/2006 Gross written premium 354 +27.2% 450 Net premium earned 197 +20.8% 237 Net underwriting result (42) -94.3% (2) - Net underwriting result incl. funds withh
Slide 10: Specialty Insurance key figures
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Specialty Ins. Investments Outlook Key figures EBIT-RETURN TARGET ACHIEVED Q1/2005 Variance Q1/2006 in m. EUR Gross written premium 421 +23.7% 520 Net premium earned 226 -5.8% 213 Net underwriting result 9 +98.7% 18 Net investment income 7 +204.6% 21
Slide 11: Investment Income
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Investments Outlook Investment Income STRONG ORDINARY INCOME FROM ASSETS UNDER OWN MGMT. in m. EUR Q1/2005 Variance Q1/2006 Ordinary investment income1) 140 +38.6% 194 Realized gains/losses 13 -31.4% 9 Impairments (2) +71.7% (4) Unrealize
Slide 12: Target Matrix
Highlights Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook TARGET MATRIX Historical data Business Group Key figures Target Q1/2006 2005 2004 2003 Property/Casualty R/I Gross-premium growth none 6.2% 12.0% (12.0%) (20.5%) Combined ratio - assuming a ≤ 100% 1) 98.5%9 112.8% 97.2%
Slide 13: European Embedded Value Highlights
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EUROPEAN EMBEDDED VALUE HIGHLIGHTS Æ First fully-fledged European Embedded Value disclosure Æ Solid development to EUR 1.3 bn. after tax (+8.2%) Æ Strong improvement of operating EV earnings after tax: EUR 112.5 m. (+18.2%) Æ Very
Slide 14: EEV: Positive development in 2005
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV POSITIVE DEVELOPMENT OF EEV IN 2005 8.2% increase 2004 Variance 2005 in m. EUR Free surplus 435.6 +35.3% 589.4 Required capital 406.1 +7.1% 434.8 Cost of capital (76.4) +44.4% (110.3) Shareholders' net worth 765.3 +19.4% 913.9
Slide 15: EEV - Analysis of change
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV - Analysis of change SHOWS STRONG EEV GROWTH IN 2005 1) Committed to further growth in 2006 20042) 2005 in m. EUR EV - 1,272.6 Implementation of EEV principles3) - (59.1) EV Beginning of year 1,166.2 - EEV Beginning of year -
Slide 16: EEV - Operating EV earnings 2005
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV - Operating EV earnings 2005 DRIVEN BY NEW BUSINESS* Very healthy Total in m. EUR Expected return on shareholders' net worth 22.5 Release of profit of existing business 59.9 Value of new business 84.7 Experience variances tota
Slide 17: EEV 2005: PVFP predominantly from life business
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV 2005 PVFP PREDOMINANTLY ARISING FROM LIFE BUSINESS* Financing treaties contribute major share of PVFP Domestic Foreign Total in m. EUR operations operations Life/annuities 564.4 323.3 887.7 Health/PA 45.2 34.0 79.2 Total 609.6
Slide 18: EEV: Value not recognised in IFRS equity
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV VALUE NOT RECOGNISED IN IFRS EQUITY* MORE THAN DOUBLED 1400 Not recognised in Not recognised in in m. EUR balance sheet: balance sheet: EUR 59.4 m. EUR 139.8 m. 1200 1000 466.1 555.7 800 1,313.1 1,213.4 600 707.2 400 598.3 200
Slide 19: EEV - Disclaimer
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV - Disclaimer FURTHER INFO AND LETTER OF OPINION (B&W DELOITTE) Hannover Rückversicherung AG is disclosing European Embedded Value (EEV) for the first time for the reporting year 2005. The results are summarised above. The deta
Slide 20: Outlook for 2006
Outlook for 2006 ® hannover re
Slide 21: Guidance for 2006 almost unchanged
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Outlook GUIDANCE FOR 2006 ALMOST UNCHANGED Gross written premium (calendar year) Æ Group + 0 - 5% • Property/Casualty R/I flat • Life/Health R/I + 12 - 15% • Financial R/I > 10% • Specialty Insurance + 0 – 5% Æ Group RoE at least
Slide 22: Outlook for 2006 (cont'd)
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Outlook OUTLOOK FOR 2006 (CONT'D) Æ K5 capital increased to USD 414 m. Swaps • Almost doubled in size vs. 2005 (C1: USD 225 m.), also in anticipation of difficult traditional retro markets Other biz groups' EBIT • Now including bo
Slide 23: Financial Calendar
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook FINANCIAL CALENDAR 7 February 2006 Conference Call on 2006 Renewals 23 March 2006 Press Conference on 2005 Annual Results 24 March 2006 Frankfurt/London Analysts' Meeting 12 May 2006 Interim Report 1/2006 12 May 2006 Annual Genera
Slide 24: Appendix
alent Appendix hannover re’
Slide 25: Our strategic business groups at a glance
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook OUR STRATEGIC BUSINESS GROUPS AT A GLANCE Property/Casualty Life/Health Financial Specialty Consolidation Total R/I R/I R/I Insurance in m. EUR Q1/2005 Q1/2006 Q1/2005 Q1/2006 Q1/2005 Q1/2006 Q1/2005 Q1/2006 Q1/2005 Q1/2006 Q1/200
Slide 26: Tactical Asset Allocation
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Tactical Asset Allocation STABLE TACTICAL ASSET ALLOCATION Strategic Tactical asset allocation Investment category allocation 2002 2003 2004 2005 31 Mar 06 Fixed income securities ≥ 50% 75% 81% 81% 82% 82% • Governmentals * 26% 25
Slide 27: Fixed Income Portfolio
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Fixed Income Portfolio HIGH QUALITY - MORE THAN 90% RATED "A" AND BETTER in m. EUR 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2002 2003 2004 2005 31 Mar 2006 AAA AA A BBB <BBB Modified duration as of 31 Mar 2006: 4.1
Slide 28: Scenarios: Focus on fixed income
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook Scenarios FOCUS ON FIXED INCOME Change in fair value Portfolio Scenario in m. EUR Equities* Prices -10% -140 Equities* Prices -20% -280 Equities* Prices -30% -419 Fixed income securities Yield increase +50 bp -358 Fixed income sec
Slide 29: EEV: Some highlights
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV SOME HIGHLIGHTS* After Before consolidation consolidation Domestic Foreign Total Total in m. EUR & as percentage of EEV 2004 operations operations EEV 2004 1,045.4 548.5 1,539.9 1,213.4 100.0% 100.0% 100.0% 100.0% Operating EE
Slide 30: EEV - Value of new business
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV - Value of new business VERY GRATIFYING VALUE OF NEW BUSINESS* A sign of sustainable value creation Domestic Foreign Total in m. EUR operations operations Profit/loss on new business during year (107.9) 0.5 (107.4) PVNB basic
Slide 31: EEV - Margins
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV - Margins NEW BUSINESS MARGINS AS GOOD AS PLANNED1) Some further expansion possible Domestic Foreign Total in m. EUR operations operations Value of new business (basic) 36.2 48.5 84.7 New business premium in 2005 (NBP) 594.4 2
Slide 32: Sensitivities of value of new business
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV SENSITIVITIES OF VALUE OF NEW BUSINESS1) After Before minorities minorites Domestic Foreign Total Total in m. EUR operations operations Value of new business (basic) 36.2 48.5 84.7 78.2 Sensitivities to economic assumptions VN
Slide 33: Sensitivities of the European Embedded Value
Highlights P/C R/I L/H R/I Fin R/I Specialty Ins. Investments Outlook EEV SENSITIVITIES OF THE EUROPEAN EMBEDDED VALUE1) After Before consolidation/minorities consolidation/ minorites Domestic Foreign Total Total in m. EUR operations operations EEV (basic) 1,189.4 691.5 1,880.9 1,117.2 Sensitivities