Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — Non-Deal Roadshow (July 2004)
21 slides from Hannover Rueck's roadshow presentation, Jul 2, 2004
Slide 1: Management of Investments for Hannover Re in a 2004 Market Environment
0X Management of Investments for Hannover Re in a 2004 Market Environment London, 2 July 2004 Rainer Decker, Managing Director
Slide 2: Overview
1 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Overview § Ampega & Talanx § I. Dynamic Financial Analysis Asset Liability Management § II. Strategic Research § III. Risk Controlling and Adjustment § Market Environment 2004 § Investment Strategy for Hannover
Slide 3: Who is Ampega?
2 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Who is Ampega ? § Ampega is the competence centre for asset management and related services within the Talanx Group § € 25.5 bn. assets under management, of which € 14.6 bn. for the Hannover Re Group § 142 high
Slide 4: Value Chain of Asset Management at Ampega
3 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Value Chain of Asset Management at Ampega Asset Allocation Investment Management Operations § ALM / DFA § Asset Allocation § Accounting – Fund Accounting § Capital Markets Research § Risk Management – Investmen
Slide 5: Hannover Re's Investment Philosophy
4 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Hannover Re's Investment Philosophy Capital maintenance and total return have top priority Optimisation of yields and risk targets Systematical implementation of by means of long-term DFA analysis investment pr
Slide 6: Ampega's Core Business for Hannover Re
5 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Ampega's Core Business for Hannover Re I. DFA and ALM to support Strategic Asset Allocation - Long-term average optimal weighting and structuring of asset classes in relation to balance sheet requirements / lia
Slide 7: Available Asset Class Spectrum
6 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Available Asset Class Spectrum Out-performance expectation Chance / Risk Governments + AAA-Bonds + 0 – 50 bps Low risk Volatility Corporates + Other investment grade + 70 - 100 bps Intensive research and superv
Slide 8: Basic Parameters
7 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Basic Parameters § Consider local balance sheet principles and financial authority regulations § Observe the guidelines of Hannover Re, its subsidiaries and branches § Comply with currency matching requirements
Slide 9: Asset Allocation
8 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Asset Allocation Long-term optimal asset allocation structure Governments + AAA-Bonds ~ 50 % Corporates + Other investment grade ~ 25 % Equities ~ 10 % Alternative assets 7.5 % Cash + Short term investments 7.5
Slide 10: Margin of Fluctuation for Asset Weighting
9 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Margin of Fluctuation for Asset Weighting Actual Framework Hannover Re 60 % Governments 50 10 % + AAA-Bonds 40 % 35 % Corporates 50 25 % % + Other investment grade 15 % 15 % Equities 10 25 % 5% 10 % Alternative
Slide 11: Currency Matching
10 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Currency Matching Govt / AAA Corporates Equities Alternatives Cash EUR € € Free shifting € possible € € Total EUR USD $ $ $ $ $ Total USD No shifts GBP £ £ £ £ £ Total GBP ˜ 20 other Total other currencies xy
Slide 12: Efficient Frontier(s)
11 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Efficient Frontier(s) Example time horizon: 10 years, risk measure: 1% CVaR Dur 10 Return 0% EQ 5% EQ Dur 6 8% EQ 10% EQ 15% EQ Dur 0 20% EQ 30% EQ Risk Duration varies from 0 (in each case lowest point) to 15
Slide 13: Efficient Frontier
12 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Efficient Frontier Long-term optimum based on… § Long-term expected balance sheet structure § Solvency requirements § Existing and available equity § Liquidity needs § Risk capacity § Long-term average perform
Slide 14: Efficient Frontier
13 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Efficient Frontier Frontier shifts possible by… § Structural balance sheet changes § Capital market changes § Exogenous effects è THE efficient frontier for a corporation does not exist è ‘Multi’ efficient fro
Slide 15: Investment Strategy Alternative Assets
14 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Investment Strategy Alternative Investments – Hannover Re's portfolio Alternative Assets Leveraged Property Private CDO Equity Hedge Funds High Yield Mortgage Portfolios Equity Tranches Key Factors: - Interest
Slide 16: Risk Controlling and Adjustment
15 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Risk Controlling and Adjustment Conclusion I. DFA – ALM determine long-term asset class weighting and investment parameters II. Strategic Research optimises the total return by opportunistic investing within t
Slide 17: Fixed Income
16 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Fixed Income Corporate spread development over 10 years* US 1996 1997 1998 1999 2000 2001 2002 2003 2004 AAA 35 40 63 77 100 71 101 60 60 AA 43 49 76 83 129 86 82 47 52 A 58 66 103 101 184 142 131 68 73 BBB 85
Slide 18: Financial Market Forecast
17 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Financial Market Forecast 31-Dec-2003 17-Jun-2004 Comments 31-Dec-2004 S&P 500 - Prognosis short-term negative momentum; long term investments 1.020 S&P 500 1112 1131 still should be avoided. Euro Stoxx 50 - P
Slide 19: Hannover Re - Decisions in 2004
18 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Hannover Re - Decisions in 2004 § Bonds – Reduction of duration from a more neutral 3.7 (31.12.2003) to a relatively short 3.4 (31.03.2004) è saved market values ˜ EUR 100 Mio. – Realisation of gains in credit
Slide 20: Hannover Re - Further investment strategy in 2004
19 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Hannover Re - Further investment strategy in 2004 § Bonds – Staying cautious, limited tactical trading è Target: satisfactory positive performance for the bond portfolio coupon ± market value changes + ‘tactic
Slide 21: Actual Framework Hannover Re
20 Ampega & Talanx DFA / ALM Strategic Research Risk Controlling Market 2004 Strategy 2004 Actual Framework Hannover Re Margin of fluctuation for asset weighting 60 % Governments = forecast mid-2004 ˜ 50 % 50 % + AAA-Bonds 40 % 35 % Corporates = forecast mid-2004 < 30 % 25 % + Other investment grade