Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — FY2020 Earnings Presentation
38 slides from Hannover Rueck's earnings presentation, Mar 11, 2021
Slide 1: Press Conference Annual Results 2020
Press Conference Annual Results 2020 Hannover, 11 March 2021
Slide 2: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 2 Press Conference
Slide 3: Favourable result in a year dominated by the Covid-19 pandemic
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | 8 | Favourable result in a year dominated by the Covid-19 pandemic Dividend proposal of EUR 4.50 per share GWP F/x-adj. +12.0% NPE F/x-adj. +10.6% EBIT Group net income 22,598 24,765 19,730 21,356 1,853 1,284 1,214 883 +9.6% +8.2% -34.5% -31.2% 2019 2020
Slide 4: 2020 dividend reflects continuing strong performance
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 2020 dividend reflects continuing strong performance Overall payout ratio in line with prior years Dividend per share in EUR 63% 60% 61% 52% 51% 52% 50% 43% 40% Payout ratio ordinary dividend: 44% 43% 42% 35 - 45% 40% 37% 38% 10.65 37% 36% 9.71 9.54 3
Slide 5: RoE of 8.2% is highly satisfactory against the backdrop of the Covid-19 impact
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | 8 | RoE of 8.2% is highly satisfactory against the backdrop of the Covid-19 impact Return on Equity: yearly Return on Equity: average 10,762 9,652 8,533 8,763 8,653 13.7% 14.0% 13.3% 13.1% 12.2% 11.7% 10.9% 11.1% 10.3% 9.9% 9.8% 9.4% 9.3% 9.0% 9.5% 8.2% 2
Slide 6: Hannover Re is one of the most profitable reinsurers
| 1 Group overview | 2 | 3 | 4 | 5 | 6 | 7 | 8 | Hannover Re is one of the most profitable reinsurers No. 1 position on 5-year average RoE - significantly above peer average 2016 2017 2018 2019 2020 2016 - 2020 Company RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank avg. RoE Rank Hannover Re 13.7% 1 10
Slide 7: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 7 Press Conference
Slide 8: Double-digit growth in an improving market environment
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | 8 | Double-digit growth in an improving market environment Underwriting result impacted by reserving for Covid-19 loss estimates Property & Casualty R/I in m. EUR Q4/2019 Q4/2020 2019 2020 YTD Gross written premium 3,128 3,396 14,781 16,7
Slide 9: Major losses including Covid-19 reserving exceed 2020 budget
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | 8 | Major losses including Covid-19 reserving exceed 2020 budget of EUR 975 m. by EUR 620 m. Natural and man-made catastrophe losses1) in m. EUR 2,127 1,790 1,722 1,730 1,595 1,497 1,127 981 956 863 846 850 662 662 724 714 578 627 559 573
Slide 10: Overall moderate major loss expenditure apart from Covid-19-related losses (1)
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | 8 | Overall moderate major loss expenditure apart from Covid-19-related losses (1) Catastrophe losses1) in m. EUR Date Gross Net Bushfire, Australia 1 - 31 Jan 27.9 26.1 Earthquake, Puerto Rico 6 - 7 Jan 18.6 15.0 Hail, Australia 15 - 21
Slide 11: Overall moderate major loss expenditure apart from Covid-19-related losses (2)
| 1 | 2 Property & Casualty reinsurance | 3 | 4 | 5 | 6 | 7 | 8 | Overall moderate major loss expenditure apart from Covid-19-related losses (2) Catastrophe losses1) in m. EUR Gross Net 17 Natural catastrophes 711.7 484.2 4 Property claims 163.3 160.6 4 Man-made losses 163.3 160.6 21 Major losses 87
Slide 12: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 12 Press Conference
Slide 13: Favourable underlying result impacted by Covid-19 losses
| 1 | 2 | 3 Life & Health reinsurance | 4 | 5 | 6 | 7 | 8 | Favourable underlying result impacted by Covid-19 losses Strong contribution from Financial Solutions Life & Health R/I in m. EUR Q4/2019 Q4/2020 2019 2020 YTD Gross written premium 2,076 2,074 7,816 8,021 • GWP f/x-adjusted +4.7% Net premi
Slide 14: Strong new business production in 2020, VNB significantly exceeds target
| 1 | 2 | 3 Life & Health reinsurance | 4 | 5 | 6 | 7 | 8 | Strong new business production in 2020, VNB significantly exceeds target Q4/2020 new and pipeline business1) New Pipeline business business Financial Solutions Mortality Financial Solutions Mortality Longevity Morbidity Longevity Morbidit
Slide 15: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 15 Press Conference
Slide 16: RoI exceeds target despite challenging market conditions
| 1 | 2 | 3 | 4 Investments | 5 | 6 | 7 | 8 | RoI exceeds target despite challenging market conditions Lower ordinary income compensated by realised gains from portfolio adjustments in m. EUR Q4/2019 Q4/2020 2019 2020 RoI YTD Ordinary investment income1) 356 347 1,407 1,331 2.7% • Lower ordinary inc
Slide 17: Ordinary return supported by alternative assets
| 1 | 2 | 3 | 4 Investments | 5 | 6 | 7 | 8 | Ordinary return supported by alternative assets Defensive credit orientation throughout the year; modest re-entry into listed equities Asset allocation1) Ordinary income split Investment category 2016 2017 2018 2019 2020 Short-term Fixed-income securitie
Slide 18: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 18 Press Conference
Slide 19: Capital adequacy ratio remains well above targets
| 1 | 2 | 3 | 4 | 5 Solvency II reporting as at 31 December 2020 | 6 | 7 | 8 | Capital adequacy ratio remains well above targets Increase in SCR driven by strong business growth in 2020 Development of the Solvency II ratio • Increase in eligible own funds despite Covid-19 losses due to positive earn
Slide 20: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 20 Press Conference
Slide 21: Target Matrix 2020
| 1 | 2 | 3 | 4 | 5 | 6 Target Matrix 2020 | 7 | 8 | Favourable business growth serves as sound foundation for positive outlook Target Matrix 2020 Business group Key figures Targets for 2020 Q1-4/2020 Group Return on investment1) ≥ 2.7% 3.0% Return on equity2) ≥ 9.0% 8.2% Earnings per share growth (
Slide 22: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 22 Press Conference
Slide 23: Profitability above margin requirements in Property & Casualty
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Outlook 2021 | 8 | Profitability above margin requirements in Property & Casualty Financial year 2021 Reporting categories Volume1) Profitability2) EMEA3) + Regional markets Americas3) + APAC3) +/- Structured Reinsurance and ILS ++ Credit, Surety and Political Risks +/- W
Slide 24: Profitability in Life & Health further impacted by Covid-19
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Outlook 2021 | 8 | Profitability in Life & Health further impacted by Covid-19 Financial year 2021 Reporting categories Volume1) Profitability2) ++ 3) Financial solutions Longevity + Mortality - Morbidity +/- 1) In EUR, development in original currencies can be different
Slide 25: Guidance for 2021
| 1 | 2 | 3 | 4 | 5 | 6 | 7 Outlook 2021 | 8 | Guidance for 2021 Hannover Re Group • Gross written premium1) ~ 5% growth • Return on investment2) 3) ~ 2.4% • Group net income2) EUR 1.15 - 1.25 bn. • Ordinary dividend pay-out ratio4) 35% - 45% • Special dividend additional pay-out if profit target is
Slide 26: Agenda
Agenda 1 Group overview 2 2 Property & Casualty reinsurance 7 3 Life & Health reinsurance 12 4 Investments 15 5 Solvency II reporting as at 31 December 2020 18 6 Target Matrix 2020 20 7 Outlook 2021 22 8 Appendix 26 26 Press Conference
Slide 27: Covid-19 impact is material but remains manageable
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Covid-19 impact is material but remains manageable 2020 Expected net P&C Covid-19 claims in m. EUR Expected net L&H Covid-19 claims in m. EUR Business interruption Morbidity 208 40 (mainly Australia) Other 293 EUR 950 m. EUR 261 m. ~65% IBNR ~33% IBNR Event
Slide 28: Efficient capital deployment supported by significant diversification
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Efficient capital deployment supported by significant diversification Increase in own funds and capital requirements in line with business growth Solvency Capital Requirements in m. EUR Property & Casualty 4,591 (4,432) Life & Health 3,145 (2,736) Market 4,
Slide 29: High-quality capital base with 87% Tier 1
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | High-quality capital base with 87% Tier 1 Unutilised Tier 2 provides additional flexibility Reconciliation of IFRS Shareholders’ equity vs. Solvency II own funds in m. EUR 2,614 1,386 14,558 1,210 13,434 587 653 1,815 12% 366 Unutilised Tier 2 11,839 548 4%
Slide 30: Our business groups at a glance 2020 vs. 2019
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Our business groups at a glance 2020 vs. 2019 Property & Casualty R/I Life & Health R/I Total in m. EUR 2019 2020 Δ 2019 2020 Δ 2019 2020 Δ Gross written premium 14,781 16,744 +13.3% 7,816 8,021 +2.6% 22,598 24,765 +9.6% Net premium earned 12,798 14,205 +11
Slide 31: Our business groups at a glance Q4/2020 vs. Q4/2019
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Our business groups at a glance Q4/2020 vs. Q4/2019 Property & Casualty R/I Life & Health R/I Total in m. EUR Q4/2019 Q4/2020 Δ Q4/2019 Q4/2020 Δ Q4/2019 Q4/2020 Δ Gross written premium 3,128 3,396 +8.6% 2,076 2,074 -0.1% 5,204 5,471 +5.1% Net premium earne
Slide 32: Well-balanced international portfolio growth
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Well-balanced international portfolio growth Gross written premium in m. EUR Africa 24,765 2.1% 22,598 6.7% Australia 4.3% 19,176 17,791 17.5% Latin America 17,069 16,354 13,963 14,362 15.5% Asia 13,774 12,096 3.9% 7.1% Other European countries 5.1% 6.8% 13
Slide 33: Property & Casualty reinsurance: diversified growth
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Property & Casualty reinsurance: diversified growth 5-year CAGR: +12.4% GWP split by reporting categories in m. EUR Gross written premium split by regions Agricultural Risks Latin 16,744 Africa America 2% 4% Australia 4% 4% 4% Aviation and Marine 14,781 5%
Slide 34: Life & Health reinsurance: portfolio structure largely unchanged
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Life & Health reinsurance: portfolio structure largely unchanged 5-year CAGR: +0.7% GWP split by reporting categories in m. EUR Gross written premium split by regions 7,816 8,021 Africa Germany Latin 3% 7,149 7,200 3% North 7,080 America Morbidity 30% 5% Am
Slide 35: Stress tests on assets under own management; focus on credit exposures
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Stress tests on assets under own management; focus on credit exposures Current credit markets almost back to pre-2020 mode Change in market Change in OCI before Portfolio Scenario value tax in m. EUR in m. EUR -10% -168 -168 Equity (listed and private equit
Slide 36: High-quality fixed-income book well balanced
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | High-quality fixed-income book well balanced Geographical allocation mainly in accordance with our broad business diversification Pfandbriefe, Short-term Semi- Governments Corporates Covered bonds, investments, Total governments ABS cash AAA 73% 60% 1% 60%
Slide 37: Currency allocation matches modelled liability profile
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | Currency allocation matches modelled liability profile Strict duration-neutral strategy continued Currency split of investments Others • Modified duration of fixed-income mainly congruent with 10% CAD liabilities and currencies 3% EUR 31% • GBP’s higher mod
Slide 38: Disclaimer
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 Appendix | 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 in