Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Re — Investor Presentation (April 2003)
57 slides from Hannover Rueck's investor presentation, Apr 15, 2003
Slide 1: Welcome to Hannover Re's Analysts' Meeting
Welcome to Hannover Re‘s Analysts‘ Meeting London, April 15, 2003 hannover re ®
Slide 2: Highlights 2002
HIGHLIGHTS 2002 à HR Group: Record operating profit Highlights Key figures à Property/Casualty R/I: Increase of premiums and net income Diversification Admin.-expense ratio due to consistent cycle management ROE à Life/Health R/I: Net income and VIF increased EPS Self-financing significantly Share p
Slide 3: Key Figures
KEY FIGURES 2002 2001 in m. € 1-3Q 4Q Total Change Total Gross written premiums 9,128 3,335 12,463 +8.3% 11,507 Highlights Key figures Net premiums earned 5,333 2,356 7,688 +18.4% 6,496 Diversification Net underwriting result (95) (216) (311) +64.6% (878) Admin.-expense ratio ROE Net investment inco
Slide 4: Our Strategic Business Groups
OUR STRATEGIC BUSINESS GROUPS: We are still the world's best diversified reinsurer 2002 2001 Highlights Program Key figures Program Business Property/ Diversification Business 21% Casualty R/I 22% 43% Admin.-expense ratio ROE EPS Self-financing Property/ Share price Casualty R/I 48% Strat. Biz Group
Slide 5: Geographic Diversification
GEOGRAPHIC DIVERSIFICATION: Almost a reflection of the world R/I market 2002 2001 Highlights Asia Latin Asia Latin Key figures Africa 3% America Germany Africa 2% America Germany Diversification 2% 1% 2% 1% 22% 22% Admin.-expense ratio Australia 2% Australia 3% ROE EPS Self-financing North Share pri
Slide 6: Administrative-Expense Ratios
ADMINISTRATIVE-EXPENSE RATIOS*: Hannover Re's are lowest 3.0% 3.7% 3,0 % 3.0% Highlights 2.7% Key figures Diversification 2.6% 2.6% Admin.-expense ratio 2,5 % ROE EPS Self-financing 2.3% 2,3 % 2.2% Share price Strat. Biz Groups - Property/Casualty R/I 1.9% - Life/Health R/I - Financial R/I - Program
Slide 7: Return on Equity
RETURN ON EQUITY: Return to previous strength 26.0% 18% 17.1% Highlights 16.0% 15.7% 15.1% Key figures Diversification 13.5% 13.5% 13.0% 13.0% 12.6% 12.3% Admin.-expense ratio ROE EPS Self-financing 9% Share price Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I - Financial R/I - Program
Slide 8: Earnings per Share
EARNINGS PER SHARE*: The old picture again 4.13 in € 3 Highlights 2.75 2.61 Key figures 2.35 2.37 2.523) Diversification 2.29 2.14 Admin.-expense ratio 2 1.94 ROE EPS Self-financing Share price 1.15 Strat. Biz Groups 1.04 1.01 - Property/Casualty R/I 1 0.89 0.92 0.81 - Life/Health R/I 0.63 0.57 - Fi
Slide 9: Self-Financing
SELF-FINANCING: We generated equity 2002 2001 Highlights Key figures Diversification Cumulative comprehensive income Admin.-expense ratio - Unrealized appr./depr. of investments 43 31 ROE EPS - Foreign currency effects (100) (58) Self-financing Share price - Others (54) (16) Strat. Biz Groups - Prop
Slide 10: HNR Share Development 2002
HNR SHARE DEVELOPMENT 2002 140% Highlights 120% Key figures Diversification 100% Admin.-expense ratio ROE EPS 80% Self-financing Share price 60% Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I 40% - Financial R/I - Program Business Investment income 20% Target matrix .02 02 .04 2 .05 02
Slide 11: HNR Share Development 2002
HNR SHARE DEVELOPMENT 2002 130% Highlights 120% Key figures Diversification Admin.-expense ratio 110% ROE EPS 100% Self-financing Share price 90% Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I 80% - Financial R/I - Program Business 70% Investment income 02 .03 2 .06 2 .09 2 .02 2 .05 2
Slide 12: Our Strategic Business Units
OUR STRATEGIC BUSINESS UNITS: Four solid legs to stand on hannover re ® Highlights Key figures Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE EPS hannover re ® hannover life re ® hannover re hannover insurance Ad
Slide 13: Property/Casualty R/I
PROPERTY/CASUALTY R/I hannover re ® Highlights Key figures Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE EPS hannover re ® hannover life re ® hannover re hannover insurance Ad v a nc e d So l u ti o ns ® Self-fin
Slide 14: Property/Casualty R/I: Consistent Cycle Management
PROPERTY/CASUALTY R/I: Consistent cycle management in m. € 6,020 6,000 Highlights 4,938 5,000 Key figures Diversification Admin.-expense ratio 4,000 ROE 3,385 3,502 EPS 2,989 Self-financing 3,000 2,736 2,614 2,524 Share price Strat. Biz Groups 2,038 2,069 2,000 - Property/Casualty R/I - Life/Health
Slide 15: Geographic Development: North America
GEOGRAPHIC DEVELOPMENT: Taking advantage of current market conditions in North America 2002 2001 Africa Latin Australia Latin Highlights 2% America Australia 2% America 2% Africa 2% Germany Asia 1% Key figures Germany Asia 4% 5% 39% Diversification 32% 5% Admin.-expense ratio ROE EPS Self-financing
Slide 16: Results
RESULTS 2002 2001 in m. € 1-3Q 4Q Total Change Total Highlights Gross written premiums 4,783 1,237 6,020 +21.9% 4,938 Key figures Net premiums earned 2,867 635 3,502 +17.2% 2,989 Diversification Net underwriting result 139 (9) 131 +127.2% (481) Admin.-expense ratio ROE Net investment income 190 66 2
Slide 17: Catastrophe Losses 2002
CATASTROPHE LOSSES* 2002: Within multi-year average 1,954 in m. € 717 505 500 Highlights Key figures 423 Diversification 372 Admin.-expense ratio ROE 286 EPS Self-financing 244 250 209 Share price 182 Strat. Biz Groups - Property/Casualty R/I 136 142 - Life/Health R/I 90 88 85 67 66 74 - Financial R
Slide 18: Catastrophe Losses 2002 in Detail
CATASTROPHE LOSSES* 2002 in detail in m. € Economic Insured Hannover Re Group Catastrophe loss / Date Losses Gross Net Storm/Hailstorm South Germany 20. - 23.6. tba tba 10.7 10.7 Highlights Key figures 1) 1) Flood Europe 06. - 14.8. 17,763 2,880 143.2 69.7 Diversification Admin.-expense ratio 1) 1)
Slide 19: Life/Health R/I
LIFE/HEALTH R/I hannover re ® Highlights Key figures Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE EPS hannover re ® hannover life re ® hannover re hannover insurance Ad v a nc e d So l u ti o ns ® Self-financing
Slide 20: Growth: Particularly in Net Premiums
GROWTH: Particularly in net premiums in m. € 2,471 2,500 2,371 Highlights 2,220 Key figures 2,142 Diversification 2,091 Admin.-expense ratio 2,000 ROE EPS 1,740 Self-financing Share price 1,592 Strat. Biz Groups 1,485 - Property/Casualty R/I 1,500 1,403 - Life/Health R/I - Financial R/I - Program Bu
Slide 21: Geographic Development: Strongest Growth in Germany
GEOGRAPHIC DEVELOPMENT: Strongest growth in Germany 2002 2001 Highlights Africa Latin Latin Asia America 3% Asia America Africa Key figures Other Australia 2% 1% 4% 2% 1% European Australia Diversification 6% countries Other 6% Admin.-expense ratio 4% European ROE France countries EPS 3% 6% Self-fin
Slide 22: Remarkable Net Income Increase
REMARKABLE NET INCOME INCREASE 2002 2001 in m. € 1-3Q 4Q Total Change Total Gross written premiums 1,614 857 2,471 +4.2% 2,371 Highlights Key figures Net premiums earned 1,370 772 2,142 +23.1% 1,740 Diversification Net underwriting result (103) (82) (185) (27.2%) (146) Admin.-expense ratio ROE Net i
Slide 23: VIF Again Rises Significantly
VIF again rises significantly 2002 2001 2000 in m. € Hannover Life Re International 480 457 401 Highlights Hannover Life Re Germany (E+S Rück) 227 194 172 Key figures Diversification Hannover Life Re Ireland 179 124 42 Admin.-expense ratio Hannover Life Re America 170 130 120 ROE EPS Hannover Life R
Slide 24: VIF Based on Conservative Assumptions
VIF based on conservative assumptions Highlights 2002 2001 Key figures Diversification Admin.-expense ratio Currency Risk free rate* Risk discount rate Risk free rate* Risk discount rate ROE AUD 5.2% 8.8% 6.0% 9.8% EPS EUR 4.2% 7.8% 5.0% 8.5% Self-financing Share price GBP 4.4% 8.0% 5.1% 8.5% Strat.
Slide 25: VIF Sensitivity to Variation in Assumptions
VIF moderate sensivity to variation in assumptions Interest VIF Mortality/Morbidity Lapsation Rate 2002 + 10% -10% +10% -10% +100 bps Highlights Key figures Hannover Life Re International 480 (13) 12 (6) 6 (27) Diversification Admin.-expense ratio Hannover Life Re Germany 227 (3) 3 (3) 2 (11) ROE (E
Slide 26: Financial R/I
FINANCIAL R/I hannover re ® Highlights Key figures Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE EPS hannover re ® hannover life re ® hannover re hannover insurance Ad v a nc e d So l u ti o ns ® Self-financing S
Slide 27: Premium Development: Back to Normal
PREMIUM DEVELOPMENT: Back to normal in m. € 1,800 1,741 Highlights 1,600 Key figures 1,400 Diversification 1,280 1,211 1,243 Admin.-expense ratio 1,200 ROE EPS 1,000 870 Self-financing 801 Share price ,800 Strat. Biz Groups - Property/Casualty R/I ,600 509 463 - Life/Health R/I ,400 351 368 - Financ
Slide 28: Geographic Development: USA Dominance Reduced
GEOGRAPHIC DEVELOPMENT: USA dominance reduced 2002 2001 Highlights Other Asia Latin America European Africa Australia Key figures Africa 2% 2% countries 3% 1% Diversification 2% 3% Admin.-expense ratio Other Germany European ROE 3% countries EPS 19% Self-financing Share price Strat. Biz Groups - Pro
Slide 29: Results: Also Back to Normal
RESULTS: Also back to normal 2002 2001 in m. € 1-3Q 4Q Total Change Total Gross written premiums 733 510 1,243 (28.6%) 1.741 Highlights Key figures Net premiums earned 516 694 1,211 (5.4%) 1280 Diversification Net underwriting result (173) (135) (308) (5.9%) (291) Admin.-expense ratio Net investment
Slide 30: Program Business
PROGRAM BUSINESS hannover re ® Highlights Key figures Diversification Admin.-expense ratio Property/Casualty Reinsurance Life/Health Reinsurance Financial Reinsurance Program Business ROE EPS hannover re ® hannover life re ® hannover re hannover insurance Ad v a nc e d So l u ti o ns ® Self-financin
Slide 31: Program Business: Significant Increase in Retention
PROGRAM BUSINESS: Significant increase in retention in m. € 2,729 2,800 2,457 Highlights Key figures 2,100 1,974 Diversification Admin.-expense ratio ROE EPS 1,364 Self-financing 1,400 Share price Strat. Biz Groups 833 - Property/Casualty R/I - Life/Health R/I ,700 486 - Financial R/I 293 - Program
Slide 32: 'Export' of Program Business
'EXPORT' OF PROGRAM BUSINESS: Small plantlets 2002 2001 Highlights Africa Key figures Europe 1% Europe 8% 8% Diversification Admin.-expense ratio ROE EPS Self-financing Share price Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I - Financial R/I - Program Business Investment income USA US
Slide 33: Companies Active in Program Business
4 COMPANIES are active in program business* Highlights 2002 Key figures in m. € Clarendon ICH IH Compass Diversification Admin.-expense ratio ROE Gross written premiums 2,358 333 258 34 EPS Self-financing Net premiums earned 568 41 202 22 Share price Strat. Biz Groups Net underwriting result 64 (8)
Slide 34: Program Business Stamped by New Clarendon
PROGRAM BUSINESS* stamped by New Clarendon 2002 2001 in m. € 1-3Q 4Q Total Change Total Gross written premiums 1,999 730 2,729 +11.1% 2,457 Highlights Key figures Net premiums earned 579 254 833 +71.3% 486 Diversification Net underwriting result 41 11 52 +29.3% 40 Admin.-expense ratio ROE Net invest
Slide 35: All Strategic Business Units at a Glance
ALL STRATEGIC BUSINESS UNITS at a glance Property/Casualty Life/Health Financial Program Total R/I R/I R/I Business in m. € 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 Highlights Gross written premiums 6,020 4,938 2,471 2,371 1,243 1.741 2,729 2,457 12,463 11,507 Key figures Change in GWP 21.9
Slide 36: The Somewhat Different R/I
THE SOMEWHAT DIFFERENT R/I: What makes us different? à Decrease of quoted equity ratio from 15% (Q1/01) to < 6% Highlights à No reserve adjustments necessary: Key figures • (Almost) no A&E exposure, Diversification survival ratio 12/02: 16.9 years Admin.-expense ratio ROE • Traditionally high confid
Slide 37: Investment Income at a Glance
INVESTMENT INCOME at a glance Highlights 2002 Variance 2001 in m. € Key figures Ordinary investment income 1,120 +18.9% 942 Diversification Admin.-expense ratio • of which from funds withheld 493 +26.7% 389 ROE EPS Realized gains/losses 93 +66.2% 56 Self-financing Depreciation (215) (514.3%) (35) Sh
Slide 38: Equity Impairments Determine the Extraordinary Result
EQUITY IMPAIRMENTS determine the extraordinary result Impairments Highlights Q1-Q3/02 Q4/02 2002 Change 2001 Key figures in m. € Diversification Equities 89 75 164 993% 15 Admin.-expense ratio ROE Bonds 23 3 26 160% 10 EPS Self-financing Private Equity 8 9 17 325% 4 Share price Strat. Biz Groups Rea
Slide 39: Tactical Asset Allocation
TACTICAL ASSET ALLOCATION: Equity exposure all time low Asset class 12/2002 12/2001 12/2000 Highlights Key figures Bonds 89% 80% 73% Diversification Admin.-expense ratio • Government 35% 32% 32% ROE EPS • Corporates investment grade 22% 31% 29% Self-financing Share price Strat. Biz Groups • Corporat
Slide 40: Fixed Income Portfolio
FIXED INCOME PORTFOLIO: Continuous quality improvement in m. € 6,000 Highlights Key figures 5,000 Diversification Admin.-expense ratio 4,000 ROE EPS 3,000 Self-financing Share price Strat. Biz Groups 2,000 - Property/Casualty R/I - Life/Health R/I 1,000 - Financial R/I - Program Business ,0 Investme
Slide 41: Investments by Currency
INVESTMENTS BY CURRENCY reflect our claims reserves Others 2% 4% Highlights 2% 1% Key figures 1% Diversification Admin.-expense ratio ROE EPS EUR Self-financing 34% Share price 46% Strat. Biz Groups Main - Property/Casualty R/I currencies - Life/Health R/I 64% - Financial R/I - Program Business Inve
Slide 42: Stress Tests
STRESS TESTS* confirm our conservative asset allocation Highlights Change in market value Key figures Portfolio Scenario in m. € Diversification Admin.-expense ratio Equities Stock price (10%) (77) ROE EPS Equities Stock price (20%) (154) Self-financing Share price Strat. Biz Groups Equities Stock p
Slide 43: Target Matrix
TARGET MATRIX Target Historical Data Business Group Key figures new old 2002 2001 2000 Property/Casualty R/I Gross-premium growth N/A N/A 21.9% 45.9% 29.5% Highlights Combined ratio - assuming a = 100%* = 105%* 96.3% 116.6% 107.8% Key figures cat-loss ratio (natural & man-made) up to 5% up to 5% 5.2
Slide 44: Profitable Growth
PROFITABLE GROWTH 5-Year 1998 1999 2000 2001 2002 CAGR in m. € Highlights Key figures Gross written premiums 4,505 6,706 8,320 11,507 12,463 29% Diversification Admin.-expense ratio - of which P/C 2,734 2,614 3,385 4,938 6,020 22% ROE EPS Net earned premiums 3,549 4,180 5,210 6,496 7,688 21% Self-fi
Slide 45: Capital Management: A Continuous Process
CAPITAL MANAGEMENT: A continuous process à Capital growth in line with business expansion: Highlights Key figures • USD 400 m. hybrid capital (03/99) Diversification Admin.-expense ratio • EUR 350 m. hybrid capital (03/01) ROE EPS • ~ EUR 200 m. equity increase (11/01) Self-financing 1998 - 2002 Sha
Slide 46: Risk-Based Capital: Different Approaches
RISK-BASED CAPITAL (RBC): Different approaches1) RBC requirements (in % of NPE): Highlights Key figures Diversification HR S & P's 1) Admin.-expense ratio Business Group % EUR % EUR ROE EPS Property/Casualty ~ 40% ~ 1,400 ~ 55% ~ 1,925 Self-financing Share price Life/Health < 10% < 215 ~10% ~ 215 St
Slide 47: RBC to Be Made Up of Visible Capital
RBC to be made up of visible capital Highlights S & P's HR Key figures u/w RBC visible Diversification Admin.-expense ratio in m. € requirements1) capital2) ROE EPS 1999 1,900 1,928 Self-financing Share price 2000 2,000 2,492 Strat. Biz Groups - Property/Casualty R/I - Life/Health R/I 2001 2,500 2,6
Slide 48: CAR Requirement Supported by Invisible Capital
CAR REQUIREMENT to be supported by invisible ("soft") capital 1) 1999 2000 2001 2002 in m. € HR visible capital 1,928 2,492 2,665 2,838 Highlights Add: Invisible capital Key figures - Asset value adjustments Diversification (unrealised gains on investments, goodwill) Admin.-expense ratio - Non-life
Slide 49: HR Security Very Much in Demand
HR SECURITY very much in demand Highlights Key figures Diversification à S&P: AA- (“Very Strong“), Admin.-expense ratio ROE negative outlook EPS Self-financing Share price à A.M. Best: A+ (“Superior“), Strat. Biz Groups under review with negative implications - Property/Casualty R/I - Life/Health R/
Slide 50: Reserving Policy: Consistent and Conservative
RESERVING POLICY: Consistent and conservative approach à Loss and loss adjustment expense (LAE) reserves are Highlights Key figures calculated by: Diversification Admin.-expense ratio • using the claims advices by ceding companies ROE EPS Self-financing • adding additional case reserves (ACRs) treat
Slide 51: Reserving Policy: Keeps Us on the Safe Side
RESERVING POLICY: Keeps us on the safe side Highlights Key figures à (Almost) no A&E exposure, survival ratio 12/2002: 16.9 years Diversification Admin.-expense ratio à Traditionally high comfort level ROE EPS Self-financing à Reserving basis in soft market way above 100% C/R Share price Strat. Biz
Slide 52: Recoverables: Large Numbers - Limited Exposure
RECOVERABLES*: Large numbers - limited exposure P/C L/H FinRe Program Total Highlights in m. € Key figures Diversification Recoverables 3,074 113 632 2,403 6,222 Admin.-expense ratio ROE EPS Collateralized (incl. funds withheld, LOCs or deposits) 898 113 632 1,021 2,664 Self-financing Share price St
Slide 53: Recoverables of High Quality
RECOVERABLES of high qualitiy despite recent downgrades 2002 Highlights Key figures < BBB Diversification BBB 2% Not rated Admin.-expense ratio 8% 2% AAA ROE 6% EPS Self-financing Share price Strat. Biz Groups - Property/Casualty R/I A 32% - Life/Health R/I - Financial R/I - Program Business Investm
Slide 54: Outlook on 2003
Outlook on 2003 hannover re® PF C‘isN
Slide 55: Outlook on 2003
OUTLOOK ON 2003 à Gross premium € 12.7 bn. (+2%) Highlights • Forex effects Key figures • FinRe only business group with considerable growth Diversification à Property&Casualty R/I Admin.-expense ratio ROE • 2003 first year with full hard market impact EPS • Highly satisfying renewals in almost all
Slide 56: Outlook 2003 (Cont.)
OUTLOOK 2003 (Cont.) à Life&Health R/I • Increasing demand of individual life insurance and annuities Highlights • No change in premium volume Key figures Diversification • Considerable growth in net income expected Admin.-expense ratio à Financial R/I ROE EPS • Double-digit premium growth Self-fina
Slide 57: We Keep You Informed
WE KEEP YOU INFORMED à May 27, 2003: Highlights Key figures Conference Call on Q1/2003 Diversification Admin.-expense ratio à Summer 2003: ROE Analysts‘ seminar EPS • Part 1: Selected aspects from HR balance sheet Self-financing Share price • Part 2: Financial Reinsurance Strat. Biz Groups - Propert