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Hannover Rueck SE
Investor Presentation • Feb 5, 2020
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Investor Presentation
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1 January 2020 Property & Casualty Treaty Renewals 5 February 2020
Jean-Jacques Henchoz, Chief Executive Officer Sven Althoff, Member of the Executive Board – Property & Casualty
Important note
- Unless otherwise stated, the renewals part of the presentation is based on Underwriting-Year (U/Y) figures This basis is only remotely comparable with Financial-Year (FY) figures, which are the basis of quarterly and annual accounts
- The situation shown in this presentation mainly reflects the developments in Hannover Re's portfolio, which may not be indicative of the market development
- Pricing includes changes in risk-adjusted exposure, claims inflation and interest rates, based on internal pricing models
- Portfolio developments are measured at constant foreign exchange rates as at 31 December 2019
- Structured reinsurance (R/I) and ILS, Facultative reinsurance and direct are not reported
Time lag between underwriting year and financial year
2020 financial year reflects pricing quality in the underwriting years 2018 - 2020
Premium distribution
Financial years
| 1 | Reinsurance markets | |
|---|---|---|
Our results
Our portfolio
Guidance 2020
Appendix
Market conditions improving but diverging renewal outcomes Key market highlights of 1 January 2020 renewals
- Improved global market conditions, but reinsurance capacity remains sufficient
- Traditional capacity grew despite exit of some market participants
- Alternative market tightened capacity due to trapped capital and uncertainties on final assessment of large losses
- Positive primary pricing momentum continues in many markets and business lines, benefiting proportional reinsurance
- US long-tail business firming, with substantial rate increases and limit reductions in commercial liability
- Global NatCat market remained stable to slightly improving in spite of 2019 large losses combined with loss creep from prior years
-
Reinsurance market showed resilience and ability to react to losses
- Our results
- Our portfolio
- Guidance 2020
- Preliminary figures
- Appendix
Satisfying renewal season outcome
1 January 2020 renewal: overall, increased premium at improved conditions
- Successful renewals supported by our superior financial strength, favourable market positioning and long-standing customer relationships
- We expanded our portfolio while maintaining our disciplined underwriting
- We continue to strictly adhere to our minimum margin requirements
- We declined business which was in excess of our risk appetite
- We saw rate increases and reduced commissions at stable to slightly improving terms & conditions more often than in previous years
- We acted on opportunities opened up by cut-backs or exits of other market players
- NatCat capital allocated remained stable at 16.6% of our Solvency II economic capital
- We increased our retrocessional coverage in line with the overall exposure growth at slightly higher risk-adjusted prices
-
Our low administrative expense ratio remains a key competitive advantage, supporting the continued growth of our P&C book of business
- Our results
- Our portfolio
- Guidance 2020
- Preliminary figures
- Appendix
| 1 | 2 | 3 Our portfolio | 4 | 5 | 6 |
67% of traditional treaty reinsurance (R/I) up for renewal at 1 January 2020 Equates to 47% of the total P&C inforce premium
Estimated premium income U/Y by reporting lines
33% of traditional treaty reinsurance comes up for renewal later … … with loss-affected areas showing higher shares
Estimated premium income U/Y by regions
| 1 | 2 | 3 Our portfolio | 4 | 5 | 6 |
We offered more capacity on the back of an overall positive price development in the insurance and reinsurance markets
Treaty premium increased significantly …
… supported by positive price change and active customer relationship mgmt.
| Traditional treaty reinsurance | |||||
|---|---|---|---|---|---|
| Reporting lines | Premium 1/1/2019 |
Premium 1/1/2020 |
Premium changes | Price changes | |
| North America1) | 1,267 | 1,514 | +19.5% | +3.4% | |
| Latin America, Iberian Peninsula1), agricultural business | 335 | 452 | +35.1% | +2.1% | |
| Germany, Switzerland, Austria, Italy1) | 1,165 | 1,234 | +5.9% | +0.1% | |
| UK, Ireland, London market1) | 1,172 | 1,431 | +22.1% | +7.2% | |
| Continental Europe, Africa1) | 624 | 691 | +10.6% | -0.9% | |
| Asia, Australia, Middle East1) | 1,326 | 1,439 | +8.6% | +0.7% | |
| Credit, surety and political risks | 598 | 649 | +8.6% | +0.2% | |
| Aviation and Marine | 312 | 354 | +13.7% | +5.9% | |
| Cat XL | 250 | 270 | +7.8% | +0.7% | |
| Total 1 January renewals | 7,049 | 8,035 | +14.0% | +2.3% |
Premium estimates in m. EUR 1) All lines of business except those stated separately (excl. Structured R/I and ILS, Facultative R/I and direct)
Positive price and premium development across both treaty types Split by proportional and non-proportional business
| Proportional | Non-proportional | |||||
|---|---|---|---|---|---|---|
| Reporting lines | Premium 1/1/2020 |
Premium changes |
Price changes | Premium 1/1/2020 |
Premium changes |
Price changes |
| North America1) | 733 | +28.5% | +2.2% | 781 | +12.1% | +4.4% |
| Latin America, Iberian Peninsula,1) agricultural business |
387 | +40.8% | +2.2% | 6 5 |
+8.7% | +1.6% |
| Germany, Switzerland, Austria, Italy1) | 986 | +4.6% | +0.3% | 248 | +11.7% | -0.7% |
| UK, Ireland, London market1) | 1,293 | +24.7% | +6.5% | 138 | +2.4% | +12.5% |
| Continental Europe, Africa1) | 477 | +11.4% | +0.1% | 213 | +8.9% | -3.1% |
| Asia, Australia, Middle East1) | 1,358 | +7.5% | +0.6% | 8 2 |
+28.7% | +3.1% |
| Credit, surety and political risks | 551 | +6.9% | -0.1% | 9 9 |
+18.8% | +1.9% |
| Aviation and Marine | 243 | +28.9% | +6.5% | 112 | -9.5% | +5.0% |
| Cat XL | - | - | - | 270 | +7.8% | +0.7% |
| Total 1 January renewals | 6,027 | +15.5% | +2.1% | 2,007 | +9.7% | +2.9% |
Premium estimates in m. EUR
1) All lines of business except those stated separately (excl. Structured R/I and ILS, Facultative R/I and direct)
Non-proportional (XL) prices increase for the third consecutive year … … reaching 2011 level
XL price changes at 1 January renewals
Strong growth in North American and agricultural business
- Firming primary rates both in property and casualty
- Reinsurance rates also improving
- We acted on selected opportunities to carefully expand our book
- Substantial new business in Canada at strong underlying insurance rate increases
Latin America, Iberian Peninsula, agricultural business
- Worldwide agricultural business
- Significant rate increases in selected markets (e.g. China)
- Increased shares led to double-digit premium growth especially from emerging markets
- We grew our book & market share mostly in Central America, Ecuador and Columbia
• Very satisfying renewal at overall stable pricing
0
363
727
1.090
1.453
- Maintained leading position in a mature market, in particular in motor business
- Expanded client base as a result of our customer-centric approach
- Significant price adjustments in lossaffected programmes in Italy
0
500
1.000
1.500
2.000
2.500
3.000
Particularly strong price and premium development in UK
0
251
502
753
• Strong relationships and organic growth in London market
- Increased pricing in both property and casualty reinsurance
- Improved rates in UK motor XL following the recent Ogden rate change
- Significantly increased our support for our Lloyd's platform
- New/cancelled/restructured Changes
Continental Europe, Africa
- Higher demand across all countries
- Overall high divergence with significant variations in pricing
- Price adjustments in loss-affected programmes particularly in Northern Europe
- Eastern Europe: selective underwriting in a well diversified portfolio
- Satisfying growth in line with our expectations
- New business opportunities due to the withdrawal of a competitor
- China: strong double-digit organic growth
- ASEAN: slightly hardening R/I market
0
505
1.011
1.516
Satisfactory renewal outcome in specialty lines
- Strengthened diversification by gaining a number of new clients
- Improved market conditions
New/cancelled/restructured Changes
Aviation and Marine
Aviation
0
600
- Significant insurance market hardening
- Commissions reduced to 2016 levels
- Substantial XL rate increases on the back of recent significant losses
Marine
- Competitive market with overcapacity
- Continued with technical U/W approach and benefiting from long-term relationships
- Strong position: one of the XL lead markets
0
before 1/1/2020
600
after 1/1/2020
- A number of loss-affected regions renew later in the year (e.g. Japan, Latin America and the Caribbean) with significant rate increases expected here
- Cross-selling led to increased shares where rates were adequate
- Overall renewal at a stable to slightly increased pricing depending on region and loss experience
0
600
Overall profitability above margin requirements in Property & Casualty Financial year 2020
| Reporting categories | Volume1) | Profitability2) | |
|---|---|---|---|
| North America3) | + | ||
| Latin America, Iberian Peninsula3) | + | ||
| Germany3) | + | ||
| UK, Ireland, London market3) | +/- | ||
| Continental Europe, Africa3) | +/- | ||
| Asia, Australia, Middle East3) | +/- | ||
| Structured reinsurance and ILS | + | ||
| Facultative reinsurance and direct | + | ||
| Credit, surety and political risks | +/- | ||
| Aviation and Marine | +/- | ||
| Cat XL | +/- |
1) In EUR, development in original currencies can be different
2) ++ = well above CoC; + = above CoC; +/- = CoC earned; - = below Cost of Capital (CoC)
3) All lines of business except those stated separately
Guidance for 2020 confirmed
Hannover Re Group
| • | Gross written premium1) | ~ 5% growth |
|---|---|---|
| • | Return on investment2) 3) | ~ 2.7% |
| • | Group net income2) | ~ EUR 1.2 bn. |
| • | ratio4) Ordinary dividend payout |
35% - 45% |
• Special dividend additional payout if profit target is reached and capitalisation remains comfortable
1) At unchanged f/x rates
2) Subject to no major distortions in capital markets and/or major losses in 2020 not exceeding the large loss budget of EUR 975 m.
3) Excluding effects from ModCo derivatives
4) Relative to group net income according to IFRS
Our portfolio
| 1 | 2 | 3 | 4 | 5 Preliminary figures | 6 |
Strong net income fully meets expectations Preliminary key figures for 2019
| Preliminary key figures for 2019 | |||
|---|---|---|---|
| Hannover Re Group | Previous guidance | Preliminary figures | |
| Gross written premium | ~ 10% growth1 ) |
EUR 22.6 bn. (~ +15%1 )) |
|
| Return on investment from AuM | at least 3.2% | 3.5% | |
| Group net income | > EUR 1.25 bn. | ~ EUR 1.28 bn. | |
| Combined ratio P&C | - | 98.2% |
1) At unchanged f/x rates
Our portfolio
| 1 | 2 | 3 | 4 | 5 | 6 Appendix |
Above-average growth in proportional business stemming from solid underlying primary markets and new business acquired
| 1 | 2 | 3 | 4 | 5 | 6 Appendix |
Pleasing growth (+9.7%) in non-proportional business largely driven by increased shares and written new business
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-todate, 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 Rück SE. All rights reserved. Hannover Re is the registered service mark of Hannover Rück SE.
Financial calendar and our Investor Relations contacts
11 March 2020
Press Conference and Analysts' Conference Call
6 May 2020
Annual General Meeting Quarterly Statement as at 31 March 2020
5 August 2020
Half-yearly report as at 30 June 2020
21 October 2020
Investor's Day 2020
4 November 2020 Quarterly Statement as at 30 September 2020
Karl Steinle General Manager
Phone: +49 511 5604 - 1500 [email protected]
Julia Hartmann Senior Investor Relations Manager
Phone: +49 511 5604 - 1529 [email protected]
Axel Bock Investor Relations Manager
Phone: +49 511 5604 - 1736 [email protected]
Hannover Rück SE | Karl-Wiechert-Allee 50 | 30625 Hannover, Germany | www.hannover-re.com