Hannover Rueck SE

Earnings Release • Nov 10, 2016

Conference Call on Interim Report 3/2016

Hannover, 10 November 2016

Net income increases to EUR 790 m. Good basis to achieve full-year targets

Group

Gross written premium:  Net premium earned: 	EUR 12,454 m. (-3.8%) EUR 10,767 m. (-0.6%)	 	GWP in line with expectations (f/x adjusted -1.7%) NPE f/x-adj. growth of +1.7%
EBIT:  Group net income: 	EUR 1,189 m. EUR 790 m.	 contribution from L&H	EBIT and net income benefitting from improved P&C underwriting result and increased earnings
RoE:  Book value per share:  Shareholders' equity: 	12.5% EUR 72.81 EUR 8,781 m.	RoE remains well above our minimum target  Shareholders' equity up by 8.8%, despite dividend  payment in Q2/2016, driven by net income and increase in valuation reserves
Property & Casualty R/I	Life & Health R/I		Investments
EBIT: EUR 893 m. Improved C/R (95.0%) fuelled by 	EBIT: EBIT increased significantly by 	EUR 290 m.	NII: EUR 1,146 m. RoI from AuM: 3.0% RoI slightly above full-year target 
strong underwriting result Net major losses of EUR 393 m.  (6.6% of NPE) well below expected level, driven by benign Q3/2016 Premium development in line with  selective underwriting approach	+17.9% F/x-adj. GWP -2.0%; decreasing  growth in UK Longevity	premium due to discontinuation of large-volume treaties in Australia and China, partly offset by attractive	(2.9%) Ordinary investment income lower  mainly due to positive one-off effect in L&H in previous year AuM increased by 3.4% 

Favourable earnings contribution from both business groups Strong profit in Q3/2016

Group figures in m. EUR	Q3/2015	Q3/2016	Q1-3/2015	Q1-3/2016
Gross written premium	4,359	4,170	12,946	12,454
Net premium earned	3,811	3,600	10,830	10,767
Net underwriting result	(33)	47	(73)	44
- Incl. funds withheld	63	121	220	294
Net investment income	426	402	1,225	1,146
- From assets under own mgmt.	330	327	932	897
- From funds withheld	95	74	293	250
Other income and expenses	8	(5)	38	(2)
Operating profit/loss (EBIT)	401	444	1,190	1,189
Interest on hybrid capital	(18)	(18)	(66)	(54)
Net income before taxes	383	426	1,124	1,135
Taxes	(114)	(112)	(298)	(307)
Net income	269	314	826	828
- Non-controlling interests	15	10	40	38
Group net income	254	304	786	790
Retention	87.3%	89.4%	87.9%	89.6%
EBIT margin (EBIT/Net premium earned)	10.5%	12.3%	11.0%	11.0%
Tax ratio	29.7%	26.3%	26.5%	27.0%
Earnings per share (in EUR)	2.11	2.52	6.52	6.55

YTD

• GWP f/x-adjusted growth of -1.7%
• NPE f/x-adjusted growth of +1.7%
• Satisfactory EBIT margin of 11.0%
• Decrease in outstanding hybrid leads to lower leverage and savings in interest
• Tax ratio within normal range

Shareholders' equity up by 8.8% despite dividend payment Driven by strong earnings and increasing valuation reserves

Continued positive cash flow AuM +3.4%; increasing valuation reserves more than offset negative f/x effects

* Affected by a financial solutions treaty with approx. EUR 500 m. cash inflow in Q4/2015

Underwriting result increased by 9.6% Premium development in line with selective underwriting approach

Property & Casualty R/I in m. EUR	Q3/2015	Q3/2016	Q1-3/2015	Q1-3/2016	YTD
Gross written premium	2,347	2,493	7,319	7,121	GWP f/x adjusted -1.5%; growth mainly from  US and structured R/I, reduced volume from
Net premium earned	2,071	2,087	5,965	5,925	China motor business and specialty lines NPE f/x adjusted +0.9% 
Net underwriting result incl. funds withheld	87	116	268	294	Major losses of EUR 393 m. well below budget  of EUR 621 m. for Q1-3/2016
Combined ratio incl. interest on funds withheld	95.8%	94.4%	95.5%	95.0%	Positive reserve run-off as expected, no  extraordinary effects in Q3/2016
Net investment income from assets under own management	242	219	657	624	Satisfactory ordinary investment income 
Other income and expenses	25	(4)	12	(25)	Other income and expenses unremarkable,  Q1-3/2015 benefitted from positive f/x effects
Operating profit/loss (EBIT)	353	332	936	893	EBIT margin of 15.1% (Q1-3/2015: 15.7%)  well above 10%-target
Tax ratio	30.0%	25.8%	26.4%	27.4%
Group net income	233	237	651	613
Earnings per share (in EUR)	1.93	1.97	5.40	5.09

Major losses well below budget for Q1-3/2016 Remaining large loss budget (EUR 432 m.) provides comfortable cushion for Q4/16

2) 2006 adjusted to new segmentation

Benign large loss experience in Q1-3/2016 ... ... driven by very moderate loss situation in Q3/2016

Catastrophe losses* in m. EUR	Date	Gross	Net
Earthquake, Taiwan	6 Feb	21.2	19.9
Earthquake, Japan	14 Apr	25.9	24.5
Earthquake, Ecuador	16 - 17 Apr	56.4	55.5
Wildfires, Canada	30 Apr - 5 May	186.2	125.3
Storm "Elvira", Germany, France	27 - 28 May	19.8	12.7
Storm / Flood, China	1 Jun - 31 Jul	13.0	13.0
Storm / Hail, Netherlands, Germany	22 - 23 Jun	15.7	7.7
7 Natural catastrophes		338.1	258.6
3 Marine claims		96.7	50.2
3 Property claims		80.9	62.1
1 Credit claim		22.3	22.3
14 Major losses		538.1	393.2

* Natural catastrophes and other major losses in excess of EUR 10 m. gross

Diversified portfolio outperforms the MtCR Marine Combined Ratio affected by reserve releases in Q2/2016

Q1-3/2016: Combined Ratio vs. MtCR

NPE (in m. EUR)

Target	* North America	96.3%		1,099
markets	* Continental Europe	94.3%		942
	Marine	31.6%		146
Specialty	Aviation	86.4%		186
lines	Credit, surety and political risks	103.9%		437
worldwide	UK, Ireland, London market and direct	96.8%		303
	Facultative R/I	97.2%		651
	* Worldwide Treaty R/I	101.5%		1,259
Global R/I	Cat XL	68.6%		212
	Structured R/I and ILS	97.6%		691
Total		95.0%		5,925
		0% 20% 40% 60%	80% 100%	120% 140% 160%

MtCR = Maximum tolerable Combined Ratio Combined Ratio

* All lines of Property & Casualty reinsurance except those stated separately

Significantly increased earnings contribution from L&H Net income increased by 17.9%

Life and health R/I in m. EUR	Q3/2015	Q3/2016	Q1-3/2015	Q1-3/2016	YTD
Gross written premium	2,012	1,677	5,627	5,333	GWP f/x-adj. -2.0%, reduced premium due to  discontinued large-volume treaties in Australia &
Net premium earned	1,739	1,513	4,864	4,841	China partly offset by growth from UK Longevity NPE f/x-adjusted growth +2.8% 
Net underwriting result incl. funds withheld	(24)	5	(48)	1	Improved technical result in line with  expectation
Net investment income from assets under own management	87	105	266	263	Ordinary investment income in line with  expectation (Q1/2015 affected by positive
Other income and expenses	(17)	0	28	26	one-off of EUR 39 m.) Decreased impact from positive f/x effects 
Operating profit/loss (EBIT)	46	111	246	290	EBIT margins: 
EBIT margin	2.7%	7.4%	5.1%	6.0%	• Financial solutions: 19.7%, (target 2.0%) • Longevity: 2.4% (target 2.0%)
Tax ratio	28.4%	28.8%	26.9%	26.9%	• Mortality and Morbidity: 4.3% (target 6.0%)
Group net income	32	78	178	209
Earnings per share (in EUR)	0.27	0.65	1.47	1.73

Investment income slightly above expectations RoI target achieved

in m. EUR	Q3/2015	Q3/2016	Q1-3/2015	Q1-3/2016	RoI
Ordinary investment income*	318	285	921	855	2.8%
Realised gains/losses	58	74	124	154	0.5%
Impairments/appreciations & depreciations	(9)	(13)	(24)	(61)	-0.2%
Change in fair value of financial instruments (through P&L)	(8)	9	(9)	29	0.1%
Investment expenses	(28)	(27)	(80)	(80)	-0.3%
NII from assets under own mgmt.	330	327	932	897	3.0%
NII from funds withheld	95	74	293	250
Total net investment income	426	402	1,225	1,146
Unrealised gains/losses of investments			31 Dec 15	30 Sep 16

	31 Dec 15	30 Sep 16
On Balance-sheet	1,146	2,087
thereof Fixed income AFS	636	1,593
Off Balance-sheet	497	557
thereof Fixed income HTM, L&R	411	456
Total	1,643	2,644

* Incl. results from associated companies

YTD

• Decrease in ordinary income due to challenging yield environment and last year´s one-off effect from L&H business; decreased contribution from fixed-income securities partly compensated by higher income from Private Equity and Real Estate
• Realised gains up mainly due to Private Equity and last year´s oneoff burden from inflation swaps
• Increasing impairments driven by Listed and Private Equities as well as regular depreciation on real estate
• Valuation reserves with remarkable increase compared to year-end levels as yields and credit spreads once again decrease significantly

Ordinary income supported by asset classes with higher risk Diverging contribution to investment income from different asset classes

Asset allocation

Investment category	30 Sep 16
Fixed-income securities	86 %
- Governments	27 %
- Semi-governments	18 %
- Corporates	32 %
Investment grade	28 %
Non-investment grade	4 %
- Pfandbriefe, Covered Bonds, ABS	2) 9 %
Equities	4 %
- Listed Equity	2 %
- Private Equity	2 %
Real estate/real estate funds	4 %
Others	1 %
Short-term investments & cash	5 %
Total market values in bn. EUR	41.2

Economic view based on market values as at 30 September 2016

1) Before real estate-specific costs

2) Of which Pfandbriefe and Covered Bonds = 77.2%

Target Matrix 2016 Profit targets largely achieved

Business group	Key figures	Strategic targets for 2016	Q1-3/2016
Group	Return on investment1)	≥2.9%	3.0%
	Return on equity2)	≥10.0%	12.5%
	Earnings per share growth (y-o-y)	≥6.5%	0.5%
	Value creation per share3)	≥7.5%	n.a.
Property & Casualty R/I	Gross premium growth	3% - 5%4)	-1.5%
	Combined ratio	≤96%5)	95.0%
	EBIT margin6)	≥10%	15.1%
	xRoCA7)	≥2%	n.a.
Life & Health R/I	Gross premium growth	5% - 7%8)	-2.0%
	Value of New Business (VNB)9)	≥ EUR 220 m.	n.a.
	EBIT margin6) Financial solutions/Longevity	≥2%	9.4%
	EBIT margin6) Mortality/Morbidity	≥6%	4.3%
	xRoCA7)	≥3%	n.a.
1) Excl. effects from ModCo derivatives		2) After tax; target: 900 bps above 5-year average return of 10-year German government bonds

3) Growth in book value per share + paid dividend 4) On average throughout the R/I cycle; at unchanged f/x rates

5) Incl. expected net major losses of EUR 825 m. 6) EBIT/net premium earned

9) Based on a cost of capital of 6% (until 2014: 4.5%)

7) Excess return on allocated economic capital 8) Organic growth only; annual average growth (5 years), at unchanged f/x rates

Outlook

Guidance for 2016

Hannover Re Group

• Gross written premium1) stable to modest reduction
• Return on investment2) 3) ~2.9%
• Group net income2) at least EUR 950 m.
• Dividend payout ratio4) 35% 40% (If comfortable level of capitalisation remains unchanged, this ratio will increase through payment of another special dividend)

1) At unchanged f/x rates

2) Subject to no major distortions in capital markets and/or major losses in 2016 not exceeding the large loss budget of EUR 825 m.

3) Excluding effects from ModCo derivatives

4) Related to group net income according to IFRS

Overall profitability still above margin requirements Property & Casualty R/I: financial year 2016

	Lines of business	Volume1)	Profitability2)
Target	North America3)		+
markets	Continental Europe3)		+/-
	Marine		+
	Aviation		-
Specialty lines	Credit, surety and political risks		+/-
worldwide	UK, Ireland, London market and direct		+/-
	Facultative R/I		+/-
	Worldwide treaty3) R/I		+/-
Global R/I	Cat XL		-
	Structured R/I and ILS		+/-

1) In EUR

2) ++ = well above CoC; + = above CoC; +/- = CoC earned; - = below Cost of Capital (CoC)

3) All lines of business except those stated separately

Increasing normalised earnings expected Life & Health R/I: financial year 2016

	Reporting categories	Volume1)	Profitability2)
Financial solutions	Financial solutions		++
	Longevity		+/-
Risk solutions	Mortality		+/-
	Morbidity		+/-

1) In EUR 2) ++ = well above CoC; + = above CoC; +/- = CoC earned; - = below Cost of Capital (CoC)

Guidance for 2017

Hannover Re Group

• Gross written premium1) stable to modest reduction
• Return on investment2) 3) ~2.7%
• Group net income2) more than EUR 950 m.
• Dividend payout ratio4) 35% 40% (If comfortable level of capitalisation remains unchanged, this ratio will increase through payment of another special dividend)

2) Subject to no major distortions in capital markets and/or major losses in 2017 not exceeding the large loss budget of EUR 825 m.

3) Excluding effects from ModCo derivatives

4) Related to group net income according to IFRS

¹⁾ At unchanged f/x rates

Increasing earnings in the medium term Short term stable earnings and payment of extraordinary dividends

Appendix

Our strategic business groups at a glance Q1-3/2016 vs. Q1-3/2015

		Property & Casualty R/I			Life & Health R/I			Total
in m. EUR	Q1-3/2015	Q1-3/2016	Δ	Q1-3/2015	Q1-3/2016	Δ	Q1-3/2015	Q1-3/2016	Δ
Gross written premium	7,319	7,121	-2.7%	5,627	5,333	-5.2%	12,946	12,454	-3.8%
Net premium earned	5,965	5,925	-0.7%	4,864	4,841	-0.5%	10,830	10,767	-0.6%
Net underwriting result	251	276	+9.6%	(325)	(231)	-28.9%	(73)	44	-
Net underwriting result incl. funds withheld	268	294	+9.9%	(48)	1	-	220	294	+33.7%
Net investment income	673	642	-4.5%	543	495	-8.9%	1,225	1,146	-6.4%
From assets under own management	657	624	-5.0%	266	263	+38.8%	932	897	-3.8%
From funds withheld	16	19	+14.4%	277	231	-16.4%	293	250	-14.7%
Other income and expenses	12	(25)	-	28	26	-5.3%	38	(2)	-
Operating profit/loss (EBIT)	936	893	-4.6%	246	290	+17.9%	1,190	1,189	-0.1%
Interest on hybrid capital	(0)	0	-	0	0	-	(66)	(54)	-18.9%
Net income before taxes	936	893	-4.6%	246	290	+17.9%	1,124	1,135	+1.0%
Taxes	(247)	(244)	-1.3%	(66)	(78)	+18.0%	(298)	(307)	+3.0%
Net income	689	649	-5.8%	180	212	+17.9%	826	828	+0.3%
Non-controlling interest	38	35	-7.1%	2	3	+48.6%	40	38	-4.0%
Group net income	651	613	-5.8%	178	209	+17.5%	786	790	+0.5%
Retention	88.8%	88.3%		86.8%	91.5%		87.9%	89.6%
Combined ratio (incl. interest on funds withheld)	95.5%	95.0%		101.0%	100.0%		98.0%	97.3%
EBIT margin (EBIT / Net premium earned)	15.7%	15.1%		5.1%	6.0%		11.0%	11.0%
Tax ratio	26.4%	27.4%		26.9%	26.9%		26.5%	27.0%
Earnings per share (in EUR)	5.40	5.09		1.47	1.73		6.52	6.55

Our strategic business groups at a glance Q3 stand-alone

		Property & Casualty R/I			Life & Health R/I			Total
in m. EUR	Q3/2015	Q3/2016	Δ	Q3/2015	Q3/2016	Δ	Q3/2015	Q3/2016	Δ
Gross written premium	2,347	2,493	+6.2%	2,012	1,677	-16.6%	4,359	4,170	-4.3%
Net premium earned	2,071	2,087	+0.8%	1,739	1,513	-13.0%	3,811	3,600	-5.5%
Net underwriting result	80	109	+35.6%	(113)	(62)	-45.6%	(33)	47	-
Net underwriting result incl. funds withheld	87	116	+34.2%	(24)	5	-	63	121	+94.1%
Net investment income	248	226	-8.6%	176	173	-2.1%	426	402	-5.7%
From assets under own management	242	219	-9.2%	87	105	+21.1%	330	327	-1.0%
From funds withheld	6	7	+15.2%	89	67	-24.8%	95	74	-22.2%
Other income and expenses	25	(4)	-114.3%	(17)	0	-	8	(5)	-161.7%
Operating profit/loss (EBIT)	353	332	-5.8%	46	111	+140.6%	401	444	+10.7%
Interest on hybrid capital	0	(0)	-	(0)	(0)	-	(18)	(18)	-0.2%
Net income before taxes	353	332	-5.8%	46	111	+140.6%	383	426	+11.2%
Taxes	(106)	(86)	-19.1%	(13)	(32)	+144.3%	(114)	(112)	-1.4%
Net income	247	246	-0.2%	33	79	+139.2%	269	314	+16.6%
Non-controlling interest	14	9	-35.7%	1	1	-1.6%	15	10	-33.5%
Group net income	233	237	+2.0%	32	78	+143.5%	254	304	+19.6%
Retention	87.3%	88.5%		87.2%	90.8%		87.3%	89.4%
Combined ratio (incl. interest on funds withheld)	95.8%	94.4%		101.4%	99.6%		98.4%	96.6%
EBIT margin (EBIT / Net premium earned)	17.0%	15.9%		2.7%	7.4%		10.5%	12.3%
Tax ratio	30.0%	25.8%		28.4%	28.8%		29.7%	26.3%
Earnings per share (in EUR)	1.93	1.97		0.27	0.65		2.11	2.52

Largely unchanged asset allocation throughout third quarter Moderate increase in diversified listed equities in first quarter 2016

Asset allocation1)

Investment category	2012	2013	2014	2015	30.09.2016
Fixed-income securities	92%	90%	90%	87%	86%
- Governments	19%	19%	21%	26%	27%
- Semi-governments	23%	20%	19%	17%	18%
- Corporates	33%	36%	36%	34%	32%
Investment grade	30%	33%	33%	30%	28%
Non-investment grade3 )	3%	3%	3%	4%	4%
- Pfandbriefe, Covered Bonds, ABS	17%	15%	14%	10%	2) 9%
Equities	2%	2%	2%	3%	4%
- Listed Equity	<1%	<1%	<1 %	1%	2%
- Private Equity	2%	2%	2%	2%	2%
Real estate/real estate funds	2%	4%	4%	4%	4%
Others3 )	1%	1%	1%	1%	1%
Short-term investments & cash	3%	4%	4%	5%	5%
Total market values in bn. EUR	32.5	32.2	36.8	39.8	41.2

1) Economic view based on market values without outstanding commitments for Private Equity and Alternative Real Estate as well as fixed-income investments of EUR 983.2 m. (EUR 837.1 m.) as at 30 September 2016

2) Of which Pfandbriefe and Covered Bonds = 77.2%

3) Reallocation of High Yield Funds from "Others" to "Corporates – Non-investment grade"

Stress tests on assets under own management Unchanged focus on spreads while relevance of equities rises

Portfolio	Scenario	Change in market value in m. EUR	Change in OCI before tax in m. EUR
	-10%	-156	-156
Equity (listed and private equity)	-20%	-312	-312
	+50 bps	-855	-767
Fixed-income securities	+100 bps	-1,667	-1,495
Credit spreads	+50%	-752	-722

As at 30 September 2016

Fixed-income book well balanced Geographical allocation mainly in accordance with our business diversification

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	Governments	Semi governments	Corporates	Pfandbriefe, Covered bonds, ABS	Short-term investments, cash	Total
AAA	76.1%	65.2%	1.2%	67.2%	-	45.6%
A A	11.6%	28.2%	13.6%	15.1%	-	16.1%
A	6.6%	2.5%	37.3%	5.3%	-	16.8%
BBB	4.4%	1.2%	40.0%	8.7%	-	17.2%
<bbb< td="">	1.3%	2.9%	8.0%	3.7%	-	4.3%	1.3%	2.9%	8.0%	3.7%	-	4.3%
Total	100.0%	100.0%	100.0%	100.0%	-	100.0%
Germany	9.4%	47.1%	4.2%	26.9%	44.9%	18.6%
UK	5.5%	3.0%	8.2%	9.7%	4.1%	6.3%
France	2.4%	2.3%	7.1%	5.9%	1.1%	4.3%
GIIPS	1.3%	1.0%	5.0%	4.7%	0.0%	2.8%
Rest of Europe	5.1%	17.3%	16.4%	25.1%	3.5%	13.2%
USA	60.6%	5.1%	35.8%	4.3%	14.9%	33.2%
Australia	2.8%	8.4%	7.1%	11.9%	6.5%	6.5%
Asia	7.5%	4.4%	5.2%	0.0%	16.1%	5.8%
Rest of World	5.4%	11.4%	11.2%	11.5%	8.9%	9.3%
Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Total b/s values in m. EUR	11,165	7,048	12,544	3,624	2,044	36,425

IFRS figures as at 30 September 2016

Currency allocation matches liability profile of balance sheet Active asset liability management ensures durational match

Currency split of investments

• Modified duration of fixedincome mainly congruent with liabilities
• GBP's higher modified duration predominantly due to life business

Modified duration

2015	4.4
2014	4.6
2013	4.4
2012	4.5
2011	4.2

Modified duration as at 30 September 2016: 4.8

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-to-date, 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.

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Hannover Re is the registered service mark of Hannover Rück SE.