Talanx AG

Earnings Release • May 7, 2020

Q1 2020 Results 7 May 2020

Dr Immo Querner, CFO

Q1 2020: Group net income of EUR 223m impacted by EUR 313m corona-related claims

GWP grow by 6.4% (curr.-adj. +6.4%) – driven by Reinsurance and Industrial Lines

Corona impact

EBIT: EUR 313m claims (EUR 163m thereof overshooting the aggregate quarterly large loss budget), EUR 60m losses on investments, EUR 7m PVFP¹ impairment

Aggregate net income impact of EUR 133m – partially compensated by realised net gains and positive one-offs

Group net income of EUR 223m (-5.1%) – Group RoE at 9.0%, above minimum target

2020 Group net income outlook withdrawn on 21 April due to uncertain environment

Resilient Solvency II ratio (excl. transitional) within upper half of target range (150 - 200%)

Note: Approx. 90% of EUR 313m corona-related claims have been incurred but not reported as of 31 March 2020 1 PVFP: Present Value of Future Profits (German Life business)

Agenda

Q1 2020 results – Meaningful corona impact, net income down 5% 1

EURm	Q1 2020	Q1 2019	Delta
Gross written premiums (GWP)	12,467	11,716	+6%
Net premiums earned	8,354	7,842	+7%
Net underwriting result	(425)	(357)	(19%)
thereof P/C	1	143	(99%)
thereof Life	(427)	(500)	+15%
Net investment income	903	988	(9%)
Other income / expenses	81	(15)	n.m.
Operating result (EBIT)	559	616	(9%)
Financing interests	(51)	(45)	(12%)
Taxes on income	(116)	(160)	+28%
Net income before minorities	393	411	(4%)
Non-controlling interests	(170)	(176)	+4%
Net income after minorities	223	235	(5%)

Combined ratio	99.8%	96.8%	+3.0%pts
Tax ratio	22.7%	28.0%	(5.3%pts)
Return on equity	9.0%	10.3%	(1.3%pts)
Return on investment	2.7%	3.2%	(0.5%pts)

Comments

GWP growth driven by P/C Reinsurance (+EUR 592m) and Industrial Lines (+EUR 279m). No currency effect

Technical result impacted by corona-related claims of EUR 313m and EUR 7m PVFP impairment

Q1 2020 includes EUR 66m write-downs on equities and net EUR 20m unrealised losses on hedging instruments; partially offset by higher realised gains on bonds in P/C Reinsurance; resilience due to low-beta profile

Positive swings in currency translation (+EUR 55m) and deposit accounting (+EUR 25m)

Higher share of profits from lower-tax foreign operations

Corona impact partially offset by positive effects 1

EBIT (before taxes and minorities) in Q1 2020, in EURm

1 Realised net gains / losses on fixed income and real estate investments (net losses on equities and derivatives included in corona-related effects). Group excluding German Life business. Largest part realised in P/C Reinsurance. A portion of the realised gains would have occurred in a normalised quarter as well

2 EUR 7m deconsolidation gain in German Life

3 Includes EUR 7m deconsolidation gain in German Life (tax-free) and EUR 15m one-time tax effects in P/C Reinsurance and Corporate Operations

Total EBIT impact (before taxes and minorities) in Q1 2020, in EURm

	Industrial Lines	Retail Germany P&C	Retail Germany Life	Retail International	Rein surance	Corporate Operations	Talanx Group
Corona-related claims	(34)	(31)		(20)	(220)	(8)	(313)	Accounting impact of
Thereof absorbed by otherwise unused large loss budget	+26				+124		+150	Q1 claims: EUR 163m
Net investment income	(33)	(9)		(7)	(10)		(60)
Total EBIT impact	(41)	(40)	(7)1	(27)	(106)	(8)	(229)
Group net income impact	(39)	(28)	(5)1	(18)	(38)	(5)	(133)
Note: Numbers may not add up due to rounding. Group net income impact after taxes and minorities

1 PVFP (Present Value of Future Profits) impairment

Large losses: Substantial share of corona losses absorbed by otherwise unused 1 large loss budget in Industrial Lines and Reinsurance

Net losses Talanx Group in EURm, Q1 2020 (Q1 2019)	Industrial Lines	Retail Germany	Retail International	∑ Primary Insurance	+ = Reinsurance	Talanx Group
Bush Fires New South Wales, Australia [Jan.]	12.7			12.7	22.4	35.1
Hurricanes Ciara, Elsa, Sabine, Europe [Feb.]	4.5	8.5	0.6	13.7	17.6	31.3
Hailstorm Victoria, Australia [Jan.]	12.4			12.4	15.1	27.5
Tornado Nashville, USA [Mar.]	12.8			12.8		12.8
Flood East Coast, China [Feb.]	0.6			0.6	8.5	9.1
Sum NatCat	43.0 (40.5)	8.5 (7.0)	0.6 (3.4)	52.1 (50.9)	63.6 (40.3)	115.7 (91.2)
Fire/Property	6.0		0.1	6.1		6.1
Credit
Marine
Aviation
Casualty
Cyber
Sum other large losses	6.0 (27.2)	0.0 (0.0)	0.1 (0.0)	6.1 (27.2)	0.0 (18.6)	6.1 (45.8)	5.9%pts total
Corona losses	34.4 dd	31.0 dd	20.0 dd	92.9 dd	220.0 dd	312.9	impact on CR
Total large losses	83.4 (67.7)	39.5 (7.0)	20.7 (3.4) d	151.1 (78.1)	283.6 (59.0)	434.7 (137.0)
Pro-rata large loss budget	75.2	7.4	2.3	90.0	188.0	278.0
FY large loss budget	300.6	29.5	9.0	360.1	975.0	1,335.1
Impact on CR: materialised large losses	11.5%pts (10.7%pts)	11.4%pts (2.0%pts)	2.4%pts (0.4%pts)	7.7%pts (4.2%pts)	8.5%pts (2.0%pts)	8.2%pts (2.9%pts)	Corresponds to
Impact on CR: large loss budget	10.4%pts (10.9%pts)	2.1%pts (1.7%pts)	0.3%pts (0.2%pts)	4.6%pts (4.3%pts)	5.6%pts (6.0%pts)	5.2%pts (5.3%pts)	EUR 163m
Corona impact on CR above pro-rata budget	1.1%pts	8.9%pts	2.3%pts	3.4%pts	2.9%pts	3.1%pts	accounting impact of corona claims

Note: Definition "large loss": in excess of EUR 10m gross in either Primary Insurance or Reinsurance. EUR 7.5m large losses (net) in Corporate Operations in Q1 2020 Primary Insurance (Q1 2019: EUR 0.0m). No corona-related absorption of large loss budget in Retail Germany, Retail International and Corporate Operations.

Combined ratio still below 100%; deterioration mainly driven by corona 1

Note: This page highlights only core markets plus Italy for Retail International. Turkey Q1 2020 EBIT of EUR 3m (vs. EUR 2m in Q1 2019). Ergo Sigorta acquisition in Turkey fully included in Q1 2020, not included in Q1 2019 1 Q1 2020 combined ratio as if no corona losses above large loss budget had occurred in Industrial Lines and Reinsurance

EBIT and net income development by division 1

Agenda

Industrial Lines: Positive momentum continues despite corona 2

2 Retail Germany P/C: Results reflect corona impact

13 Q1 2020 Results, 7 May 2020

2 Retail International: Profitability improved despite technical headwind

2 Reinsurance: RoE still well above minimum target despite corona impact

Agenda

EURm, IFRS	Q1 2020	Q1 2019	Change	Comments
Ordinary investment income	862	870	(1%)
thereof current interest income	699	691	+1%	Ordinary investment income largely unchanged
thereof income from real estate	74	71	+5%
Extraordinary investment income	30	111	(73%)	Strong increase in realised net gains mainly related to portfolio
Realised net gains / losses on investments	197	84	135%	changes in Reinsurance; as usual, some realised gains to fund
Write-ups / write-downs on investments	(98)	(38)	(158%)	annual build-up in Zinszusatzreserve under German accounting
Unrealised net gains / losses on investments	(69)	65	n.m.	Write-downs mainly on equities due to the 20% price decrease trigger
Other investment expenses	(29)	(23)	(25%)	Significant unrealised losses on interest rate hedging instruments
Income from assets under own management	822	920	(11%)	in German Life
Interest income on funds withheld and contract deposits	81	68	+20%
Income from investment contracts	1	0	+184%
Total: Net investment income	903	988	(9%)
Assets under own management	122,678	116,574	+5%	Assets under own management unchanged versus 31 December 2019 (EUR 122.6bn)
Net return on investment1	2.7%	3.2%	(0.5%pts)
Current return on investment2	2.6%	2.8%	(0.2%pts)

1 Net return on investment: Income from assets under own management dividend by average assets under own management

2 Current return on investment: Income from investments under own management (excl. (un-)realized gains/losses, excl. impairments/appreciation) in relation to average investments under own management

Conservative investment portfolio with below-average risk exposure 3

Position in more risky asset classes Talanx in a peer comparison

Note: Peers comprise Allianz, Axa, Generali, Mapfre, Munich Re, Swiss Re, VIG, Zurich. Own calculations based on FY 2019 annual reports or results presentations. Fixed income ratings partly approximated. Iso risk lines represent average rating, standard formula, internal model, and portfolio management calculations

Changes in equity – OCI reduction reflects spread widening 3

Shareholders' equity

 Shareholders' equity declined to EUR 9,716m, which is EUR 433m, or 4%, below the level of Dec 2019
 Negative OCI reflects corona-induced capital market movements mainly on bond positions

in EUR	31 Dec	31 Mar	Change
	2019	2020	Abs.	%
Book value per share	40.15	38.43	1.72	-4.3
excl. goodwill	35.78	34.30	1.48	-4.1

Note: Figures restated on the basis of IAS 8

Unrealised gains of EUR 11.1bn – EUR 2.64 per share of off-balance sheet 3 reserves attributable to shareholders

Unrealised gains and losses (off- and on-balance sheet) as of 31 March 2020 (EURm)

Δ market value vs. book value

Note: Shareholder contribution estimated based on historical profit sharing pattern

Development of Solvency II capitalisation (excl. transitional)

Note: Solvency II ratio relates to HDI Group as the regulated entity. The chart does not contain the effect of transitional measure. Solvency II ratio including transitional measure for 31 Dec 2019: 246%

Updated sensitivities of Solvency II ratio as of 31 Dec 2019 3

Estimation of stress impact¹

1 Estimated solvency ratio changes in case of stress scenarios (stress applied on both Eligible Own Funds and capital requirement, approximation for loss absorbing capacity of deferred taxes) 2 Interest rate stresses based on non-parallel shifts of the interest rate curve based on EIOPA approach

3 The credit spreads are calculated as spreads over the swap curve (credit spread stresses include simultaneous stress on government bonds)

Overall moderate sensitivity to various stress scenarios – above target range for all sensitivities

Agenda

In view of the ongoing corona pandemic and the considerable uncertainty around how the economic and capital markets environment will develop, the Talanx Group withdrew the outlook for the financial year 2020 on 21 April 2020. The previous net income target of between "more than EUR 900 million" and EUR 950 million is subject to too many uncertainties to be maintained.

Agenda

Segments Investments / Capital Outlook 2020 Appendix 1 Group Highlights Q1 2020 2 3 4 5 Additional Information Risk Management

Strong EBIT increase of 20% – driven by excellent P/C results at Warta and HDI Italy

EBIT decrease due to lower investment result by HDI Brazil

5 Additional Information – Segment P/C Reinsurance

EURm, IFRS 2020 2019

Note: EBIT margin reflects a Talanx Group view

5 Additional Information – Segment Life/Health Reinsurance

EURm, IFRS 2020 2019

Note: EBIT margin reflects a Talanx Group view

5 Additional Information – Segments

	Industrial Lines				Retail Germany P/C		Retail Germany Life
EURm, IFRS	Q1 2020	Q1 2019	Change	Q1 2020	Q1 2019	Change	Q1 2020	Q1 2019	Change
P&L
Gross written premiums	2,575	2,296	+12%	774	782	(1%)	1,075	1,104	(3%)
Net premiums earned	726	634	+14%	348	355	(2%)	812	812	(0%)
Net underwriting result	(11)	(18)	+39%	(13)	4	n.m.	(270)	(363)	+25%
Net investment income	34	71	(52%)	14	28	(49%)	304	401	(24%)
Operating result (EBIT)	30	35	(15%)	(3)	30	n.m.	36	30	+16%
Net income after minorities	17	23	(24%)	-	-	-	-	-	-
Key ratios
Combined ratio non-life insurance and reinsurance	101.6%	102.9%	(1.3%pts)	103.8%	99.3%	+4.5%pts	-	-	-
Expense ratio	18.0%	19.8%	(1.9%pts)	36.7%	37.6%	(0.9%pts)	-	-	-
Loss ratio	83.6%	83.0%	+0.6%pts	67.1%	61.7%	+5.4%pts	-	-	-
Return on investment	1.5%	3.3%	(1.8%pts)	1.4%	2.8%	(1.4%pts)	2.4%	3.3%	(0.9%pts)

5 Additional Information – Segments

		Retail International		P/C Reinsurance		Life/Health Reinsurance			Group
EURm, IFRS	Q1 2020	Q1 2019	Change	Q1 2020	Q1 2019	Change	Q1 2020	Q1 2019	Change	Q1 2020	Q1 2019	Change
P&L				9
Gross written premiums	1,513	1,617	(6%)	4,986	4,394	+13%	1,989	1,979	+1%	12,467	11,716	+6%
Net premiums earned	1,341	1,413	(5%)	3,338	2,930	+14%	1,753	1,681	+4%	8,354	7,842	+7%
Net underwriting result	3	15	(79%)	(2)	112	n.m.	(129)	(108)	(20%)	(425)	(357)	(19%)
Net investment income	90	91	(2%)	298	243	+23%	174	162	+7%	903	988	(9%)
Operating result (EBIT)	75	73	+3%	305	340	(10%)	123	113	+8%	559	616	(9%)
Net income after minorities	43	42	+2%	-	-	-	-	-	-	223	235	(5%)
Key ratios
Combined ratio non-life insurance and reinsurance	96.6%	94.7%	1.9%pts	99.8%	95.7%	+4.0%pts	-	-	-	99.8%	96.8%	+3.0%pts
Expense ratio	29.3%	28.3%	+1.0%pts	29.9%	29.9%	±0.0%pts	-	-	-	28.6%	28.9%	(0.3%pts)
Loss ratio	67.2%	66.3%	+0.9%pts	70.1%	66.2%	+3.9%pts	-	-	-	71.4%	68.1%	+3.3%pts
Return on investment	3.0%	3.4%	(0.4%pts)	3.2%	2.8%	+0.4%pts	3.7%	4.1%	(0.5%pts)	2.7%	3.2%	(0.5%pts)

Additional Information – Breakdown of investment portfolio 5

Investment strategy unchanged – 95% of bonds are investment grade

Note: Percentages may not add up due to rounding. "Below BBB and n.r." includes non-rated bonds

Investments into issuers from countries with a rating below A- (in EURm), as of 31 March 2020

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Country	Rating	Sovereign	Semi Sovereign	Financial	Corporate	Covered	Other	Total
Italy	BBB-	2,895	-	689	497	419	-	4,500
Brazil	BB-	346	-	58	224	-	12	640
Mexico	BBB	184	1	133	304	-	-	622
Russia	BBB	314	13	36	200	-	-	563
Hungary	BBB	489	-	17	13	26	-	544
South Africa	BB+	98	-	3	78	-	1	180
Turkey	BB-	125	-	16	32	4	-	178
Portugal	BBB	35	-	25	41	1	-	102
Other BBB+		100	-	74	90	-	-	264
Other BBB		195	71	93	112	-	-	471
Other <bbb< th="">		254	49	95	171	-	-	568		254	49	95	171	-	-	568
Total		5,036	133	1,239	1,762	450	13	8633
in % of total investments under own management		4.1%	0.1%	1.0%	1.4%	0.4%	~0.0%	7.0%
in % of total Group assets		2.8%	0.1%	0.7%	1.0%	0.3%	~0.0%	4.9%

Dec 2019 Solvency II Ratio (net of transitional) improved to 211% (Dec 2018: 209%). Per 31 March 2020 within upper half of target range (150 – 200%)

84% of Eligible Own Funds in Solvency II View are covered by unrestricted Tier 1 capital. Tier 1 coverage of SCR stands at strong 180%

Decline in credit spread sensitivity reflects high quality investment portfolio, model approval for dynamic volatility adjuster in P/C and improved level of diversification

Note: In the entire presentation, calculations of Solvency II Capital Ratios are based on a 99.5% confidence level, including volatility adjustments without the effect of the applicable transitional – if not explicitly stated differently

Risk Management

TERM 2019 results – Comfortable capital position from all angles 5

• Basic Own Funds (including hybrids and surplus funds as well as non-controlling interests)

• Risk calculated with the full internal model including operational risk

• Eligible Own Funds, i.e. Basic Own Funds (including hybrids and surplus funds as well as non-controlling interests) including haircut effects

• For the Solvency II perspective, the HDI V.a.G. as ultimate parent is the addressee of the regulatory framework for the Group

Note: Group Solvency II Ratios including transitional (i.e. Regulatory View): Dec 2019: 246%; Dec 2018: 252%. Calculations of Solvency II Capital Ratios are based on a 99.5% confidence level, including volatility adjustments and excluding the effect of applicable transitional – if not explicitly stated differently. TERM: Talanx Enterprise Risk Model

Risk Management

TERM 2019 results – Development of Solvency II ratio (excl. transitional) 5

EOF

SCR

Risk Management

TERM 2019 results – Operating and economic effects in detail

Operating and economic effects (excl. transitionals)

Operating and economic effects	1,708
Taxes	(339)
Other	(52)
Other (including tax)	(391)
Market variances	242
Other, including holding costs	(68)
Debt costs	(191)
Operating variances in-force business	366
Expected in-force contribution	1,144
New business contribution	607
Operating impact	1,857
In EURm

and consolidation Note: structure according to CFO-Forum working group recommendation. Allocation of management expenses to in-force and new business according to the proportion of claims provisions. Stated amount of taxes without Primary Life (taxes of Primary Life already included in operating impact).

Comments

Operating impact

• Positive new business contribution from all divisions
• Expected in-force contribution includes mainly return on investments (real-world assumption) and unwinding of risk margin
• Operating variances consider positive run-off result of P/C business which compensates major loss experience in Reinsurance and Industrial lines in new business

Market variances

• Economic profit is driven by narrowing credit spreads, appreciation of USD against EUR and positive contribution of stocks and alternative investments
• Furthermore, the positive effects from falling risk-free interest rates on investments compensates the negative effect on life and pensions

Other (including tax)

"Other" considers revaluation of other assets and liabilities

Note: "Opening adjustments" reflects model changes. "Change in eligibility restrictions" mainly comprises haircut effects (e.g. minorities). "Capital management" includes dividend payments

5

Risk Management TERM 2019 results – SCR split into components (Economic View) 5

Note: Figures show risk categories for Talanx Group including non-controlling interests. Solvency capital requirement determined according to 99.5% security level for the Economic View, based on Basic Own Funds (BOF).

Significant diversification between risk categories – market risk at 43% (tail-VaR contribution) well below the 50% threshold

Risk Management TERM 2019 results – From IFRS equity to Eligible Own Funds 5

Economic view
	in EURm
Talanx IFRS equity	16,610
Goodwill and intangible assets	(1,998)
Revaluation effects	4,159
Surplus funds	1,741
Talanx excess of assets over liabilities	20,513
Subordinated liabilities (incl. minority interests)	3,672
Own shares	0
Forseeable dividends, distributions and charges	(799)
Talanx basic own funds before deductions	23,386
BOF 23,386 BOF CAR = = = 258% SCR 9,062 BOF

SCRBOF

Solvency II ratio HDI Group (excluding transitional) Talanx basic own funds before deductions 23,386 HDI V.a.G. (extension of Talanx Group to HDI Group) 2,194 in EURm HDI basic own funds 25,580 Non-available own-funds items (Haircut) (6,241) Other (62) Own funds for FCIIF, IORP and entities included 142 HDI Group total eligible own funds (EOF) 19,419 Ancillary own funds 0 Total available own funds (AOF) 19,419 Effects from tiering restrictions 0

SII Ratio =
$$
\frac{\text{EOF}}{\text{SCR}_{\text{EOF}}} = \frac{19,419}{9,224} = 211\%
$$

Haircut on minorities and HDI solo funds mark the key difference between both own funds concepts

FCIIF – Financial Credit Institutions and Investmend Firms; IORP – Insitutions for Occupational Retirement Provisions

Risk Management TERM 2019 results – Solvency II tiering 5

Capital tiering (net of transitional)

Comments

• The capital tiering reflects the composition of Own Funds under the Solvency II perspective
• The vast majority of Eligible Own Funds consists of unrestricted Tier 1. The overall Tier 1 coverage (unrestricted and restricted) reflects 180% of our capital
• Tier 2 mainly consists of subordinated bonds issued by Talanx AG, Talanx Finance and Hannover Re

Strong Solvency II Ratio is dominated by unrestricted Tier 1 capital

IR contacts 5

Contact us

Carsten Werle, CFA, Head of IR Phone: +49 511 3747-2231 E-mail: carsten.werle@talanx.com

Anna Färber, Event Management

E-mail: anna.faerber@talanx.com

Phone: +49 511 3747-2227

You can reach us also via video conference

Disclaimer

This presentation contains forward-looking statements which are based on certain assumptions, expectations and opinions of the management of Talanx AG (the "Company") or cited from third-party sources. These statements are, therefore, subject to certain known or unknown risks and uncertainties. A variety of factors, many of which are beyond the Company's control, affect the Company's business activities, business strategy, results, performance and achievements. Should one or more of these factors or risks or uncertainties materialize, actual results, performance or achievements of the Company may vary materially from those expressed or implied as being expected, anticipated, intended, planned, believed, sought, estimated or projected.in the relevant forward-looking statement.

The Company does not guarantee that the assumptions underlying such forward-looking statements are free from errors nor does the Company accept any responsibility for the actual occurrence of the forecasted developments. The Company neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.

Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by the Company as being accurate. Presentations of the company usually contain supplemental financial measures (e.g., return on investment, return on equity, gross/net combined ratios, solvency ratios) which the Company believes to be useful performance measures but which are not recognised as measures under International Financial Reporting Standards, as adopted by the European Union ("IFRS"). Therefore, such measures should be viewed as supplemental to, but not as substitute for, balance sheet, statement of income or cash flow statement data determined in accordance with IFRS. Since not all companies define such measures in the same way, the respective measures may not be comparable to similarly-titled measures used by other companies. This presentation is dated as of 7 May 2020. Neither the delivery of this presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. This material is being delivered in conjunction with an oral presentation by the Company and should not be taken out of context.

Guideline on Alternative Performance Measures - For further information on the calculation and definition of specific Alternative Performance Measures please refer to the Annual Report 2019 Chapter "Enterprise management", pp. 24 and onwards, the "Glossary and definition of key figures" on pp. 250 as well as our homepage https://www.talanx.com/investor-relations/ueberblick/midterm-targets.aspx?sc\_lang=en