Results Presentation Q May Herbert K. Haas, CEO Dr. Immo Querner, CFO

Transcription

1 Results Presentation Q May 2014 Herbert K. Haas, CEO Dr. Immo Querner, CFO

2 Agenda I II III IV V Group Highlights Segments Investments / Capital Essentials Risk Management Reports 2013 Outlook Appendix Mid-term Target Matrix Q Additional Information Risk Management Reports

3 I Q On track to reach FY2014 targets Talanx had a good start into FY2014. When adjusting for the SwissLife effect of 22m (after tax) in Q1 2013, the Net Income of 192m even exceeds last year s level GWP marginally lower (-0.5% vs. Q1 2013) mainly due to currency effects (+1.6% currency-adj.), the decline in traditional German life business and more selective Reinsurance underwriting Moderate large loss burden does not boost Q results - treatment of unused large loss budget in Primary Insurance in correspondence with established Reinsurance practice End of March 2014, shareholders equity stood at 7,538m (FY2013: 7,214m), or per share. Solvency I ratio at 220% (FY2013: 210%) Talanx confirms its FY2014 target to achieve Net Income of at least 700m 3

4 I Q results Key financials Summary of Q m, IFRS Q Q Change Gross written premium 8,414 8,458 (1) % Net premium earned 5,599 5,715 (2) % Net underwriting result (415) (249) n/m Net investment income 1, % Operating result (EBIT) (4) % Net income after minorities (7) % Key ratios Q Q Change Combined ratio non-life insurance and reinsurance 95.8% 95.0% 0.8%pts Return on investment 4.3% 3.7% 0.6%pts Balance sheet Q FY 2013 Change Investments under own management 88,069 86, % Goodwill 1,103 1,105 (0) % Total assets 136, , % Technical provisions 95,127 91, % Total shareholders' equity 11,741 11, % Shareholders' equity 7,538 7, % 2013 numbers in this presentation adjusted on the basis of IAS8 Comments Slight decline in gross written premium, mainly due to currency effects (currency-adj. GWP: +1.6%), the decline in traditional German life business and more selective Reinsurance underwriting Combined ratio rises by only 0.8%pts to 95.8%, predominantly due to a lower run-off result in Retail Germany Realisation of capital gains, in Retail Germany to finance Zinszusatzreserve (ZZR). ~40% of the anticipated ZZR charge for FY2014 ( ~272m in German local GAAP, HGB) already digested in Q Q net income ( 192m) even exceeds the strong Q level, when adjusting for the base effect of 22m from last year s partial disposal of Talanx s SwissLife stake Shareholders equity up to 7,538m, or per share. Solvency I ratio up to 220% (FY2013: 210%) Good results, even when compared to the strong Q figures 4

5 I Large losses 1 in Q ( m) Primary insurance Reinsurance Talanx Group Total Nat Cat Aviation Property Total man-made large losses Total large losses Large loss burden of 41m in Q higher than in Q ( 13m), but still at a moderate level Net burden of manmade large losses of 10m in Primary and 31m in Reinsurance No large losses from Nat Cat Impact on Combined Ratio (incurred) 0.8%pts 1.9%pts 1.4%pts Total large losses (Q1 2013) Treatment of unused large loss budget in Primary Insurance in correspondence with established Reinsurance practice 5 1 definition large loss : in excess of 10m gross

6 I Combined ratios Development of net combined ratio 1 Combined ratio by segment/selected carrier Q Q FY Industrial Lines 98.6% 99.4% 101.3% Retail Germany 100.2% 95.0% 102.4% Retail International 95.1% 94.1% 95.8% HDI Seguros S.A., Brazil 97.5% 95.7% 96.7% HDI Seguros S.A., Mexico % 80.1% 90.6% TUiR Warta S.A., Poland % 93.7% 94.3% TU Europa S.A., Poland % 68.8% 87.0% Q1 Q2 Q3 Q4 Q Expense ratio Loss ratio HDI Sigorta A.Ş., Turkey 104.4% 106.5% 105.9% HDI Assicurazioni S.p.A., Italy 94.5% 99.4% 98.8% Non-Life Reinsurance 94.5% 94.0% 94.9% 1 incl. net interest income on funds withheld and contract deposits 2 Warta acquisition closed on 1 July 2012; numbers incl. HDI Asekuracia TU S.A. (legal merger on 28 Dec 2012) 3 TU Europa acquisition closed on 1 June numbers incl. Metropolitana Q combined ratios remain well below 100% in most lines and units 6

7 I GWP trend GWP development ( bn) Seasonal pattern remains intact In Q1 2014, GWP virtually flat vs. Q (0.2) (0.2) (0.2) (0.2) (0.2) Q1 Q2 Q3 Q4 Q1 Negative currency effects (GWP currencyadj:+1.6%), the decline in traditional German life business and a more selective Reinsurance underwriting curb GWP growth Industrial Lines Non-Life Reinsurance Retail Germany Life/Health Reinsurance Retail International Corporate Functions and Consolidation Q top-line virtually flat vs. previous year 7

8 Agenda I II III IV V Group Highlights Segments Investments / Capital Essentials Risk Management Reports 2013 Outlook Appendix Mid-term Target Matrix Q Additional Information Risk Management Reports

9 II Segments Industrial Lines P&L for Industrial Lines Comments m, IFRS Q Q Change Gross written premium 1,763 1,735 +2% Net premium earned (7%) Net underwriting result % Net investment income % Operating result (EBIT) % Group net income % Return on investment (annualised) Combined ratio* 99% 103% 80% FY2013: 101% 83% 98% 4.2% 3.2% +1.0%pts 116% 85% 99% 59% 80% GWP grew 1.6% in Q (currencyadj.:+2.2%), increase mainly from international business On track to reach self-retention level of ~50% in FY2014. Q retention level affected by transfer of business to Talanx Re and typical quarterly time shift in reinsurance accounting Slight improvement in Q combined ratio although unused large loss budget has not improved the technical result Increase in investment income and positive forex contribution lead to higher EBIT result Higher tax rate of 40.5% (Q1 2013: 34.7%) resulting from tax surcharge on large corporates in France 19% 20% 18% 26% 19% Q Q Q Q Q Expense ratio *incl. net interest income on funds withheld and contract deposits Loss ratio High level of residual large loss budget EBIT benefits from higher investment result 9

10 II Segments Retail Germany P&L for Retail Germany m, IFRS Q Q Change Gross written premium 2,027 2,113 (4%) Of which Life 1,219 1,277 (5%) Of which Non-Life (3%) Net premium earned 1,287 1,323 (3%) Net underwriting result (430) (296) n/m Of which Life (430) (313) n/m Of which Non-Life (0) 18 (100%) Net investment income % Operating result (EBIT) (18%) Group net income (32%) Return on investment (annualised) Combined ratio* 95% FY2013: 102% 4.7% 3.8% +0.9%pts 104% 105% 105% 100% 59% 69% 76% 64% 67% 36% 35% 29% 41% 34% Q Q Q Q Q Expense ratio Loss ratio *incl. net interest income on funds withheld and contract deposits Comments GWP decline by 4% due to reduction in traditional German life business and focus on profitability in motor. Premiums in liability and property lines increased Increase in combined ratio from lower (one-time) run-off results than in Q On adjusted level, Q EBIT would improve by 4m vs. Q Realisation of capital gains to finance ZZR ( 126m) leads to ROI of 4.7% (Q1 2013: 3.8%); neutral on EBIT level ~40% of anticipated 2014 ZZR allocation already digested (forecast of ~ 272m for FY2014; FY 2013: 313m; both according to HGB). Total ZZR stock expected to rise close to 1bn until yearend 2014 Higher tax rate (Q1 2014: 38.6% vs. Q1 2013: 29.7%) due to loss making start-up of Talanx Re s Retail Germany-related cell Q compares to strong Q with positive base effect from one-time reserve releases 10

11 II Segments Retail International P&L for Retail International m, IFRS Q Q Change Gross written premium 1,164 1, % Of which Life % Of which Non-Life (1%) Net premium earned % Net underwriting result 8 17 (53%) Of which Life (19) (17) n/m Of which Non-Life (19%) Net investment income (0%) Operating result (EBIT) (6%) Group net income % Return on investment (annualised) Combined ratio* 67% 67% 67% 64% 65% 27% FY2013: 96% 4.7% 5.1% (0.4%)pts 94% 96% 98% 96% 95% 29% 30% 32% 30% Q Q Q Q Q Expense ratio Loss ratio *incl. net interest income on funds withheld and contract deposits Comments Q top-line growth of 10.2% is burdened by currency effects (currency-adj %) Strong P&C business in Poland, at the same time decline in life insurance business against single premium. Strong motor business in Brasil, effect dampened by depreciation in currency Combined ratio rises by 1%pt impacted by initial consolidation effects. The adjusted combined ratio improves by 0.9%pt Investment income benefits from higher interest rates in Brasil and realised capital gains (Q1 2014: 11m; Q1 2013: 12m) Adj. for realised capital gains and a positive valuation effect in Italy ( ~3m), the normalised EBIT would be slightly below 50m, in line with plan Turkey contributed 1m to EBIT making all entities in Retail International profitable Turkey delivered targeted turnaround all entities profitable 11

12 II Segments Non-Life Reinsurance P&L for Non-Life Reinsurance Comments m, IFRS Q Q Change Gross written premium 2,108 2,198 (4%) Net premium earned 1,632 1,692 (4%) Net underwriting result (12%) Net investment income % Operating result (EBIT) % Group net income % Return on investment (annualised) Combined ratio 1 FY2013: 95% 3.3% 3.0% +0.3%pts 94% 94% 97% 95% 95% Q GWP down by 4.1% (currency-adj.: -1.7%) on the back of active cycle management in a competitive market, e.g. reduced premium income from Nat Cat business Only one major loss ( 31m) - well below Q budget of 156m Investment income benefits from increased level of realisations mainly in connection with bond redemption and the change of balance sheet currency of the Bermudian entities Limited impact from inflation swaps (Q1 2014: -1m; Q1 2013: -2m) EBIT margin 2 of 17.5% (Q1 2013: 15.7%) is well above target 68% 68% 72% 72% 69% 26% 26% 25% 23% 26% Q Q Q Q Expense ratio Q Loss ratio 1 incl. net interest income on funds withheld and contract deposits 2 EBIT margins reflect a Talanx Group view Underwriting and investment income contributed positively 12

13 II Segments Life/Health Reinsurance P&L for Life/Health Reinsurance m, IFRS Q Q Change Gross written premium 1,517 1,560 (3%) Net premium earned 1,281 1,389 (8%) Net underwriting result (87) (68) n/m Net investment income (6%) Operating result (EBIT) (37%) Group net income (43%) Return on investment (annualised) EBIT ( m) 4.1% 4.3% (0.2%)pts Comments GWP declined by 2.8% in Q (currencyadjusted: +0.7%); growth was further driven by China and longevity business, offset by reduced premium income from two large financing treaties Technical result slightly below expectations Net investment income at expected level EBIT margin 1 of 5.0% slightly below Q (7.3%) as financial solutions and longevity business ahead of plan, compensated by weaker margin in mortality and morbidity business ModCo contribution to net investment income of 2m in Q vs. 6m in Q Q Q Q Q Q EBIT margin reflects a Talanx Group view Heading for a normalised result in FY

14 Agenda I II III IV V Group Highlights Segments Investments / Capital Essentials Risk Management Reports 2013 Outlook Appendix Mid-term Target Matrix Q Additional Information Risk Management Reports

15 III Investments Breakdown of investment portfolio Asset allocation as of 31 March 2014 Fixed-income-portfolio split Comments 1% Other Equities 9% 90% Fixed income securities Total: 88.1bn Breakdown by type Other 29% 32% 37% Covered bonds Corporate bonds Government bonds 2% Total: 79.5bn Breakdown by rating 20% 21% 31% 28% BBB and below A AA AAA Investment portfolio remains strongly dominated by fixedincome securities (Q1 2014: 90% portfolio share) 80% (Q1 2013: 83%) of fixedincome portfolio invested in A or higher-rated bonds 16% of investments under own management are held in USD, 27% overall in non-euro currencies Moderate increase in GIIPS sovereign exposure to 1.7% of total assets (FY2013:1.2%) Investments under own management up by +1.7% y/y and +2.0% vs. 31 Dec Share of equity investments remains at around 1% Conservative investment style remains broadly unchanged 15

16 III Net investment income Net investment income Talanx Group m, IFRS Q Q Change Ordinary investment income % Thereof current investment income from interest Thereof profit/loss from shares in associated companies % % Realised net gains on investments % Write-ups/write-downs on investments Unrealised net gains/losses on investments (10) (13) (27%) % Investment expenses (55) (42) +30% Income from investments under own management (18%) Income from investment contracts 0 2 (87%) Interest income on funds withheld and contract deposits (5%) Total 1, % Comments Ordinary investment income in line with Q level On the back of the increase in asset base, the current investment income from interest has also slightly increased compared to Q Higher realised net gains on investments due to: Retail Germany s ambition to finance a major part of this year s assumed ZZR charge early in the year, the selective de-risking in Industrial Lines, the change of balance sheet currency of the Bermudian entities in Non-Life Re Contribution from unrealised results in reinsurance derivatives vs. Q1 2013: delta in ModCo -4m and inflation swaps +1m Return on investment of 4.3% (Q1 2013: 3.7%) Investment yield up to 4.3% (Q1 2013: 3.7%) 16

17 III Equity and capitalization Solid equity base Optimized capital structure Capital breakdown ( bn) Mar June Sep Dec Mar Shareholders equity Minorities Subordinated liabilities 1 adjusted due to IAS8 2 NAV calculated as shareholders equity minus shareholder share in goodwill Shareholders equity is up by 2.4% vs. Q and even 4.5% vs. FY2013. The recent increase q/q is mainly due to net earnings as well as OCI effects from rates and currencies of 131m Goodwill stands at 1,103m. When deducting non-controlling interests, the amount reduces to 1,095m Book value per share stands at 29.82, while NAV 2 per share is at the end of March 2014 Both per share figures do not contain offbalance sheet reserves. After the recent decline in interest rates, these amount to ~3.5bn (see next page), or roughly 1.30 per share (shareholder share only) Subordinated liabilities decline following the call of the 2004 issued 750m Hannover Finance bond in February Shareholders equity up by ~ 320m vs. FY2013 helped by net income and positive OCI effects 17

18 III Equity and capitalization Unrealised gains Unrealised gains and losses (off and on balance sheet) as of 31 March 2014 ( m) 2, ,749 6,247 3, (298) 3,498 Loans and receivables Held to maturity Investment property Real estate own use Subordinated loans Off balance sheet reserves Available for sale Other assets On balance sheet reserves Total Total unrealised gains (losses) 31 Dec 13 2, (250) 2,867 1, ,940 4,808 market value vs. book value Talanx s off-balance sheet up to 3.5bn end of March 2014 (end Dec 2013: 2.9bn) 18

19 Agenda I II III IV V Group Highlights Segments Investments / Capital Essentials Risk Management Reports 2013 Outlook Appendix Mid-term Target Matrix Q Additional Information Risk Management Reports

20 IV Essentials Risk Management Reports 2013 Increase in MCEV to 3.5bn, with the MCEV roughly equally split between Primary Insurance and Reinsurance improvement in Primary Insurance largely driven by capital market development (incl. duration management), in Reinsurance positive new business contribution First-time presentation of separate MCEV values for the cumulated German and foreign entities of Primary Insurance Significant reduction in duration gap in Life and the more favourable yield and spread environment trigger the material decline in yield sensitivity of the MCEV TERM (Talanx Enterprise Risk Model) run 2013 overall confirms reliability of the internal model. Capital Adequacy Ratio of 333% close to 2012 level of 351% for 99.5% confidence level At the 99.97% confidence level which reflects Talanx s own strategic targets -, the Capital Adequacy Ratio stands at 186% (2012: 196%) Market risks at 37% remain well below the 50% threshold. Non-life risks representing 38% of risk capital consumption making it the largest single risk category 20

21 Agenda I II III IV V Group Highlights Segments Investments / Capital Essentials Risk Management Reports 2013 Outlook Appendix Mid-term Target Matrix Q Additional Information Risk Management Reports

22 V Outlook for Talanx Group Gross written premium % Return on investment 3.4% Group net income 700m Return on equity ~ 10% Dividend payout ratio 35-45% target range 1 The targets are based on an increased large loss budget of 185m (from 80m) in Primary Insurance and 670m (from 625m) in Reinsurance 2 On divisional level, Talanx expects gross written premium growth of +3-5% in Industrial Lines, -(1-2)% in Retail Germany, +4-8% in Retail International and a flat to low single-digit growth rate in Reinsurance Targets are subject to no large losses exceeding budget (cat), no turbulences on capital markets (capital), and no material currency fluctuations (currency) 22

23 Agenda I II III IV V Group Highlights Segments Investments / Capital Essentials Risk Management Reports 2013 Outlook Appendix Mid-term Target Matrix Q Additional Information Risk Management Reports

24 A Mid-term Target Matrix Segments Key figures Strategic targets Group Industrial Lines Retail Germany Retail International Non-life reinsurance Life & health reinsurance Return on equity 750 bps above risk free 1 Group net income growth ~ 10% Dividend payout ratio 35-45% Return on investment 2 3.5% Gross premium growth 3 3-5% Combined ratio 96% EBIT margin 4 10% Retention rate 60-65% Gross premium growth 0% Combined ratio (non-life) 97% New business margin (life) 2% EBIT margin 4 4.5% Gross premium growth 3 10% Combined ratio (non-life) 96% Value of New Business (VNB) growth 5-10% EBIT margin 4 5% Gross premium growth 3-5% Combined ratio 96% EBIT margin 4 10% Gross premium growth 3 5-7% Value of New Business (VNB) growth 10% EBIT margin 4 financing and longevity business 2% EBIT margin 4 mortality and health business 6% 1 Risk-free rate is defined as the 5-year rolling average of the 10-year German government bond yield 2 Derived from actual asset duration. Currently ~ 6.5 years, therefore the minimum return is the 13-year average of 13-year German government bond yield. Annually rolling 3 Organic growth only; currency neutral 4 EBIT/net premium earned Note: growth targets are on p.a. basis. They are based on 2012 results. 24

25 A Q Additional Information - Segments Industrial Lines Retail Germany Retail International m, IFRS Q Q Change P&L Gross written premium 1,763 1,735 +2% Net premium earned (7%) Net underwriting result % Net investment income % Operating result (EBIT) % Net income after minorities % Key ratios Combined ratio non-life insurance and reinsurance 98.6% 99.4% -0.8%pts Return on investment 4.2% 3.2% 1.0%pts Q Q Change 2,027 2,113 (4%) 1,287 1,323 (3%) (430) (296) n/m % (18%) (32%) 100.2% 95.0% 5.2%pts 4.7% 3.8% 0.9%pts Q Q Change 1,164 1, % % 8 17 (53%) (0%) (6%) % 95.1% 94.1% 1.0%pts 4.7% 5.1% -0.4%pts Note: Differences due to rounding may occur. 25

26 A Q Additional Information - Segments (continued) m, IFRS Q Q Change P&L Gross written premium 2,108 2,198 (4%) Net premium earned 1,632 1,692 (4%) Net underwriting result (12%) Net investment income % Operating result (EBIT) % Net income after minorities % Key ratios Combined ratio non-life insurance and reinsurance Non-Life Reinsurance 94.5% 94.0% 0.5%pts Return on investment 3.3% 3.0% 0.3%pts Life and Health Reinsurance Q Q Change 1,517 1,560 (3%) 1,281 1,389 (8%) (87) (68) n/m (6%) (37%) (43%) % 4.3% -0.2%pts Group Q Q Change 8,414 8,458 (1%) 5,599 5,715 (2%) (415) (249) n/m 1, % (4%) (7%) 95.8% 95.0% 0.8%pts 4.3% 3.7% 0.6%pts Note: Differences due to rounding may occur. 26

27 A Q Additional Information GWP of main risk carriers Retail Germany GWP, m, IFRS Q Q Change Retail International GWP, m, IFRS Q Q Change Non-life Insurance (3%) HDI Versicherung AG (3%) Life Insurance 1,219 1,277 (5%) HDI Lebensversicherung AG (11%) neue leben Lebensversicherung AG (3%) TARGO Lebensversicherung AG % PB Lebensversicherung AG (0%) Total 2,027 2,113 (4%) Non-life Insurance (1%) HDI Seguros S.A., Brazil (11%) TUiR Warta S.A. 3, Poland % TU Europa S.A. 4, Poland % HDI Assicurazioni S. p. A., Italy (P&C) (4%) HDI Seguros S.A. De C.V., Mexico % HDI Sigorta A.Ş., Turkey (2%) Life Insurance % TU Warta Zycie S.A., Poland (32%) TU Europa Zycie 4, Poland (43%) Open Life % 1 Entity results from Sept 2012 merger of HDI Direkt Versicherung AG and HDI-Gerling Firmen und Privat Versicherung AG 2 Talanx ownership 67.5% 3 includes HDI Asekuracja TU S.A., Poland; Talanx ownership of 75.74% 4 Talanx ownership 50% + 1 share; closed on 1 June includes Metropolitana 6 includes HDI-Gerling Zycie, Poland; Talanx ownership of 75.74% HDI Assicurazioni S. p. A., Italy (Life) % Total 1,164 1, % Numbers for main carriers represent data entry values, fully consolidated 27

28 A Q Additional Information Details on GIIPS exposure Total GIIPS exposure (31 March 2014) m Government bonds Corporate bonds GIIPS exposure Sovereign Semi- Sovereign Financial Corporate Covered Other Total Greece Ireland Italy 1, ,106 Portugal Spain ,987 Total 2, , ,790 Details on sovereign exposure in m Total: 2,149m (amortized cost), 2,291m (fair value) ,347 1, Total unrealised gain: 142m Comments Total GIIPS exposure incl. private sector assets at ~4.2% of total assets GIIPS sovereign exposure at 1.7% of total assets (Q1 2013: 0.7%, FY2013: 1.2%) Talanx may top up its sovereign exposure to selected GIIPS government issuers to up to 3% of total assets in the course of 2014 Talanx over time has slightly raised its exposure to Italian and Spanish issuers very selectively, following the investment strategy already communicated to the capital markets Additional investments of ca. 1.2bn since 31 Dec mainly in sovereign ( ~0.8bn) and semi-sovereign ( ~0.3bn) issue issuers Greece Ireland Italy Portugal Spain Amortized cost Fair value Slight increase in GIIPS investments increase in unrealised gains 28

29 A MCEV Overview Primary insurance Reinsurance Talanx D INT Total Change m m m m m m m m % Net asset value (NAV) , , , , Present value of future profits (certainty equivalent) , , , , , Financial options and guarantees (FOGs) Cost of residual non-hedgeable risks (CoRNHR) Cost of required capital (CoRC) Look through and other adjustments Value in-force (VIF) , , , MCEV after minorities 1, , , , , , , Split of primary insurance business into German domestic (Primary D) and international (Primary INT) business shown to acknowledge the increase of international business MCEV explicitly calculated for the major primary life insurance carriers in Germany, Italy, and Poland, namely HDI-, neue leben-, PB and TARGO Lebensversicherung AG, HDI Pensionskasse AG, HDI Assicurazioni S.p.A. Life and Towarzystwo Ubezpieczen na Zycie WARTA S.A., and for the active life and health reinsurance businesses of Hannover Re L&H Covered businesses contribute more than 93% of the total IFRS net premiums written by life insurance and life and health reinsurance businesses of the Group MCEV of 3.5bn reflects life business of primary insurance and reinsurance 29

30 A MCEV Movement of Embedded Value Movement of Embedded Value ( m) ,538 2, , Opening MCEV Initial adjustments Adjusted opening MCEV New business value Roll forward Operating assumptions and variances (incl. model changes) Economic and other nonoperating variance Total MCEV earnings Closing adjustments Closing MCEV Increase of MCEV for primary business mainly due to higher yields and lower credit spreads 30

31 A MCEV Analysis of change FS + RC = NAV VIF Closing MCEV after minorities 1, , , ,538.3 VIF= value in force FS= free surplus RC= required capital Total FS + RC = NAV Talanx VIF Total Total m m m m m mm m Opening MCEV 1, , , , ,727.1 Capital injection Dividend payments Other implications Adjusted opening market consistent embedded value (MCEV) , , ,763.5 New business value Expected existing business contribution (reference rate) Expected existing business contribution (in excess of reference rate) Transfers from VIF and required capital (RC) to free surplus (FS) Primary insurance Reinsurance Experience variances Assumption changes Other operating variances Operating MCEV earnings Economic variances Other non-operating variances Total MCEV earnings Closing adjustments Capital injection Dividend payments Change in currency exchange rates Comments Primary insurance Increase of MCEV for domestic primary insurance mainly driven by economic variances, due to the more favourable economic environment compared to year end 2012 Improved credit modelling positively affects MCEV, more than offsetting the negative effects of more conservative modelling of certain assets regarding credit risk Reinsurance Excellent value of new business Reduced collateral costs for US mortality business Negative effects from change in interest rates and currency exchange rates Apart from increase in primary insurance MCEV, reinsurance business contributed an excellent new business value 31

32 A MCEV 2013 New Business Profit/Loss on new business Present value of future profits (certainty equivalent) Financial options and guarantees (FOGs) Cost of residual non-hedgeable risks (CoRNHR) Cost of required capital (CoRC) Look through and other adjustments New business value after minorities New business margin D 2013 m % Primary insurance INT 2013** m % 2013** m % Total 2012* m % Reinsurance *The values for 2012 exclude the NBV of WARTA because WARTA was included in the 2012 MCEV results only as a closing adjustment. **The values for 2013 exclude the new business written by HDI-Gerling Zycie since the merger of WARTA with HDI-Gerling Zycie is included in the 2013 MCEV only in the closing adjustments m % 2012 m % 2013** m % Talanx 2012* m % Change % % Comments Primary segment Increase in new business value Increase of profitability due to: Decrease of FOGs for domestic primary insurance due to lower guaranteed interest rates Decrease of CoRNHR due to lower necessary internal risk capital Reinsurance segment New business value on the same excellent level as last year Lower contribution of treaties by the subsidiaries in Ireland, Bermuda and the US where the premiums are set equal to the fees leads to lower new business margin Increase of Talanx s new business value by 6.3% 32

33 A MCEV Sensitivity analysis Primary insurance Reinsurance Talanx D INT Total m m m m m m m m MCEV after minorities 1, , , , , , ,727.1 % % % % % % % % Mortality/Morbidity + 5% (non-annuity) Mortality/Morbidity -5% (non-annuity) Mortality +5% (annuity) Mortality -5% (annuity) Lapse rate +10% Lapse rate -10% Maintenance expenses +10% Maintenance expenses -10% Yield curve +1% Yield curve -1% Swaption implied volatilities +25% Equity and property value +10% Equity and property value -10% Equity option volatilities +25% Decrease of sensitivities with respect to economic data Asymmetrical and non-linear impact from embedded options and guarantees on shareholders cash flows Impact on MCEV thus lower in 2013 due to more favourable economic environment Increased asset duration for primary business also positively affects interest sensitivity Reduced impact of changes in interest rates due to more favourable economic situation Higher diversification effect between German/international Primary Insurance and Reinsurance 33

34 A MCEV New Business Value sensitivity analysis D Primary insurance INT ** 2013** 2012* ** 2012* m m m m m m m m NBV after minorities % % % % % % % % Mortality/Morbidity + 5% (non-annuity) Mortality/Morbidity -5% (non-annuity) Mortality +5% (annuity) Mortality -5% (annuity) Lapse rate +10% Lapse rate -10% Maintenance expenses +10% Maintenance expenses -10% Yield curve +1% Yield curve -1% Swaption implied volatilities +25% Equity and property value +10% Equity and property value -10% Equity option volatilities +25% *The values for 2012 exclude the NBV of WARTA because WARTA was included in the 2012 MCEV results only as a closing adjustment. **The values for 2013 exclude the new business written by HDI-Gerling Zycie since the merger of WARTA with HDI-Gerling Zycie is included in the 2013 MCEV only in the closing adjustments. Total Reinsurance Talanx Diversification for economic sensitivities between domestic and international primary business 34

35 A MCEV Duration concepts Durations of technical reserves and bond portfolio, 2013 and < 1.0 = =1.1 = = = Primary insurance (life) 2013 Primary insurance (life) 2012 Primary insurance (non-life) 2013 Primary insurance (non-life) 2012 Talanx Group 2013 Talanx Group 2012 Technical reserves (Macaulay) Technical reserves (effective) Bond portfolio (Macaulay incl. derivatives) approx.for slightly lower modified duration Duration of bond portfolio increased for life insurance because of portfolio adjustments Active and significant reduction of asset-liability-missmatch in life insurance 35

36 A SCR Result History (Economic View) Own Funds ( bn) Comments Own funds (after minorities) increase significantly from 6.6bn (31 Dec 2012) to 7.8bn 31 Dec Solvency Capital Required ( bn) Capital Adequacy Ratio (CAR) 322% 351% 333% 277% year year Change in own funds from 2012 to 2013 largely due to the increase of the own funds for the primary life insurance companies, which is mainly driven by higher yields and lower credit spreads end 2013 the increase of the own funds for the Hannover Re Group, which is mainly driven by the best estimate revaluation of the reserves, the discount effects on claim reserves due to an increase of interest rates year CAR almost unchanged compared to 2012 which is reflected by the simultaneous change of own funds and SCR 36

37 A SCR 2013 Split by division SCR 1 by Division (As of 31 December 2013, bn) 52% Comments Diversification effect of 25% among primary divisions 30% 27% % 1.4 (0.4) (15%) The Group benefits from a diversification effect of 15% between primary insurance and reinsurance 23% 21% (0.4) (25%) This corresponds to an absolute amount of 0.4bn 0.4 Retail Germany 31 Dec 12 Retail International Industrial Lines Corporate Operations Diversification between primary divisions and corporate functions Primary Insurance Reinsurance Diversification between primary and reinsurance Talanx Group 35% 18% 25% 22% 40% 45% 55% 22% Solvency capital requirement; determined according to 99.5% security level, economic view, after minorities Talanx Group features a well-diversified portfolio 37

38 A SCR Own Funds by division Own funds 1 by Division (as of 31 December 2013, bn) (1.9) Retail Germany Retail International Industrial Lines Reinsurance Corporate Functions Talanx Group 31 Dec (1.9) economic view, after minorities Material rise in Own Funds in comparison to year-end

39 A Solvency capital requirement split into components Risk components of Talanx Group 1 (as of 31 December 2013, m) 29.0% 1, % 16.1% % % 4, % 1, % 38.2% 651 1, % 1, % 433 1, % % % 1, % 259 1,850 2,356 Market risk nonlife and reinsurance Market risk primary life Pension risk Diversification Total market risk Counterparty default risk Premium and reserve risk (nonlife) Nat Cat (net) Diversification Nonlife risk Further risk (life) Operational risk Other risk Total risk before tax and before diversification Tax effect (nonlife and small entities) Diversification Total risk 1 Figures show risk categorisation of the Talanx Group after minorities, tax effects and diversification effects as of Solvency capital requirement determined according to 99.5% security level, economic view, after minorities High diversification between risk categories 39

40 A SCR Sensitivity of Solvency Capital Ratios Economic view Comments In the Economic View, subordinated liablities are not included in Own Funds % Own Funds SCR CAR Inclusion of subordinated liabilities Subordinated liabilities would lead to an increase in own funds of roughly 1.9bn Inclusion of subordinated liabilities leads to an increase in the capital adequacy ratio to 412% Consideration of subordinated liabilities has no influence on solvency capital requirements 9.7 Own funds incl. subordinated liabilities 2.4 SCR 412% CAR Conservatism of Talanx s economic view underlined by not including subordinated liabilites into Own Funds 40

41 A SCR Sensitivity of Solvency Capital Ratios Haircut Effect Capital Adequacy Ratio Effect of availability constraints on CAR Comments Regulatory framework under Solvency II relates minorities to the availability of capital, respectively Own Funds. This places restrictions on regulatory Own Funds on Group level (e.g. minority interest) 333% 233% The amount, however, depends on the risk capital allocated to solo entities Capital allocation is determined by an appropriate allocation method The main impact on availability of Own Funds stems from minority interest in Hannover Re CAR Economic View at Talanx level Internal Model based allocation after haircut at HDI VaG level 1 1 Solvency capital requirement; determined according to 99.5% security level, Regulatory View (including subordinated liabilities 267%) Talanx s CAR would be at a comfortable level even after a haircut 41

42 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 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 15 May 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. 42