Investor Presentation July 2017

Transcription

1 Investor Presentation July 207

2 Founded as a lead insurer by German corporates Group structure History Large German corporates, e.g. Free float 2.0% Industrial Lines Retail Germany (P/C and Life) V.a.G. 79.0% German Mittelstand Retail International Including employee shares and stake of Meiji Yasuda (below 5%) Private policy holders Reinsurance (P/C and Life/Health) Foundation as Haftpflichtverband der deutschen Eisen- und Stahlindustrie in Frankfurt Relocation to Hannover Companies of all industry sectors are able to contract insurance with HDI V.a.G. Foundation of Hannover Rückversicherungs-AG Diversification into life insurance IPO of Hannover Rückversicherungs-AG Renaming of HDI Beteiligungs AG to Talanx AG Start transfer of business from HDI V.a.G. to individual Talanx subsidiaries Acquisition of Gerling insurance group by Talanx AG IPO of Talanx AG Listing at Warsaw Stock Exchange Strong roots: originally founded by German corporate clients; HDI V.a.G still key shareholder 2 Investor Presentation July 207

3 Four divisions with a strong portfolio of brands Industrial Lines Retail Germany Retail International Reinsurance Financial Services Integrated international insurance group following a multi-brand approach 3 Investor Presentation July 207

4 International footprint and focussed growth strategy International presence International strategy by divisions Industrial Lines Local presence by own risk carriers, branches and partners create efficient network in >30 countries Key target growth regions: Latin America, Southeast Asia/India, Arabian Peninsula Presence in countries Retail International Target regions: CEE (incl. Turkey) and Latin America # 2 motor insurer in Poland 2 # 5 motor insurer in Brazil 2 # 3 motor insurer in Chile 2 # 7 motor insurer in Mexico 2 Total GWP: 3.bn (206) 206 GWP: 50% in Primary Insurance (205: 49%), 50% in Reinsurance (205: 5%) Group wide presence in >50 countries 20,039 employees (FTE) in 206 Reinsurance Global presence focussing on Western Europe, North- and South America as well as Asia ~5.000 customers in >50 countries By branches, agencies, risk carriers, representative offices 2 Source: local regulatory authorities, Talanx AG Global network in Industrial Lines and Reinsurance leading position in retail target markets 4 Investor Presentation July 207

5 Among the leading European insurance groups Top 0 German insurers Top 0 European insurers German insurers by global GWP (206, bn) European insurers by global GWP (206, bn) Allianz 6.2 Allianz 6.2 Munich Re 48.9 AXA 94.2 Talanx 3. Generali 70.5 R + V 4.8 Munich Re 48.9 Debeka Prudential Vk Bayern 7.8 Zurich 43.7 HUK 6.9 Swiss Re 32.3 Signal Iduna CNP 3.8 Gothaer 4.4 Aviva 3.2 W&W 4.0 Talanx figures 3 Gross earned premium 2 preliminary figures Listed insurers Source: Company publications, as of 5 June 207 Third-largest German insurance group with leading position in Europe 5 Investor Presentation July 207

6 Regional and segmental split of GWP and EBIT GWP by regions 206 (consolidated Group level) GWP by segments 206 4% 8% 8% 5% 28% 8% 9% Germany United Kingdom Central and Eastern Europe including Turkey (CEE) Rest of Europe North America Latin America RoW 20% 5% 2% 8% 6% 20% Industrial Lines Retail Germany P/C Retail Germany Life Retail International Non-Life Reinsurance Life/ Health Reinsurance GWP by regions 206 (Primary Insurance) 2% EBIT by segments 206,2 % % 4% 7% 4% % 5% Germany United Kingdom Central and Eastern Europe including Turkey (CEE) Rest of Europe North America Latin America RoW 47% % 20% 6% 5% Industrial Lines Retail Germany Life Retail International Non-Life Reinsurance Life/ Health Reinsurance Corporate Operations and Consolidation Adjusted for the 50.2% stake in Hannover Re 2 Calculation excludes Retail Germany P/C, w hich reported a negative EBIT of 2m Well-diversified sources of premium and EBIT generation 6 Investor Presentation July 207

7 B2B competence as a key differentiator Strategic focus on B2B and B2B2C Excellence in distribution channels Industrial Lines Core focus on corporate clients with relationships often for decades Blue-chip client base in Europe Capability and capacity to lead international programs Bancassurance Brazil Retail Germany Market leader in Bancassurance Market leader in employee affinity business Automotive Retail International ~35% of segment GWP generated by Bancassurance Distribution focus on banks, brokers and independent agents Brokers Retail Industrial/Reinsurance Reinsurance Typically non-german business generated via brokers Unique strategy with clear focus on B2B business models Employee affinity business Samples of clients/partners Superior service of corporate relationships lies at heart of our value proposition 7 Investor Presentation July 207

8 Key Pillars of our risk management 2 3 Asset risk is limited to less than 50% of our SCR (solvency capital requirement) Generating positive annual earnings with a probability of 90% Sufficient capital to withstand at least an aggregated 3,000-year shock 8 Investor Presentation July 207

9 Focus on insurance risk Risk components of Talanx Group Comments 3% Counterparty default risk 4% Operational risk Total market risk stands at 47% of solvency capital requirements, which is comfortably below the 50% limit 7% 29% 47% Underwriting risk life Non-life risk Market risk Self-set limit of 50% reflects the dedication to primarily focus on insurance risk Non-Life is the dominating insurance risk category, comprising premium and reserve risk, NatCat and counterparty default risk Equities ~2% of investments under own management Over 75% of fixed-income portfolio invested in A or higher-rated bonds broadly stable over recent quarters Figures show risk categorisation, in terms of solvency capital requirements, of the Talanx Group in the economic view (based on Basic Ow n Funds) as of FY206 Market risk sensitivity (limited to less than 50% of solvency capital requirement) is deliberately low 9 Investor Presentation July 207

10 Talanx Group and predecessors net income # of loss making 2 Diversification of business model leads to earnings resilience Talanx Group net income Talanx Group net income ( m) competitors Net profit Net loss Net income of Talanx after minorities, after tax based on restated figures as shown in annual reports ( according to IFRS) 2 Adjusted on the basis of IAS 8 3 Top 20 European peers, each year measured by GWP; on group level; IFRS standards Source: Bloomberg, annual reports Robust cycle resilience due to diversification of segments 0 Investor Presentation July 207

11 3 TERM 206 results Capitalisation perspectives Economic View (BOF CAR) 264% (205: 253%) Limit 200 % Basic Own Funds (including hybrids and surplus funds as well as non-controlling interests) Risk calculated with the full internal model with haircut operational risk modeled with standard formula HDI solo-funds Solvency II Ratio 86% (205: 7%) Target corridor 50%-200% Eligible Own Funds, i.e. Basic Own Funds (including hybrids and surplus funds as well as non-controlling interests) with haircut on Talanx s minority holdings Operational risk modeled with standard formula, ( partial internal model ) For the Solvency II perspective, the HDI V.a.G. as ultimate parent is the addressee of the regulatory framework for the Group Group Solvency II Ratios including transitional (i.e. Regulatory View ): FY206: 236%, FY205: 224% Note: In the entire presentation, calculations of Solvency II Capital Ratios are based on a 99.5% confidence level, including volatility adjustments yet w ithout the effect of applicable transitionals if not explicitly stated differently Capital ratios improved despite a continuing low level of interest rates Investor Presentation July 207

12 Industrial Lines International programmes as competitive edge Talanx Primary Insurer: 37 countries Network partner Individual solution possible Network hubs 2 Investor Presentation July 207

13 Industrial Lines An impressive long-standing client franchise Overview of selected key customers by customer segment German mid-market (SMEs) German corporates (multinationals) International corporates (multinationals) Well-established relationships with main players in targeted segments 3 Investor Presentation July 207

14 Industrial Lines Three initiatives to optimise performance Strategic 3-element-programme Balanced Book raising profitability in our domestic market 2 Generating profitable growth in foreign markets 3 Establishing best-in-class efficiency and processes 4 Investor Presentation July 207

15 Motor 3 Marine Property Industrial Lines Profitabilisation measures in Germany Portfolios under review (GWP) 205/6 206/7 Results from negotiations (gross) and portfolio improvement Portfolios under review (GWP) Results from negotiations (gross) and portfolio improvement 300 Negotiated 303.7m Effects on premium - 8.4% 50 Negotiated 50m Effects on premium - 2.0%,370m Capacity - 2.7%,350m Capacity - 9.0% Premium to capacity ratio +25%,2 Premium to capacity ratio +20.7%,2 72 Negotiated 7.8m Effects on premium -5.3% 25 Negotiated 24.5m Effects on premium +23.2% 325m Capacity -26.9% 350m Capacity -5.0% Premium to capacity ratio +30% Premium to capacity ratio +44% Negotiated 2m 362m 2 Effects on premium -0.% Effect on losses 4 ~ -4% Successfully completed in 206 Expected improvement in loss ratio by FY206 3%pts 5 Premium negotiated For portfolio under review 2 Including effect of additional specific reinsurance measures 3 German business only 4 Expected, in terms of loss volume 5 Assuming constant claims statistic; FY205 loss ratio: 84.4% (gross) 5 Investor Presentation July 207

16 Retail Germany - Key Messages from Capital Markets Day 206 Retail Germany stands for 2% of Talanx s GWP and 47% of its assets under own management. It adds Life exposure to the Talanx Group which is overall strongly geared to P/C business Retail Germany has a strong and highly committed management team with an excellent professional track-record in handling challenges and in turning businesses around Management initiatives and the central strategic programme KuRS focus on optimising the position in Bancassurance and on turning HDI around. Based on a customer-centric, sustainable and stable business model, we target for a material improvement of the risk-return profile for shareholders KuRS combines three substantial strategic pillars: a new Life strategy, a new P/C strategy and investments in Digitalisation/IT in combination with ongoing cost management KuRS is the by far largest initiative with ~ 330m of investments and a targeted cost cutting of ~ 240m. Targeted strategic investments comprise overall ~ 420m. This includes ~ 90m for Voyager4life targeting at a joint IT Life platform All interim goals have been met. In 207, the KuRS programme savings are likely to first-time exceed costs on EBIT level Retail Germany targets for a sustainable EBIT contribution of at least 240m from 202 onwards 6 Investor Presentation July 207

17 Retail Germany KuRS programme: Investment and cost reduction targets Estimated project costs and savings Comments in m ~ 240m Cost reduction ~ 330m Investment ~40 ~-60 ~55 ~80 ~222 ~-20 ~-40 ~-5 ~240 ~-3 Strategic target: Gross reduction cost base by ~ 240m Targeted strategic investments for KuRS are expected to be ~ 330m The related cost saving target is ~ 240m p.a. Both numbers refer to Life and P/C business in sum Target is to implement all initiatives in full by the end of 2020 with the full cost benefit to be reached in 202 Targeted strategic investments comprise overall ~ 420m, including already communicated ~ 90m for Voyager4life E 208E 209E 2020E 202E Cost reductions Cost reductions planned (205/206) Investment & personnel redundancies Cost reduction before inflation Strategic investments target at restructuring HDI (catching up with market) and optimising BA (strengthening excellent market positions) 7 Investor Presentation July 207

18 Retail Germany KuRS programme: Strategic approach P/C P/C Selective growth Growth within target segment corporate business in 206: New business in total grew about +44% y/y therof exclusive distribution (incl. direct sales) + 26% thereof third-party distribution + 77% 50k new motor policies via direct sales in 206 Modernisation IT & processes Implementation of a new inventory management system in Motor within one year By the help of the new system, a straight-through processing rate of more than 80% in the motor year-end business has been achieved The migration of Motor legacy systems is planned until the beginning of 209 Digitalisation Succesful implementation of a claims app with more than 3k settled damages within one year (the app has been installed in April 206) HDI together with cooperation partners offers innovative telematics services via the app TankTaler ; nearly 3k customers have already registered Strong base for the ongoing turnaround 8 Investor Presentation July 207

19 Retail Germany KuRS programme: Strategic approach Life Life New business Strong growth in biometric products of more than % in 206 (~ 200m 2 ) Successful launch of new capital-efficient products in all carriers Strategy-conform reduction of single-premium business by around 2.5% compared to 205 for the Retail Germany Life carriers Solvency II Approval of the internal model for all four German Life carriers Digitalisation Digitalisation of bav services (pension scheme business) has been further boosted, with 62k active contracts until May 207 Service apps have been introduced for all bancassurance companies until the end of 206 (e.g. SmartCapture@BA) includes the follow ing products: term life insurance, funeral expense insurance, disabilitiy insurance, nursing care insurance, credit life insurance 2 in terms of total premiums paid Key measures taken to allow for a successful performance in the low-interest environment 9 Investor Presentation July 207

20 Retail Germany Asset Management Strategy: Comparison of average running yields versus average guarantee rates HDI Life 4.0% 3.5% 3.0% 2.5% 2.0%.5%.0% 0.5% 0.0% Bancassurance 4.0% 3.5% 3.0% 2.5% 2.0%.5%.0% 0.5% 0.0% Comments The implicit market expectation for 20- year AAA euro government bonds plus 50 bps is taken as the assumed reinvestment yield for in the two diagrams - e.g..33% for 207 The fixed-income reinvestment yield in 206 was higher at.34% for Bancassurance and at.50% for HDI Life avg. running yields avg. guarantee rates (incl. ZZR) reinvestment yield (fixed income) All numbers refer to German GAAP (HGB) Based on these assumptions, the average running yields will be sufficient to finance the guarantees for policyholders 20 Investor Presentation July 207

21 Retail Germany Targets from Capital Markets Day 206 Targets Retail Germany Gross premium growth (p.a.) 0% Life ~ 0% P/C 3% Cost cutting initiatives to be implemented by end of 2020 ~ 240m Combined ratio % Life new business: share of traditional life products by 202 (new business premium) 25% P/C: Growth in Property & Liability to SMEs and self-employed professionals by % EBIT contribution (targeted sustainably from 202) 240m Talanx definition: incl. net interest income on funds w ithheld and contract deposits 2 Compared to base year 204 Talanx targets for a combined ratio of ~96% until 209 in Primary Insurance Targets are subject to no large losses exceeding budget (cat), no turbulences on capital markets (capital), and no material currency fluctuations (currency) 2 Investor Presentation July 207

22 Retail International Core Markets: FY206 overview Brazil GWP growth (local currency) Combined ratio -4.8% 02.% Motor: 8.8% Non-Life: 4.6% +2.8%pts Poland GWP growth (local currency) % = market share in % -6.4% Motor: 4.8% Non-Life: 2.8% EBIT ( ) Mexico GWP growth (local currency) 42.3m +7.0% -8.8% Motor: 4.9% Non-Life: 2.2% o/w Life o/w Non-Life Combined ratio 2 EBIT ( ) -24.4% -4.% 96.% 89.3m -0.4%pts -20.9% Combined ratio EBIT ( ) 95.3% 8.m +2.%pts -2.6% o/w Life o/w Non-Life 4.3m 84.9m -8.6% -4.9% Chile GWP growth (local currency) +24.7% Motor: 7.5% Non-Life: 0.% Turkey GWP growth (local currency) +24.2% Motor: 2.7% Non-Life: 2.5% Combined ratio 88.7% -3.5%pts Combined ratio 02.5% 0.0%pts EBIT ( ) 24.m +2.3% EBIT ( ) 5.8m +9.9% Includes all entities of HDI Chile Group operating in the Chilean market; Magallanes integrated in February Combined ratio for Warta only Note: Market shares based on regional supervisory authorities or insurance associations (Polish KNF, Turkish TSB, Brazilian Siscorp, Mexican AMIS, Chilean AACH) Most of our core markets in Retail International with business growth 22 Investor Presentation July 207

23 Retail International Cycle management: Strategic initiatives in Core Markets Brazil Behavioral economics to improve claims & service process HDI Digital & Recycle to optimise profitability Increase usage ratio of Bate Prontos Mexico Combined Ratio in %: E Poland (Warta) Innovation in pricing ( Big Data ) Data driven claims handling 360 sales management Combined Ratio in %: E Channel consolidation P&C diversification Combined Ratio in %: Pricing intelligence & Behavioral economics E Turkey Chile Increase direct online sales Focus on customer service Increase sales through mid-sized brokers Combined Ratio in %: E Focus on non-motor, pro-active risk selection in motor own damage Cost management in claims handling Offer best in class IT processes Combined Ratio in %: E Magallanes integrated in February 205 Strategic initiatives as key drivers of combined ratio improvement supported by transfer of best practices 23 Investor Presentation July 207

24 Challenges & Opportunities Digitalisation Pursuing and implementing a stringent innovation and digitalisation strategy Elinvar White-label platform for the digitalisation of private wealth management HDI.de Redesign and launch of new online products and services WARTA Digital Extensive data analysis for a customer-specific approach Startupbootcamp / Plug and Play Partnerships to identify the globally most promising technologies in the insurance industry Claims app The app HDI hilft for the transmission of claims information and to track the processing status Telematics HDI TankTaler the new telematics product attracting customers by various extra benefits In-house expertise partner of leading global accelerators group-internal know-how transfer 24 Investor Presentation July 207

25 Outlook for Talanx Group 207 Gross written premium > % Return on investment Group net income 3.0% ~ 800m Return on equity >8.0% Dividend payout ratio 35-45% target range The targets are based on a large loss budget of 290m (206: 300m) in Primary Insurance, of w hich 260m (206: 270m) in Industrial Lines. The large loss budget in Reinsurance stands at an unchanged 825m Targets are subject to no large losses exceeding budget (cat), no turbulences on capital markets (capital), and no material currency fluctuations (currency) 25 Investor Presentation July 207

26 Management ambition Earnings balance Primary Insurance vs. Reinsurance EBIT 206 EBIT ambition by % 58% ~50% ~50% Primary Insurance Reinsurance Primary Insurance Reinsurance Adjusted for the 50.2% stake in Hannover Re Profitability improvement in Primary Insurance to lead to a balanced EBIT split 26 Investor Presentation July 207

27 Management ambition Reducing the valuation discount on Primary Insurance Implicit valuation Primary Insurance in bn Key measures Implicit valuation Primary Insurance P/E 207E 6.5x P/Book x Talanx Primary insurance (implicit value) 206 in market cap Primary Insurance of ~.0bn Hannover Re (Talanx stake) In this analysis, Primary insurance also contains Corporate Operations and Consolidation. Share prices as of 9 June 207 Calculated as of 9 June Industrial Lines: optimisation of domestic portfolios pushing profitable foreign growth process excellence Retail International: continuing focused profitable growth Retail Germany: consequent de-risking of our Life business forceful profitabilisation of our P/C business specific focus on investments in Digitalisation/IT Corporate Operations / Holding: further cost reductions strict capital discipline A comprehensive set of measures to raise the profitability in Primary Insurance 27 Investor Presentation July 207

28 Total shareholder return More than four and half years since IPO Performance of the Talanx share 20% TLX m 9 June % 70% Market cap 3 Dec 206 8,368 50% 30% Market cap IPO./. 4,623 Dividends +,554 0% Value creation since IPO 5,299 90% Total shareholder return since IPO close to 8% p.a. 28 Investor Presentation July 207

29 Summary - Investment highlights Global insurance group with leading market positions and strong German roots Leading and successful B2B insurer Value creation through group-wide synergies Profitability measures implemented in Industrial Lines and Retail Germany Dedication to focus on insurance rather than market risks Commitment to continuously fulfill a AA capital requirement by Standard & Poor s Dedication to pay out 35-45% of IFRS earnings to shareholders 29 Investor Presentation July 207

30 Mid-term Target Matrix & Current Status Segments Key figures Strategic targets ( ) /206 8 Group Gross premium grow th Return on equity Group net income grow th Dividend payout ratio Return on investment 3-5% 750 bps above risk free 2 mid single-digit percentage grow th rate 35-45% risk free + (50 to 200) bps 2 (0.3%) 0.4% [ 8.4%] 23.6% 37.6% 3.6% [ %] 2.2% 9.7% [ 8.6%] 9.5% 4.2% 3.6% [ %] Industrial Lines Gross premium grow th Retention rate 3-5% 60-65% (0.%) 53.4%.2% 52.6% Retail Germany Gross premium grow th 0% (5.7%) (4.5%) Retail International Gross premium grow th 0% 0.2% 8.4% Primary Insurance P/C Reinsurance 7 Life & Health Reinsurance 7 Combined ratio 3 EBIT margin 4 Gross premium grow th 6 Combined ratio 3 EBIT margin 4 Gross premium grow th Average value of New Business (VNB) after minorities 5 EBIT margin 4 financing and longevity business EBIT margin 4 mortality and health business ~ 96% ~ 6% 3-5% 96% 0% 5-7% 0m 2% 6% 98.% 5.3% (0.2%) 93.7% 7.2% (4.3%) 448m 9.4% 3.4% - 4.5% 4.% - 7.2% 2.5% 36m 0.2% 3.5% Organic grow th only; currency-neutral 2 Risk-free rate is defined as the 5-year rolling average of the 0-year German government bond yield 3 Talanx definition: incl. net interest income on funds w ithheld and contract deposits 4 EBIT/net premium earned, 5 Reflects Hannover Re target of at least 220m 30 Investor Presentation July Average throughout the cycle; currency-neutral, 7 Targets reflect Hannover Re s targets for strategy cycle 8 Grow th rates calculated as CAGR; otherw ise arithmetic mean Note: grow th targets are based on 204 results. Grow th rates, combined ratios and EBIT margins are average annual targets

31 3 Investor Presentation July Q 207 -

32 I Q 207: Well on track to meet FY207 Group Outlook Q 207 Group net income increased by 7% y/y to 238m (Q 206: 222m) well on track to meet our FY207 Group net income Outlook of ~ 800m The Group s combined ratio remained stable at 96.3% (Q 206: 96.3%). Improvement in Primary Insurance segments (Industrial Lines, Retail Germany P/C) overcompensate the slightly higher combined ratio in Reinsurance P/C segment Return on investment stood at 3.5% (Q 206: 3.7%). Ordinary investment income up, also driven by distributions in real estate and other alternative investments Shareholders equity stood at 9,368m, or per share at the end of Q 207. This is above the FY206 level ( 9,078m or 35.9 per share). RoE reached 0.3% (FY206: 0.4%) well on track to achieve FY207 RoE Outlook of >8.0% FY 206 Solvency II Ratio (excluding transitional) improved to 86% (FY205: 7%) and is expected to have moved sideways in Q 207 Adjusted for the 50.2% stake in Hannover Re 32 Investor Presentation July 207

33 I Q 207 Divisional contribution to change in Group net income in m (0) 3 (9) Mar 206 reported Industrial Lines Retail Germany Retail International Reinsurance Corporate Operations incl. Consolidation 3 Mar 207 reported Improvement of Group net income is due to positive contribution from Primary Insurance (incl. holding functions) 33 Investor Presentation July 207

34 I Q 207 results Key financials Summary of Q 207 m, IFRS Q 207 Q 206 Change Gross written premium 9,752 8,995 +8% Net premium earned 6,692 6,266 +7% Net underwriting result (45) (422) n/m Net investment income,0,022 (%) Operating result (EBIT) % Net income after minorities % Key ratios Q 207 Q 206 Change Combined ratio non-life insurance and reinsurance 96.3% 96.3% 0.0%pts Return on investment 3.5% 3.7% (0.2%)pts Balance sheet Q 207 FY206 Change Investments under own management 07,80 07,74 +% Goodwill,060,039 +2% Total assets 60,06 56,57 +2% Technical provisions 2,68 0,429 +2% Total shareholders' equity 5,32 4,688 +3% Shareholders' equity 9,368 9,078 +3% Comments GWP markedly up by 8.4% y/y, slightly supported by currency tailwind (curr.-adj. GWP growth was 7.4%). Retail International and P/C Reinsurance were the main growth drivers, both contributing double-digit growth rates Combined ratio remained stable y/y at 96.3%. Cost ratio improved by 0.%pts to 27.9%, while loss ratio was up by 0.3%pts to 68.6%. Industrial Lines (Q 207: 96.5% vs. Q 206: 97.6%) and Retail Germany (0.7% vs. 03.8%; adj. for KuRS cost: 99.2% vs. 0.6%) with improved combined ratios and overcompensating the higher combined ratio in Reinsurance. Retail International s combined ratio (96.6% vs. 96.2%) also somewhat up due to losses from wild fires in Chile Higher ordinary investment result, helped by better results from real estate and other alternative investments, largely compensating the lower extraordinary investment result Q 207 EBIT slightly up compared to an also loss-light Q 206. Net income benefitted from a lower tax rate, resulting from a higher pre-tax profit contribution from entities with below-average tax rates mainly in Industrial Lines and Retail International Shareholders equity increased to 9,368m, or per share (FY206: 35.9; Q 206: 33.75). 206 Solvency II ratio (excluding transitional) significantly improved by 5%pts y/y to 86% (FY205: 7%, Q3 206: 60%) expected to have moved sideways in Q 207 Increased net income due to improved net underwriting result and increased profit from lowertaxed entities improvement in Solvency II ratio (FY206) to 86% 34 Investor Presentation July 207

35 I Large losses in Q 207 m, net Primary Insurance Reinsurance Talanx Group Storms/tornadoes; USA January Wild fires; Chile Jan./Feb Cyclone Debbie ; Australia March Total NatCat Transport Fire/Property Aviation Credit Other Total other large losses Total large losses pro-rata large loss budget Impact on Combined Ratio (incurred).2%pts 6.2%pts 4.0%pts Total large losses Q Impact on Combined Ratio (incurred) Q %pts 2.8%pts 3.5%pts Group Q 207 large loss burden of 53m was above the level of Q 206 ( 23m), but below the Q 207 pro-rata large loss budget of 243m Q 207 net burden of 9m in Primary and 34m in Reinsurance the latter due to a mix of man-made and NatCat large losses, including cyclone Debbie in Australia and wild fires in Chile Primary Insurance as well as Reinsurance remained well within their pro-rata large loss budgets (Primary Insurance: 73m; Reinsurance: 70m) Def inition large loss : in excess of 0m gross in either Primary Insurance or Reinsurance Note: : Q 207 Primary Insurance large losses (net) are split as f ollows: Industrial Lines: 6.2m; Retail Germany : 0m; Retail International: 3.0m, Corporate Operations: 0m; since FY206 reporting onwards, the table includes large losses f rom Industrial Liability line, booked in the respectiv e FY. Please also note that as long as large losses of the period are within the pro rata large loss budget, single segments book their resüectiv e large loss budgets into their P&L statements. 35 Investor Presentation July 207

36 I Combined ratios Development of net combined ratio Combined ratio by segment/selected carrier Q 207 Q 206 FY206 FY206: 95.7% Industrial Lines 96.5% 97.6% 96.8% 96.3% 97.3% 96.4% 93.% 96.3% Retail Germany P/C 0.7% 03.8% 03.3% Retail International 96.6% 96.2% 96.5% HDI Seguros S.A., Brazil 02.0% 0.6% 02.% 68.3% 69.0% 68.5% 65.7% 68.6% HDI Seguros S.A., Mexico 94.2% 92.0% 95.3% HDI Seguros S.A., Chile % 90.5% 88.7% TUiR Warta S.A., Poland 95.6% 95.8% 96.% 28.0% 28.6% 28.% 27.5% 27.9% TU Europa S.A., Poland 87.% 8.5% 83.0% Q Q2 Q3 Q4 Q HDI Sigorta A.Ş., Turkey 02.% 02.5% 02.5% HDI Assicurazioni S.p.A., Italy 96.8% 96.4% 94.0% Expense ratio Loss ratio Non-Life Reinsurance 95.6% 94.7% 93.7% Incl. net interest income on funds w ithheld and contract deposits 2 Incl. Magallanes Generales; merged w ith HDI Seguros S.A. on April 206 Q 207 combined ratios in all P/C segments below the 00% level also Retail Germany when adjusting for KuRS costs 36 Investor Presentation July 207

37 II Segments Industrial Lines P&L for Industrial Lines m, IFRS Q 207 Q 206 Δ Gross written premium 2,004,92 +4% Net premium earned % Net underw riting result % Net investment income % Operating result (EBIT) % Group net income % Return on investment (annualised) 3.5% 2.6% +0.9%pts Combined ratio FY204: 03% FY206: 97% 98% 98% 98% 93% 97% 77% 75% 74% 73% 76% 20% 23% 24% 20% 2% Q 206 Q2 206 Q3 206 Q4 206 Q 207 Expense ratio Loss ratio Comments Q 207 GWP up by 4.3% y/y, helped by currency effects (curr.-adj.:+3.%). Underlying growth effects from European markets like e.g. France as well as from US underwriting. Takeover of the motor fleet business from Retail Germany P/C had an impact of ~%pts on the Q 207 GWP growth rate Slight increase in retention rate to 56.4% (Q 206: 55.5%), mainly due to above-average growth in lines with generally higher retention (e.g. transport) and some higher retention rate in Liability business Q 207 combined ratio improved to 96.5% (Q 206: 97.6%) as large losses remained within their budget. While the loss ratio was.4%pts down y/y at 75.9%, the cost ratio was slightly higher (Q 207: 20.6% vs. Q 206: 20.2%), mainly due to higher project cost Net investment result improved. This was partly due to a higher extraordinary investment result. However, also the ordinary investment result was up, helped by improved result from investments in private equity vehicles Insignificant reserving impact from Ogden tables EBIT is negatively impacted by a weaker currency result in the other result. At the bottom line this is partly compensated by a lower tax rate due to above-average profit contribution from lower-taxed entities Incl. net interest income on funds w ithheld and contract deposits Improved net underwriting result and higher investment income led to increased profitability 37 Investor Presentation July 207

38 II Segments Retail Germany Division P&L for Retail Germany m, IFRS Q 207 Q 206 Δ Gross written premium,906,904 +0% of w hich Life,47,55 (%) of w hich Non-Life % Net premium earned,84,27 (3%) Net underw riting result (422) (478) n/m of w hich Life (47) (465) n/m of w hich Non-Life (6) (3) n/m Net investment income (4%) Operating result (EBIT) (27%) Group net income 9 29 (35%) Return on investment (annualised) 3.7% 4.5% (0.8%)pts EBIT ( m) FY206: 90m Comments Having started with 6M 206 reporting, the Life and P/C segments in the German Retail business report separately. In addition, we continue to show the aggregated numbers for the Division Q 207 GWP was flat y/y as the effect from a slight top line decline in the Life segment (Q 207: -0.7%) is fully compensated by a.3% increase in P/C gross premiums Improvement in the net underwriting result was backed by both segments: While P/C reported some improvement of its combined ratio, the Life segment benefited from a lower RfB contribution, resulting from lower extraordinary investment gains, the latter predominantly to finance the ZZR Cost impact from KuRS affected the Division by a total of ~ 2m (Q 206: ~ 0m). The impact of costs on the Q 207 EBIT was ~ 9m (Q 206: ~ 8m). Impact from KuRS costs on net income was ~ 6m (Q 206: ~ 5m) EBIT impacted by higher RfB allocation due to passthrough of tax benefits to policyholders in Life. Nevertheless, divisional tax ratio up Q 206 Q2 206 Q3 206 Q4 206 Q 207 EBIT impacted by higher RfB allocation due to pass-through of tax benefits to Life policyholders 38 Investor Presentation July 207

39 II Segments Retail Germany P/C P&L for Retail Germany P/C m, IFRS Q 207 Q 206 Δ Gross written premium % Net premium earned (%) Net underw riting result (6) (3) n/m Net investment income % Operating result (EBIT) % EBIT margin 3.8%.6% 2.2%pts Investments under ow n Management 3,990 4,027 (%) Return on investment (annualised) 2.5% 2.3% 0.2%pts Combined ratio FY206: 03% 04% 06% 00% 03% 02% 68% 7% 66% 62% 65% 36% 35% 34% 4% 37% Q 206 Q2 206 Q3 206 Q4 206 Q 207 Expense ratio Loss ratio Comments Premium decline stopped: Q 207 GWP up y/y, mainly due to continuing growth effects from SMEs and self-employed professionals as well as unemployment insurance products. In Motor, growth contribution from digital distribution ( direct business ) nearly compensated the effect from the shift of the fleet business towards the Industrial Lines segment Better claims experience led to an improvement of the combined ratio in Q 207. The latter was impacted by ~ 8m costs for KuRS programme (Q 206 impact was also ~ 8m). Adjusting for KuRS, the Q 207 combined ratio reached 99.2% (Q 206: 0.6%) Impact from ordinary investment income was stable, while extraordinary investment result slightly improved but without major overall impact. As a consequence, Q 207 RoI improved to 2.5% (Q 206: 2.3%) Overall, Q 207 EBIT was burdened by ~ 9m (Q 206: 8m) costs for KuRS; the impact of KuRS on other result was limited (~ m) as personnel redundancy cost have been fully booked until 206 Incl. net interest income on funds w ithheld and contract deposits Top-line growth, improvement in underwriting result and slightly higher net investment income lead to improvement in EBIT 39 Investor Presentation July 207

40 II Segments Retail Germany Life P&L for Retail Germany Life m, IFRS Q 207 Q 206 Δ Gross written premium,47,55 (%) Net premium earned (4%) Net underw riting result (46) (465) n/m Net investment income (5%) Operating result (EBIT) 2 4 (49%) EBIT margin 2.5% 4.7% (2.2%)pts Investments under ow n Management 45,483 44,886 +% Return on investment (annualised) 3.9% 4.7% (0.8%)pts EBIT ( m) FY206: FY205: 92m 99% Q 206 Q2 206 Q3 206 Q4 206 Q 207 Comments Very moderate decline in GWP (Q 207: -0.7% y/y) as effects from the targeted phase-out of traditional/single-premium business were broadly compensated by growth effects from credit life insurance business. Some higher decline in net premiums earned due to above-average deferred credit life premiums related to coming quarters ~ 3m cost impact from KuRS completely compensated in the EBIT due to policyholder participation Investment result is significantly lower compared to Q 206. This is due to lower extraordinary gains mainly being used to finance ZZR. Ordinary investment result is up by roughly 4% thanks to higher ordinary income from real estate and other alternative investments Q 207 ZZR allocation according to HGB - of 207m (Q 206: 68m). Total ZZR stock reached 2.48bn in Q 207, expected to rise to ~ 3.bn until year-end 207 EBIT impacted by higher RfB allocation due to pass-through of tax benefits to policyholders Top-line stabilised EBIT impacted by higher RfB allocation due to pass-through of tax benefits to policyholders 40 Investor Presentation July 207

41 II Segments Retail International P&L for Retail International m, IFRS Q 207 Q 206 Change Gross written premium,483,48 +29% of w hich Life % of w hich Non-Life % Net premium earned, % Net underw riting result 7 8 (3%) of w hich Life (8) (6) n/m of w hich Non-Life % Net investment income % Operating result (EBIT) % Group net income % Return on investment (annualised) 3.7% 4.0% (0.3%)pts Combined ratio FY206: 97% 96% 97% 98% 95% 97% 65% 65% 67% 64% 67% 3% 32% 3% 3% 30% Q 206 Q2 206 Q3 206 Q4 206 Q 207 Expense ratio Loss ratio Comments Q 207 GWP significantly up by 29% y/y also helped by tailwind from currencies in Brazil and Chile (curr.- adj.:+25.8%) and the consolidation of CBA/Italy since Q3 206 (GWP impact 48m). All core markets grew their top line, in local currency as well as in -terms. Mexico, Poland and Turkey even with significant doubledigit underlying growth rates P/C business grew by 23% in Q 207 y/y. Currencyadjusted, top line in P/C grew by 8.4% y/y, mainly backed by double digit growth rates in Poland, Mexico and Turkey and a high single digit growth rate in Chile Q 207 combined ratio slightly up by 0.4%pts y/y to 96.6%. Increase in loss ratio by 2%pts to 66.9% due to higher theft rates in Brazil, higher prices for spare parts namely in Mexico and wild fires in Chile. This is widely compensated by a.6%pts decline in the cost ratio predominantly due to cost optimisation measures in Poland and in Brazil EBIT up despite an overall negative currency influence (~ m) and the impact from wild fires in Chile (~ 3m), while additional EBIT contribution from CBA Vita was ~ 2m Turkey added.4m to Q 207 EBIT (stable vs. Q 206). Contribution from Chile was 83m GWP (Q 206: 69m) and 3.m in terms of EBIT ( 4.6m) Incl. net interest income on funds w ithheld and contract deposits First quarter 207 showed strong top-line growth and slight improvement in EBIT 4 Investor Presentation July 207

42 II Segments Reinsurance Division P&L for Reinsurance m, IFRS Q 207 Q 206 Change Gross w ritten premium 4,547 4,263 7% Net premium earned 3,733 3,542 5% Net underwriting result (23) 32 n/m Net investment income % Operating result (EBIT) (3%) Group net income (7%) Return on investment 3.% 3.0% 0.%pts EBIT ( m) FY206:, Comments The Division Reinsurance combines the two segments P/C Reinsurance and Life/Health Reinsurance. Since the FY206 reporting we additionally show the aggregated numbers for the Reinsurance Division Q 207 GWP up by 6.6% y/y; adjusted for currency effects: +5.9%. Net premium is up by 5.4% on a reported basis and grew by 4.3% on a currency-adjusted basis RoI slightly up by 0.%pts y/y to 3.% in Q 207; ordinary investment income higher mainly due to private equity and real estate investments Good EBIT net income driven by strong investment performance and favourable P/C underwriting result. Q 207 EBIT margin of 0.7% (Q 206:.7%) Q 206 Q2 206 Q3 206 Q4 206 Q 207 EBIT margin reflects a Talanx Group view; Note: Differences between figures from Reinsurance Division and Hannover Re reporting may occor due to different recognition of common private equity investments. At Talanx, they are fully consolidated due to Hannover Re s majority stakes. Favourable start into 207, in line with targets 42 Investor Presentation July 207

43 III Net investment income Net investment income Talanx Group m, IFRS Q 207 Q 206 Change Ordinary investment income % thereof current investment income from interest thereof profit/loss from shares in associated companies % % Realised net gains/losses on investments (38%) Write-ups/write-downs on investments (32) (40) n/m Unrealised net gains/losses on investments 24 3 (2%) Investment expenses (54) (55) n/m Income from investments under own management % Income from investment contracts () 2 n/m Interest income on funds withheld and contract deposits (3%) Comments Ordinary investment income up, also driven by distributions in real estate and other alternative investments Realised investment net gains about ~ 80m lower y/y to 37m in Q 207, as increased ZZR is partly financed by extraordinary operating gains. Q 207 ZZR allocation: 207m vs. Q 206: 68m; under German GAAP only) Investment writedowns lower compared to Q 206, remaining on a very moderate level Q 207 RoI at 3.5% - slightly lower compared to the previous year (Q 206: 3.7%) and predominantly due to lower realised gains on investments. Well on track to reach FY207 outlook of at least 3.0% Impact from ModCo derivatives was limited at m in Q 207 vs. Q 206: - m. There is no impact from inflation swaps anymore as these have been terminated already FY205 Total,0,022 (%) Q 207 RoI of 3.5% at sufficient level - well on track to reach FY207 Outlook of at least 3.0% 43 Investor Presentation July 207

44 III Equity and capitalisation Our equity base Capital breakdown ( bn) Mar 6 30 June 6 30 Sep 6 3 Dec 6 3 Mar 7 Comments Compared to the end of FY206, shareholders equity increased by 290m to 9,368m at the end of Q 207, predominantly driven by the contribution from net income ( 238m). Limited effect on OCI from the change in currency effects, but also from interest rates Book value per share stood at compared to 35.9 in FY206 and in Q 206. NAV per share was (FY206: 3.80; Q 206: 29.64) Neither book value per share nor NAV contain off-balance sheet reserves. These amounted to 382m (see next page), or.5 per share (shareholder share only). This would add up to an adjusted book value of per share and an adjusted NAV (excluding goodwill) of Shareholders equity Minorities Subordinated liabilities Shareholders equity up by 290m compared to end of FY Investor Presentation July 207

45 III Equity and capitalisation Unrealised gains Unrealised gains and losses (off and on balance sheet) as of 3 March 207 ( m) 526 3,806 4, (20) (58) 9,069 4,604 4,737 Loans and receivables Held to maturity Investment property Real estate own use Subordinated loans Notes payable and loans Off balance sheet reserves Δ market value vs. book value Available for sale Other assets On balance sheet reserves Total unrealised gains (losses) 3 Dec 6 4, (296) (68) 4,948 4, ,78 9,666 Note: Shareholder contribution estimated based on FY205 profit sharing pattern Off-balance sheet reserves of ~ 4.7bn 382m (.5 per share) attributable to shareholders (net of policyholders, taxes & minorities) 45 Investor Presentation July 207

46 III Equity and capitalisation Contribution to change in equity In m Comments 52 At the end of Q 207, shareholders equity stood at 9,368m, or per share 238 This was 290m above the level at the end of FY206 ( 9,078m or 35.9 per share), predominantly driven by the Q 207 Group net income 9,078 9,368 At the end of FY206, the Solvency II Ratio (Solvency II view, HDI Group level) stood at 86% (FY205: 7%; Q3 206: 60%) 3 Dec 206 Net income after minorities Other comprehensive income 3 March 207 Based on Basic Own Funds, so taking the full internal model into account, Talanx s capitalisation was 264% (FY205: 253%; Q3 206: 239%) all numbers before transitional Shareholders equity up to 9,368m, or per share (FY206: 9,078m) 46 Investor Presentation July 207

47 A Q 207 Additional Information GWP trend GWP development ( bn) Comments (0.2) (0.2) (0.) (0.2) (0.2) Q Q2 Q3 Q4 Q Industrial Lines Retail Germany P/C Retail Germany Life Retail International Reinsurance P/C Life/Health Reinsurance Corporate Functions and Consolidation Q 207 GWP were significantly up (+8.4%), somewhat helped by currency effects (curr.-adj.: +7.4%) Retail International and Industrial Lines were the main drivers of growth Retail International helped by consolidation effect from CBA/Italy (from 30 June 206), explaining ~50% of the segment s GWP growth Overall, seasonal pattern remains intact Q 207 GWP significantly up due to strong contribution from Retail International and Industrial Lines 47 Investor Presentation July 207

48 A New Segmentation in Retail Germany The responsibilities within the Retail Germany Division have been separated between Life and Property/Casualty. As a consequence, applying IFRS 8, both segments report separate P&Ls (incl. EBIT) since the 6M 206 reporting In addition, Talanx continues to show the former segment Retail Germany as the aggregated division Talanx insurance activities are now subdivided into six, rather than the previous five reportable segments Divisions Operating Segments Industrial Lines Retail Germany P/C Insurance Life Insurance Retail International Reinsurance P/C Reinsurance Life/Health Reinsurance Retail International continues to act as one single segment including life and non-life activities. To further raise transparency, Talanx has started to show regional P&Ls (incl. EBIT) in the status report The (very limited) effects of the interaction betw een the tw o new segments in the Retail Germany division are now eliminated in the Group s consolidation line. Under the former segmentation, interaction betw een Life and Non-Life business has been eliminated w ithin Retail Germany. 48 Investor Presentation July 207

49 A Q 207 Additional Information Segments Industrial Lines Retail Germany P/C Retail Germany Life m, IFRS Q 207 Q 206 Change P&L Gross written premium 2,004,92 +4% Net premium earned % Net underwriting result % Net investment income % Operating result (EBIT) % Net income after minorities % Key ratios Combined ratio non-life insurance and reinsurance 96.5% 97.6% (.0%)pts Return on investment 3.5% 2.6% 0.9%pts Q 207 Q 206 Change % (%) (6) (3) n/m % % n/a n/a n/a 0.7% 03.8% (2.%)pts 2.5% 2.3% 0.2%pts Q 207 Q 206 Change,47,55 (%) (4%) (46) (465) n/m (5%) 2 4 (49%) n/a n/a n/a % 4.7% (0.8%)pts 49 Investor Presentation July 207

50 A Q 207 Additional Information Segments (continued) Retail International P/C Reinsurance Life and Health Reinsurance Group m, IFRS Q 207 Q 206 Change Q 207 Q 206 Change Q 207 Q 206 Change Q 207 Q 206 Change P&L Gross written premium,484,48 +29% 2,85 2,502 +3%,732,76 (2%) 9,752 8,995 +8% Net premium earned, % 2,66,96 +0%,567,58 (%) 6,692 6,266 +7% Net underwriting result 7 8 (3%) 9 00 (9%) (4) (68) n/m (45) (422) n/m Net investment income % % (6%),0,022 (%) Operating result (EBIT) % % (7%) % Net income after minorities % n/a n/a n/a n/a n/a n/a % Key ratios Combined ratio non-life insurance and reinsurance 96.6% 96.2% 0.4%pts 95.6% 94.7% 0.9%pts % 96.3% 0.0%pts Return on investment 3.7% 4.0% (0.3%)pts 3.0% 2.8% 0.2%pts 3.6% 3.6% 0.0%pts 3.5% 3.7% (0.2%)pts 50 Investor Presentation July 207

51 A Q 207 Additional Information GWP of main risk carriers Retail Germany GWP, m, IFRS Q 207 Q 206 Change Retail International GWP, m, IFRS Q 207 Q 206 Change Non-life Insurance % HDI Versicherung AG (0%) Life Insurance,47,55 (%) HDI Lebensversicherung AG (4%) neue leben Lebensversicherung AG (9%) TARGO Lebensversicherung AG % PB Lebensversicherung AG 6 88 (4%) Total,906,904 +0% Non-life Insurance % HDI Seguros S.A., Brazil % TUiR Warta S.A. 2, Poland % TU Europa S.A. 3, Poland 2 28 (25%) HDI Assicurazioni S. p. A., Italy (P&C) % HDI Seguros S.A. De C.V., Mexico % HDI Sigorta A.Ş., Turkey % HDI Seguros S.A., Chile % Life Insurance % TU Warta Zycie S.A., Poland % TU Europa Zycie, Poland % HDI Assicurazioni S. p. A., Italy (Life) (7%) Total,483,48 +29% Talanx ow nership 67.5% 2 Talanx ow nership of 75.74% 3 Talanx ow nership 50% + share 4 incl. Magallanes Generales; merged w ith HDI Seguros S.A. from April Investor Presentation July 207

52 A Outlook for Talanx Group FY 207 Expected change factors in Group net income in m ~(85) ~(35) ~(0) (26) ~(25) ~25 ~ ~800 FY206 Change in net income from Reinsurance Investment result in Primary insurance According to Hannover Re guidance (after Talanx s minorities) 2 In case of neutral currency result booked in other result Currency result in Primary Insurance 2 C-Quadrat disposal Full utilisation of large loss budget in Primary Insurance Result improvement KuRS Operating performance & other Expected operating inprovement in Primary Insurance (incl. KuRS effects) likely to be overcompensated by lower investment result and guided profit decline in Reinsurance FY207E 52 Investor Presentation July 207

53 A Retail Germany KuRS programme: Investment and cost reduction targets P/C Estimated project costs and savings in P/C in m ~ 40m Cost reduction ~ 230m Investment Cost reduction before Inflation EBIT impact -5-5 ~28 ~50 ~80 ~20 ~ E 208E 209E 2020E 202E Cost reduction ~70 ~-42 ~80 Investment & personnel redundancies ~96 ~26 ~40 ~-5 ~-30 ~-5 ~-2 Comments Cumulative costs for KuRS in P/C are expected to account for ~ 230m More than half of all project costs are expected to have been booked until end-206 The expected costs for personnel redundancies have been covered until mid-206 In 207, the KuRS programme savings are likely to exceed costs on EBIT level for the first time From 207 onwards, the improvement in EBIT is expected to visibly progress year by year From 207 onwards, the EBIT contribution of KuRS is expected to be positive 53 Investor Presentation July 207

54 A Q 207 Additional Information Retail International Europe: Key financials P&L for Retail International Europe m, IFRS Q 207 Q 206 Δ Gross written premium, % Net premium earned % Net underw riting result () n/m Net investment income % Operating result (EBIT) % Combined ratio and EBIT by selected carrier GWP split by carriers (P/C) 8m ( 69m) 93m ( 88m) 2m ( 28m) 34m ( 36m) 525m ( 44m) 296m ( 220m) GWP split by carriers (Life) Warta (Poland) TU Europa (Poland) HDI Italy HDI Turkey Other Warta, (Poland) TU Europa, (Poland) HDI Italy 95.6%; 25m 95.8%; 20m 87.%; 5m 8.5%; 6m 96.8%; 9m 96.4%; 0m 229m ( 8m) 47m ( 40m) 539m ( 375m) 78m ( 32m) Warta Life (Poland) TU Europa Life (Poland) HDI Italy HDI Turkey 02.%; m 02.5%; m 85m ( 222m) Other Q 207 Q 206 EBIT number includes Life and Non-Life operations Strong top-line improvement due to growth effects mainly from Poland EBIT flat 54 Investor Presentation July 207