Hannover Re - The somewhat different reinsurer Wilhelm Zeller Chairman of the Executive Board Dresdner Kleinwort - German Investment Seminar New York, 16 January 2008
HR Overview Non-Life R/I Life R/I DISCLAIMER This presentation does not address the investment objectives or financial situation of any particular person or legal entity. Investors should seek independent professional advice and perform their own analysis regarding the appropriateness of investing in any of our securities. While Hannover Re has endeavoured to include in this presentation information it believes to be reliable, complete and up-to-date, the company does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such information. Some of the statements in this presentation may be forward-looking statements or statements of future expectations based on currently available information. Such statements naturally are subject to risks and uncertainties. Factors such as the development of general economic conditions, future market conditions, unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the actual events or results to be materially different from those anticipated by such statements. This presentation serves information purposes only and does not constitute or form part of an offer or solicitation to acquire, subscribe to or dispose of, any of the securities of Hannover Re. Hannover Rückversicherung AG. All rights reserved. Hannover Re is the registered service mark of Hannover Rückversicherung AG.
HR Overview Non-Life R/I Life R/I Premium-league table WE ARE AMONG THE TOP REINSURERS IN THE WORLD Rank Group Country GWP NPW 1 Swiss Re CH 28,415 25,808 2 Munich Re D 27,337 25,453 3 Berkshire Hathaway 2) USA 14,126 13,474 4 Hannover Re D 12,265 9,361 5 Lloyd's 3) GB 10,887 8,726 6 RGA Re USA 4,732 4,346 7 Everest Re BDA 4,001 3,876 8 Transatlantic Re USA 3,983 3,633 9 SCOR F 3,875 3,620 10 Partner Re BDA 3,734 3,689 11 XL Re BDA 3,682 2,960 12 Korean Re ROK 3,413 2,373 13 London Re CDN 3,287 2,979 14 Assicurazioni Generali SpA I 2,853 n.a. 15 Odyssey Re USA 2,336 2,161 "Volume is vanity, profit is sanity" (2006 figures in million USD 1) ) 1 1) Source: A.M. Best 2) GenRe Group; Berkshire Hathaway Re Group (National Indemnity) 3) 64 syndicates (as of Jul 2006) n.a. = not available
HR Overview Non-Life R/I Life R/I Return on equity STRONG ROE DESPITE STEADILY GROWING "E" Low standard deviations show: profitability is not a result of excessive risk-taking 26.0% 18.7% 18% 17.1% 17.1% 15.9% 15.7% 14.0% 13.9% 13.9% 13.5% 13.0% 13.1% 12.7% 12.5% 12.3% 12.2% 12.1% 11.7% 12.6% 12.0% 11.5% 11.5% 9% 1.9% 0.7% 0% 1997 1998 Minimum target 1) 1999 2000 Actual 2001 2002 2003 2004 2005 2006 Avg. 02-06 Avg. 97-06 St. Dev. (10y) = 7.6% "Sharpe ratio" 2) = 1.16x St. Dev. (5y) = 6.7% "Sharpe ratio" 2) = 1.26x 2 1) 750 bps above 10-year government bonds (RFR), after tax 2) (Avg. RoE Avg. RFR)/St. Dev.
HR Overview Non-Life R/I Life R/I Profit-league table HNR1 CONSISTENTLY AMONG MOST PROFITABLE REINSURERS Even on after-tax basis, in spite of strong Bermuda competition 2002 2003 2004 2005 1) 2006 1) 2002-2006 Company avg. RoE Rank RoE Rank RoE Rank RoE Rank RoE Rank Rank RoE Renaissance Re 26% 1 31% 1 5% 9 (11%) 9 28% 2 16% 1 1) Odyssey Re 22% 2 20% 2 13% 5 (10%) 8 28% 1 15% 2 Hannover Re 16% 3 18% 4 13% 4 2% 4 19% 4 14% 3 Partner Re 10% 5 20% 3 17% 1 (2%) 6 22% 3 13% 4 Transatlantic Re 9% 6 14% 6 10% 7 1% 5 16% 8 10% 5 Everest Re 11% 4 15% 5 11% 6 (6%) 7 18% 6 10% 6 1) Swiss Re (1%) 10 10% 7 14% 3 7% 2 16% 7 9% 7 Munich Re 2) 7% 7 (3%) 10 10% 8 12% 1 14% 9 8% 8 XL Re 3) 6% 9 6% 9 16% 2 (17%) 10 19% 5 6% 9 1) Converium 7% 8 10% 8 (40%) 10 4% 3 3% 10 (3%) 10 1) We aim to be one of the top 3 R/I in terms of RoE each year 3 Ranking among shown peer group 1) Based on company data 2) 2002 R/I only, 2003-2006 group figures 3) Based on XL Capital group figures
HR Overview Non-Life R/I Life R/I HANNOVER RE'S "TRIPLE-10 TARGET" Annual double-digit growth of: Operating profit (EBIT) Earnings per share (EPS) by 10% every year Book value per share (BV/S) Volume is vanity, profit is sanity! 4
HR Overview Non-Life R/I Life R/I Triple-10 target EBIT GROWTH FAR ABOVE TARGET 1,000 in m. EUR 958,900,800,700 732 CAGR: 19.4% 647* 826*,600,500,400,300 471 539,200,100,0 2002 2003 2004 2005 2006 122 EBIT 5 * Planned 2002-2003 US GAAP, from 2004 IFRS
HR Overview Non-Life R/I Life R/I Triple-10 target 1) EPS REACHES NEW ALL-TIME HIGH Proof to our claim that single years of volatility only disrupt l.-t. positive trend!,5,4 in EUR 4.13 3.92 6) 4.27,4,3,3,2 1.94 2.29 CAGR: 16.3% 2.70 4) 2.75 3.24 3.40 5) 2.32,2,1 1.04,1 0 2) 3) 3) 3) 3) 3) 3) 0.41 0.11 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 EPS 1) 1) Figures have been adjusted to the 3-for-1 share split in July 2002 4) Analysts' consensus estimate before 9/11 losses 2) Revised DVFA/GDV method (including goodwill write-off) 5) Analysts' consensus estimate before 4 Florida hurricanes 3) Earnings per share on US-GAAP basis, fully diluted 6) Analysts' consensus estimate before "KRW" 6
HR Overview Non-Life R/I Life R/I Triple-10 target BOOK VALUE-PER-SHARE TARGET EASILY OVERACHIEVED,25,25,23,24,24,19,19,20,20,21,21,22,22,23,17,18,18,16,16,17,14,15,15,12,12,13,13,14,10,10,11,11,7,8,8,9,9,6,6,7,4,5,5,3,3,4,1,1,2,2 0 in EUR 17.76 17.21 17.90 CAGR: 14.5% 24.03 22.76 21.57 20.94 19.57 19.50 19.97 17.89 14.76 15.50 14.50 13.95 12.67 12.02 10.95 7.12 6.64 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Book value per share Tangible book value per share* 7 * Excl. goodwill 1997 German GAAP, 1998 2003 US GAAP, from 2004 IFRS
HR Overview Non-Life R/I Life R/I Hannover Re Group THE SOMEWHAT DIFFERENT REINSURER Focus on profitability, not on premium, league tables or market share We have no premium-growth targets, only for earnings We are not all things to all people We specialise in what we know best (= our definition of specialist) Being a "Multi Specialist" with a global footprint reduces risk and stabilises earnings Capital management Lean equity base with intelligent use of hybrids and soft capital We have the lowest CoC in our industry (6.6%) Cost leadership We have the lowest administrative-expense ratio in the industry (2.7%) Fast, flexible, and undogmatic approach to business opportunities We often do exactly the opposite of what our peers do 8
HR Overview Non-Life R/I Life R/I NON-LIFE REINSURANCE Non-Life Reinsurance Life/Health Reinsurance E+S Rück, Hannover Hannover Re, Hannover with B/Os in Hong Kong, Kuala Lumpur, Manama, Paris, Stockholm, Sydney, Toronto Hannover Re Africa, Johannesburg Hannover Re (Bermuda) Ltd., Hamilton, Bermuda Hannover Re (Ireland) Ltd., Dublin Hannover ReTakaful, Manama, Bahrain Inter Hannover, London Compass Ins. Co, Johannesburg Hannover Life Re Africa, Johannesburg Hannover Life Re America, Orlando/Florida Hannover Life Re Australasia, Sydney Hannover Life Re Bermuda, Hamilton Hannover Life Re Germany (E+S Rück), Hannover Hannover Life Re International, Hannover Hannover Life Re Ireland, Dublin Hannover Life Re UK, Virginia Water/London 9
HR Overview Non-Life R/I Life R/I Non-Life Reinsurance THE SOMEWHAT DIFFERENT REINSURER Centralised underwriting approach Secures U/W discipline and opportunistic cycle management Lean, efficient infrastructure with no U/W authority in London or U.S. Cycle management We only grow our market share in "hard" markets Reserve adequacy No. 1 priority in our risk management Traditionally high comfort level (> 50%); no material A&E* exposure Distribution through brokers Specialty vs. commodity business No appetite for acquisitions Our cycle management gets us all the business we want A no frills, opportunistic player 10 * Asbestos & environmental
HR Overview Non-Life R/I Life R/I Diversification A "MULTI SPECIALIST" WITH A GLOBAL FOOTPRINT Non-Life Reinsurance We are not all things to all people! We specialise in what we know best: USA Germany Marine (incl. energy) Aviation Credit, surety & political risks Global cat. XL business Global facultative business Structured products "Best overall reinsurer 2004 and 2006"* "No. 2 R/I in Germany, the No. 2 P/C mkt." "The leading XL reinsurer" "One of the market leaders" "No.3 worldwide" (Neg. correlation to rest of P/C) "Dedicated cat. writer (~10% of GWP)" "A truly global player" "Advanced Solutions for more than 25 years" Hannover Re, a "Multi Specialist" 11 * As voted in Flaspoehler survey
HR Overview Non-Life R/I Life R/I LIFE/HEALTH REINSURANCE Non-Life Reinsurance Life/Health Reinsurance E+S Rück, Hannover Hannover Re, Hannover with B/Os in Toronto, Sydney, Kuala Lumpur, Stockholm Hannover Re Africa, Johannesburg Hannover Re (Bermuda) Ltd., Hamilton, Bermuda Hannover Re (Ireland) Ltd., Dublin Hannover ReTakaful, Manama, Bahrain Inter Hannover, London Compass Ins. Co, Johannesburg Hannover Life Re Africa, Johannesburg Hannover Life Re America, Orlando/Florida Hannover Life Re Australasia, Sydney Hannover Life Re Bermuda, Hamilton Hannover Life Re Germany (E+S Rück), Hannover Hannover Life Re International, Hannover Hannover Life Re Ireland, Dublin Hannover Life Re UK, Virginia Water/London 12
HR Overview Non-Life R/I Life R/I Life/Health Reinsurance THE SOMEWHAT DIFFERENT REINSURER Focus, focus, focus 10 key markets = 95% of our business; 50 main clients = 85% of our portfolio 4 special products stand for > 50% of our total business - Stochastic partnerships - New markets - Bancassurance - Multinationals Sophisticated client-relationship management Ability to differentiate between value-creating and value-destroying clients We create win-win situations (don't play zero-sum games) We do consider acquisitions But only if strategic fit/complement No strategic prices Focused, long-term, growth-oriented, win-win approach 13
HR Overview Non-Life R/I Life R/I Life/Health Reinsurance THE FIVE-PILLAR BUSINESS MODEL Stochastic Partnerships Growth market New business financing More risks (esp. lapse risk) Higher prices BAT Hardly any competition Good conditions in most markets Bancassurance Most successful distribution channel for individual European life assurance and pension insurance Knowledge-oriented "Right" products, "right" risk selection, "right" remuneration for bank employees Excellent conditions New Markets "Generation 60+" Solutions for wealth decumulation age-related risks (critical illness, LTC) Conventional Risk R/I Leader in selected markets and products High business volume, thorough client selection Local, full service Multinationals Large, int. companies Dual marketing (central & local support) Ceded business Financing R/I Risk-oriented R/I 14
HR Overview Non-Life R/I Life R/I Diversification A "MULTI SPECIALIST" WITH A GLOBAL FOOTPRINT (CONT'D) Despite sale of Praetorian the diversification story is fully intact! Others 22% Structured products 16% Cat. XL 8% Facultative 7% 2006 GWP: EUR 5,499 m. 2) USA1) 19% Marine 6% Aviation 7% Credit, surety and pol. risks 6% Non-Life Reinsurance Germany 9% 1) Germany 15% Australia 4% Asia 6% Group Africa 3% Latin America 2% Multinationals 16% Traditional mortality risks 44% North America 37% Stochastic partnerships 13% 2006 GWP: EUR 2,794 m. Life/Health Reinsurance Bancassurance 11% New markets 16% Other European countries 33% 2006 GWP EUR 9,289 m. 3) We are not all things to all people. We specialise in what we know best. 15 1) All lines of Non-Life reinsurance except those stated below 2) Property/Casualty R/I and Financial R/I 3) Incl. consolidation
HR Overview Non-Life R/I Life R/I A PRELIMINARY SNAPSHOT AT 1/1 RENEWALS U.S. Primary - On average low double digit rate declines, especially on larger accounts - Casualty: Largest declines in Umbrella/Excess, Hospital Professional Liability and D&O - Property: Competitive in non-catastrophe areas Reinsurance - Property: Mostly stable with limited rate reductions - Casualty: Less competitive than primary due to stringent security requirements; somewhat shrinking margins but still adequate Bermuda property catastrophe General: Pressure in selected areas, but overall still profitable U.S.: Decrease of around 10% for hurricane and earthquake-exposed programmes Europe: Pressure on prices/decrease of rates of 5% - 10%; in "Kyrill" affected areas and Intra European programmes at least stable prices RoW: Decreases in catastrophe rates around 5% 16
HR Overview Non-Life R/I Life R/I A PRELIMINARY SNAPSHOT AT 1/1 RENEWALS Germany Primary - Industrial property: Rates still declining - Industrial casualty: Unabated competition - Motor: Price erosion to a lesser extent than expected Reinsurance - Industrial property: Full transparency for flood and windstorm required, stable conditions - Industrial casualty: Limited capacity, flight to quality - Motor: Rates in non-prop. motor liability continued on a sufficient level Catastrophe business: Stronger demand for protections covering higher return periods, rates increased 5% - 10% due to Kyrill Specialty lines Aviation: Softening in primary; only slightly reduced pricing in non-prop. reinsurance Marine: Further softening in primary markets; pressure on non-proportional reinsurance but no significant reductions Credit/Surety: Pressure on rates and terms and conditions in primary and reinsurance 17
HR Overview Non-Life R/I Life R/I OUR INVESTOR RELATIONS TEAM Hannover Re Karl-Wiechert-Allee 50 30625 Hannover, Germany Tel. + 49/5 11/56 04-0 (Switchboard) Fax: + 49/5 11/56 04-16 48 (direct line) Stefan Schulz Gabriele Bödeker Associate Director Senior IR Manager Corporate Communications Corporate Communications +49/5 11/56 04-15 00 +49/5 11/56 04-17 36 stefan.schulz@hannover-re.com gabriele.boedeker@hannover-re.com Simone Huch Daniela Gissinger Deputy IR Manager Assistant IR Manager Corporate Communications Corporate Communications +49/5 11/56 04-21 38 +49/511/56 04 15 29 simone.huch@hannover-re.com daniela.gissinger@hannover-re.com