Hannover Rück SE Shanghai Branch Solvency Report Summary 2016 Q4
Solvency Report Summary 2016 Q4 1. Basic information 1.1. Name of Company Hannover Rück SE Shanghai Branch 1.2. Registered Address: Suite 701-703, Building 1, Lujiazui Century Financial Plaza, 729 South Yanggao Road, Shanghai, P.R.China 200127 1.3. General Manager: Lye Fook Kong ( 译名 : 黎福光 ) 1.4. Scope of business and area of operations: Life Reinsurance, includes Reinsurance business within the territory of China; Retrocession business within the territory of China; International reinsurance business. Nonlife Reinsurance, includes Reinsurance business within the territory of China; Retrocession business within the territory of China; International reinsurance business. 1.5. Ownership structure and shareholders List of Top 10 major shareholders at the end of current quarter Order Name of shareholders Actual Investment (in CNY 10,000) Stake (%) Share Class Share Status 1 Hannover Rück SE 130,500 100% Foreign shares Normal Page 1/8
1.6. Subsidiaries, joint ventures and affiliates We have no subsidiaries, joint ventures and affiliates in this quarter. 1.7. Basic Information about senior management Name Age Education Title Term start date Qualification approval document number Lye Fook Kong ( 译名 : 黎福光 ) 46 Bachelor of Insurance Business GM July 31, 2015 CIRC approval [2015] No.776 Director of Investment June 06, 2015 - Tenure and part-time status in the related party and other units 江瀚 JIANG Johnson 王岩 WANG Yan 盛毅 SHENG Sunny 刘晓岚 LIU Helen 41 Bachelor of Economics 42 Doctor of Economics and Social Sciences 38 Master of Business Administration DGM May 31, 2008 CIRC International [2008] No.421 Chief Actuarial July 28, 2008 CIRC P&C [2008] No. 960 CIRC P&C [2009] No. 684 CIRC P&C [2010] No. 868 CIRC P&C [2011] No. 1195 CIRC P&C [2012] No. 898 DGM Mar 5, 2014 CIRC approval [2014] No.195 CFO Sep 21, 2009 CIRC Accounting [2009] No.952 CRO Apr 1, 2015-35 LLM CCO Aug 28, 2015 CIRC approval [2015]No. 879 1.8. Contact person for solvency information disclosure Name: 盛毅 SHENG Sunny Tel: +86 21 20358998 Mobile: +86 186 1681 6631 Fax: +86 21 58209396 Email: sunny.sheng@hannover-re.com Page 2/8
2. Main indicators 2.1. Solvency ratio indicators (CNY; %) Name of indicator Current quarter Last quarter Core solvency surplus 1,101,625,122 1,288,778,564 Core solvency adequacy ratio 254% 277% Comprehensive solvency surplus 1,101,625,122 1,288,778,564 Comprehensive solvency adequacy ratio 254% 277% 2.2. The latest comprehensive risk rating According with the requirements of the CIRC Notice of Data Preparation for the Solvency ǁ Risk Comprehensive Rating ([2016] No.628), we completed the reporting for 2016Q3 risk comprehensive rating, and received the Notification of the Risk Comprehensive Rating Result (Classified Regulation) for the 2016Q3 ([2017] No.55) which confirmed us that we were classified as B-class in the Risk Comprehensive Rating (Classified Regulation) for 2016Q3. 2.3. Business Indicators (CNY) Name of indicator Current quarter Last quarter Insurance business income 1,149,746,264 1,049,672,375 Net profit 1,239,307 7,164,759 Net assets 1,554,929,873 1,573,623,101 3. Actual capital (CNY) Name of indicator Current quarter Last quarter Admissible assets 26,911,316,968 32,009,379,398 Admissible liabilities 25,096,615,932 29,993,897,126 Actual capital 1,814,701,036 2,015,482,273 Including: 1,814,701,036 2,015,482,273 Core tier 1 capital Core tier 2 capital - - Supplementary tier 1 capital - - Supplementary tier 2 capital - - Page 3/8
4. Minimum capital (CNY) No. Name of indicator Current quarter Last quarter 1. Minimum capital 713,075,914 726,703,709 1.1. Minimum capital for quantitative risk 728,074,244 726,703,709 1.1.1. Minimum capital for Nonlife insurance risk 278,955,720 346,555,702 1.1.2. Minimum capital for Life insurance risk 377,270,012 316,678,116 1.1.3. Minimum capital for Market risk 190,218,170 192,691,249 1.1.4. Minimum capital for Credit risk 231,231,223 219,536,064 1.1.5. Correlation 349,600,880 348,757,423 1.1.6. Loss absorbency of specific insurance contracts - - 1.2. Minimum capital for control risk -14,998,329-1.3. Supplementary capital - - 5. The latest two comprehensive risk ratings (classified regulation) The Risk Comprehensive Rating (Classified Regulation) for 2016Q2: A-class The Risk Comprehensive Rating (Classified Regulation) for 2016Q3: B-class 6. Risk management requirement and assessment 6.1. The latest SARMRA assessment result Items Score SARMRA result 84.12 Including: Risk management foundation and environment 16.93 Risk management targets and tools 7.4 Insurance risk management 8.46 Market risk management 8.51 Credit risk management 8.16 Operational risk management 8.28 Page 4/8
Strategy risk management 8.51 Reputation risk management 8.87 Liquidity risk management 9 6.2. Risk management execution framework Hannover Re Shanghai Branch is subject to the Hannover Re Group s risk strategy and risk management framework. Our current corporate strategy encompasses ten guiding principles that safeguard the realization of our vision Long-term success in a competitive business across the various divisions. The following principles of the corporate strategy constitute the key strategic points of departure for our Hannover Re Group-wide risk management: We manage risks actively. We maintain an adequate level of capitalization. We are committed to sustainability, integrity and compliance. The risk strategy is derived from our corporate strategy. It forms the core element in our handling of opportunities and risks. The risk strategy specifies more closely the goals of risk management and documents our understanding of risk. We have also defined ten overriding principles within our risk strategy: We adhere to the risk appetite set by the Executive Board. We integrate risk management into value-based management. We promote an open risk culture and the transparency of our risk management system. We strive for the highest ERM rating and a comfortable level of capital adequacy under Solvency II. We determine a materiality threshold for our risks. We make use of appropriate quantitative methods. We apply well-suited qualitative methods. We allocate our capital risk-based. We ensure the necessary separation of functions through our organizational structure. We assess the risk contribution from new business areas and new products. The risk strategy is similarly specified with an increasing degree of detail on the various levels of the company. The risk strategy and the major guidelines derived from it, such as the Framework Guideline on Risk Management and the central system of limits and thresholds, are reviewed at least once a year. In this way we ensure that our risk management system is kept up-to-date. We manage our total enterprise risk such that we can expect to generate positive Group net income with a probability of 90% p. a. and the likelihood of the complete loss of our economic capital and shareholders equity does not exceed 0.03% p. a. These indicators are monitored using our internal capital model and the Executive Board is informed quarterly about adherence to these key parameters as part of regular reporting. The necessary equity resources are determined according to the requirements of our economic capital model, solvency regulations, the expectations of rating agencies with respect to our target rating and the expectations of our clients. Above and beyond that, we maintain a capital cushion in order to be able to act on new business opportunities at any time. The internal target capitalization of the Hannover Re Group is therefore significantly higher than the minimum confidence level of 99.5% required under the European Solvency II regime. Page 5/8
The Hannover Re Group is regulated in Europe under Solvency II. In addition, Hannover Re Shanghai Branch is regulated according to the China Risk-oriented Solvency System. 6.3. Measures to improve risk management and progress To improve our comprehensive risk management capability, according to the relevant requirements set out in The insurance company solvency regulation no.11: solvency risk management requirements and assessment, our work progresses in the risk management are as follows: CIRC implemented the on-site review to Shanghai Branch in Aug 2016, according to the CIRC Notice of 2016 SARMRA reviewing result ([2017] No.328), our SARMRA score for 2016 is 84.12. This quarter, we made some supplements and revisions to the existed risk management policies and procedures based on the questions raised during the on-site review. So far parts of these documents have been finished and waiting for the sign-off by the senior management to form a more sophisticated risk management system. To follow the principle of implementation effectiveness, all responsible departments reinforced the implementation of the policies and procedures and make the related documentations. As noticed by CIRC, we will receive the formal feedbacks from CIRC for the detailed reviewing results, regarding our weaknesses and improvement requirements, after the formal feedbacks received, we will get further improved for our risk management system to be in line with the regulatory standards. This quarter, the risk management department sorted the main risk management procedures during the daily work by using the Hannover Re group s standard process documentation system. This way we established the Hannover Re group s standardised procedures. The risk management department will review and revise the procedure once a year, to make our company s risk management more professional and standardized. Our company team of risk management would timely follow-up and focus on the progress of all improvement measures, and start from the system soundness and implementation effectiveness, carry out the risk management works in both business implementation and company government, strengthen the company s risk awareness of all kinds of risks and improve the company s ability of solvency risk management. 7. Liquidity risk 7.1. Liquidity risk regulatory items(cny; %) Items This quarter Net cash flows -48,915,005 Consolidated liquidity ratio Within 3 months 78% Within 1 year 75% Above 1 year 131% Liquidity coverage ratio Stress Scenario 1 805% Page 6/8
Stress Scenario 2 1579% Liquidity coverage ratio on separate accounts of investment-linked insurance business Not applicable 7.2. Liquidity risk analysis and coping measures 7.2.1. Changes on liquidity risk regulatory items The liquidity risk regulatory indicators of the latest and the previous quarter are listed in the upper part. In this quarter the net cash outflows is around 50 million, of which, business operation has a cash inflow of 0.35 billion and investment has a cash outflow of 0.41 billion. For the consolidated liquidity ratio, the total asset is larger than total liability, and our consolidated liquidity ratio is overall robust. The company investment assets have high quality, and under the stress scenarios 1 and 2, the coverage ratios are 805% and 1579%, which indicates that the company liquidity coverage is abundant. 7.2.2. Analysis on the difference between reporting period, coping measures and target of improvement In this quarter the net cash outflows is around 50 million, of which, business operation has a cash inflow of 0.35 billion and investment has a cash outflow of 0.41 billion. The cash inflow for the operation side is in line with the forecast; while for the cash outflow of investment side, it is mainly due to our investment portfolio adjusted from MMF to Bond by considering the higher investment return from Bond. Since the MMF is a cash management tool, the decision to increase Bond while reduce MMF position led to cash decreasing by investment net cash outflow. 8. Regulatory measures taken by regulatory authorities against the company 8.1. Regulatory measures taken by the CIRC against the company No regulatory measures were taken by the CIRC against the company in the reporting period. 8.2. Rectification measures adopted by the company and information about implementation Not applicable. Hannover Rück SE P.O. Box 61 03 69, 30603 Hannover, Germany Supervisory Board Herbert K. Haas/Chairman Page 7/8
Executive Board Ulrich Wallin/Chairman, Sven Althoff, Claude Chèvre, Jürgen Gräber, Dr. Klaus Miller, Dr. Michael Pickel, Roland Vogel Registered Office Hannover, Commercial Register Hannover, HRB 6778 Page 8/8