Annual Report 2010 - Hannover Re

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and risk management. In the coming years we expect the reinsurance market to develop a more vigorous growth momentum than the primary market. Furthermore, it is our expectation that earnings prospects will remain on a satisfactory level. Life and health reinsurance is generally characterised by its stable growth and minimal exposure to random fluctuations in results. There are nevertheless financial and non-financial risks (particularly risks such as mortality and longevity, morbidity and disability as well as the lapse risk), which are fully integrated into Hannover Re’s risk management. In this context, crucial importance attaches to the appropriate selection of pricing assumptions, fundamental research into developments affecting the biometric actuarial bases, the adequate and complete reserving of all technical liabilities as well as risk diversification (both geographically and in terms of risk types, e.g. between mortality and longevity). Investments In view of the low yield level on government bonds and the reduced risk premiums on corporate bonds, any increase in investment income will be driven largely by the anticipated further growth in asset holdings. Although indications are emerging that money market rates will remain low on a sustained basis, we believe that there is an increased probability of a rise in yields – especially at the long end of the yield curve, with corresponding effects on equity from medium- and long-dated bonds. We shall counter this with a slightly reduced interest rate positioning and by expanding the balance sheet protection for our shareholders’ equity through recognition at cost. Bearing in mind the current economic expectations, we shall moderately increase our equity allocation in the current year. However, since we anticipate substantially greater volatility on equity markets, we shall manage this asset class particularly tightly according to risk considerations. The above notwithstanding, we shall counteract a potential increase in volatility through broad diversification of asset classes and individual debtors. Outlook for the full 2011 financial year We expect another very good overall result for the Hannover Re Group in the current year. The non-life reinsurance business group is expected to deliver stable or slightly higher net premium income, with an increase of up to 3%. Despite the continued trend towards softening markets, we anticipate a very good result for 2011. The life and health reinsurance business group is forecast to generate net premium growth of 10% to 12% and an EBIT margin in excess of 6%. The expected positive cash flow that we generate from the technical account and our investments should – subject to stable exchange rates – lead to further growth in our asset portfolio. In the area of fixed-income securities we continue to stress the high quality and diversification of our portfolio. We are targeting a return on investment of 3.5% for 2011. Bearing in mind the satisfactory to good market conditions described above in non-life and life/health reinsurance as well as our strategic orientation, we are looking forward to another good financial year in 2011. We expect our gross premium volume in total business to grow by about 5%. If no allowance is made for the special effects that favourably influenced the result in 2010, the net income generated by the Hannover Re Group will inevitably fall short of the previous year’s level. As things currently stand, based on our positioning and our financial strength as well as the business prospects described above, we expect Group net income to come in at around EUR 650 million. This is subject to the premise that the burden of catastrophe losses does not significantly exceed the expected level of around EUR 530 million and that there are no drastically adverse movements on capital markets. For 2011, as in recent years, we are therefore aiming for a dividend in the range of 35% to 40% of Group net income. Matters of special significance arising after the closing date for the consolidated financial statements are discussed in Section 7.11 of the notes “Events after the balance sheet date” on page 185. Our strategy of progressively stepping up investments in real estate will continue in 2011. We anticipate further attractive opportunities here in our focus markets of Germany and the United States. Within the bounds of our investment strategy we shall make active use of other types of alternative investments in order to diversify our risks and boost returns. 98 Management report Forecast Hannover Re Group annual report 2010
Profit and growth targets for 2011 Business group Key data Strategic targets Non-life reinsurance Combined ratio ≤ 100% Net catastrophe loss expectancy in EUR million ≤ 530 EBIT margin ≥ 10% IVC margin 1 ≥ 2% Life and health reinsurance Gross premium growth 10 – 12% EBIT margin ≥ 6% MCEV increase 2 ≥ 10% Increase in the value of new business ≥ 10 % Group Investment return ≥ 3.5% 3 Minimum return on equity ≥ 11.1% 4 EBIT growth ≥ 10% Triple-10 targets Growth in earnings per share ≥ 10% Growth in book value per share ≥ 10% 1 IVC/net premium earned 2 MCEV increase on the basis of the adjusted MCEV of the previous year after elimination of capital changes and changes from currency effects 3 Risk-free interest rate + cost of capital 4 750 basis points above the risk-free return Management report Outlook for 2012/2013 Looking beyond the current financial year, we expect largely favourable conditions in non-life reinsurance and life/health reinsurance. In non-life reinsurance we are guided exclusively by profit rather than growth targets. Our goal here is to achieve an EBIT margin of at least 10% each year. In life and health reinsurance we have set ourselves an annual growth target of 10% to 12% for gross premium income. Along with our organic growth we anticipate further portfolio acquisitions in mature insurance markets. We are targeting an EBIT margin of at least 6%. On the Group level our return-on-equity target is at least 750 basis points above the risk-free interest rate. Both the earnings per share and the book value per share also constitute central management ratios and performance indicators for our company. Our strategic objective is to increase these key figures – together with the operating profit (EBIT) – by doubledigit margins every year. Hannover Re Group annual report 2010 Forecast Management report 99
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Annual Report 2010
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The Hannover Re Group America Europ
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Contents For our investors 2 - 15 L
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Our operational business was impact
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Our life and health reinsurance bus
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years will generate increasing inco
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For our investors Seated from left
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The market capitalisation of the Ha
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Basic information Securities identi
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Strategic objectives 1. Profitable
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Macroeconomic climate The global ec
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Business development We are thoroug
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Non-life reinsurance Accounting for
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Along with the aforementioned natur
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The establishment of the Federal In
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The Die beste volatility Volatilit
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Credit and surety Breakdown of gros
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Thanks not least to a new branch of
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The insurance sector continues to b
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have enlarged our portfolio. In the
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anch in Shanghai concentrates on bu
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Ageing macht creates Märkte market
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Key figures for life and health rei
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new business. Against this backdrop
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The rating agency Standard & Poor
Page 51 and 52: Rating of fixed-income securities
Page 53 and 54: In 2009 Hannover Re launched anothe
Page 55 and 56: Solvency For our company II heißt
Page 57 and 58: Social commitment Hannover Re’s c
Page 59 and 60: Opportunity and risk report Overrid
Page 61 and 62: Available capital and required risk
Page 63 and 64: Internal risk management and contro
Page 65 and 66: The table below lists the catastrop
Page 67 and 68: Sensitivity analysis of the Market
Page 69 and 70: events. Further significant risk ma
Page 71 and 72: Gross written premium retained in %
Page 73 and 74: Strategic risks derive from the ris
Page 75 and 76: Performance Excellence Check The PE
Page 77 and 78: Financial position Asset / liabilit
Page 79 and 80: Financing and Group debt In additio
Page 81 and 82: Financial strength ratings of subsi
Page 83 and 84: Naturkatastrophen Natural catastrop
Page 85 and 86: Corporate Governance The principles
Page 87 and 88: for orderly performance of their ta
Page 89 and 90: in question. With the aim of making
Page 91 and 92: The Annual General Meeting of Hanno
Page 93 and 94: Measurement bases/conditions of pay
Page 95 and 96: Individual remuneration received by
Page 97 and 98: motivation, customer satisfaction,
Page 99 and 100: eversal. Nevertheless, we anticipat
Page 101: of demand and the diversification o
Page 105 and 106: as at 31 December 2010 Liabilities
Page 107 and 108: Consolidated statement of comprehen
Page 109 and 110: Consolidated cash flow statement 20
Page 111 and 112: Figures in EUR thousand 1.1.- 31. 1
Page 113 and 114: as at 31 December 2010 Life/health
Page 115 and 116: as at 31 December 2010 Life/health
Page 117 and 118: 1. Company information The parent c
Page 119 and 120: Standards Applicable to financial y
Page 121 and 122: Impairments: as at each balance she
Page 123 and 124: asis of a five-year detailed plan a
Page 125 and 126: come. Currency translation differen
Page 127 and 128: The projections, which cover variou
Page 129 and 130: The following list of shareholdings
Page 131 and 132: Name and registered office of the c
Page 133 and 134: Name and registered office of the c
Page 135 and 136: Investments Within the scope of its
Page 137 and 138: 5. Notes on the individual items of
Page 139 and 140: The stated maturities may in indivi
Page 141 and 142: Amortised cost, unrealised gains an
Page 143 and 144: Carrying amounts before impairment
Page 145 and 146: Breakdown of investments by currenc
Page 147 and 148: In addition, we held indirect real
Page 149 and 150: Development of level 3 financial in
Page 151 and 152: Development of deferred acquisition
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This item principally consists of t
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Technical provisions in EUR thousan
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Net loss reserve and its run-off in
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Liabilities in liability and motor
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From 1997 onwards it has been possi
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The recognised provision for pensio
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in EUR thousand Other reclassificat
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Debt and subordinated capital in EU
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Furthermore, a long-term unsecured
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6.2 Investment income Investment in
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6.3 Reinsurance result Reinsurance
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Tax-relevant bookings on the Group
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The following table presents a reco
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Maturity structure of derivative fi
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Business assumed and ceded in Germa
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last twenty trading days prior to t
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On this basis the aggregate provisi
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7.7 Contingent liabilities and comm
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7.11 Events after the balance sheet
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Responsibility statement To the bes
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ated by a reinsurance subsidiary do
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- in each case drawn up as at 31 De
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Branch offices and subsidiaries of
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Spain United Kingdom USA HR Hannove
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Corporate Governance: serves to ens
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Life and health (re-)insurance: col
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Segmental reporting: presentation o
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Financial calendar 2011/2012 9 Marc
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Contact information Corporate Commu
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Annual Report 2010 - Hannover Re

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