1,059.5
2021
1 Restated pursuant to IAS 8
2
Proposed dividend
Key figures
in EUR million
Results
E 06
2021
+/-
previous
20201
2019
2018
2020
2017
Gross written premium
27,762.3
+12.1%
24,770.3
22,597.6
19,176.4
17,790.5
Net premium earned
24,143.7
+13.0%
21,360.8
19,729.7
17,289.1
year
15,631.7
2019
2017
1.50
5.752
4.50
1.50
1.50
1.50
4
-1.50
3.00
3.00
1.25
3
0.40
2018
2
-3.50
-3.75
-4.00
3.00
3.25
2.60
1
0
20121
2013
2014
2015
2016
-3.50
Dividend
Net underwriting result²
(691.0)
shareholders of Hannover
Rück SE
11,885.0
+8.1%
10,995.0
Non-controlling interests
871.2
+3.2%
844.4
10,528.0
826.5
8,776.8
8,528.5
765.2
Equity attributable to
Hybrid capital
+33.4%
2,231.6
2,234.4
1,493.1
758.1
1,492.0
Investments (excl. funds
withheld by ceding companies)
56,213.2
+14.7%
49,001.6
47,629.4
42,197.3
40,057.5
2,977.4
(211.1)
10,778.5
13,588.9
(9.7)
156.9
(253.6)
Net investment income
1,943.0
+15.3%
1,685.5
1,757.1
1,530.0
1,773.9
Operating profit (EBIT)
1,734.8
+42.9%
11,035.1
1,214.1
1,596.6
1,364.4
Group net income
1,231.3
+39.4%
883.1
1,284.2
958.6
Balance sheet
Policyholders' surplus
15,733.6
+11.8%
14,071.0
1,853.2
4.25
4.75
5.00
in EUR million
E 02
1,284.2
1,150.7
1,171.2
1,231.3
985.6
958.6
1,059.5
1,000
849.6
895.5
883.1
Group net income
500
20121
2013
2014
2015
2016
2017
2018
2019
2020
2021
Policyholders' surplus
in EUR million
E 03
0
15,733.6
2021
2019
somewhat
digerent
hannover re
An overview
Gross premium
in EUR million
E 01
30,000
27,762.3
24,770.3
25,000
22,597.6
19,176.4
20,000
20201
17,068.7
16,353.6
13,774.2 13,963.4 14,361.8
15,000
10,000
5,000
0
20121
2013
2014
2015
2016
2017
2018
17,790.5
15,000
13,588.9 14,071.0
10,239.5
60
50.22
48.83
40
40
20
0
Dividend
in EUR
20121
2013
2014
2015
60
2016
2018
2019
2020
2021
E 05
1.25
-4.50
6
5.50
5.25
5
Special dividend
5.00
2017
62.61
66.90
-72.78
10,267.3
11,231.4
10,778.5
11,035.1
10,000
8,947.2
8,767.9.
5,000
0
20121
2013
2014
2015
2016
2017
2018
2019
2020
2021
Book value per share
in EUR
E 04
98.55
100
91.17
87.30
74.61
80
70.72
Total assets
82,902.3
+16.0%
71,437.5
277 Responsibility statement
278 Supervisory Board
278 Report of the Supervisory
Board
283 Supervisory Board of
Hannover Rück SE
284 Further information
285
Branch offices and subsidiaries
of the Hannover Re Group
abroad
Hannover Re | Annual Report 2021
288
266 Independent Auditor's Report
294
Glossary
List of graphs, tables and charts
Contact information
299 Financial calendar
300 Imprint
1
We grow with our
clients and partners
For more than 50 years Hannover Re has generated profitable growth and created added
value through reinsurance. We deploy our expertise and power of innovation to sustainably
develop profitable products and solutions that deliver reliable and affordable risk protection
for our customers and ultimately for insureds.
"It is only through profitable growth
that we remain a reliable partner
for our clients over the long term.
This has been and continues to be
our focus going forward."
Jean-Jacques Henchoz, Chief Executive Officer
In so doing, we pay special attention to the comprehensive
understanding and assessment of risks. In addition to techni-
cal pricing that adequately reflects the risk, we look at the
entire value chain and optimise it with all the tools offered by
reinsurance. In this way, we ensure that risk covers are and
remain calculable and affordable. Despite the Covid-19
pandemic, we have grown considerably over the past three
years - large and financially robust partners are especially
sought-after in times of crisis.
With our highly diversified portfolio we are active worldwide.
As one of the market leaders in numerous specialty lines and
with our expertise in traditional and alternative risk transfer,
we create new opportunities for our clients and partners
particularly with an eye to current and future changes that we
are able to monitor very closely and even anticipate.
Thanks to our worldwide network of experts, we are in a po-
sition not only to respond quickly to sudden changes but also
to assess long-term trends strategically in terms of their busi-
ness potential, thereby enabling us to leverage profitable op-
portunities. In this context, we prefer to explore possible av-
enues for supporting the development of new and sustainable
technologies with our solutions.
298
We have no doubt: the great challenges of our time - climate
change, digitalisation, shifting demographics, and indeed
changes in economic framework conditions – can only be
mastered through joint efforts. Together with our customers
and partners, we shape the future and secure major invest-
ments for a better life.
173 Notes to the consolidated
financial statements 2021
170 Consolidated cash flow
For our investors
14
Letter from the Chairman of
the Executive Board
18
Executive Board of
Hannover Rück SE
20
The Hannover Re share
25
Combined management report
26
Foundations of the Group
statement 2021
31
70
Combined non-financial
information statement
86
Opportunity and risk report
118 Enterprise management
153 Outlook
Within just 50 years Hannover Re has
grown into a global company that tackles.
risk and opportunity with equal success.
We intend to write the next chapter of
our success story as a reinsurer - with a
partnership-based approach, a power of
innovation that spans the world and the
extensive decision-making powers
entrusted to our experts.
Somewhat different.
163 Consolidated financial
statements
164 Consolidated balance sheet
as at 31 December 2021
166 Consolidated statement of
income 2021
167 Consolidated statement of
comprehensive income 2021
168 Consolidated statement of
changes in shareholders'
equity 2021
Report on economic position
2
Hannover Re | Annual Report 2021
Digitalisation
Hannover Re | Annual Report 2021
Underwriting automation
Optimising standard processes
Application
Rule design
alysis
deployment
Point of Sale
Ling
Examining and accepting risks - in other words, un-
derwriting - are routine processes in the insurance
industry. They are based on large quantities of data,
empirical values from the past and assumptions
regarding future developments. By making correct
use of these data resources, we can appreciably
streamline or even - depending on the risk -
k - 
entirely
automate the decision processes.
Example: With "hr | ReFlex" we are able to offer a
modular, automated underwriting system that facili-
tates immediate, risk-appropriate decision-making
directly at the point of sale. It supports all sales chan-
nels and makes integration of new products or func-
tions a breeze - enabling us to offer primary insurers
the flexibility, responsiveness and expertise that they
have already come to expect from us now in digital
form too.
Wherever reliable tools are able to step in, it leaves
underwriters free to devote themselves to challenging
new issues and individual solutions.
1010
Standardised products, some of which have already been on
the market for a very long time, can now be automated or
optimised. This means that they stay competitive and can
address larger customer groups thanks to optimised cost
structures. Hannover Re is able to do this, for example,
through the smart use of automated underwriting or with
the aid of innovative parametric covers. New risks such as
cyber exposures, on the other hand, need to be evaluated
using a constantly expanding data pool so as to provide
adequate coverage.
Digitalisation - Maximising the possibili-
0010 ties of digitalisation and making standard
products leaner and more efficient
Hannover Re | Annual Report 2021
5
Parametric covers
Index-based protection against weather risks
Parametric insurance products also known as
-
index-based covers have already been used in
agricultural business for a number of years. These
products insure and settle losses on the basis of
defined parameters that can be unambiguously
established. In cases where risks are insurable, para-
metric products can help to make coverage more
accessible, settle claims more quickly and hence
close the protection gap in many areas. Hannover Re
develops and explores products offering parametric
protection for risks such as floods or heatwaves - not
to mention cyber risks. By making claims settlement
quicker and more straightforward, these insurance
products deliver added value because the customer
experiences a direct and immediate benefit. These
solutions, which are frequently developed in
public-private partnerships, could take on added
significance in connection with climate change.
"We see considerable potential in
parametric covers and are taking a keen
interest in them."
(Dr. Michael Pickel, member of the Executive Board)
Climate change - designing innovative
products to protect against extreme
weather events
6
Hannover Re | Annual Report 2021
10011
4
Growth in traditional reinsur-
ance business - we team up to
create opportunities
3
• Industry 4.0
Innovative sales channels
• Ecosystem building
• Data analytics
• Automation opportunities
Cyber crime
Megatrends
Climate change
• Extreme weather events
• Food security
• Risks to infrastructure
⚫ Health risks (e.g. from heat)
1010
0010
0011
Demographics
• Longevity
• Healthcare costs
• Mortality
• Urbanisation/Megacities
• Value concentrations in urban centres
• Economic shifts
Hannover Re | Annual Report 2021
Economic
growth in
Asia
• Region with rapidly
growing economies
• Protection gaps
• Competitive pressure
Economic
framework conditions
• Rules governing capital requirements
for insurers and reinsurers
• Protracted low interest rate environment
• Trade restrictions
13
2021
Contents
E 08
167.15
+28.3%
130.30
172.30
117.70
104.90
Market capitalisation at
year-end
20,157.8
+28.3%
15,713.8
20,778.9
14,194.3
Share price at year-end in EUR
12,650.6
Combined ratio (property and
casualty reinsurance) 2
97.7%
101.6%
98.2%
96.5%
99.8%
Large losses as percentage of
net premium earned (property
and casualty reinsurance) 5
7.5%
11.2%
7.5%
7.9%
12.3%
Retention
Ratios
89.5%
3.50 +1.504
603.0
71,356.4
64,508.6
61,196.8
Share
Earnings per share
(basic and diluted) in EUR
10.21
+39.4%
7.32
10.65
8.79
7.95
Book value per share in EUR
3.75 +1.504
98.55
91.17
87.30
Dividend
693.4
+27.8%
542.7
Dividend per share in EUR
4.50 +1.25 3,4
+27.8%
4.504
663.3
4.00 +1.504
72.78
633.1
70.72
+8.1%
90.1%
90.0%
90.7%
The Group worldwide
E 07
A complete list of our shareholdings is provided on page 190 et seq. of the notes.
The addresses of the Hannover Re Group's branch offices and subsidiaries abroad
are to be found in the section "Further information" on page 285 et seq.
Strategic business groups
Hannover Re Group
Property & Casualty reinsurance
Regional Markets
EMEA (including CIS)
Americas
•
APAC
Worldwide Markets
• Structured Reinsurance and
Operating result (EBIT)/net premium earned
•
Insurance-Linked Securities
Facultative Reinsurance
Credit, Surety and Political Risks
• Aviation and Marine
•
Agricultural Risks
Life & Health reinsurance
Financial Solutions
Risk Solutions
•
Longevity
Mortality
• Morbidity
•
Hannover Re Group's net share for natural catastrophes and other major losses in excess of EUR 10 million gross as a percentage
of net premium earned
special dividend of EUR 1.50 for 2019, dividend of EUR 3.75 plus special dividend of EUR 1.50 for 2018 and dividend of EUR 3.50 plus
special dividend of EUR 1.50 for 2017
Dividend of EUR 4.50 plus special dividend of EUR 1.25 for 2021, Dividend of EUR 4.50 for 2020, dividend of EUR 4.00 plus
90.5%
Return on investment
(excl. funds withheld by
ceding companies)
3.2%
3.0%
3.5%
3.2%
3.8%
EBIT margin
6
7.2%
5.7%
9.4%
9.2%
8.7%
Return on equity (after tax)
10.8%
8.2%
13.3%
12.2%
10.9%
1 Restated pursuant to IAS 8
2 Including interest on funds withheld and contract deposits
3
Proposed dividend
4
5
6
Growth
through
innovation
Annual Report
1,500
(586.7)
15,210.9
Counterparty default risks
Risk landscape of
Hannover Re
Market risks
Sustainability and
reputational risks
Strategic risk◄
Liquidity risk
Emerging risks
Other risks
Operational risks
Longevity and
mortality risk
Morbidity and
disability risk
Lapse risk
Catastrophe risk
Expense risk
Equity risk
Interest rate risk
Real estate risk
Foreign exchange
Underwriting risks
risk
spread risk
Business continuity risks
Business process and data
quality risks
Compliance risks
Fraud risks
Human resources risks
Information security risks
Outsourcing risks
Hannover Re | Annual Report 2021
Combined management report
The risk landscape of Hannover Re encompasses:
•
Default and
underwriting risks in property & casualty and
life & health reinsurance which originate from our
business activities and manifest themselves inter alia in
fluctuations in loss estimates as well as in unexpected
catastrophes and changes in biometric factors such as
mortality,
Life and health reinsurance
Price/premium risk
Catastrophe risk
Reserving risk
Risk steering
The steering of all risks is the task of the operational business
units on the divisional and company level. In this context, the
identified and analysed risks are either consciously accepted,
avoided, increased or minimised. The risk/reward ratio is
factored into the division's decision. Risk steering is assisted
by the parameters of the central and local underwriting and
investment guidelines incl. the defined limits and thresholds.
Risk monitoring
The monitoring of all identified material risks is a core func-
tion of risk management. This includes, inter alia, monitoring
execution of the risk strategy as well as adherence to the de-
fined limits and thresholds and to risk-related methods and
processes. A further major task of risk monitoring is the as-
certainment of whether risk-steering measures were carried
out and whether the planned effect of the measures is
sufficient.
Risk communication and risk culture
Risk management is firmly integrated into our operational
processes. It is assisted by transparent risk communication
and the open handling of risks as part of our risk culture. Risk
communication takes place, for example, through internal
and external risk reports, in the context of committee and
project work, through information on current risk complexes
in the intranet and by way of training activities for staff.
Risk reporting
Our risk reporting provides systematic and timely information
about all material risks and their potential implications. The
central risk reporting system consists primarily of regular risk
reports, e. g. on the overall risk situation, adherence to the
parameters defined in the risk strategy or on the capacity uti-
lisation of natural catastrophe scenarios. Complementary to
the regular risk reporting, immediate internal reporting on
material risks that emerge at short notice takes place as
necessary.
Process-integrated/-independent monitoring and
quality assurance
Irrespective of internally assigned competencies, the Execu-
tive Board is responsible for the orderly organisation of the
company's business. This also encompasses monitoring of
the internal risk steering and control system. Process-inde-
pendent monitoring and quality assurance of risk manage-
ment is carried out by the internal audit function and external
instances (regulators, independent auditors and rating agen-
cies). Most notably, the independent auditors review the trig-
ger mechanism and the internal monitoring system in rela-
tion to the accounting. The risk management system is
rounded off with process-integrated procedures and rules,
such as those of the internal control system.
Internal control system
The internal control system (ICS) is an important subsystem
that serves, among other things, to secure and protect exist-
ing assets, prevent and reveal errors and irregularities and
comply with laws and regulations. The core elements of Han-
nover Re's ICS are documented in a guideline that establishes
a common understanding of the differentiated execution of
the necessary controls. The guideline defines concepts, stip-
ulates responsibilities and provides a guide for the descrip-
tion of controls. The ICS consists of systematically structured
organisational and technical measures and controls within
the enterprise. These include, among other things, the princi-
ple of dual control, separation of functions, documentation of
the controls within processes as well as technical plausibility
checks and access privileges in the IT systems.
Property and casualty reinsurance
The proper functioning of the ICS necessitates the involve-
ment of management, executive staff and employees on all
levels.
We use a central IT solution with standardised accounting
and consolidation processes, posting rules and interfaces for
data delivery in order to draw up the consolidated financial
statement. Access rights for the reporting systems are as-
signed through an approval process. All components of the
accounting-related internal control system, the processes for
the organisation and implementation of consolidation tasks
and for the preparation of the consolidated financial state-
Hannover Re | Annual Report 2021
93
ment as well as the accompanying controls are consistently
documented. In order to safeguard and continuously improve
the adequacy of the control system it is subject to regular re-
view and evaluation. In this regard, the internal audit function
ensures that the quality of the control system is constantly
monitored. All relevant accounting principles are collated in a
Group Accounting Manual that sets out uniform Group-wide
rules for the recognition, measurement and reporting of items
in the consolidated financial statement. The process for up-
dating and, if necessary, adjusting these rules is clearly regu-
lated with respect to information channels, responsibilities
and period of validity. Not only that, we provide prompt
Group-wide notification of significant developments and
modified requirements in Group financial reporting.
Within the scope of our control system the Group companies
are responsible for Group-wide adherence to the accounting
policies and the internal control guidelines. The managing
directors and chief financial officers of the Group companies
defined as material in our control system affirm to the Execu-
tive Board of Hannover Rück SE at each closing date the com-
pleteness, correctness and reliability of the financial data that
they pass on to Group Accounting. Data for the preparation of
the consolidated financial statement is delivered using a net-
worked IT application. The relevant data for Group financial
reporting is collected in a database and processed via auto-
matic interfaces in a consolidation system. As part of the fi-
nancial reporting process we perform preventive and detec-
tive checks on the reported figures in order to minimise the
probability and reduce the impacts of a potentially incorrect
Risk landscape of Hannover Re
disclosure. Depending upon the results of our checks, these
figures can be corrected if necessary. Given that our Group
financial reporting is heavily dependent on IT systems, these
systems also need to be subject to controls. Authorisation
concepts regulate system access and for each step con-
tent-based as well as system-side checks have been imple-
mented, by means of which errors are analysed and promptly
eliminated.
At a time when the workforce is teleworking from home on
account of Covid-19, it is particularly important to perform
the controls that would otherwise have been performed in
person using electronic means.
Risk landscape of Hannover Re
In the context of its business operations the Hannover Re
Group is confronted with a broad variety of risks. These risks
are deliberately accepted, steered and monitored in order to
be able to act on the associated opportunities. The parame-
ters and decisions of the Executive Board with respect to the
risk appetite of the Hannover Re Group, which are based on
the calculations of risk-bearing capacity, are fundamental to
the acceptance of risks. In this context crucial importance at-
taches to our risk management in order to ensure that, among
other things, risks to the reinsurance portfolio remain calcu-
lable and even exceptional major losses do not have an undu-
ly adverse impact on the result.
M 49
94
The financial reporting must satisfy international and national
financial reporting standards as well as regulatory require-
ments. This is safeguarded in the area of accounting and fi-
nancial reporting by processes with integrated controls which
ensure the completeness and accuracy of the annual and con-
solidated financial statements. A structure made up of differ-
entiated criteria, control points and materiality thresholds
assures our ability to identify and minimise the risk of errors
in the annual and consolidated financial statements at an
early stage.
In principle, every risk that is identified and considered mate-
rial is quantitatively assessed. Only risk types for which quan-
titative risk measurement is currently impossible or difficult
are primarily assessed qualitatively. This encompasses strate-
gic risks, sustainability and reputational risks and emerging
risks. Qualitative assessment can take the form of, for exam-
ple, expert evaluations. Quantitative assessment of risks and
the overall risk position is performed using Hannover Re's
internal capital model. The model makes allowance for risk
concentration and risk diversification.
market risks which arise in connection with our
investments and also as a consequence of the valuation
of sometimes long-term payment obligations associated
with the technical account,
• sustainability and reputational risks, liquidity risks,
strategic risks and emerging risks.
3,364.7
2,398.4
Adjustments due to tax effects and
other
(1,591.5)
Economic equity
Hybrid capital
Foreseeable dividends
Available economic capital
15,156.0
3,029.7
(721.6)
17,464.1
(1,389.0)
13,434.1
2,363.5
2
provisions 3
3
Minor differences for 31 December 2020 compared to Annual Report
2020 only in the allocation of adjustments for assets under own manage-
ment and technical provisions.
Adjustments for technical provisions in life & health and
property & casualty reinsurance including risk margin.
The required risk capital of the Hannover Re Group at the
confidence level of 99.5% rose over the course of the year.
This was driven principally by the larger business volumes,
which have led to an increase in underwriting risks and mar-
ket risks. The weaker euro against foreign currencies also
contributes to a higher risk.
The increase in the market risk is a reflection first and fore-
most of the larger volume due to higher fair value measure-
ment and new investments in the areas of private equity and
real estate. The larger volumes of fixed-income securities on
account of growth in the business are a further factor here.
The underwriting risks in property and casualty reinsurance
increased primarily as a consequence of higher premium and
reserves. The enlarged volumes are driven by the business
growth, the large loss expenditure and accompanying higher
reserves as well as stronger foreign currencies.
The underwriting risks in life and health reinsurance in-
creased primarily due to the business expansion in the areas
of longevity and morbidity risks as well as the appreciation of
foreign currencies. The rise in counterparty default risks can
be attributed principally to a higher volume of receivables
due from retrocessionaires.
The changes in the operational risk are attributable above all
to updated expert assessments regarding the impact of indi-
vidual scenarios.
The loss-mitigating effect from taxes and the diversification
effect remain largely stable.
The internal capital model is based on current methods from
actuarial science and financial mathematics. In the case of
underwriting risks, we are able to draw on a rich internal data
history to estimate the probability distributions, e.g. for the
reserve risk. For risks from natural perils we use external
models, which are adjusted in the context of a detailed inter-
nal review process such that they reflect our risk profile as
closely as possible. In the area of life and health reinsurance
long-term payment flows are modelled under various biome-
tric and lapse scenarios. With respect to all the aforemen-
tioned risks we use internal data to define scenarios and
probability distributions. The internal data is enhanced by
way of parameters set by our internal experts. These parame-
ters are especially significant in relation to extreme events
that have not previously been observed.
When it comes to aggregating the individual risks, we make
allowance for dependencies between risk factors. Dependen-
cies arise, for example, as a consequence of market shocks,
such as the financial crisis, which simultaneously impact mul-
tiple market segments. What is more, several observation pe-
riods may be interrelated on account of market phenomena
such as price cycles. In dealing with these dependencies,
however, it is our assumption that not all extreme events oc-
cur at the same time. The absence of complete dependency is
referred to as diversification. Hannover Re's business model
is based inter alia on building up the most balanced possible
portfolio so as to achieve the greatest possible diversification
effects and in order to deploy capital efficiently. Diversifica-
tion exists between individual reinsurance treaties, lines,
business segments and risks. We define the cost of capital to
be generated per business unit according to the capital re-
quired by our business segments and lines and based on their
contribution to diversification.
1 The figures are based on the Solvency II reporting as at 31 December
2021. The relevant Solvency II audit procedures conducted by the
independent auditor have still to be completed.
counterparty default risks resulting from our diverse
business relationships and payment obligations inter
alia with clients, retrocessionaires and banks,
operational risks which may derive, for example, from
deficient processes or systems and
Adjustments for technical
management
Sustainability risks can affect all areas of our risk
landscape in connection with environmental, social
and governance (ESG) issues. Examples include the
implications for property and casualty insurance of
potentially more widespread natural disasters due to
climate change or the decline in value of certain in-
vestments in conjunction with the changeover to a
world free of greenhouse gas emissions in the future.
It has become common practice to differentiate be-
tween the risks caused by ESG issues to which a com-
pany is exposed (outside-in perspective) and the im-
pacts that a company has on people and the
environment (inside-out perspective). Sustainability
risks corresponding to the outside-in perspective are
financial risks due to the potential financial repercus-
sions of environmental, social and governance (ESG)
issues on Hannover Re. These financial risks encom-
pass market, underwriting, counterparty default and
operational risks and are integrated into the risk man-
agement processes for such risks. The inside-out per-
spective refers to situations in which the activities of
Hannover Re would be harmful to the environment or
social norms or would reflect a failure of governance.
Reputational risks form the bridge between the out-
side-in and the inside-out perspective. Due to a - per-
ceived or real - external impact of the company, a
reputational risk arises for the company from the in-
side-out perspective. As a general principle, we inte-
grate sustainability risks (outside-in) into our regular
risk management processes. According to the in-
side-out perspective, reputational risks relate to trans-
gressions against environmental and social concerns,
governance failings are defined as a failure to comply
with internal guidelines, codes of conduct and other
internal policies.
At the present time our most significant individual risks are
the default and spread risks within the market risks, the re-
serving and catastrophe risks within the underwriting risks of
property and casualty reinsurance and the longevity risks
within the underwriting risks of life and health reinsurance.
The specific risk characteristics and the principal monitoring
and steering mechanisms are described in the following
sections.
Internal risk assessment
In this subsection we compare the available economic capital
with the required risk capital.
Hannover Re calculates the economic equity as the difference
between the market-consistent value of the assets and the
market-consistent value of the liabilities. While fair values are
available for most investments, the market-consistent valua-
tion of reinsurance treaties necessitates a specific valuation
model. We establish the market-consistent value of technical
items as the present value of projected payments using actu-
arial methods. This is adjusted by a risk loading that factors
in the potential fluctuation in future payments. Such fluctua-
tions result from risks that cannot be hedged by means of
capital market products, such as underwriting risks. For the
discounting of future cash flows we use the risk-free basic
yield curves calculated in accordance with Solvency II re-
quirements increased by the volatility adjustment. Market
prices for options and guarantees embedded in insurance
contracts are determined or approximated using option valu-
ation models from the field of financial mathematics. The vol-
ume of these options and guarantees in our portfolio is, how-
ever, comparatively slight. The adjustments for assets under
own management shown in the following table indicate the
difference between fair value and book value of those invest-
ments recognised under IFRS at book values. Other adjust-
ments encompass above all the deferred taxes. The available
economic capital, which is available as liable capital for poli-
cyholders, is composed of the economic equity and the hy-
brid capital and includes the deduction of foreseeable divi-
dends as required by Solvency II. Hybrid capital is recognised
at market-consistent value as required by Solvency II, with
changes in the own credit risk not being included in the
valuation.
The available economic capital increased to EUR 17,461.1
million as at 31 December 2021, compared to EUR 15,210.9
million as at 31 December 2020. In life and health reinsur-
ance the operating performance was adversely affected by
Covid-19 and changes in assumptions, while favourable de-
velopments were driven by new business above target. For
property and casualty reinsurance we experienced large
losses above the budgeted level, which were cushioned by a
positive effect from the actuarial assumption changes.
Hannover Re | Annual Report 2021
95
96
96
626.6
The economic investment income was above expectations,
especially in the areas of private equity and real estate. Unfa-
vourable movements in interest rates were offset by positive
exchange rate effects and effects associated with credit
spreads.
Reconciliation
(economic capital/shareholders' equity)¹
M 50
585.3
in EUR million
31.12.20211
31.12.2020²
Shareholders' equity including
minorities
12,756.2
11,839.4
Adjustments for assets under own
In the first quarter Hannover Re issued a new hybrid bond
with a volume of EUR 750 million, resulting in a further in-
crease in the available economic capital.
Risk analysis and assessment
Combined management report
Hannover Re | Annual Report 2021
above and beyond the existing tools. This poses, among other
issues, a systemic risk that company-specific approaches may
be too heavily restricted as a consequence of the findings.
Combined management report
87
88
Hannover Re | Annual Report 2021
In the course of 2021, EIOPA carried out multiple compara-
tive studies of internal models, in which Hannover Re partici-
pated. Aspects such as the diversification, parameters and
results of the market risk models as well as those for the non-
life underwriting risk were compared. The studies and their
findings are intended to harmonise supervisory approaches
in the EU and hence refine the supervision of internal models
Numerous regulatory developments relating to sustainability
occurred in 2021 on the international, European and national
level. In the EU they are linked to the European Green Deal
strategy pursued by the European Commission. The Europe-
an Commission renewed the high-level goals for sustainable
finance, which were first set out in the Commission's 2018
action plan. The Commission also published a delegated act
proposing how the disclosure duties under the Taxonomy
Regulation are to be fulfilled, and in which the specific re-
quirements for (re)insurance undertakings are elaborated in
greater depth. Initial limited reporting pursuant to the Taxon-
omy Regulation is provided in the present report. Further
new regulation introduced relates to the consideration given
to climate change scenarios.
In the year under review the European Financial Reporting
Advisory Group (EFRAG) also endorsed the IFRS 17 standard,
with European insurers now making preparations for its im-
plementation.
EIOPA has also proposed extensive changes to reporting
rules for insurance undertakings, namely the revision of the
Quantitative Reporting Templates (QRTs) and changes to the
Implementing Technical Standards (ITS).
Regulatory developments: The recommendations of the
European Insurance and Occupational Pensions Authority
(EIOPA) for the overhaul of the European prudential regime
Solvency II were submitted to the European Commission,
which then published its proposals in September 2021. In
some instances the Commission diverged from EIOPA's rec-
ommendations. The European Parliament and the member
states in the Council will now negotiate the final legislative
texts based on the Commission's proposals. The proposals
include, among other things, new macroprudential supervi-
sory powers as well as changes to yield curves and revisions
to the calculation of the risk margin. Depending on the final
outcome of the ongoing legislative process, these proposals
could have considerable implications for the European insur-
ance industry.
The biometric effects of the pandemic on our reinsurance
portfolios are discussed in a separate subsection.
We are also monitoring the long-term post-infection effects.
The so-called "post-Covid syndrome" would have negative
implications for the coverage of sickness costs and disability.
Early study results suggest that these patients suffer not only
from fatigue and a general loss of energy, but also increasing-
ly from anxiety disorders and depression.
Turning to new and upcoming regulatory requirements and
expectations, compliance risks are taking on ever greater sig-
nificance at both the national and international level. Espe-
cially in the context of IT regulation, more exacting supervi-
sory standards have been adopted on the security and
governance of Information and Communication Technology.
Furthermore, at the end of 2021 the Federal Financial Super-
visory Authority (BaFin) began work on a revision of the Su-
pervisory Requirements for IT in Insurance Undertakings
(VAIT) in order to harmonise them with European laws and
regulations.
We continue to evaluate our financial strength and profitabil-
ity on a regular basis using stress tests and sensitivity analy-
ses and will take measures as needed to reduce risks or
strengthen our equity resources. In this regard, the largest
reserves on the reinsurance side were for coverage of busi-
ness interruption, excess mortality, credit insurance and
event cancellations. With the pandemic still ongoing, any
forecasts are still subject to considerable uncertainty. It re-
mains to be seen how well the vaccines and boosters current-
ly available will work against new variants of the virus.
-
This subsection describes external factors that were particu-
larly relevant in 2021 and could continue to influence risk
management in subsequent years.
Major external factors influencing
risk management
threshold; countermeasures would be triggered if the solven-
cy ratio were to fall below this threshold. Currently, the sol-
vency ratio (unaudited by the independent auditor) stands at
243%, i.e. above the threshold. These indicators are moni-
tored using our internal capital model and the Executive
Board is informed quarterly about adherence to these key pa-
rameters as part of regular risk reporting. The necessary eq-
uity resources are determined according to the requirements
of our economic capital model, regulatory parameters, the
expectations of rating agencies with respect to our target rat-
ing and the expectations of our clients.
17,464.1
15,210.9
Eligible own funds
16,783.7
14,557.5
Solvency capital requirement/
Required risk capital at the
confidence level of 99.5%
Our quantitative risk management provides a uniform frame-
work for the evaluation and steering of all risks affecting the
company as well as of our capital position. The internal capi-
tal model - a stochastic enterprise model – is a central tool in
this context. It covers all subsidiaries and business groups of
the Hannover Re Group. The core variable in risk and enter-
prise management is the economic equity, which is calculat-
ed according to market-consistent valuation principles and
also constitutes the basis for calculating the own funds under
Solvency II. Hannover Re's internal capital model reflects all
risks that influence the development of the economic equity.
These are split into underwriting risks, market risks, counter-
party default risks and operational risks. For each of these
risk categories we have identified a number of risk factors for
which we define probability distributions. These risk factors
include, for example, economic indicators such as interest
rates, exchange rates and inflation indices, but also insur-
ance-specific indicators such as the mortality of a particular
age group within our portfolio of insureds in a particular
country or the number of natural catastrophes in a certain
region and the insured loss amount per catastrophe. The
specification of the probability distributions for the risk fac-
tors draws upon historical and publicly available data, exclu-
sive industry data and the internal data resources of the Han-
Excess capital (Solvency II)
Covid-19 pandemic: The Crisis Management Team set up in
2020 continued to manage operations prudently in 2021.
Business travel remained constrained. Working from home
which applied to large parts of the workforce - went smooth-
ly, in part thanks to the use of videoconferencing and exten-
sively digitalised business processes. Consequently, in 2021
we once again did not identify any material impacts of the
Covid-19 pandemic on our operations. After an initial, gradu-
al return to the company's business premises in the second
half of the year, employees were, once again, urged to
work from home in the fourth quarter - depending on their
location due to the accelerating spread of infections around
the world.
Capital adequacy ratio (Solvency II)
Market access risks continue to emerge worldwide. Growing
protectionism is a particularly unfortunate trend at a time
when, a global, large and persistent gap exists between the
level of economic losses (especially following catastrophic
events) and the level of insured losses. In its work programme
for 2022, EIOPA announced its intention to assess harmonisa-
tion of the rules for EU market access regarding third-country
reinsurers as part of its mission to bring about convergence
of international supervisory standards. Should Europe decide
to impose more exacting restrictions, there is a risk that this
may lead to reciprocal actions by international jurisdictions.
Risks from the processing of electronic data: Recent years
have seen the increasing emergence of risks relating to elec-
tronic data and systems. Hannover Re, in common with other
companies, is at risk of outside attacks on its own IT systems
and has put in place extensive safeguards. Furthermore,
Hannover Re offers reinsurance coverage for risks connected
with electronic systems and data (cyber risks). The systems
used to manage these cyber risks are continuously refined so
that the risks can be appropriately limited. In this context,
care is taken to ensure that cyber risks are largely assumed
deliberately in reinsurance treaties and not unknowingly in-
cluded as incidental risks under the cover provided (silent
cyber).
31.12.20211
in EUR million
M 47
resources.
In the interests of our shareholders and clients we strive to
ensure that our risks remain commensurate with our equity
Risk capital
Own funds and required risk capital
nover Re Group. This process is further supplemented by the
know-how of internal and external experts. The fit of the
probability distributions is regularly checked by our specialist
departments, although more importantly it is also verified in
the context of the regular, company-wide use of the capital
model when assessing risks and allocating the cost of capital.
The Hannover Re Group calculates the required risk capital as
the Value at Risk (VaR) of the economic change in value over
a period of one year with a confidence level of 99.5%. This
corresponds to the requirements of Solvency II. For its capi-
talisation under Solvency II Hannover Re has set a limit of
180% and a threshold of 200% for the capital adequacy ra-
tio. It remains the case that the limit and threshold are clearly
exceeded.
Biometric risks: We continuously monitor the development
of our mortality business (especially in the United States) as
well as of our worldwide morbidity business, particularly with
an eye to the impacts of the Covid-19 pandemic. It is to be
anticipated that the Covid-19 pandemic will lead to further
strains in 2022. Mention should be made here of not only the
US portfolio but also, most notably, the book of South African
and South American mortality business.
Increasingly exacting regulatory requirements governing
corporate responsibility for human rights and other sustaina-
bility concerns, especially as they relate to supply chains, will
continue to grow in importance for the international business
community over the coming years.
Combined management report
68
Corporate taxes: In 2021 the OECD presented its so-called
model rules for reform of the international tax system to as-
sist in implementation of a minimum 15% global corporate
income tax rate. The OECD model rules are intended to serve
as a template for adoption into national law by the individual
member states. The OECD is proposing implementation as
early as 2023.
89
Supply chain risks: It has become clear over the course of
the current pandemic that global supply chains - especially in
combination with lower inventories - pose risks to the conti-
nuity of operations in many sectors. This can result in higher
claims expenditures on account of increased procurement
costs or business interruptions.
Inflation on the underwriting side: The higher rates of infla-
tion worldwide have the potential to affect multiple factors in
our business activities, including for example the premium
calculation, the loss reserves, the large loss budget, the in-
vestments (as described in the previous section) and the man-
agement expenses. We have developed measures to deal with
inflation in all these respects. It should be borne in mind here
that the general rise in inflation (e.g. as measured by the US
CPI) needs to be differentiated from the drivers of claims and
cost inflation relevant to our company. The Hannover Re-spe-
cific claims inflation index is a blend of different regions and
currencies and dependent on the line of business. Mention
should be made here of wages and salaries for liability busi-
ness, construction costs for property insurance including nat-
ural perils and medical expenses for life and health insurance.
Inflation is considered in our reserving process. Essentially,
this process is based on average past inflation rates; we work
with loadings if there are indications of a future rise in infla-
tion. Adequate reserving processes are especially important
in long-tail lines because multiple underwriting years can be
affected at the same time. We monitor inflation drivers over
the entire course of the business and reduce them by, among
other things, making appropriate allowance in the premium
calculation and by means of index clauses and sliding-scale
commissions.
As far as our investments are concerned, we anticipate con-
tinuing elevated volatility on global capital markets in the im-
mediate future, although we also see this as an opportunity
and believe that we are appropriately prepared with our cur-
rent investment posture. For further information please see
the "Investments" section of the management report on page
55 et seq. Geopolitical tensions and armed conflict, as cur-
rently seen in Ukraine, pose corresponding risks to the polit-
ical balance of power in Europe. Adverse impacts on financial
markets are possible. Resulting increases in energy prices
may push inflation even higher.
modified expectations for contractual conditions as well as
probabilities of lease extensions or new leases, these changed
market parameters are reflected in adjusted fair values for
real estate. Pandemic-related developments are therefore fac-
tored into the real estate valuations. This is true not only of
the directly held portfolio but also - with the usual slight time
delay of the real estate fund holdings.
The pandemic has proven to be an additional factor directly
affecting the conditions and dynamics on real estate markets.
If the economic weakness results (temporarily) in reduced de-
mand for space, this could give rise to flat or declining rental
income or rising vacancy rates. Taken in combination with
We continue to have exposure to the private equity market.
Fair value changes here tend to be less influenced by general
market conditions and more by company-specific evalua-
tions. The risks are therefore primarily associated with the
business model and profitability and to a lesser extent with
the interest rate component in a consideration of cash flow
forecasts. Thus, for example, we also view the need to take
higher write-downs in the previous year on isolated assets in
response to the Covid-19 pandemic not as a reflection of a
generally elevated risk in the market, but rather in the context
of the risk profile specific to this asset class and set of compa-
ny characteristics. The write-downs taken in the period under
review were already back to the average level of previous
years. The significance of real estate risks remains substantial
for us owing to our consistent participation in this sector. We
spread these risks through broadly diversified investments in
high-quality markets around the world, with each investment
decision being preceded by extensive analyses of the relevant
property, manager and market.
strong support from central banks in our main currency are-
as, which largely pressed ahead with their expansionary in-
terest rate policy adopted in the prior year. Both the Federal
Reserve and the European Central Bank left their key rates on
the previous year's low level. The Bank of England, on the
other hand, was the first major central bank to modestly in-
crease its key lending rate in December primarily in re-
sponse to inflationary tendencies. The ECB - in common with
the Fed and the Bank of England – continued its extensive
asset purchase programme for bonds issued by governments
and corporate entities in order to support them in this time of
crisis. Overall, then, the policies pursued by central banks in
our main currency areas were essentially consistent – supple-
mented by significant fiscal interventions –, although they
varied in scale and the measures taken. We view these world-
wide interventions by governments and central banks with
their enormous money supply as a not inconsiderable chal-
lenge because in some ways they divorce the financial world
from the natural, reciprocal control mechanisms of the finan-
cial markets and it is unclear to what extent the current or
future valuation levels are supported by fundamentals. The
worldwide progress of vaccination campaigns and their effec-
tiveness will be pivotal to economic development going for-
ward. In conjunction with continued catch-up effects and
higher inflation, this may still lead to very high - but poten-
tially unstable - valuation levels on credit and equity markets.
Hannover Re | Annual Report 2021
88
Capital market environment: The persistently low level of
interest rates is a major external factor influencing the return
that can be generated on our investments. Interest rate in-
creases - which in some instances were very marked - were
recorded not only for euro-denominated bonds but also in the
US dollar and sterling markets in the first quarter of the year.
Despite renewed modest declines subsequently seen in the
area of the US dollar and British pound, we benefit from the
higher rate level overall when making new investments and in
our reinvesting activities. Yields on euro area government
bonds were negative well beyond the 10-year maturity point.
Credit spreads also retreated from the beginning of the year
onwards for bonds issued by developing countries and in the
case of lower-quality issuers, while in other sectors they re-
mained very largely stable or showed at most modest declines
over a long period. Here, too, however, emerging nervous-
ness on financial markets in connection with new variants of
the coronavirus was reflected in slightly higher risk premi-
ums by year-end. All in all, the economic repercussions of the
Covid-19 pandemic on financial markets continued to be ex-
tensively cushioned by fiscal and monetary backstopping.
This was reinforced by the vaccination progress made world-
wide and a slow easing in the consumption backlog. This im-
pressive development is also reflected in rising raw materials
and transport costs. These, in turn, are passed on in the form
of generally higher prices. The systematic inflation concerns
of other market participants currently still appear fragile
when it comes to their potential longevity. It is still too soon
to make any definitive judgement on the indications of struc-
tural and protracted higher inflation. As growth normalises
and the kinks in the supply chain are ironed out again, it is
our expectation that inflation may fade and secondary effects
such as wage pressures can be curbed. We are nevertheless
keeping close track of the situation with an eye to any oppor-
tunities that may arise. The economy continues to enjoy
Natural disasters should be viewed as inextricably linked to
climate change. The associated impacts present a major chal-
lenge for risk management. We use both external and internal
risk models to simulate the impacts of catastrophic events.
The monitoring of risks resulting from natural perils is com-
plemented by stress tests as well as scenario and sensitivity
analyses. Further specifics are provided in the separate sec-
tion "Climate change".
Natural catastrophe risks and climate change: In 2021
Hannover Re was again impacted by natural catastrophe
events in various parts of the world (Europe, the United
States, Australia). Particularly noteworthy in the year under
review were winter storm Uri, intense rainfall event Bernd,
Hurricane Ida and a series of tornados in the US.
Hannover Re | Annual Report 2021
6,904.2
6,190.4
9,879.5
2nd line of defence
Risk Committee
Operational risk manage-
ment, monitoring and
coordinating body as well
as implementation and
safeguarding of a con-
sistent Group-wide risk
management culture
Actuarial
Committee
Monitoring and
coordinating body
in relation to the
Actuarial Function
Compliance
Committee
Monitoring and
coordinating body
in relation to the
Compliance Function
Risk Management
Function
Risk monitoring across
the Group as whole and
the business groups of all
material risks from the
company perspective
Actuarial
Function
2nd line of defence
Ensures adequacy of the
methods used and under-
lying models in relation to
calculation of the technical
provisions
supported by
risk management functions
of the subsidiaries
and branches
supported by
actuarial functions
of the subsidiaries
and branches
supported by
compliance functions
of the subsidiaries
and branches
1st line of defence
Treaty/regional and service divisions within the business
groups of Property & Casualty reinsurance, Life & Health
reinsurance and investments
Risk steering and original risk responsibility for risk identification
and assessment on the divisional and company level
3rd line of defence
M 48
Group
Auditing
Process-independent and
Group-wide monitoring
Compliance
Function
Monitoring of areas
where misconduct can
result in civil actions or
criminal/administrative
proceedings
Overall responsibility for Group-wide risk management and definition of the risk strategy
Executive Board
Advising and supervising the Executive Board in its management of the company,
inter alia with respect to risk management
8,367.1
243.1%
235.2%
1 The figures regarding the available economic capital are based on the
Solvency II reporting as at 31 December 2021. The relevant Solvency II
audit procedures conducted by the independent auditor have still to be
completed. The solvency capital requirement and the non-eligible
non-controlling interests (and hence the eligible own funds) involve
information that has not been audited by the independent auditor.
The eligible own funds for regulatory purposes are lower than
the available economic capital because the non-controlling
interests under Solvency II are in part treated as non-eligible.
The available economic capital and the eligible own funds in-
clude the static volatility adjustment, whereas the required
risk capital includes the dynamic volatility adjustment. These
risk indicators refer to the Hannover Re Group.
In addition, Hannover Rück SE is subject to regulatory capital
requirements. The solvency ratio of Hannover Rück SE is nor-
mally higher than the solvency ratio of the Hannover Re
Group because there are no restrictions with regard to the
use of own funds attributable to non-controlling interests.
90
Hannover Re | Annual Report 2021
Combined management report
We strive for a rating from the rating agencies most relevant
to our industry that facilitates and secures our access to all
reinsurance business worldwide. Hannover Re is analysed by
the rating agencies Standard & Poor's (S&P) and A.M. Best as
part of an interactive rating process. The current financial
strength is assessed as "AA-" (Very Strong, stable outlook) by
Standard & Poor's and "A+" (Superior, stable outlook) by A.M.
Best. In this context both Standard & Poor's and A.M. Best
consider Hannover Re's risk management to be a very impor-
tant aspect in the evaluation of financial strength and rate it
as very good. Hannover Re's internal capital model was also
subjected to expert appraisal. As a result of this review,
Standard & Poor's factors the results of the Hannover Re
Group's internal capital model into the determination of cap-
ital requirements.
Against the backdrop of the planned growth of our business
in property and casualty reinsurance and selected areas of life
and health reinsurance, we continuously track the impacts on
capital adequacy and our rating. In order to ensure our capi-
tal adequacy and our rating we initiate measures promptly
and also consider the issuance of further hybrid capital sub-
ject to an appropriate capital market environment.
Organisation and processes of
risk management
Hannover Re has set up risk management functions and bod-
ies Group-wide to safeguard an efficient risk management
system. The organisation and interplay of the individual func-
tions in risk management are crucial to our internal risk steer-
ing and control system. The central functions of risk manage-
ment are closely interlinked in our system and the roles, tasks
and reporting channels are clearly defined and documented
in terms of the so-called "three lines of defence". The first
line of defence consists of risk steering and the original risk
responsibility on the divisional or company level. The second
line of defence is made up of the core risk management func-
tions, the actuarial function and the compliance function.
These functions are responsible for process-integrated moni-
toring and control. The third line of defence is the process-in-
dependent monitoring performed by the internal audit func-
tion. The following chart provides an overview of the central
functions and bodies within the overall system as well as of
their major tasks and powers.
Group-wide risk communication and an open risk culture are
important to our risk management. Regular global meetings
attended by the actuarial units and risk management func-
tions serve as a major anchor point for strategic considera-
tions in relation to risk communication. In addition, risk man-
agement requirements are formulated in guidelines that are
discussed and published throughout the organisation.
Key elements of our
risk management system
Our risk strategy and our Risk and Capital Management
Guideline including the system of limits and thresholds for
material risks of the Hannover Re Group describe the central
elements of our risk management system. This is subject to a
constant plan, do, check and adjust cycle of improvement.
Systematic risk identification, analysis, measurement, steer-
ing and monitoring as well as risk reporting are especially
crucial to the effectiveness of the system as a whole.
This guideline describes, among other things, the major
tasks, rights and responsibilities, the organisational frame-
work conditions and the risk control process. The rules, which
are derived from the corporate strategy and the risk strategy,
additionally take account of the regulatory requirements for
risk management as well as international standards and de-
velopments relating to appropriate enterprise management.
Risk-bearing capacity concept
The establishment of the risk-bearing capacity involves deter-
mining the total available risk coverage potential and calcu-
lating the funds required to cover all risks. This is done in
conformity with the parameters of the risk strategy and the
risk appetite defined by the Executive Board. Individual risks
and the risk position as a whole are measured using our inter-
nal capital model. A central system of limits and thresholds is
in place to monitor material risks. This system incorporates
the limits and thresholds derived from the corporate strategy.
Adherence is verified on an ongoing basis.
Risk identification
A key source of information for monitoring risks is the risk
identification carried out on a periodic basis. All identified
risks are documented in a central register containing all ma-
terial risks. Risks are identified through, among other things,
interviews and scenario analyses as well as in the evaluation
of new products and large transactions. External insights
from bodies and working groups are incorporated into the
process. Risk identification is important for ensuring that our
risk management consistently remains up-to-date.
Hannover Re | Annual Report 2021
91
Central functions of risk monitoring and steering
92
Supervisory Board
Hannover Re | Annual Report 2021
31.12.2020
Available economic capital
Hannover Re | Annual Report 2021
3,144.9
4,874.8
4,395.7
468.0
449.0
626.9
548.4
(5,238.5)
(4,624.3)
(2,630.2)
(2,314.7)
6,904.2
6,190.4
The risk capital at the confidence level of 99.5% reflects the
loss from the respective risk that with a probability of 99.5%
will not be exceeded. The risk capital required for specific
risks is shown in each case before tax.
Climate change
Climate change, defined as naturally occurring or hu-
man-caused climatic changes, and the associated ef-
fects are already influencing our lives today. This was
made clear at the UN Climate Change Conference in
Glasgow (COP26) and in the publications of the Inter-
governmental Panel on Climate Change (IPCC) last
year. Climate change already poses a significant mac-
roeconomic risk and has wide-ranging implications
for the (re)insurance industry in common with many
other sectors.
In order to combat climate change the international
community reached agreement in 2015 on ambitious
goals to protect the climate at the UN Climate Change
Conference in Paris. Signed by 195 countries, the Par-
is Agreement seeks to limit the rise in the global aver-
age temperature to well below 2 degrees, preferably to
1.5 degrees Celsius, compared to pre-industrial levels.
The path to achieving the Paris climate goal depends
on a fundamental shift in the economic system and in
human habits.
3,329.7
This transformation and the transition to a world
largely free of greenhouse gas emissions also entails
risks. Shares or bonds issued by corporate entities
could, for example, gradually or abruptly drop in value
if the company's profitability declines.
1 This information has not been audited by the independent auditor.
Tax effects
100
50
50
0
Hannover Re | Annual Report 2021
104
The predefined discussion and analysis mechanisms upon
triggering of the escalation levels of the early-warning system
were activated in the course of the year under review on ac-
count of interest rate volatility as well as possible central bank
moves in response to inflationary tendencies. In accordance
with our guidelines, the Investment Committee therefore reg-
ularly discussed the potential implications for our invested
asset classes and the current portfolio composition in each
case. Thanks to the broad diversification and conservative
posture of our investments, there was no need to modify the
strategic orientation of our portfolios towards a more defen-
sive investment strategy during the reporting period.
Interest rate markets were again highly volatile over the
course of the year under review. In contrast to the previous
years, which had seen continued declines in the rate level,
rates moved higher in the year under review across virtually
all maturities in our main currency areas. While the increases
in euro rates were on the modest side, they were in some in-
stances appreciable on the US dollar and pound sterling mar-
kets. After the very sharp rises and highest-ever level of vola-
tility recorded in the previous year, risk premiums on
corporate bonds remained relatively stable throughout the
entire period under review on the low level seen prior to the
coronavirus. Overall, a substantial decrease in the hidden re-
serves for fixed-income securities was booked over the year
as a whole.
With a view to preserving the value of our assets under own
management, we constantly monitor adherence to a trigger
mechanism based on a clearly defined traffic light system that
is applied across all portfolios. This system defines clear
thresholds and escalation channels for the cumulative fluctu-
ations in fair value and realised gains/losses on investments
since the beginning of the year. They are unambiguously de-
fined in conformity with our risk appetite and trigger speci-
fied information and escalation channels if a corresponding
fair value development is overstepped.
767.7
1,024.1
1,618.9
646.5
(2,563.5)
1 Required risk capital with a confidence level of 99.5%;
information not audited by the independent auditor
Including private equity
4,395.7
Cost estimation
4,874.8
Market risk
755.4
(3,423.4)
Diversification
Required risk capital of the Hannover Re Group
The consequences of climate change affect all areas of
our business, not only in property & casualty and life &
health reinsurance but also in our investing activities.
At the same time, the implications of climate change
represent the most significant sustainability risk for
our company and are therefore closely analysed, mon-
itored and controlled. The focus of climate change risk
analysis is currently on changes in the frequency and
severity of natural catastrophes (physical risks). In ad-
dition, we analyse investments and liability treaties in
relation to risks from climate change.
Physical risks affect us as a risk carrier primarily in
property and casualty reinsurance, but also in life and
health reinsurance, Climatic changes and weather
events can, for example, cause higher and more fre-
quent losses in property and casualty reinsurance as
well as elevated numbers of deaths among the insured
groups of persons. Many forecasts in this connection
are subject to uncertainty, especially if they refer to
periods further in the future. In order to assess the
possible consequences, we have developed scenarios
to enable us to evaluate the implications of climate
change for all our business activities and initiate ap-
propriate measures for steering the business. Various
natural catastrophe scenarios are modelled, such as
floods, regional droughts and tropical cyclones. Our
interdisciplinary team for natural hazards modelling
takes account of the insights gained in pricing for re-
insurance solutions and in risk management. In addi-
tion, we conduct internal studies and explore the issue
in international working groups so as to assess the
risks posed by climate change. Currently, we primarily
look at two scenarios (rise in temperature of 2 degrees
Celsius or 4 degrees Celsius), under which we focus
on the windstorm, flood and wildfire perils in the con-
text of physical risks. The results of the analyses are
presented to the Risk Committee and included in the
Own Risk and Solvency Assessment (ORSA).
(1,663.2)
(1,348.2)
Underwriting risk property and
casualty
5,473.5
4,591.4
1 Required risk capital with a confidence level of 99.5%;
information not audited by the independent auditor
A large share of the required risk capital for the premium risk
(including catastrophe risk) is attributable to risks from natu-
ral disasters. They constitute the main concentration risk in
property and casualty reinsurance. The following table shows
the required risk capital for five of our largest natural hazards
scenarios:
1
Required risk capital¹ for the five largest
natural hazards scenarios
in EUR million
Hurricane US
Earthquake US West Coast
Winter storm Europe
Earthquake Japan
Earthquake Chile
M 53
2021
2020
2,355.4
2,027.0
1,784.2
Diversification
2,595.0
3,225.8
3,344.6
In addition, ESG risks - in common with compliance
risks that are generally associated with laws and regu-
lations relating to environmental law or ESG standards
- are subject to scrutiny under every New Products
Process (NPP). Our Risk & Capital Management Guide-
line, which contains supplementary work instructions
and definitions regarding climate change and other
ESG issues, is applicable throughout the Group. The
Property & Casualty Executive Committee, the Invest-
ment Committee and the Environmental Officer simi-
larly develop and discuss climate-related strategic
Hannover Re | Annual Report 2021
97
Combined management report
goals and operational measures. Our decision to join
the Net-Zero Insurance Alliance in the year under
review should be mentioned in this context as part of
an industry-wide effort to fight climate change.
Climate change can result in shifts that are reflected in
stronger demand for reinsurance products to protect
against natural catastrophes and also in new opportu-
nities. Hannover Re offers a wide range of products
that help customers to protect themselves against in-
creased losses and damage (both in terms of frequen-
cy and severity) from natural disasters. What is more,
changes in temperature extremes around the world
I can lead to higher rates of mortality, which in turn
may trigger stronger demand for our products in life
and health reinsurance.
Underwriting risks in property and
casualty reinsurance
Risk management in property and casualty reinsurance has
defined various overall guidelines for efficient risk steering.
These include, among other things, the use of retrocessions
to reduce volatility and conserve capital. It is also crucially
important to consistently maximise the available risk capaci-
ties on the basis of the risk management parameters of the
Hannover Re Group and to steer the acceptance of risks sys-
tematically through the existing central and local underwrit-
ing guidelines. Our conservative reserving level is a key factor
in our risk management.
Utilisation of the trigger system
in %
For risk management purposes we make a fundamental dis-
tinction between risks that result from business operations of
past years (reserve risk) and those stemming from activities
in the current or future years (price/premium risk). Particu-
larly in the latter case, special importance attaches to the ca-
tastrophe risk.
-
Required risk capital¹ for underwriting risks
in property and casualty reinsurance
M 52
31.12.2021
31.12.2020
in EUR million
Premium risk
(including catastrophe risk)
Reserve risk
3,910.9
Diversification within the Property & Casualty reinsurance
business group is actively managed through allocation of the
cost of capital according to the contribution made to diversi-
fication. A high diversification effect arises out of the under-
writing of business in different lines and different regions
with different business partners. In addition, the active limita-
tion of individual risks such as natural catastrophes - en-
hances the diversification effect. The risk capital with a confi-
dence level of 99.5% for underwriting risks in property and
casualty reinsurance breaks down as follows:
150
try
Q1 2021
Share prices +10%
Share prices +20%
M 64
Portfolio change on
a fair value basis
Change in equity
before tax
-206.2
-206.2
-412.3
-412.3
+206.2
+206.2
+412.3
+412.3
Fixed-income securities
Yield increase +50 basis points
-1,422.2
Share prices -20%
Share prices -10%
Equity securities and
private equity
in EUR million
M 62
Combined management report
Value at Risk¹ for the investment portfolio of the Hannover Re Group
in %
1.0
0.9
0.8
0.7
0.6
-1,375.8
Q1 2021
1 VaR upper limit according to Hannover Re's investment guidelines: 2.5%
Stress tests are conducted in order to be able to map extreme
scenarios as well as normal market scenarios for the purpose
of calculating the Value at Risk. In this context, the loss po-
tentials for fair values and shareholders' equity (before tax)
are simulated on the basis of already occurred or notional
extreme events.
Q3 2021
Q4 2021
M 63
Scenarios for changes in the fair value of material asset classes
Scenario
Q2 2021
1,389.1
Yield increase +100 basis points
-2,675.9
4,591.4
5,473.5
Underwriting risk property and casualty reinsurance
31.12.2020
31.12.2021
in EUR million
M 51
Required risk capital at the confidence level of 99.5% 1
used to calculate the VaR indicators for the Hannover Re
Group. It is based on historical time series of relevant market
parameters (equity prices, yield curves, spread curves and
exchange rates). Against the backdrop of a very turbulent
capital market and interest rate environment, volatilities - es-
pecially of fixed-income assets - again reached a high level at
times in the year under review. Based on continued broad
risk diversification and the orientation of our investment port-
folio, our VaR was nevertheless clearly below the VaR upper
limit defined in our investment guidelines. It amounted to
0.8% (previous year: 0.8%) as at the end of the reporting
period.
The short-term loss probability measured as the Value at Risk
(VAR) is another vital tool used for operational monitoring
and management of the market price risks associated with
our securities positions. It is calculated on the basis of histor-
ical data, e.g. the volatility of the securities positions under
own management and the correlation between these risks. As
part of these calculations the decline in the fair value of our
securities portfolio is simulated with a certain probability and
within a certain period. The VaR of the Hannover Re Group
determined in accordance with these principles specifies the
decrease in the fair value of our securities portfolio under
own management that with a probability of 95% will not be
exceeded within ten trading days. A standard market model is
Warning level 3
Warning level 2
Warning level 1
Utilisation by Hannover Re
Q4 2021
Q3 2021
Q2 2021
Underwriting risk life and health reinsurance
Market risk
Counterparty default risk
Operational risk
Yield decrease -50 basis points
+1,508.5
+1,460.4
Yield decrease -100 basis points
+3,113.3
+3,014.6
Real estate
Real estate market values -10%
-2,766.8
Real estate market values +10%
-130.0
+80.6
-
Further significant risk management tools
along with the
various stress tests used to estimate the loss potential under
extreme market conditions – include sensitivity and duration
analyses and our asset/liability management (ALM). The in-
ternal capital model provides us with quantitative support for
the investment strategy as well as a broad diversity of VaR
calculations. In addition, tactical duration ranges are in place,
within which the portfolio can be positioned opportunistically
according to market expectations. The parameters for these
ranges are directly linked to our calculated risk-bearing ca-
pacity. It should be borne in mind that the issued subordinat-
ed bonds and resulting induced interest rate exposure are
actively factored into our ALM. Further information on the
risk concentrations of our investments can be obtained from
the tables on the rating structure of fixed-income securities
as well as on the currencies in which investments are held.
Please see our comments in section 6.1 of the notes entitled
"Investments under own management" on page 204 et seq.
Equity risks derive from the possibility of unfavourable
changes in the value of equities, equity derivatives or equity
index derivatives in our portfolio. Their relevance to our in-
106
Hannover Re | Annual Report 2021
Diversification
-310.6
+310.6
(777)
1,148.3
1,477.2
12.7
17.6
18-23 March
Hail/Storm/Flood, Australia
11.5
18.4
13 July-25 October
Wildfire "Dixie" Northern America, USA
21.5
21.5
1 Credit Loss
(1,277)
32.5
2 Aviation Losses
23.1
35.3
25-30 October
Storm "Filomena", Spain
Thunderstorm Australia
7-8 January
15.1
13.1
28 June-1 July
13.1
14.0
1 April
13.4
14.3
11-14 April
Total
Frost France
Storm "Xero", Germany, Austria, Switzerland
Drought Canada
Cyclone "Seroja", Australia
14.3
14.8
13-14 February
Earthquake Fukusihma, Japan
16.6
34.8
42.1
30.2
Tornados, USA
Storm "Volker", Germany
8 Man-made losses
Winterfreeze, USA
Hurricane "Ida", Caribbean, USA
Flood "Bernd", Europe
in EUR million
Catastrophe losses and major claims¹ in 2021
For the purposes of risk limitation, maximum amounts are
also stipulated for various extreme loss scenarios and return
periods; the limits set take into account the profitability of the
business in question. Risk management ensures adherence to
these maximum amounts. The Executive Board, Risk Com-
mittee and P&C Executive Committee are kept regularly up-
dated on the degree of capacity utilisation.
16-22 July
21-25 June
8-16 July
Date
Combined management report
99
Risk management considers numerous scenarios and ex-
treme scenarios, determines their effect on portfolio and per-
formance data, evaluates them in relation to the planned fig-
ures and identifies alternative courses of action.
Within the scope of this process for the management of natu-
ral catastrophes, the Executive Board defines the risk appe-
tite and the limit for natural perils once a year on the basis of
the risk strategy.
3 Marine Losses
Floods, China
Net expenditure on major losses in the year under review
amounted to EUR 1,250.2 million (EUR 1,594.9 million). Our
company incurred the following catastrophe losses and major
claims in the 2021 financial year:
M 56
47.9
65.6
111.9
10-11 December
69.6
113.3
218.9
222.6
10.6
156.0
11-21 February
304.9
790.5
26 August-4 September
208.4
801.8
Net
Gross
310.5
7 April
10.7
10.6
reserves
in years
15.0
78.9
26.5
13.5
75.0
32.2
In order to partially hedge inflation risks Hannover Re holds
securities in its portfolio with inflation-linked coupons and
redemption amounts. An inflation risk exists particularly inas-
much as the liabilities (e.g. loss reserves) could develop dif-
ferently than assumed at the time when the reserve was con-
stituted because of inflation. The specified bonds help to
provide partial protection for these parts of the loss reserves
against inflation risks.
For the purpose of assessing our material catastrophe risks
from natural hazards (especially earthquake, windstorm and
flood) we use licensed scientific simulation models, supple-
mented by the experience of our own specialist departments.
The monitoring of the risks resulting from natural hazards is
rounded out by scenario analyses. Major scenarios and stress
tests are shown in the following table:
Stress tests for natural catastrophes after
retrocessions
Aggregate annual loss
in EUR million
Hurricane US
2021
M 55
2020
Survival ratio
IBNR reserves
Individual loss
Survival ratio
in years
873.5
1,387.5
945.4
Required risk capital with a confidence level of 99.5% on an aggregate
annual loss basis; information not audited by the independent auditor
The reserve risk, i.e. the risk of under-reserving already in-
curred or foreseeable losses and the resulting strain on the
underwriting result, is a high priority in our risk manage-
ment. We attach importance to maintaining a conservative
reserving level. In order to counter the risk of under-reserv-
ing we calculate our loss reserves based on our own actuarial
estimations and establish, where necessary, additional re-
serves supplementary to those posted by our cedants as well
as the segment reserve for losses that have already occurred
but have not yet been reported to us. Liability claims have a
major influence on the segment reserve. The segment reserve
is calculated on a differentiated basis according to lines and
regions. The segment reserve established by the Hannover
Re Group amounted to EUR 9,379.3 million (EUR 8,095.6 mil-
lion) in the year under review.
98
Hannover Re | Annual Report 2021
In calculating the reserves, we use actuarial methods based
on run-off triangles. Run-off triangles show the changes in
the reserve over time due to paid claims and in the recalcula-
tion of the reserves to be established at each balance sheet
date. Their adequacy is monitored using actuarial methods.
Effect on forecast net income
Our own actuarial calculations regarding the adequacy of the
reserves are also subject to annual quality assurance reviews
in the form of an external analysis. For further remarks on the
reserve risk please see our comments in section 6.7 "Techni-
cal provisions" on page 225 et seq.
Survival ratio in years and reserves for asbestos-related claims and pollution damage
M 54
in EUR million
Asbestos-related claims/
pollution damage
2020
2021
Individual loss IBNR reserves
reserves
Asbestos- and pollution-related claims account for only a
small share of the Hannover Re Group's loss reserves. It is
particularly difficult to reliably estimate future loss payments
for such claims. The adequacy of these reserves can be
estimated using the so-called “survival ratio”. This ratio
expresses how many years the reserves would cover if the
average level of paid claims over the past three years were to
continue.
792.5
100-year loss
250-year loss
(1,107)
250-year loss
(493)
(223)
.
• Historical loss and exposure analysis
Calculation of the loss expectancy
Step 1
Ensuring the quality of our portfolios
In addition, Hannover Re's regional and treaty departments
prepare regular reports on the progress of their respective
renewals. They report on, among other things, significant
changes in conditions, risks (e.g. in relation to the premium
level) and also on emerging market opportunities as well as
the strategy pursued in order to accomplish targets. The de-
velopment of the combined ratio in property and casualty re-
insurance in 2021 and prior years is shown in the table below:
The price/premium risk lies in the possibility of a random
claims realisation that diverges from the claims expectancy
on which the premium calculation was based. Regular and
independent reviews of the models used for treaty quotation
as well as central and local underwriting guidelines are vital
management components. We have put in place a multi-step
quotation process to ensure the quality of our portfolios:
1
Hannover Re | Annual Report 2021
100
Natural catastrophes and other major claims in excess of EUR 10 million gross
1
1,250.2
2,649.4
100-year loss
Earthquake Chile
(747)
(1,203)
(1,594)
Earthquake US West Coast
100-year loss
(839)
250-year loss
Winter storm Europe
100-year loss
(1,615)
(554)
(1,184)
(667)
(1,452)
(1,959)
(377)
105
(1,009)
(631)
Earthquake Japan
100-year loss
(758)
(347)
250-year loss
250-year loss
15.9
Changes in the quantity of underlying risks
Discounting of future cash flows
Hannover Re | Annual Report 2021
Hannover Re | Annual Report 2021
The risks arising out of life and health reinsurance are reflect-
ed in the internal capital model.
The impacts of Covid-19 on the rest of our morbidity portfolio
have been limited to date. We continuously track the potential
implications of the Covid-19 pandemic for our worldwide life
and health reinsurance business. It is to be anticipated that
the Covid-19 pandemic will lead to further strains in 2022.
Along with US business, particular mention should be made
here of the South African and Latin American mortality port-
folio. Special protection covers have been taken out to limit
the mortality risk.
We monitor developments in the worldwide morbidity portfo-
lio on an ongoing basis.
Based on the information available to us today, we continue
to assume a positive VIF for our US mortality business as a
whole. Should additional information lead to the determina-
tion that this is no longer the case, this would result in a one-
off charge to the IFRS result.
The actual risk experience for the portfolio in question was
again influenced by the Covid-19 pandemic in 2021. We are
monitoring the further development of the underlying mortal-
ity, especially as the Covid-19 pandemic unfolds, on an ongo-
ing basis.
Rate increases for further selected treaties were initiated in
the course of 2021.
majority of the underlying business, these rate adjustments
have been successfully implemented or the cedant has recap-
tured the business. We are currently engaged in arbitration
procedures with a small number of individual cedants in re-
spect of the implemented rate increases. Another arbitration
procedure with a cedant was successfully concluded in the
past year. Based on the information currently available to us,
we take a favourable view of our legal position for the remain-
ing proceedings.
As part of our inforce management measures we had initiated
rate adjustments for the portfolio concerned in 2018. For the
In recent years we have reported regularly on the results of
our US mortality business, which have been poorer than an-
ticipated. The reason for this development was the negative
earnings performance of a large portfolio that we, as reported
at the time, acquired at the beginning of 2009.
local accounting principles satisfy all requirements with re-
spect to the calculation methods used and assumptions made
(e.g. use of mortality and morbidity tables, assumptions re-
garding the lapse rate). In addition, the assumptions are con-
tinuously reviewed on the basis of empirical data and modi-
fied if necessary. New business is written in all regions in
compliance with underwriting guidelines applicable world-
wide, which set out detailed rules governing the type, quality,
level and origin of risks and how these considerations are
factored into the pricing. These global guidelines are revised
annually and approved by the Executive Board. Special un-
derwriting guidelines give due consideration to the particular
features of individual markets. By monitoring compliance
with these underwriting guidelines we minimise the risk of an
inability to pay or of deterioration in the financial status of
cedants. Regular reviews and holistic analyses (e.g. with an
eye to lapse risks) are carried out with respect to new busi-
ness activities and the assumption of international portfolios.
Large transactions are also examined by our risk manage-
ment department. Individual actuarial reports and documen-
tation ensure that regular scrutiny also takes place at the sub-
sidiary level. The interest rate risk, which in the primary
sector is important in life business owing to the guarantees
that are given, is of only minimal relevance to our company
thanks to the design of our reinsurance treaties. We have con-
fidence in the entrepreneurial abilities of our underwriters
and grant them the most extensive possible powers. In our
decentralised organisation we manage risks where they arise
using a consistent Group-wide approach in order to obtain an
overall view of the risks in life and health reinsurance. Our
global underwriting guidelines provide underwriters with an
appropriate framework for this purpose.
Hannover Re | Annual Report 2021
102
Through our quality assurance measures we ensure that the
reserves established by ceding companies in accordance with
Diversification is a central management tool for our com-
pany. We seek to spread risks as far as possible across differ-
ent risk classes and different regions. In our pricing of
reinsurance treaties we provide incentives to further increase
diversification.
103
-1 to 0
Combined management report
Faced with a challenging capital market climate, particularly
high importance attaches to preserving the value of assets
under own management and the stability of the return.
Hannover Re's portfolio is therefore guided by the principles
of a balanced risk/return profile and broad diversification.
Based on a risk-averse asset mix, the investments reflect both
the currencies and durations of our liabilities. Market price
risks include equity risks, interest rate risks, foreign exchange
risks, real estate risks, spread and default risks. Our portfolio
currently consists in large part of fixed-income securities,
and hence default and spread risks account for the bulk of the
market risk. We minimise interest rate and foreign exchange
risks through the greatest possible matching of payments
from fixed-income securities with the projected future pay-
ment obligations from our insurance contracts. Market risks
derive from the investments managed by Hannover Re itself
and from investment risks of ceding companies that we as-
sume in connection with insurance contracts. The following
table shows the risk capital with a confidence level of 99.5%
for the market risks from investments under own and
third-party management.
Real estate risk
2,048.3
Equity risk²
1,593.4
Foreign exchange risk
1,082.2
Interest rate risk
31.12.2020
2,902.0
2,818.9
Default and spread risk
31.12.2021
in EUR million
M 61
Required risk capital' for market risks
2
Market risks
Changes in the quality of underlying risks
-1 to 0
-2 to 0
(3,481.0)
Diversification
222.8
163.2
Expense risk
396.8
353.7
1,488.3
1,671.6
Morbidity and disability risk
Lapse risk
2,302.5
31.12.2021
31.12.2020
2,116.3
2,176.3
(3,441.8)
-2 to 0
Underwriting risk life and health
3,144.9
-5 to -2
-5 to -2
-4 to -2
-4 to -2
-10 to -7
-8 to -5
2020
M 60
2021
Mortality +5%
(excluding annuity business)
Morbidity +5%
Mortality -5%
(annuity business only)
Lapse rate +10%
Costs +10%
Sensitivities of the underwriting risks
(impact corridors in % of the available
economic capital)
The monitoring of the risk exposure is complemented by reg-
ular stress tests performed with regard to selected underlying
underwriting risk factors. The impact (in % of the available
economic capital) is within the following ranges:
2 Mortality risk incl. catastrophe risk
Required risk capital with a confidence level of 99.5%;
information not audited by the independent auditor
1
3,329.7
Longevity risk
2,505.9
7.8
Required risk capital¹ for underwriting risks
in life and health reinsurance
The reserves are determined on the basis of secure biometric
actuarial bases in light of the information provided by our
clients. The biometric actuarial bases used and the lapse as-
sumptions are continuously reviewed with an eye to their ad-
equacy and if necessary adjusted. This is done using the com-
pany's own empirical data as well as market-specific insights.
Our current risk profile in life and health reinsurance is dom-
inated by mortality and longevity risks. This is due to the fact
that under some of our contracts we pay death benefits, while
under others we pay survival benefits. The volume of our an-
nuity portfolio contributes to diversification within life and
health reinsurance. We calculate the diversification effect be-
tween mortality and longevity risks prudently in view of the
fact that the contracts are normally taken out for different re-
gions, age groups and individuals. Morbidity risks are also
playing an increasingly significant role. The required risk
capital with a confidence level of 99.5% for underwriting
risks in life and health reinsurance breaks down as follows:
All risks directly connected with the life of an insured person
are referred to as biometric risks. They include in particular
the miscalculation of mortality, life expectancy, morbidity and
occupational disability. Biometric risks are the material risks
for our company in the area of life and health reinsurance.
Our goal is to strike a balance between biometric risks. Fur-
thermore, we are exposed to lapse risks because the cash
flows resulting from our reinsurance treaties are in part de-
pendent on lapse rates among policyholders. Counterparty
default risks are also material since we partly prefinance our
cedants' new business acquisition costs. Furthermore, we are
exposed to catastrophe risks, especially events involving a
high number of fatalities in our insured portfolio such as the
Covid-19 pandemic in 2021.
Underwriting risks in life and
health reinsurance
Combined management report
101
Hannover Re | Annual Report 2021
For further information on the run-off of the loss reserves
please see our explanatory remarks in the section "Run-off of
the net loss reserve in the property and casualty reinsurance
segment" on page 226 et seq.
Net share of the Hannover Re Group for natural catastrophes and other major claims in excess of EUR 10 million gross as a percentage
of net premium earned
7.0
8.4
6.1
M 59
7.1
12.3
7.9
7.5
11.2
7.5
Thereof catastrophe losses¹
95.8
94.9
94.7
94.4
93.7
99.8
101.6
in EUR million
Mortality risk²
97.7
casualty reinsurance)
• Commissions
Step 2
• Broker fees
• Internal administration
M 57
Calculation of the cost of capital
• Level of capital allocation determined by volatility
of the business covered and contribution
to diversification
Expected return on equity
Capital structure
Step 3
•
Combined and catastrophe loss ratio
M 58
in %
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Combined ratio (property and
96.5
98.2
the risk management function and the respective risk identi-
fication, analysis, evaluation, steering, monitoring and re-
porting. The assessment of the maturity level enables us,
among other things, to prioritise operational risks. In order to
calculate the capital commitment in our internal capital mod-
el we perform extensive scenario analyses and take the find-
ings as a basis for specifying the parameters for the stochas-
tic model. In this context, experts across all disciplines
establish assumptions for the loss frequency and losses in
joint workshops. In addition, internal loss events and
near-losses are systematically recorded and examined with
an eye to possible measures for improving the control system.
The internal data are enhanced with insights gained from ex-
ternal events, which either become known through public
channels or were reported through a loss data consortium of
which we are a member.
2019
Regular quarterly risk reporting to the Risk Committee and
the Executive Board takes place with regard to all operational
risks. In the context of the reporting, risks are also evaluated
on the basis of risk indicators.
Required risk capital¹ for
operational risks
in EUR million
Operational risk
M 69
31.12.2021
Management of operational risks
626.9
1 Required risk capital with a confidence level of 99.5%;
information not audited by the independent auditor
548.4
Unlike market, counterparty default and underwriting risks,
operational risks are categorised as non-financial risks. We
discuss below the subcategories of operational risks. Risks
connected with ESG issues can occur in particular in the sub-
categories of business continuity, compliance, human re-
sources, information security and outsourcing.
Business continuity risks
Business continuity risks arise from natural or man-made
hazards that threaten or disrupt the business operations. The
risk also includes IT service continuity risks. Our Business
Continuity Management (BCM) system reduces the risk
through preventive measures, such as an emergency power
supply, alternative infrastructures and contingency plans that
are regularly tested. A special organisational and operational
structure has been set up to deal reactively with a crisis event.
This has proven itself, inter alia in connection with the cur-
rent Covid-19 pandemic, and there were no material impacts
on our business operations.
In contrast to underwriting risks (e. g. the reserve risk), which
we enter into in a deliberate and controlled manner in the
context of our business activities, operational risks are an in-
divisible part of our business activities. The focus is therefore
on risk minimisation. With the aid of half-yearly Group-wide
self-assessments, in which all relevant corporate operations
are actively involved, we determine the maturity level of our
risk management system for operational risks and define ac-
tion fields for improvements. The assessment is carried out
by evaluating the maturity level of the corporate governance,
110
Combined management report
Operational risks refer to the risk that arises from inadequate
or failed internal processes, or from personnel and systems,
or from external evetns. Within the overall framework of op-
erational risks, we pay particularly close attention to business
continuity risks, business process and data quality risks, com-
pliance risks, fraud risks, human resources risks, information
security risks and outsourcing risks.
Operational risks
As the parent company, Hannover Re provides a guarantee to
clients for a small number of low-risk structured transactions.
In this context, it guarantees the payment of liabilities by
Hannover Re under these specific transactions in the event
that the subsidiary is unable to meet its assumed obligations.
Since each of these guarantees is associated with a specific
transaction and formulated in such a way that each potential
payment can only arise once per corporate entity of Hannover
Re (i.e. either at the subsidiary itself as part of the transaction
or at Hannover Re as a consequence of the guarantee), the
existence of a guarantee on the part of Hannover Re has no
effect on the underwriting risk from Hannover Re's proper-
ty & casualty or life & health reinsurance business.
Lastly, short-term deposits at banks are also at risk of coun-
terparty default.
Counterparty default risks, among other risks, are also rele-
vant to our investments and in life and health reinsurance
because we prefinance acquisition costs for our ceding
companies. Our cedants, retrocessionaires and broker rela-
tionships as well as our investments are therefore carefully
evaluated and limited in light of credit considerations and are
constantly monitored and controlled within the scope of our
system of limits and thresholds.
The volume of assets subject to collateral arrangements is
well below 60% of Hannover Re's total assets. This statement
is relevant for the calculation of the counterparty default risk
with respect to Hannover Re.
Combined management report
109
< BBB, NR
2021
2020
non-availability/shortage of personnel,
Hannover Re | Annual Report 2021
31.12.2020
Cyber insurance
116
Cyber attacks and loss of sensitive data
Cyber attacks and the loss of sensitive information can
be associated with considerable financial losses and
also reputational risks. In our highly networked world
it has therefore become increasingly important in re-
cent years to protect information and defend against
cyber attacks. This has become all the more true dur-
ing the Covid-19 pandemic given extensive working
from home and the associated changed risks.
With a view to protecting against these risks, Han-
nover Re has implemented an Information Security
Management System (ISMS) that is closely aligned
with international standards - principally ISO 27001
- and harmonised with other management systems
such as data protection or outsourcing management.
The central document is the "Information Security
Policy", which is valid for all locations worldwide. To-
gether with specific guidelines and standards, it regu-
lates all technical and organisational measures includ-
ing those relating to the confidentiality, integrity and
availability of information assets. Consideration is giv-
en to all types of digital and physical information as-
sets. Appropriate allowance has been made in the IT
processes.
The Executive Board bears overall responsibility for
information security. It is supported by the Risk Com-
mittee. The Information Risk & Security Committee
(IRSC) is a sub-committee of the Risk Committee and
is comprised of the Head of Risk Management, the
Chief Information Security Officer (CISO) and the
Head of IT. The IRSC evaluates and monitors the cor-
responding risks and steers any conflicts of interest in
relation to information and IT security. It acts - in
common with the risk management function and the
CRO - independently of any instructions. The full
Executive Board is provided with information at least
annually by way of an information security report and
also within the year if necessary. The Risk Committee
receives information on a quarterly basis.
The CISO, as the main process owner, is responsible
for the planning, implementation and ongoing devel-
opment of the ISMS as well as for coordinating the
corresponding tasks within the Hannover Re Group.
He is supported by local contacts and additionally
bears responsibility Group-wide for the definition and
monitoring of controls. The CISO cooperates closely
with Information Risk Management (IRM), the central
Compliance function and the Data Protection Officer.
Both the CISO and the other specified functions form
part of the second line of defence. Furthermore, every
single member of staff is responsible for adhering to
the relevant guidelines and instructions. To this end,
all employees receive training in information security
topics annually and at the time of their appointment
and receive awareness-raising within the year.
When it comes to a transfer of knowledge in relation to
our own (operational) risks in connection with cyber
risks (cyber resilience), we participate in various co-
operative projects undertaken by our industry and en-
gage in a regular dialogue with, among others, the
Bundesverband der IT-Anwender e. V. in the context
of the Cyber Security Competence Center.
Cyber risks in underwriting practice
Hannover Re offers reinsurance protection for cyber
risks. The risks stemming from the cyber portfolio are
monitored and managed using, among other things,
the internal model. The management approach also
encompasses cyber exposures from insurance con-
tracts that do not primarily cover this risk (silent cyber
risk), although these diminished in importance last
year due to the implementation of exclusions. In addi-
tion, part of the risk is ceded through an external pro-
tection cover.
The issues of information security and cyber security
as well as the associated risks in underwriting practice
are also addressed by our working group on emerging
risks, which supports monitoring across the various
departments.
112
Hannover Re | Annual Report 2021
Combined management report
Other risks
Under other risks we include emerging risks, strategic risks,
sustainability and reputational risks as well as liquidity risks.
Management of other risks
Other risks are managed primarily using qualitative methods
and on the basis of risk indicators. Risk management moni-
tors and reduces the other risks through mitigation measures
such as company-wide working groups and guidelines. Regu-
lar quarterly risk reporting to the Risk Committee and the Ex-
ecutive Board takes place with regard to the other risks. Risks
are also evaluated as part of the reporting.
Within the risk management processes we also take into ac-
count the impacts on operational and reputational risks of
aspects of environmental management, employee matters,
social concerns, respect for human rights and the combating
of corruption and bribery, as required by the CSR Directive
Implementation Act in accordance with § 289b and c German
Commercial Code (HGB) and § 315c German Commercial
Code (HGB).
Reputational risks are included under non-financial risks.
Risks connected with ESG topics can arise, in particular, in
the subcategories of emerging and strategic risks as well as
sustainability and reputational risks.
Emerging risks
Emerging risks are risks that are in the process of forming or
may shortly become relevant due to current developments.
Emerging risks evolve gradually from weak signals to unmis-
takable tendencies. They can directly impact our treaty port-
folio in both property & casualty and life & health reinsurance
and influence our investments. A further hallmark is that their
risk content cannot be reliably assessed, especially with re-
spect to our treaty portfolio. Emerging risks include, for ex-
ample, scarcity of resources and shortage of water as well as
the loss of biodiversity.
Early detection and subsequent evaluation of risks are cru-
cially important when it comes to emerging risks. For this
reason, we deploy Hannover Re's internal, interdepartmental
and multi-line expert working group on “Emerging Risks &
Scientific Affairs" and we ensure its linkage to risk manage-
ment. The analyses performed by this working group are
used Group-wide in order to pinpoint any necessary meas-
ures. The working group is currently exploring around 20
megatrends so as facilitate the identification and adequate
evaluation of not only existing but also emerging risks. Meg-
atrends are defined as developments with a trend cycle of at
In selected market niches we transact primary insurance
business that complements our reinsurance activities. In so
doing, just as on the reinsurance side, we always work to-
gether with partners from the primary sector - such as insur-
ance brokers and underwriting agencies. This gives rise to
risks associated with distribution channels, although these
are minimised through the careful selection of agencies,
mandatory underwriting guidelines and regular checks. The
distribution channel risk forms an integral part of manage-
ment of the outsourcing risk.
Outsourcing risks can result from the outsourcing of func-
tions, services and/or organisational units to third parties.
They also include intra-group outsourcings. Mandatory rules
have been put in place to limit this risk; among other things,
they stipulate that a risk analysis and partner assessment are
to be performed prior to outsourcing. In the context of these
analyses a check is carried out to determine, inter alia, which
specific risks are associated with the outsourcing and what
risk management measures need to be taken. The results of
the analyses are subject to regular review.
Outsourcing risks
111
e. g. as a consequence of a pandemic
•
loss of the workplace environment
• failure of local/central IT
•
•
failure of external infrastructures/service providers
security incidents (life and limb of employees at risk)
Business process and data quality risks
Business process risks are associated with the risk of inade-
quate or failed internal processes, which can arise inter alia
as a consequence of an inadequate process organisation. We
have defined criteria for managing the risk that result in a
high process quality. Data quality is similarly a very critical
success factor, especially in risk management, because for
example the validity of the internal model is largely based on
the data provided. As part of our data quality management,
we have defined extensive automatic routines that continu-
ously determine data quality in central systems.
Compliance risks
least 30 years. They are not presently associated with direct
impacts on operations, but may potentially evolve in this di-
rection. The monitored megatrends of ESG relevance include,
among others, the decline in biodiversity, global warming
and scarcity of resources. Megatrends are considered in con-
nection with emerging risks and resulting opportunities.
Thus, for example, the megatrend towards a decline in biodi-
versity can be viewed in conjunction with emerging risks as-
sociated with scarcity of resources, air pollution, genetically
modified organisms or food security and availability - but
also goes hand-in-hand with a need for innovative (insurance)
solutions and services. Action on climate change means new
or refined technologies, such as renewable energies or hy-
drogen concepts and their various possible applications, for
which insurance coverages are needed.
Compliance risks are associated with the risk of breaches of
standards and requirements, non-compliance with which may
entail lawsuits or official proceedings with not inconsiderable
detrimental implications for the business activities of the
Hannover Re Group. Compliance with regulatory standards,
the company's Code of Conduct, tax regulations, data privacy
requirements as well as the stipulations of anti-trust and
competition law have been defined as issues of particular
relevance.
We report on our compliance management system as part of
our combined non-financial information statement on page
70 et seq. For further information on compliance-related top-
ics, including for example lawsuits, contingent liabilities and
commitments, please see section 8.6 “Lawsuits" on page 261
and section 8.7 "Contingent liabilities and commitments" on
page 261 et seq.
Fraud risks
Fraud risks refer to the risk that results from intentional viola-
tions of laws or rules from own employees and/or from third
parties in order to gain an advantage. This risk is reduced by
the internal control system as well as by the audits conducted
by Group Auditing on a Group-wide and line-independent
basis. Should an instance of fraud nevertheless occur, estab-
lished escalation processes to involve all relevant functions
are in place and a risk-specific analysis (e.g. forensic investi-
gation) is conducted including determination of appropriate
measures.
Human resources risks
The proper functioning and competitiveness of the Hannover
Re Group can be attributed in large measure to the expertise
and dedication of our staff. In order to minimise personnel
risks, we pay special attention to the skills, experience and
motivation of our employees and foster these qualities
through outstanding personnel development and leadership
activities. These measures are supported by ongoing talent
management and regular employee surveys.
Hannover Re has at its disposal specific indicators for the ear-
ly detection and monitoring of material risks. Along with a
determination of the weighted level of maturity, this also en-
compasses continuous succession planning, ensuring the
timely (re)staffing of vacant positions and monitoring turno-
ver rates based on industry benchmarks.
Information security risks
Information security risks arise, inter alia, out of the risk of
inadequate integrity, confidentiality or availability of informa-
tion as well as impacts from or on other assets such as sys-
tems, processes, buildings/premises or persons. By way of
example, losses and damage resulting from the unauthorised
passing on of confidential information, the malicious over-
loading of important IT systems or from computer viruses/
ransomware are material to the Hannover Re Group. Given
the broad spectrum of such risks, a diverse range of technical
steering and monitoring measures and organisational stand-
ards, including for example the requirement to conclude con-
fidentiality agreements with service providers, have been put
in place. In addition, our employees are made aware of such
security risks through practically oriented tools provided on-
line in the intranet, by way of training opportunities and
through targeted information.
Hannover Re | Annual Report 2021
In conformity with a risk-based approach, sanctions screen-
ing software is used on the relevant parts of the Hannover Re
Group's portfolio as well as on loss advices to filter out indi-
viduals who are subject to sanctions. Suitable steps are taken
if such individuals are identified. Business partners are also
screened in this way. Responsibilities within the compliance
organisation are regulated and documented Group-wide and
interfaces with risk management have been put in place. The
set of tools is rounded off with regular compliance training
programmes.
Another observed trend is urbanisation. The steady increase
in urbanisation means the growth and change of cities. Those
leaving the countryside and moving to the city are mostly
young, hence altering both rural and urban age distributions.
Correlated trends such as the ageing society and new types of
mobility, increasingly against a backdrop of sustainability, are
throwing up major questions. The significance of these trends
and the speed of change are compelling the insurance indus-
try to plan which role it wants to play in helping to shape the
future. In this context it is important to consider both busi-
ness opportunities and risks. Given that all this is affected by
climate change, people's property - especially when value
concentrations form in future megacities – will have to be in-
sured against natural perils. In a worst-case scenario, this
could mean that certain regions and risks become uninsura-
ble if adequate urban planning - taking account of natural
hazards – is neglected in the spread of large cities around the
world. Urbanisation not only means new buildings, technolo-
gies and lifestyles that have to be insured; rather, living close
together also has implications for people's physical and men-
tal well-being, which is relevant to our portfolio of life and
health insurance.
Hannover Re publishes position papers on various emerging
risks which can be accessed on our website. In the year under
review the papers on pandemics, medical advances and mi-
croplastics, among others, were updated. A position paper on
social media was made available for internal purposes.
Hannover Re, represented by members of staff from Risk
Management and other units, is a member of the Chief Risk
Officer (CRO) Forum and a constant participant in the CRO
Forum's Emerging Risk Initiative, which continuously tracks
and analyses various emerging risks, publishes information
on megatrends and associated risks and conducts corre-
M 70
Trends
Ideas
Future factors
Soft signals
Analysis
Concrete specification
Assessment
Handover to line
responsibility
Product launch under line
responsibility
Opportunity management process
Risk assessment in the
context of the "new product
process", as appropriate
Creating value through reinsurance
-
If a business idea is translated into reality and a new reinsur-
ance product results, the normal procedure provided the
criteria defined for this purpose by Risk Management are
applicable is to work through the so-called new product
process. This process is supported by Risk Management at
Hannover Re. The process is always worked through if a
contractual commitment is to be entered into in a form not
previously used by Hannover Re or if a new type of risk is to
be insured. If this is the case, all material internal and exter-
nal influencing factors are examined beforehand by Risk
Management (e.g. implications for the overall risk profile or
the risk strategy) and evaluated. Risk Management ensures
that before it can be used or sold a new reinsurance product
must be approved by the Executive Board.
Overall assessment by the
Executive Board
Based on our currently available insights arrived at from a
holistic analysis of the opportunities and risks, the Executive
Board of Hannover Re cannot discern any risks that could
jeopardise the continued existence of the Hannover Re Group
in the short or medium term or have a material and lasting
effect on its assets, financial position or net income. We are
convinced that:
•
•
our established system of risk management affords us a
transparent overview of the current risk situation at all
times
our overall risk profile is appropriate, and
our opportunity management plays an important part in
Hannover Re's sustainable and profitable growth.
Corporate strategy
Hannover Re | Annual Report 2021
Cyber attacks on critical systems are becoming increas-
ingly common. They can cause considerable financial
losses and also damage corporate reputations. Not only
that, they can severely hamper private and public life,
especially if critical infrastructures are impacted - such
as the health, transportation/traffic and energy sectors.
In such instances supply bottlenecks with lasting ef-
fects as well as major disruptions to public safety may
ensue. In a networked world the repercussions of cyber
attacks are intensifying because the volume of globally
stored data and the extent of system dependencies are
constantly growing - and in this context it is not only
one's own technical infrastructure that needs to be se-
cured. On the contrary, the trend towards cloud com-
puting is increasingly shifting the focus to third-party
infrastructures and the associated network connection.
As part of our holistic approach to risk and business
opportunity management, we are also tackling the
question of what new insurance products can be devel-
oped in order to protect against the relevant risks. The
constant refinement of our systemic analyses for the
assessment of cyber risks forms the basis for develop-
ing new (re)insurance solutions. We aim to bring trans-
parency to the customer's cyber risks and we seek to
cover the need for risk-mitigating measures by offering
suitable solutions. To this extent, we also see an oppor-
tunity to generate additional reinsurance premium in
this line of business.
115
Hannover Re | Annual Report 2021
113
sponding impact analyses. The megatrends considered in-
clude ageing and health, consumer habits and digitalisation,
economic stability, environment and climate change, shifting
geopolitical landscapes, technological advances as well as ur-
banisation and social changes. New topics added in the year
under review were digital misinformation, plastics & mi-
croplastics as well as the skills shortage and retraining. The
"pandemic" issue was upgraded from "first significant im-
pacts expected in 1-5 years" to "significant impacts on insur-
ance claims". The publications are publicly accessible on the
CRO Forum website. An exploration of the carbon intensity of
insured portfolios (Carbon footprinting methodology for un-
derwriting portfolios) is also available there.
Strategic risks
Strategic risks derive from a possible imbalance between the
corporate strategy of the Hannover Re Group and the con-
stantly changing general business environment. Such an im-
balance might be caused, for example, by incorrect strategic
policy decisions, a failure to consistently implement the de-
fined strategies and business plans or an incorrect allocation
of resources. We therefore regularly review our corporate
strategy in a multi-step procedure and adjust our processes
and the resulting guidelines as and when required. We have
defined performance criteria and indicators for operational
implementation of the strategic principles and objectives;
these are authoritative when it comes to determining fulfil-
ment of the various targets. The process for the management
of strategic risks continues to be assessed annually as part of
the monitoring of business process risks.
Sustainability and reputational risks
Reputational risks refer to the risk that the trust put in our
company by clients, shareholders, employees or the public at
large may be damaged. This risk has the potential to signifi-
cantly jeopardise the business foundation of the Hannover Re
Group. A good corporate reputation is therefore an indispen-
sable prerequisite for our core business as a reinsurer. Repu-
tational risks may arise out of all business activities conduct-
ed by the Hannover Re Group. Reputational damage may be
caused, inter alia, by a data mishap that becomes public
knowledge or financial difficulties on account of an under-
writing risk. In addition to the risk identification methods al-
ready described, we use a number of different techniques for
risk mitigation, such as our defined communication channels
(e.g. Crisis Communication Guideline), a professional ap-
proach to corporate communications, tried and tested pro-
cesses for specific crisis scenarios as well as our established
Code of Conduct.
Above and beyond the general influence that sustainability
risks have on a number of other risk categories (outside-in
perspective), we also see a correlation between reputational
and ESG risks (inside-out perspective). Risk Management and
Corporate Communications work together closely to identify
ESG and reputational risks. This applies both to the assess-
ment of ESG risks and to the monitoring of media reports, the
analysis of NGO activities and the dialogue cultivated with
relevant stakeholder groups.
In the year under review we therefore extensively updated
our Framework Guideline on Sustainability and Reputational
Risk Management with an eye to the ESG perspective.
Liquidity risks
2018
The liquidity risk refers to the risk of being unable to meet our
financial obligations when they become due. The liquidity
risk consists of the refinancing risk (necessary cash could not
be obtained or could only be obtained at increased costs) and
the market liquidity risk (financial market transactions could
only be completed at a poorer price than expected due to a
lack of market liquidity). Core elements of the liquidity man-
agement of our investments are, in the first place, manage-
ment of the maturity structure of our investments on the basis
of the planned payment profiles arising out of our technical
liabilities and, secondly, regular liquidity planning as well as
the asset structure of the investments. Above and beyond the
foreseeable payments, unexpected and exceptionally large
payments may pose a threat to liquidity. In reinsurance busi-
ness, however, significant events (major losses) are normally
paid out after a lead time that can be reliably planned. As part
of our liquidity management we have nevertheless defined
asset holdings that have proven to be highly liquid - even in
times of financial stress such as the 2008 financial crisis. Our
holdings of unrestricted German, UK and US government
bonds as well as cash during the year under review were larg-
er than possible disbursements for assumed extreme events,
which means that our liquidity is assured even in the unlikely
case of financial crises coinciding with an extreme event that
needs to be paid out quickly. The liquid asset reserve stood at
EUR 6.7 billion as at the balance sheet date. In addition, we
manage the liquidity of the portfolio by checking on each
trading day the liquidity of the instruments contained therein.
These measures serve to effectively reduce the liquidity risk.
Hannover Re | Annual Report 2021
Combined management report
Opportunity report
Speed is one of the qualities used to measure a successful
knowledge transfer. The name of the game is quick and effec-
tive solutions and staying one step ahead of the competition.
Hannover Re searches systematically for new business op-
portunities in order to generate sustainable growth and
strengthen the company's profitable development. With a
view to identifying opportunities and successfully translating
ideas into business, Hannover Re adopts a number of closely
related approaches in order to ensure holistic opportunity
and risk management. Of significance here is the interplay
without overlaps of the various functions within opportunity
and risk management, which is assured by defined interfaces.
Key elements in Hannover Re's opportunity management in-
clude its various market-specific innovations in the
Life & Health and Property & Casualty reinsurance business
groups (see the Forecast on page 141 et seq.).
Trends affecting these business groups are systematically
identified and analysed with the support of external sources
and partners and the needs of our clients are anticipated
along the entire insurance-related value-added chain. New
business opportunities that promise access to innovative
technologies and enhance our appeal in the eyes of custom-
ers are specifically pinpointed. With this in mind, Hannover
Re cultivates business-related partnerships with accelerators,
incubators, company builders, start-ups and research insti-
tutes in order to boost our competitiveness in the insurtech
sector and the area of digital solutions. Various competence
centres have been set up in the Hannover Re Group to evalu-
ate the strategic and technical significance of innovative new
digital technologies and the goals pursued by these innova-
tion units have been put on a strategic footing. The interplay
between these units is based on a dedicated approach that
enhances the activities with specific expertise and efficiency.
In concrete terms, new accelerator units have been estab-
lished in the areas network, business (in each case in the P&C
and L&H business group), technology and parametrics. The
tasks performed by these organisational units include, among
others, global scaling of existing regional products and solu-
tions, developing new sector- and customer-specific digital
assets as well as providing systematic support for insurtechs
as they build their digital business models. This broad spec-
trum of tasks is geared to the clearly defined goals of gener-
ating new premium potential for the Group, cultivating new
strategic partnerships and acquiring new capabilities in the
fields of digitalisation and data analytics.
Closing the protection gap
The economic costs of natural disasters have risen
sharply as catastrophes have grown in number and se-
verity. The heightened risk is primarily due to eco-
nomic development and population growth, a greater
concentration of assets in exposed regions and in-
creasingly also to climate change. The gap between
uninsured and insured losses is particularly large in
emerging and developing countries. Against this
backdrop, Hannover Re is stepping up its involvement
through cooperation with both the public sector and
private enterprise so as to further close the insurance
gap for protection against natural disasters – especial-
ly those that are climate-related - in developing and
emerging countries. By way of example, this is
achieved in selected exposed countries in the context
of the trilateral agreement between the Insurance De-
velopment Forum, the Federal Ministry for Economic
Cooperation and Development and the United Nations
Development Programme. In substantive terms, we
provide capacity for the Natural Disaster Fund and
participate in regional risk pools against natural perils
as well as a number of other programmes with a
bearing on reinsurance. For example, Hannover Re is
currently involved in projects for the development
of insurance products in Jordan, Argentina and
Colombia.
The dynamic networking of the members of staff active in the
field of innovation at Hannover Re gives rise to close links
with other projects, working groups and bodies, such as with
the working group on "Emerging Risks und Scientific Affairs"
in regard to emerging risks and opportunities (see page 113
et seq. “Other risks”). This working group carries out qualita-
tive assessments of emerging risks. As a result, however, not
only are the potential risks explored but also any available
business opportunities. Analyses are compiled here exploring
how Hannover Re can counter megatrends such as climate
change, digitalisation or shifting demographics with novel
(re)insurance products or capital investments. In the year
under review, for example, issues such as "Social media",
"Demographics”, “Long Covid” and “Supply chain risks in
medicine" were analysed by the working group.
Hannover Re | Annual Report 2021
114
2017
AAA AA A
Overall, our focus in BCM is on the following five scenarios:
0
2021
2020
2019
2018
2017
89.5
90.1
90.0
M 67
90.7
90.1
90.3
90.3
90.7
89.7
88.2
89.8
89.5
90.5
90.7
Life and health reinsurance
Hannover Re Group
On a fair value basis EUR 6,465.2 million of the corporate
bonds held by our company were issued by entities in the fi-
nancial sector. Of this amount, EUR 5,158.4 million was at-
tributable to banks. The vast majority of these bank bonds
(75.3%) are rated “A” or better. Our investment portfolio un-
der own management does not contain any written or issued
credit default swaps.
Counterparty default risks
The counterparty default risk consists primarily of the risk of
complete or partial failure of the counterparty and the associ-
ated default on payment. The following table shows the re-
quired risk capital for counterparty defaults with a confidence
level of 99.5%.
Required risk capital' for the
counterparty default risk
in EUR million
Counterparty default risk
M 66
31.12.2021
Property and casualty reinsurance
31.12.2020
449.0
1 Required risk capital with a confidence level of 99.5%;
information not audited by the independent auditor
108
Hannover Re | Annual Report 2021
Since the business that we accept is not always fully retained,
but instead portions are retroceded as necessary, the coun-
terparty default risk is also material for our company in rein-
surance transactions. Our retrocession partners are carefully
selected and monitored in light of credit considerations in
order to keep the risk as small as possible. This is also true of
our broker relationships, which entail a risk inter alia through
the potential loss of the premium paid by the cedant to the
broker. We minimise these risks, among other measures, by
reviewing broker relationships with an eye to criteria such as
the existence of professional indemnity insurance, payment
performance and proper contract implementation. The credit
status of retrocessionaires is continuously monitored. The Se-
curity Committee decides on measures where necessary to
secure receivables that appear to be at risk of default. This
process is supported by a risk management application,
which specifies cession limits for the individual retrocession-
aires participating in protection cover programmes and de-
termines the capacities still available for short-, medium- and
long-term business. Depending on the type and expected
run-off duration of the reinsured business, the selection of
reinsurers takes into account not only the minimum ratings of
the rating agencies Standard & Poor's and A.M. Best but also
internal and external expert assessments. Overall, retroces-
sions conserve our capital, stabilise and optimise our results
and enable us to act on market opportunities across a broader
front, e. g. following a major loss event. Regular visits to our
retrocessionaires give us a reliable overview of the market
and put us in a position to respond quickly to capacity chang-
es. The following table shows how the proportion of assumed
risks that we do not retrocede (i.e. that we run in our reten-
tion) has changed in recent years:
Gross written premium retained
in %
468.0
91.7
Alongside traditional retrocessions in property and casualty
reinsurance we also transfer risks to the capital market. Any
counterparty default risks associated with investors in a capi-
tal market transfer are collateralised via LOCs or a trust ac-
count (e.g. using cash) in favour of Hannover Re.
61.4% of our recoverables from reinsurance business are se-
cured by deposits or letters of credit. For the majority of our
retrocessionaires we also function as reinsurer, meaning that
in most cases recoverables can potentially be set off against
our own liabilities.
76
0
245
362
1,500
Secured
352
0
373
245
The average default rate over the past four years was 0.2%.
Retrocession gives rise to claims that we hold against our
retrocessionaires. These reinsurance recoverables - i. e. the
reinsurance recoverables on unpaid claims amounted to
-
EUR 2,674.1 million (EUR 1,883.3 million) as at the balance
sheet date.
Hannover Re | Annual Report 2021
278
1,000
3
0
197
1,650
33
The following chart shows the development of our reinsur-
ance recoverables
split by rating quality due from our
retrocessionaires.
-
Reinsurance recoverables as at the balance sheet date
in EUR million
M 68
3,000
2,500
2,674
81
2,085
754
2,050
In terms of the Hannover Re Group's major companies,
EUR 537.6 million (7.5%) of our accounts receivable from
reinsurance business totalling EUR 7,207.7 million were
older than 90 days as at the balance sheet date.
44
40
2,000
1,883-
345
265
In general terms, Hannover Re gears its investment portfolio
to the principles of a balanced risk/return ratio coupled with
broad diversification. Accordingly, we counter the risk con-
centrations that nevertheless arise in individual asset classes
with the broadest possible spread of different issuers per
asset class. This is just as much a key component of our
investment policy as credit rating assessment and manage-
ment based on the quality criteria defined in the investment
guidelines.
1,642
1 Securities held through investment funds are recognised pro rata with their corresponding individual ratings.
2 Including government-guaranteed corporate bonds
100.0
M 65
Covered bonds/
asset-backed securities
AAA
AA
A
BBB
< BBB
Total
Corporate bonds
in %
in %
million
in EUR
million
in %
in EUR
million
in %
in EUR
million
in EUR
75.4
entities²
We then assess the credit risk first on the level of individual
securities (issues) and in subsequent steps on a combined
basis on the issuer level. In order to limit the risk of counter-
party default we set various limits on the issuer and issue
level as well as in the form of dedicated rating quotas. A com-
prehensive system of risk reporting ensures timely reporting
to the functions entrusted with risk management.
Combined management report
vestments was, however, very slight because we acted on
market opportunities to dispose of equity funds in what was
already our minimal portfolio of equities and equity funds go-
ing into the year under review. Our equity allocation thus
stands at just 0.5%. Our exposure to the private equity mar-
ket remains unchanged. Changes in fair value here tend to be
prompted less by general market conditions and more by en-
tity-specific assessments. The risks are associated principally
with the business model and profitability and less so with the
interest rate component in the consideration of cash flow
forecasts. Please see our comments in section 6.1 of the notes
entitled "Investments under own management" on page 204
et seq.
The portfolio of fixed-income securities is exposed to the in-
terest rate risk. Declining market yields lead to increases and
rising market yields to decreases in the fair value of the
fixed-income securities portfolio. The credit spread risk
should also be mentioned. The credit spread refers to the in-
terest rate differential between a risk-entailing bond and risk-
free bond with the same maturity. Changes in these risk
premiums, which are observable on the market, result – anal-
ogously to changes in pure market yields - in changes in the
fair values of the corresponding securities. We minimise in-
terest rate risks by matching the durations of payments from
fixed-income securities as closely as possible with the pro-
jected future payment obligations under our insurance con-
tracts.
Foreign exchange risks are especially relevant if there is a
currency imbalance between the technical liabilities and the
assets. Through extensive matching of currency distributions
on the assets and liabilities side, we reduce this risk on the
basis of the individual balance sheets within the Group. The
short-term Value at Risk therefore does not include quantifi-
cation of the foreign exchange risks. We regularly compare
the liabilities per currency with the covering assets and opti-
mise the currency coverage by regrouping assets. In so do-
ing, we make allowance for collateral conditions such as dif-
ferent accounting requirements. Remaining currency
surpluses are systematically quantified and monitored within
the scope of economic modelling. A detailed presentation of
the currency spread of our investments is provided in section
6.1 of the notes entitled "Investments under own manage-
ment" on page 204 et seq.
Real estate risks result from the possibility of unfavourable
changes in the value of real estate held either directly or
through fund units. They may be caused by a deterioration in
particular qualities of a property or by a general downslide in
market values. Real estate risks continued to grow in impor-
tance for our portfolio owing to our ongoing involvement in
this sector. We spread these risks through broadly diversified
investments in high-quality markets worldwide; each invest-
ment is preceded by detailed analyses of the property, man-
ager and market concerned.
The pandemic also has implications for real estate markets.
Against a backdrop of travel restrictions and business clo-
sures, the hardest hit areas have been the restaurant, hotel
and retail industries, and to some extent also the office sec-
tor. In our real estate portfolio we are seeing concrete im-
pacts on directly held properties, above all in the retail sector
and especially in relation to lessees in the restaurant industry.
Rent reductions and defaults here in the financial year just
ended led to shortfalls in regular income of EUR 3.1 million.
Overall, though, an increase in the vacancy rate was not ob-
served in this connection. Hannover Re is not directly invest-
ed in the hotel sector. Exposures are solely through diversi-
fied funds and account for less than 2% of the total real estate
portfolio.
The realities and dynamics of real estate markets are indirect-
ly subject to another influencing factor as a consequence of
the pandemic. If the economic softness (temporarily) reduces
demand for space, this could result in flat or even declining
rental price trends or indeed a rising vacancy rate. In combi-
nation with modified expectations as regards contract condi-
tions and the likelihood of lease extensions or new leases,
these changes in parameters will be reflected in adjusted fair
values of the properties. Pandemic-related developments
have therefore been factored into the real estate valuations.
This applies to both the directly held portfolio and - with the
usual slight time delay - the portfolio of real estate funds.
Securities issued by
semi-governmental
We use derivative financial instruments only to the extent
needed to hedge risks. The primary purpose of such financial
instruments is to hedge against potentially adverse develop-
ments on capital markets. A portion of our cash flows from
the insurance business as well as foreign exchange risks aris-
ing because currency matching cannot be efficiently achieved
are hedged to some extent using forward exchange transac-
tions. Hannover Re holds further derivative financial instru-
ments to hedge interest rate risks from loans taken out to fi-
nance real estate. In addition, Hannover Re holds hedges in
the form of equity swaps to hedge price risks in connection
with the stock appreciation rights granted under the Share
Award Plan. These are intended to neutralise changes in the
fair values of the awarded stock appreciation rights. Con-
tracts are concluded with reliable counterparties and for the
most part collateralised on a daily basis so as to avoid credit
risks associated with the use of such transactions. The re-
maining exposures are controlled according to the restrictive
parameters set out in our investment guidelines.
107
Since 2019 we have entered into term repurchase agreements
as a supplementary liquidity management tool. The holdings
exchanged in this context are fully collateralised.
Insurance derivatives connected with the technical account
are also recognised under the investments due to IFRS finan-
cial reporting requirements. For a more detailed presentation
of the underlying underwriting risks we would refer to the
subsection "Derivative financial instruments in connection
with reinsurance" in section 8.1 "Derivative financial instru-
ments and financial guarantees".
Our investments entail credit risks that arise out of the risk of
a failure to pay (interest and/or capital repayment) or a
change in the credit status (rating downgrade) of issuers of
securities. We attach equally vital importance to exceptional-
Rating structure of our fixed-income securities¹
Rating classes
Government bonds
ly broad diversification as we do to credit assessment con-
ducted on the basis of the quality criteria set out in the invest-
ment guidelines. We measure credit risks in the first place
using the standard market credit risk components, especially
the probability of default and the potential amount of loss
making allowance for any collateral and the ranking of the
individual instruments depending on their effect in each case.
-
Hannover Re | Annual Report 2021
14,546.4
53.2
4,125.0
121.0
43.4
7,634.1
11.5
393.5
1.5
297.1
13.4
1.6
1,037.0
1,844.6
2.5
100.0
19,303.1
100.0
7,749.3
100.0
17,573.5
10.5
796.7
4.1
435.8
0.7
120.5
59.8
2,044.7
9.8
1,884.8
23.9
1,852.5
10.7
1,886.1
13.5
462.0
9.2
1,778.0
7.9
613.7
34.6
6,088.2
12.7
85.1
3,421.3
1,451
0
1,383
941
500
1,233
With a view to ensuring that the concept of diversity is ap-
plied on an ongoing basis, an assessment is made in the con-
text of every new appointment to the Executive Board or Su-
pervisory Board as to whether the envisaged appointment is
also in keeping with the diversity concept.
When appointments are made to the Executive Board and Su-
pervisory Board, Hannover Rück SE is guided by a number of
considerations including the principle of diversity. Wide-rang-
ing qualifications, expertise and relevant experience on the
part of the members of the Executive Board and Supervisory
Board facilitate a nuanced evaluation of the opportunities and
risks associated with business operations and enable bal-
anced and professional actions and decisions to be taken on
this basis. Due consideration is given to the aspect of diversi-
ty when members of the Executive Board and Supervisory
Board are appointed. In addition to specialist and personal
qualifications (competencies), this aspect encompasses in
particular age, gender, education and professional career.
II. Diversity concept for the composition of the Executive
Board and Supervisory Board
The age diversity on the Executive Board ranged from 51 to
61 in the 2021 financial year. On the Supervisory Board the
age range was from 48 to 72.
The diversity of the Executive Board with respect to female
members remained unchanged in 2021. The goal of appoint-
ing at least one additional woman as a member of the compa-
ny's Executive Board by the year 2022 is factored into succes-
sion planning as far as possible.
Furthermore, the Supervisory Board considers it important
that an adequate number of Supervisory Board members are
independent as defined by the German Corporate Govern-
ance Code (DCGK). In its own assessment, the Supervisory
Board currently meets the target set by the Code because Dr.
Lipowsky, Dr. Ollmann and Dr. Pollak are independent within
the meaning of Code Recommendation C.6. Dr. Schipporeit
similarly largely fulfils the independence criteria according to
the Code, but in view of the fact that he was first appointed on
3 May 2007 he has already belonged to the body for longer
than twelve years.
Diversity on the Supervisory Board and Executive Board con-
tinued to be a major focus in the 2021 financial year. Since
the end of the Annual General Meeting on 8 May 2019 alto-
gether five women have belonged to the Supervisory Board.
It remains the case that female members of the Supervisory
Board sit on two of the three Supervisory Board committees.
One woman serves on the Finance and Audit Committee and
one is a member of the Nomination Committee.
I. Implementation of the diversity concept in the 2021 finan-
cial year
Diversity concept - Goals for the
composition of the Executive Board and
Supervisory Board as well as status of
implementation (§ 289f Para. 2 Number 6
German Commercial Code (HGB)
Combined management report
122
The composition of the Supervisory Board shall be such that
overall its members are equipped with the knowledge, abili-
ties and specialist experience necessary for proper perfor-
mance of the tasks. The make-up of the Supervisory Board
shall ensure that the Executive Board in an internationally
operating, broadly positioned reinsurance group receives
qualified supervision and advice from the Supervisory Board.
Above and beyond the legally required specialist expertise in
investing, insurance practice and accounting, the topics of
internationality, taxation, M&A, human resources, risk man-
agement, IT and compliance have been taken into account on
a voluntary basis. The goal is that the Supervisory Board as a
whole has all the know-how and experience considered to be
material in light of the activities of the Hannover Re Group.
Moreover, special attention is to be paid to the integrity, char-
acter, commitment, professionalism and independence of in-
dividuals put forward for election. In accordance with the
Rules of Procedure for the Supervisory Board, for example,
members of the Supervisory Board shall ensure that they
have sufficient time at their disposal for their activities and
that potential conflicts of interest are avoided. Furthermore,
candidates shall be put forward to the Annual General Meet-
ing for election to the Supervisory Board only if they will not
have passed the age of 72 by the time of their election and -
with effect from the election of the new Supervisory Board in
2014 provided they have not sat on the Supervisory Board
for more than three full consecutive terms of office. With re-
gard to the appropriate number of independent Supervisory
Board members from the perspective of the Supervisory
Board, the Supervisory Board has decided that it shall have
three independent members as defined by the German Cor-
porate Governance Code (DCGK). Employee representatives
on the Supervisory Board are disregarded in this context.
The target for the two levels of senior management below the
Executive Board is 18% (corresponding to 16 women), again
to be reached by 30 June 2022.
On the level of the Executive Board, the goal continues to be
to appoint another women as a member of the company's
Executive Board by the year 2024. Currently, one woman
serves on the body, which has altogether seven members.
Five members of the Supervisory Board of Hannover Rück SE
were women in the year under review. In addition, it remains
the case that one woman sits on the Supervisory Board's Fi-
nance and Audit Committee and one is a member of its Nom-
ination Committee. The proportion of women serving on the
Supervisory Board was therefore 56% in 2021. The propor-
tion is thus in excess of the 30% target currently defined pur-
suant to §§ 76 Para. 4, 111 Para. 5 Stock Corporation Act
(AktG) for the period from 1 July 2017 to 30 June 2022.
Targets pursuant to § 289f Para. 4
Sentence 1 in conjunction with Para. 2
No. 4 German Commercial Code (HGB)
For further details of the activities of the Supervisory Board
committees in the year under review, please see the explana-
tory remarks provided in the Report of the Supervisory Board
on page 278 et seq.
Mr. Herbert Haas and Dr. Andrea Pollak - is tasked with pro-
posing to the Supervisory Board appropriate candidates for
the nominations that it puts forward to the Annual General
Meeting for election to the Supervisory Board.
-
The Nomination Committee
Hannover Re | Annual Report 2021
-
With an eye to Hannover Re's international orientation, it is to
be ensured that a sufficient number of members with
long-standing international experience belong to the Super-
visory Board. Based on their current or former service as a
Mr. Torsten Leue (Chairman), Mr. Herbert Haas and Dr. Er-
hard Schipporeit came together in the period under review as
the Standing Committee. The body prepares personnel deci-
sions for the Supervisory Board. It bears responsibility for
granting loans to the group of persons specified in §§ 89
Para. 1, 115 Stock Corporation Act (AktG) and those consid-
ered equivalent pursuant to § 89 Para. 3 Stock Corporation
Act (AktG) as well as for approving contracts with Supervisory
Board members in accordance with § 114 Stock Corporation
Act (AktG). It exercises the powers arising out of § 112 Stock
Corporation Act (AktG) in lieu of the Supervisory Board and
- in cooperation with the Executive Board - ensures that
long-term succession planning is in place. A systematic ap-
proach is taken in this regard and a list of potential candi-
dates with their associated development periods is main-
tained, regularly updated and discussed by the committee in
light of the diversity targets. This routinely constitutes an
item for reporting and deliberation in the committee meet-
ings and it is explored in detail – also in connection with the
Executive Board's strategic objectives in the area of talent
management.
The material modifications to the system of Executive Board
remuneration applicable until 2020 are summarised in the
following overview:
gard. The measurement of performance also takes account of
sustainability criteria. In addition, the remuneration of the
Executive Board is geared even more closely to the interests
of our investors through a stronger share correlation based
on the use of a Performance Share Plan and relative measure-
ment of the Hannover Re share's performance in comparison
with our competitors. Furthermore, the implementation of
malus und clawback provisions makes it possible to reduce or
claw back variable remuneration components in the event of
serious compliance violations.
Changes in the remuneration system of the Executive Board
Due to the reduction in the number of variable remuneration
components and the focus on altogether fewer, yet at the
same time central financial and non-financial performance
criteria derived from Hannover Re's Group strategy, the re-
muneration system is structured more transparently and
comprehensibly overall. The considerable relevance of the
variable remuneration and the reinforcement of the concept
of "pay-for-performance” remain front and centre in this re-
The new remuneration system has been applicable to all
members of the Executive Board with effect from 1 January
2021. It is in full conformity with the amended legal and reg-
ulatory requirements and the recommendations of the Ger-
man Corporate Governance Code (DCGK).
Hannover Re | Annual Report 2021
Insofar as no material changes are made to the remuneration
system, the system of remuneration will be resubmitted to the
General Meeting at least every four years for its approval.
The new remuneration system for the Executive Board was
decided on by the Supervisory Board at its meeting on 4 Au-
gust 2020 and – in view of the material changes – presented
to the General Meeting on 5 May 2021 for its approval. The
General Meeting approved the new remuneration system of
the Executive Board with a majority of 85.54%.
In its elaboration of the current remuneration system the Su-
pervisory Board was supported by the Standing Committee,
which in particular put forward recommendations for the or-
ganisation of the system in light of the defined guidelines. As
part of the elaboration and determination of the remuneration
system, the Supervisory Board made use of its option to call
upon the services of an external remuneration consultant who
is independent of the Executive Board and the company.
The changed legal and regulatory requirements for the remu-
neration system of the Executive Board due to the entry into
force of the Act Implementing the Second Shareholders'
Rights Directive (ARUG II) and the revised version of the Ger-
man Corporate Governance Code (DCGK) prompted the Su-
pervisory Board of Hannover Rück SE to review and compre-
hensively overhaul the system of remuneration for the
members of the Executive Board. In his context the Supervi-
sory Board also took into account the expectations of our in-
vestors and other key stakeholders.
In order to ensure that the relevant selection criteria are met,
the Supervisory Board followed the recommendation of the
Nomination Committee and defined a requirements and com-
petence profile for Supervisory Board members; this is in-
tended, among other things, to assure the availability on the
Supervisory Board of the expertise needed to cover all the
Group's areas of business. In addition, Supervisory Board
members may not hold mandates on governing bodies at ma-
jor competitors of the company or of a Group undertaking,
nor may they perform individual advisory tasks for such com-
petitors.
Procedure for determining and implementing the
remuneration system
Remuneration of the Executive Board
Due to the entry into force of the Act Implementing the Second
Shareholders' Rights Directive (ARUG II) on 12 December
2019, the Executive Board and Supervisory Board have drawn
up the remuneration report for the 2021 financial year for the
first time on the basis of the new regulatory requirements of
§ 162 Stock Corporation Act (AktG). The report is in conformity
with the recommendations and suggestions of the German
Corporate Governance Code (DCGK) as amended on 16 Decem-
ber 2019 and takes account of relevant regulatory provisions.
The remuneration report describes the structure and system
of the remuneration for the Executive Board and Supervisory
Board and provides detailed information about the individual
remuneration of present and former members of the Execu-
tive Board and Supervisory Board of Hannover Rück SE that
is granted and owing to them for their work in the 2021 finan-
cial year.
124
In selecting members of the Executive Board the goal is to
ensure that the members have the skills and experience need-
ed to properly perform their tasks. The Supervisory Board
considers diversity in the composition of the Executive Board.
Moreover, on the level of the Executive Board the aim is to
appoint another woman as a member of the company's Exec-
utive Board by the year 2024. The age limit for the Executive
Board is set at 65. The members of the Executive Board are
appointed by the Supervisory Board for a term of at most five
years. Members of the Executive Board are initially appointed
for no more than three years.
When it comes to selecting candidates who are to be put for-
ward to the Annual General Meeting for election to the Super-
visory Board, care is taken to ensure that the individuals con-
cerned have the necessary knowledge, skills and specialist
experience. The principle of diversity is also reflected in the
selection process.
as managing director with internationally operating under-
takings or organisations, all the shareholder representatives
on the Supervisory Board have long-standing international
experience. In the opinion of the Supervisory Board, due con-
sideration is given to the international dimension of opera-
tions. The goal is to maintain the currently existing interna-
tional profile.
board member/chief executive officer or in a comparable role Remuneration report
123
Hannover Re | Annual Report 2021
Modification of the remuneration system effective
1 January 2021/
The Finance and Audit Committee was made up of Mr. Her-
bert Haas (Chairman), Mr. Torsten Leue and Dr. Ursula Lip-
owsky as an independent financial expert in the reporting
period. The committee monitors the accounting process and
the effectiveness of the internal control system, the risk man-
agement system and the internal auditing system. It also han-
dles issues relating to compliance and the information system
for the Supervisory Board and discusses the Quarterly State-
ments as well as the Half-yearly Financial Report prior to
their publication. It prepares the Supervisory Board's exami-
nation of the annual financial statement, management report
and proposal for the appropriation of profit as well as of the
consolidated financial statement and Group management re-
port. In this context, the Finance and Audit Committee re-
ceives detailed information on the auditor's view of the net
assets, financial position and results of operations as well as
explanations of the effects of any modified recognition and
measurement principles on the net assets, financial position
and results of operations together with available alternatives.
In addition, the committee prepares the Supervisory Board's
decision on the commissioning of the independent auditor for
the financial statements. It considers matters associated with
the necessary independence of the auditor, the awarding of
the audit mandate to the independent auditor, the determina-
tion of the audit concentrations, the fee agreement and the
quality of auditing. The agendas and minutes of the meetings
of the Finance and Audit Committee are also made available
to the members of the Supervisory Board who do not sit on
the committee.
Hannover Re | Annual Report 2021
Working practice of the committees of
the Supervisory Board
Remuneration of senior executives below the
Executive Board
Supervisory Board for the 2021 financial year is itemised on
page 148 et seq. of the Annual Report.
da.pdf. The individual remuneration of the members of the
site, https://www.hannover-re.com/1671472/invitation-agen- Sustainability of enterprise management
119
Hannover Re | Annual Report 2021
The agenda and the invitation to the Annual General Meeting
2021, including the description of the remuneration system
under agenda item 9, can be viewed on the company's web-
The remuneration of the members of the Supervisory Board is
balanced overall and commensurate with the responsibility
and tasks of the Supervisory Board members and the position
of the company, with consideration also given to the remuner-
ation arrangements of comparable listed companies. The re-
muneration arrangements as well as the remuneration system
are regularly reviewed by the Supervisory Board with an eye
to their adequacy, in which regard the advice of external con-
sultants may also be sought. The Annual General Meeting
considers the remuneration of the Supervisory Board mem-
bers at least every four years and if changes to the remunera-
tion arrangements are proposed. This was most recently the
case at the Annual General Meeting on 5 May 2021. The An-
nual General Meeting can confirm the existing system of re-
muneration for the Supervisory Board or adopt a resolution to
amend it.
The system of remuneration for the members of the Supervi-
sory Board is geared to the legal requirements and reflects the
recommendations and suggestions of the German Corporate
Governance Code. It is governed by § 14 of the company's
Articles of Association, https://www.hannover-re.com/34118/
statute-hannover-ruck-se.pdf.
Remuneration of the Supervisory Board
https://www.hannover-re.com/remuneration-report-2022.
The remuneration report 2021 can be found on page 124 et
seq. and at
pdf.
The agenda and the invitation to the Annual General Meeting
2021, incl. the description of the remuneration system under
agenda item 8, can be viewed on the company's website,
https://www.hannover-re.com/1671472/invitation-agenda.
The applicable system of remuneration for the members of the
Executive Board of Hannover Rück SE was adopted by the Su-
pervisory Board at its meeting on 4 August 2020. This was
further presented to the Annual General Meeting on 5 May
2021, where it was approved by a majority of 76.31%. The
remuneration system was developed by the Supervisory Board
with the support of an independent consultant and is in con-
formity with the requirements of the Stock Corporation Act
(AktG) as well as the recommendations of the German Corpo-
rate Governance Code (DCGK) as amended on 16 December
2019 (published in the Federal Gazette on 20 March 2020).
Remuneration of the Executive Board
Remuneration
The Executive Board, The Supervisory Board
Hannover, 3 November 2021
Aside from this divergence discussed above, the company
will also continue in future to comply with all recommenda-
tions of the Code in the version dated 16 December 2019.
Mr. Haas is optimally suited to chairing the Audit Committee,
and in the opinion of Hannover Rück SE it is therefore in the
interest of the company to diverge from Recommendation
C.10 in conjunction with C.7.
The structure and system underlying the remuneration
scheme for senior executives below the Executive Board
(management levels 2 and 3) and for the domestic key func-
tion holders belonging as a matter of principle to the ranks of
senior executives are specified in greater detail on pages 151
et seq.
Information on share-based payment is provided in the sec-
tion of the notes "Share-based payment" on page 256 et seq.
and in the remuneration report with respect to the members
of the Executive Board.
Further enterprise management
principles of Hannover Re
then established the basis for exploration of the insights
gained at the next meeting of the Supervisory Board. All in
all, the picture that emerged from the self-assessment was
extremely satisfactory.
121
Hannover Re | Annual Report 2021
The Supervisory Board decides in individual cases whether
external advice should also be sought as a decision-making
aid. A regular self-assessment is intended to survey the gen-
eral efficiency of its working approach and assure it on a last-
ing basis. In the year under review this self-assessment was
conducted in accordance with the German Corporate Govern-
ance Code. For this purpose, the individual assessments of
the Supervisory Board members were first surveyed in ad-
vance. The consolidated anonymised evaluation of this survey
The Rules of Procedure of the Supervisory Board provide in-
ter alia that each member of the Supervisory Board must have
the knowledge, skills and professional experience required
for orderly performance of their tasks and that a sufficient
number of independent members on the shareholder side
shall belong to the Supervisory Board. Currently, at least
three of the six shareholder representatives are independent
as defined by the German Corporate Governance Code. Per-
sons suggested to the Annual General Meeting as candidates
for election to the Supervisory Board may not be older than
72 at the time of their election and shall normally not belong
to the Supervisory Board as a member for longer than three
full consecutive terms of office; the term of office commenc-
ing from the end of the 2014 Annual General Meeting is the
first term of office to be counted for this purpose. Nomina-
tions shall take account of the company's international activi-
ties as well as diversity. Furthermore, it shall be ensured that
the proposed person can allocate the expected amount of
time. For their part, each sitting member of the Supervisory
Board shall also ensure that they have sufficient time to dis-
charge their mandate. The Supervisory Board meets at least
twice each calendar half-year. The Supervisory Board's report
provides information about the attendance of individual Su-
pervisory Board members at the meetings. No more than two
former members of the company's Executive Board may be-
long to the Supervisory Board.
The Rules of Procedure of the Executive Board are intended
to ensure that a consistent business policy is elaborated and
implemented for the company in accordance with its strategic
objectives. Within the framework of a consistent business
policy, the principle of “delegation of responsibility” enjoys
special status. In the interests of shareholders, importance is
expressly attached to an organisation that facilitates cost-ef-
fective, quick and unbureaucratic decision processes. Open
and trusting cooperation geared to the interest of the whole is
the foundation of success. In this context, the members of the
Executive Board bear joint responsibility for the overall man-
agement of business. Irrespective of their overall responsibil-
ity, each member of the Executive Board leads their own area
of competence at their individual responsibility within the
bounds of the resolutions adopted by the Executive Board.
Only persons under the age of 65 may be appointed to the
Executive Board. The term of appointment shall be deter-
mined such that it expires no later than the end of the month
in which the member of the Executive Board turns 65.
The Chairman of the Supervisory Board stays in regular con-
tact with the Chairman of the Executive Board in order to dis-
cuss with him significant business occurrences. The compo-
sition of the Executive Board (including areas of
responsibility) as well as of the Supervisory Board and its
committees (including period of membership) is set out on
page 18 et seq. and page 283 respectively of the present An-
nual Report.
The Executive Board and Supervisory Board of Hannover
Rück SE work together on a trusting basis to manage and
supervise the company and the Group as a whole. In accord-
ance with the Rules of Procedure of the Executive Board,
matters of fundamental importance require the consent of the
Supervisory Board. The Supervisory Board is comprised of
nine members. Six members are elected as shareholder rep-
resentatives by the shareholders at the Annual General Meet-
ing. The three seats held by employee representatives, which
are currently allocated to Germany pursuant to Part III. § 13
(3) of the Agreement regarding the Participation of Employ-
ees in Hannover Rück SE of 23 January 2013, are elected in
accordance with the provisions of the SE Participation Act
(SEBG) by the responsible representative body (currently the
joint Employee Council of Hannover Rück SE and E+S
Rückversicherung AG). The Supervisory Board appoints the
members of the Executive Board. Since members of the Su-
pervisory Board cannot at the same time belong to the Exec-
utive Board, a high degree of independence in the oversight
of the Executive Board is thus already ensured by structural
means. In addition, the Supervisory Board is kept informed
on a regular and timely basis of the business development,
the execution of strategic decisions, material risks and plan-
ning as well as relevant compliance issues.
Working practice of the Executive Board
and Supervisory Board
Hannover Re considers a properly functioning compliance
structure to be an essential tool for ensuring compliance with
external rules and regulations as well as requirements im-
posed internally by the company. Further details of the com-
pliance management system are provided in the combined
non-financial information statement contained in this Annual
Report on pages 70 et seq. The results of our compliance ac-
tivities are documented annually in the compliance report,
which is submitted to the Finance and Audit Committee of the
Supervisory Board and the full Supervisory Board; in the re-
gard please see the Report of the Supervisory Board on pages
278 et seq.
M 71
Compliance
Combined management report
Hannover Re | Annual Report 2021
120
In view of the special significance of sustainability issues and
ESG risks, there is also close cooperation with Group Risk
Management. The meetings of the Risk Committee are rou-
tinely presented with information on ESG-related and reputa-
tional risk topics. The Executive Board also approved a "Sus-
tainability/RepRisk Framework" in the year under review.
For more extensive information on risk management and the
The Executive Board adopted a new ESG governance struc-
ture in the year under review with a view to strengthening
governance as it relates to ESG-relevant issues. Core ele-
ments are the newly created “Sustainability Function” and
the "ESG Management Team". The tasks of the sustainability
function, which is assigned to the Chief Executive Officer's
scope of responsibility, include inter alia central coordination
of all ESG activities, identifying, analysing and evaluating
ESG topics, leading ESG projects (e.g. for implementation of
the EU Taxonomy), advising the specialist units on ESG is-
sues, presenting proposals for long-term ESG goals to the
Executive Board, regular reporting to the Executive Board
and coordinating an annual ESG programme. The ESG man-
agement team is composed of high-calibre participants from
a range of different departments. The ESG management team
ensures coordinated dovetailing with the Group strategy and
serves as the interface to local units as well as the central
point of contact for fulfilment of ESG-related regulatory re-
quirements. The described ESG governance structure pro-
vides for quarterly reporting to the Executive Board. Further-
more, ESG and the sustainability strategy were topics of
discussion in the year under review at the meetings of the
Supervisory Board and its Finance and Audit Committee.
The Executive Board is responsible for the underlying strate-
gies, the implementation of corresponding structures and
provision of appropriate resources as well as the definition of
responsibilities in the organisational guidelines. The Supervi-
sory Board is tasked with providing advice and oversight for
the Executive Board in its leadership of the company, inter
alia with an eye to the handling of sustainability risks.
In the year under review it was again evident that ESG issues
continued to take on greater strategic and regulatory signifi-
cance. The associated risks and opportunities go hand-in-
hand with increasing expectations placed on the role of cor-
porate governance. Requirements derive from, among other
things, the G20/OECD Principles of Corporate Governance,
Solvency II, the Corporate Sustainability Reporting Directive
(CSRD), the BaFin Guidance Notice on Dealing with Sustain-
ability Risks, the German Corporate Governance Code (DCGK)
as well as the recommendations made by the Task Force on
Climate-Related Financial Disclosures (TCFD). It is envisaged
that corporate governance will assume a prominent role in
shaping ESG topics and integrate them into enterprise man-
agement.
The risk management system applicable throughout the en-
tire Hannover Re Group is based on the risk strategy, which in
turn is derived from the corporate strategy. A core component
is the systematic and comprehensive recording of all conceiv-
able risks that from the current standpoint could potentially
jeopardise the company's profitability and continued exist-
ence. Further details in this regard may be obtained from the
risk report contained in the present Annual Report on pages
86 et seq.
Risk monitoring and steering
In addition to the Corporate Governance principles, Hannover
Rück SE has adopted its own Code of Conduct (www.han-
nover-re.com/50943/code-of-conduct.pdf) that is applied
Group-wide as a set of minimum standards. Complementing
our corporate strategy and the Corporate Governance princi-
ples, it establishes rules governing integrity in the behaviour
of all employees of Hannover Re and is intended to help
members of staff cope with the ethical and legal challenges
that they face as part of day-to-day work. The rules defined in
the Code of Conduct reflect the high standards that guide our
actions worldwide. It is our belief that integrity in dealings
with our stakeholders constitutes the foundation of a success-
ful enterprise. In both our strategic planning and our day-to-
day business activities, we therefore aspire to consistently
apply the highest ethical and legal standards; for our actions
and the way in which every single one of us presents and
conducts himself or herself are crucial in shaping the image
of Hannover Re.
integration of ESG topics, we would refer to the "Opportunity
and risk report" from page 86 onwards.
In order to efficiently perform its tasks the Supervisory Board
has formed a number of committees: the Finance and Audit
Committee, the Standing Committee and the Nomination
Committee. The Supervisory Board committees are each
comprised of three members (further details of the names of
the members and background information on the individual
committee members can be found on page 283 of the report)
and prepare matters within their scope of competence for dis-
cussion and adoption of a resolution by the full Supervisory
Board. Moreover, the committees are also assigned their own
authority to adopt resolutions. The number of meetings of the
committees in the period under review as well as the attend-
ance of the committee members are discussed in greater
detail in the Report of the Supervisory Board on page 278 et
seq.
As an internationally operating reinsurance group, we move
in a highly complex environment. Nevertheless, thanks to our
business activities in all lines of reinsurance we are able to
achieve optimal risk spreading through geographical and
risk-specific diversification while at the same time maintain-
ing a balanced opportunity/risk profile. We consider the risks
described in the above sections to be manageable, particular-
ly because our steering and monitoring measures are effec-
tively and closely interlinked. Despite these diverse mecha-
nisms, individual and especially accumulation risks can
decisively affect our assets, financial position and net income.
In accordance with our understanding of risk, however, we
consider not only risks but also at the same time opportuni-
ties. We therefore only enter into those risks that go hand-in-
hand with opportunities. Our steering and monitoring tools
as well as our organisational and operational structure ensure
that we identify risks at an early stage and are able to act on
our opportunities. Our central monitoring tool is the system
of risk management that we have installed Group-wide, which
brings together both qualitative and quantitative information.
ments in the defined risk tolerances and enables us to react in
a timely manner. Our necessary equity resources are deter-
mined by the requirements of our economic capital model,
solvency regulations, the assumptions of rating agencies with
respect to our target rating and the expectations of our clients
and shareholders. We have a sufficient capital cushion to be
able both to absorb risks and act on business opportunities
that may arise. Similarly, our very good financial strength rat-
ings (see page 63) also testify to our financial stability. The
quality of our Enterprise Risk Management (ERM), for exam-
ple, is assessed by Standard & Poor's as a key factor in the
rating process. Special consideration is given to our estab-
lished risk management culture, which promotes the devel-
opment of appropriate risk monitoring systems and supports
strategic risk management. The rating encompasses in par-
ticular the areas of risk culture, risk controls, emerging risk
management, risk models and strategic risk management.
This external appraisal confirms the quality of our holistic ap-
proach to risk management.
M 72
•
• Variable remuneration largely share-based with a multi-year orientation
Performance criteria derived from the corporate strategy
Transparency
Allowance for market practice and
regulatory compliance
Linkage to shareholder interests
Adequacy of remuneration
Pay-for-performance
Promoting the corporate strategy
Long-termism and sustainability
Sustainability targets (ESG) integrated into the measurement of variable remuneration
Guiding principles for the Executive Board remuneration of Hannover Re
the recommendations for the remuneration of the manage-
ment board contained in Section G of the German Corporate
Governance Code (DCGK) establish the regulatory frame-
work.
The members of the Executive Board are remunerated in light
of the company's position and according to their performance
and their scope of activity and responsibility. The require-
ments of the Stock Corporation Act (AktG), the provisions of
Article 275 of Delegated Regulation (EU) 2015/35 with
amendments by Delegated Regulation (EU) 2016/2283 and
of the Insurance Supervision Act in conjunction with the Reg-
ulation on the Supervisory Law Requirements for Remunera-
tion Schemes in the Insurance Sector (VersVergV) as well as
125
Hannover Re | Annual Report 2021
The remuneration of the Executive Board makes a substantial
contribution to the advancement of our Group strategy and
the long-term and sustainable development of the Hannover
Re Group. The remuneration ensures a transparent, perfor-
mance-related incentive, strongly focused on the company's
long-term success, which in particular depends on perfor-
mance criteria derived from the Group strategy and on the
performance of the Hannover Rück SE share, including in
comparison with our competitors. In addition, an excessive
risk appetite is discouraged.
Risk management and corporate social responsibility are de-
fined more closely in specific strategies derived from the
Group strategy. For further information about the risk man-
agement system we would refer to the "Opportunity and risk
report" from page 86 onwards. For further information on
corporate social responsibility and the compliance manage-
ment system please see the non-financial information state-
ment from page 70 onwards. We report on the basic princi-
ples of our corporate governance from page 118 onwards.
Basic principles for determining the remuneration
The strategy of the Hannover Re Group is geared to sustaina-
ble outperformance in the interests of the Group's stakehold-
ers (in particular investors, clients and employees). In remu-
nerating the Executive Board our focus is therefore on the
principles of continuity, financial strength and profitability.
With a rigorous underwriting policy, partnership-based cus-
tomer relationships, a lean operating model and our highly
efficient risk and capital management, we aim to preserve our
outstanding position as one of the world's leading and most
profitable reinsurance groups on an enduring basis and be
the market leader in terms of profitability, earnings growth
and cost efficiency. In our “Striving for sustainable outper‐
formance", governance, risk management, compliance and
corporate social responsibility constitute the foundations for
our growth as a trusted global reinsurance partner.
Remuneration of the Executive Board in
the 2021 financial year
Combined management report
Maximum remuneration
In determining the remuneration for the Executive Board of
Hannover Re, the Supervisory Board followed the guidelines
set out below:
In the period from 1994 to 2002 Mr. Haas served as the com-
pany's Chief Financial Officer. During this time, he acquired
superb knowledge of the company and he is equipped with
extensive professional expertise in the topics that fall within
the scope of responsibility of the Finance and Audit Commit-
tee. His additional long-standing experience on the compa-
ny's Supervisory Board in part also as Chair similarly
marks him out for fulfilling with the utmost diligence both the
preparatory tasks of the Committee and the tasks that were
assigned to the Committee by law or by the full Supervisory
Board at its own responsibility. In electing him as Chair of the
Committee, the Supervisory Board took into account Mr.
Haas' wealth of experience and considered this to be valua-
ble.
⚫ Bulk of target direct remuneration comprised of variable remuneration components
Adequate and ambitious defined performance criteria
•
126
The customary nature of the remuneration in comparison to
other similar companies (horizontal comparison) and in terms
of the amount of remuneration as well as the remuneration
structure within the company (vertical comparison) was re-
viewed as part of the overhaul of the remuneration system in
2020. Companies listed on the DAX and MDAX (excluding
Hannover Re) as at 1 May 2020 were used on a combined
basis as a peer group for the horizontal comparison of remu-
neration. The vertical comparison is based on the proportion
The remuneration of the members of the Executive Board is
determined by the Supervisory Board on the basis of the re-
muneration system in accordance with the recommendations
of the Standing Committee. When determining the remuner-
ation of the members of the Executive Board, the Supervisory
Board considers the responsibility and tasks of the individual
members of the Executive Board, their individual perfor-
mance, the economic situation and the success and future
prospects of the company.
Review of the appropriateness of the
Executive Board remuneration
The remuneration structure is geared to the sustainable and
long-term development of the Hannover Re Group. The STI
accounts for 40% of the variable remuneration components
and thus contributes 24% to the target direct remuneration.
The LTI, which accounts for a 60% share of the variable re-
muneration components, represents 36% of the target direct
remuneration.
In order to reinforce the concept of pay-for-performance, the
target direct remuneration (sum of fixed remuneration and
target amounts of the variable remuneration components in
the event of 100% target attainment) is comprised of 40%
fixed remuneration and 60% variable remuneration compo-
nents. The variable remuneration consists of a short-term in-
centive (STI) and a long-term incentive (LTI) with a perfor-
mance period of four years.
The idea of "pay-for-performance" and the long-term orienta-
tion are paramount concepts central to the remuneration sys-
tem for the Executive Board of Hannover Re.
Remuneration structure
Ex-post disclosure of the individual premium/deduction per Board member
.
•
Ex-post disclosure of target values and target attainment
Allowance for current market practice of relevant peers in the Board remuneration
Ensuring conformity with legal and regulatory requirements relevant to Hannover Re
Relative performance measurement creates incentives for long-term outperformance of
our competitors on the capital market
Harmonisation of the interests of the Executive Board with those of our shareholders
Malus and clawback provisions apply to entire variable remuneration
Caps on the individual variable remuneration components and total remuneration
Remuneration of Executive Board members commensurate with the tasks and
performance of the respective Board member and the position of the company
Allowance for internal and external remuneration ratios
Variable remuneration can fluctuate between zero and a cap
.
•
.
•
.
Our own evaluation of the manageability of existing risks is
confirmed by various financial indicators as well as by exter-
nal assessments of rating agencies. Specific monitoring indi-
cators, corresponding notification thresholds and potential
escalation steps are defined on a mandatory basis in our cen-
tral system of limits and thresholds for the material risks of
the Hannover Re Group. As a result, the system provides us
with a precise overview of potentially undesirable develop-
clawback
60%
Recommendation C.7
Code Recommendation C.10 in conjunction with
The Executive Board and Supervisory Board therefore de-
clare pursuant to § 161 Stock Corporation Act (AktG) that in
its fulfilment of the German Corporate Governance Code
Hannover Rück SE diverges in one respect from the recom-
mendations contained in the version of the Code dated
16 December 2019 (published in the Federal Gazette on
20 March 2020):
Combined management report
Hannover Re | Annual Report 2021
Under § 161 Stock Corporation Act (AktG) it is incumbent on
the Management Board and Supervisory Board of German
listed companies to provide an annual declaration of con-
formity with the recommendations of the “German Corporate
Governance Code Government Commission" published by
the Federal Ministry of Justice and Consumer Protection or to
explain which recommendations of the Code were/are not
applied and why this is the case.
Declaration of Conformity pursuant to
§ 161 Stock Corporation Act (AktG)
regarding compliance with the
German Corporate Governance Code at
Hannover Rück SE
Based on such a high degree of fulfilment of the recommen-
dations and suggestions of the Code, Hannover Rück SE con-
tinues to place well overall among the companies listed on
the DAX and MDAX - as is borne out again this year by the
findings of the analysis conducted by the German Association
for Financial Analysis and Asset Management (DVFA).
The positive attitude of Hannover Rück SE towards the Code
is not contradicted by the fact that in the year under review
we did not comply with one recommendation, since a justi-
fied deviation from the recommendations of the Code may -
as in the present case - be very much in the interests of good
corporate governance tailored to a particular company, i.e. by
reflecting enterprise- and industry-specific features.
As an instrument of self-regulation for the business world, the
German Corporate Governance Code defines current best
practices for corporate governance and is intended to make the
German system of corporate governance transparent and com-
prehensible. It seeks to foster the trust of international and na-
tional investors, customers, employees and the general public
in the management and supervision of German listed compa-
nies. Although the Code does not have binding legal force, the
enterprises addressed by the Code are nevertheless required
by § 161 Stock Corporation Act (AktG) to provide an annual
declaration as to whether or not the recommendations of the
Code were and are complied with in the reality of the com-
pany's business activities. If recommendations were not acted
upon, this is to be explained and disclosed as part of the Dec-
laration of Conformity. Supplementary to the present declara-
tion, the Declarations of Conformity pursuant to § 161 Stock
Corporation Act (AktG) regarding compliance with the German
Corporate Governance Code for recent years are published
on our website (https://www.hannover-re.com/200801/
declaration-of-conformity).
Independence of the Chair of the Audit Committee
from the company and the Management Board
Pursuant to Recommendation C.10 of the Code, the Chair of
the Audit Committee shall be independent of the company
and the Management Board. Pursuant to Recommendation
C.7 of the Code, when assessing the independence of the Su-
pervisory Board's members from the company and the Man-
agement Board, the shareholder representatives shall par-
ticularly take into consideration whether the respective
Supervisory Board member has belonged to the Supervisory
Board for more than twelve years. Mr. Haas, the Chair of the
Finance and Audit Committee, was first elected to the Super-
visory Board of Hannover Rück SE on 24 May 2002 and has
therefore already belonged to it for more than twelve years.
Corporate Governance
Hannover Rück SE hereby provides insight into its enterprise
management practices as part of the Declaration on Corpo-
rate Governance pursuant to § 289f German Commercial
Code (HGB) and pursuant to § 315d German Commercial
Code (HGB) in conjunction with § 289f German Commercial
Code (HGB) for the Hannover Re Group:
The Executive Board and Supervisory Board of Hannover
Rück SE expressly support the suggestions and recommenda-
tions of the German Corporate Governance Code and are
guided by them in our activities. The principles of responsible
and good enterprise management therefore constitute the
core of our internal Corporate Governance principles (www.
hannover-re.com/50889/corporate-governance-principles.
pdf). These are reviewed and revised regularly, most recently
in May 2021. We cultivate integrity at all times in our dealings
with business partners, staff, shareholders and other stake-
holder groups and we support the principles of value-based
and transparent enterprise management and supervision for-
mulated in the German Corporate Governance Code. The Su-
pervisory Board, Executive Board and employees of Han-
nover Re identify with these principles, which thus form part
of our corporate self-image. The Executive Board ensures
that the principles are observed Group-wide.
Hannover Re's objective continues to be to consolidate its po-
sition as one of the leading, most profitable reinsurance
groups operating worldwide. In aspiring towards this goal, it
is particularly important to observe and fulfil the principles of
good and sustainable corporate governance. In so doing, we
not only comply with the German Corporate Governance
Code (DCGK, hereinafter also referred to as the Code), but
have also developed our own model for responsible enter-
prise management which we consistently pursue and adjust
to the latest requirements in accordance with our best prac-
tice standards.
This subsection is a part of the report that the legis-
lator has expressly exempted from the audit of the
financial statement/audit of the management report
(§ 317 Para. 2 Sentence 6 and Sentence 4 German
Commercial Code (HGB); unaudited information).
Declaration on Corporate
Governance pursuant to
§§ 289f, 315d German
Commercial Code (HGB)
Enterprise management
Combined management report
117
Hannover Re | Annual Report 2021
We would also refer to the explanatory remarks on the finan-
cial strength ratings of our subsidiaries in the “Financial po-
sition" section of the management report on page 63. In addi-
tion, the risk trigger mechanism and internal monitoring
system are reviewed annually by the independent auditor in
relation to the financial reporting. The Group-wide risk man-
agement system is also a regular part of the audits conducted
by the internal audit function.
118
Malus and
-
Previous remuneration system up to
and including the 2020 financial year
40%
HR Hannover Re
(HR performance share awards)
20%
HR share awards (long-term)
Long-term incentive
Variable
remuneration
20%
Bonus bank (long-term)
Variable
remuneration
-
Short-term incentive
Immediate amount paid out
(short-term)
Pension scheme
Pension scheme
Fringe benefits
Fixed
remuneration
Fixed remuneration
New remuneration system from
the 2021 financial year onwards
Fringe benefits
Fixed remuneration
Fixed
remuneration
60%
Mr. Torsten Leue (Chairman),
in %
Determination of target remuneration
15.0
1.1
8.0
0.8
Fixed remuneration components
535.0
40.7
408.0
40.5
One-year variable remuneration (STI)
312.0
23.7
240.0
23.8
Fringe benefits 1
Multi-year variable remuneration (LTI) 2,3
468.0
35.6
360.0
35.7
Variable remuneration components
780.0
59.3
600.0
59.5
Total target remuneration
1,315.0
100.0
1,008.0
100.0
(performance share awards 2021)
39.7
400.0
39.6
(performance share awards 2021)
756.0
33.7
468.0
35.6
Variable remuneration components
Total target remuneration
Service cost4
1,260.0
56.2
780.0
59.3
2,244.1
100.0
1,316.1
100.0
215.0
520.0
Basic remuneration
in %
in EUR thousand
in %
in EUR thousand
Service cost 4
2021
(Chief Financial Officer)
Clemens Jungsthöfel
divisional responsibility)
(Board member with
Claude Chèvre
288.7
2021
Multi-year variable remuneration (LTI) 2,3
148.7
1
527.0
40.3
One-year variable remuneration (STI)
312.0
24.0
312.0
23.9
Multi-year variable remuneration (LTI) 2,3
(performance share awards 2021)
468.0
36.0
468.0
35.8
Variable remuneration components
Total target remuneration
40.0
Service cost 4
60.0
780.0
59.7
1,300.7
100.0
1,307.0
100.0
136.1
203.9
Silke Sehm
(Board member with
divisional responsibility)
2021
in EUR thousand
780.0
520.7
Fixed remuneration components
0.5
2
3
Excluding insurance under group contracts
The LTI tranche 2021 (Hannover Re performance share awards 2021) is allocated at the start of the 2022 financial year. The LTI amount payable is
determined and paid out at the end of the four-year performance period in the 2026 financial year under the terms of the plan (see detailed description
of the LTI).
In the 2021 financial year the members of the Executive Board received further benefits from multi-year variable remuneration that refer to earlier
financial years. This table shows the target remuneration for the 2021 financial year without entitlements from previous years.
4
For details of the service cost see the table "Pension commitments" on page 142.
128
Hannover Re | Annual Report 2021
3
1
2
Dr. Klaus Miller
(Board member with
divisional responsibility)
Dr. Michael Pickel
(Board member with
divisional responsibility)
2021
7.0
0.0
0.7
39.8
520.0
40.0
103.2
520.0
Basic remuneration
in %
in EUR thousand
in %
in EUR thousand
2021
Fringe benefits¹
23.7
312.0
22.5
Chief Executive Officer: EUR 5,000,000
Other Board members: EUR 3,000,000
Cap: 400% of the LTI target amount (max. 200% LTI
allocation value + max. 200% measured by the TSR)
Relative Total Shareholder Return (TSR) compared to
relevant peers
•
• Performance of the Hannover Re share (plus dividends)
• Hannover Re Group ROE of the financial year
Individual performance criteria of the financial year
Performance criteria:
LTI allocation value is dependent on the determined target
attainment for:
Four-year performance period
("Hannover Re Performance Shares")
Performance Share Plan
Cap: 200% of the STI target amount
Individual performance criteria (financial and non-financial,
including ESG targets)
Hannover Re Group ROE
•
Option of the Supervisory Board to partially or fully withhold
("malus") or claim back ("clawback") the variable
remuneration in the event of gross misconduct or an incorrect
consolidated financial statement
•
Malus and
Maximum
remuneration
incentive (LTI)
Long-term
Variable remuneration components
Granting customary fringe benefits and
pension schemes to attract and retain the
most suitable Board members
Remunerating the scope of responsibility,
expertise and experience of the individual
Board members
Attracting and retaining the most suitable
Board members
M 75
•
Target
Performance criteria:
Defined contribution commitment: annual funding contribu-
tion amounting to 25% of the defined measurement basis
Dr. Pickel: continuation of a defined benefit commitment
(legacy commitment): commitment to a pension calculated as
a percentage of the pensionable fixed annual remuneration
Target bonus model
Vehicle for business and personal use, accident, luggage and
D&O insurance in an appropriate amount
clawback
•
•
•
Every member of the Executive Board is given a contractual
commitment to customary target remuneration. This is
aligned with their scope of responsibility and with their ex-
pertise and experience that are relevant to the role.
In the context of the overhaul of the remuneration system, the
Supervisory Board also modified the amount of target remu-
neration of the members of the Executive Board with effect
from 1 January 2021, i.e. at the same time as the entry into
force of the new remuneration system. This was done on the
basis of the development of remuneration at the major peers
used for comparative purposes as well as the development of
business at the company. In keeping with the pay-for-perfor-
mance concept and the long-term focus of the Executive
Board remuneration, the remuneration modification centred
on the LTI as the remuneration component with a long-term
orientation and multi-year structure. As a consequence of the
remuneration modification, the target remuneration of the
members of the Executive Board is in the customary range for
a company the size of Hannover Re.
The following tables show the target remuneration for each
member of the Executive Board for the 2021 financial year.
The target remuneration encompasses the remuneration
commitment for the financial year that is granted in the event
of 100% target attainment.
Structure of the target direct remuneration
remuneration
mponents
36% long-term incentive
- 40% fixed remuneration-
24%
short-term
Basic remuneration
/делел %09
Hannover Re | Annual Report 2021
127
M 73
Combined management report
Target remuneration
•
Incentivising attainment or outper-
formance of the annual corporate and
business group targets and remuneration
of the individual contribution to the result
and to sustainability
in %
in EUR thousand
2021
The fixed remuneration is paid in cash in twelve equal
monthly instalments.
2021
Coordinator of the Property & Casualty
divisional responsibility/
(Board member with
Sven Althoff
Jean-Jacques Henchoz
(Chief Executive Officer)
M 74
reinsurance business group)
incentive (STI)
Short-term
Pension scheme
40.6
410.4
Fixed remuneration components
1.0
10.4
Fringe benefits 1
39.6
400.0
in EUR thousand
in %
Basic remuneration
Fringe benefits¹
Signing bonuses
840.0
37.4
520.0
39.5
504.0
One-year variable remuneration (STI)
40.7
536.1
43.8
984.1
One-year variable remuneration (STI)
Fixed remuneration components
5.8
130.0
1.2
16.1
0.6
14.1
0.0
of the remuneration of the Executive Board relative to the
remuneration of the total workforce of Hannover Re in
Germany. Both the status quo and the development over time
of the remuneration ratios were taken into consideration. The
remuneration ratios between the Executive Board and the
total workforce were also compared with the remuneration
ratios of selected peers from the insurance industry, where
available.
240.0
Multi-year variable remuneration (LTI) 2,3
Fringe benefits
tion
Fixed remunera-
remuneration components
Fixed
Remuneration component/ Measurement basis/parameter
Remuneration condition
Remuneration components and their target
The following table provides an overview of the components
of Hannover Re's remuneration system in the 2021 financial
year and the associated targets:
Application of the remuneration system in
the 2021 financial year
It is only possible to report definitively on adherence to the
maximum remuneration for the 2021 financial year after the
LTI tranche awarded for 2021 has been paid out, which will
occur in 2026. Should the payment made from the LTI lead to
the maximum remuneration being exceeded, the amount
paid out will be reduced accordingly so as to ensure adher-
ence to the maximum remuneration.
The Supervisory Board has determined an upper limit for
each member of the Executive Board based on the amount for
the total of fixed remuneration, fringe benefits, STI and LTI as
well as pension service cost (“maximum remuneration") in
accordance with § 87a Para. 1 Sentence 2 No. 1 Stock Corpo-
ration Act (AktG). The maximum remuneration limits all pay-
ments that result from the commitment for a financial year,
irrespective of the date of receipt. The maximum remunera-
tion is EUR 5,000,000 for the Chief Executive Officer and EUR
3,000,000 for all other members of the Executive Board.
Adherence to maximum remuneration
130
Combined management report
129
Hannover Re | Annual Report 2021
For details of the service cost see the table "Pension commitments" on page 142.
(performance share awards 2021)
360.0
35.6
Variable remuneration components
600.0
59.4
23.8
Total target remuneration
100.0
Service cost4
188.7
Excluding insurance under group contracts
The LTI tranche 2021 (Hannover Re performance share awards 2021) is allocated at the start of the 2022 financial year. The LTI amount payable is
determined and paid out at the end of the four-year performance period in the 2026 financial year under the terms of the plan (see detailed description
of the LTI).
In the 2021 financial year the members of the Executive Board received further benefits from multi-year variable remuneration that refer to earlier
financial years. This table shows the target remuneration for the 2021 financial year without entitlements from previous years.
1,010.4
incentive
4
Hannover Re | Annual Report 2021
120.5%
133
III. Individual targets (premium or deduction)
-
By applying an individual premium or deduction to target at-
tainment of the performance criterion Group RoE, the Super-
visory Board can consider - in addition to the financial suc-
cess of the Hannover Re Group – the individual contribution
made by the member of the Executive Board and, as appro-
priate, the division under their responsibility to the result as
well as the attainment of sustainability targets in the context
of the STI. The amount of the premium or deduction, which
can range from -25 percentage points to +25 percentage
points, is determined by the Supervisory Board at its reason-
able discretion. The criteria and indicators for determination
of the individual premium or deduction are in each case
defined in advance by the Supervisory Board for the coming
financial year and communicated to the members of the
Executive Board.
For the 2021 financial year the Supervisory Board determined
for the individual members of the Executive Board the follow-
ing criteria and indicators as well as - on this basis – the fol-
lowing individual premiums and deductions subsequent to
the financial year:
Individual targets and target attainment of the member of the Executive Board
Member of the
Executive Board
Jean-Jacques Henchoz
Performance
Covered by performance
criterion Group RoE
Sven Althoff
IVC² Property & Casualty
reinsurance
Claude Chèvre
IVC2 Life & Health
reinsurance
Clemens Jungsthöfel
Target attainment
8.96%
Target RoE
interest rate
For the 2021 financial year the Supervisory Board defined a
target value (100% target attainment) of 900 basis points
above the riskfree interest rate for the Group RoE. This is con-
sistent with the company's strategic target of generating sus-
tainable value creation through a return on equity of at least
900 basis points above the risk-free interest rate. The lower
threshold was defined as the risk-free interest rate without a
spread, while the upper threshold was set at 1,800 basis
points above the risk-free interest rate.
The risk-free interest rate on 10-year German government
bonds over a five-year average amounted to -0.04% as at the
end of 2021. For the 2021 financial year the target Group RoE
therefore stands at 896 basis points. In the 2021 financial
year a Group RoE of 10.8% (1080 basis points) was generat-
ed. This corresponds to target attainment of the performance
criterion Group RoE of 120.5%.
M 78
200%
100%
0%
-0.04%
0 basis points above
the risk-free interest rate
Covered by performance
criterion Group RoE
8.96%
17.96%
1,800 basis points above
the risk-free interest rate
Hannover Re | Annual Report 2021
RoE
Group RoE
10.8%
Risk-free
-0.04%
900 basis points above
the risk-free interest rate
Dr. Klaus Miller
IVC² Life & Health
reinsurance
Dr. Michael Pickel
3
P&C = Property & Casualty reinsurance
4 APAC = Asia-Pacific region
5
ESG = Environmental, Social and Governance
6 L&H= Life & Health reinsurance
134
Hannover Re | Annual Report 2021
IVC (Intrinsic Value Creation) = A tool of value-based enterprise management used to measure the attainment of long-term targets on the level
of the Group, the business groups and the operational units.
Individual premium/deduction
in %
Leadership/Commitment (OHC¹)
Change in OHC score 2020/2021;
relative improvement of the OHC¹ score in
certain focus areas
Change in OHC score 2020/2021;
relative improvement of the OHC1 score in
certain focus areas
Change in OHC score 2020/2021;
relative improvement of the OHC 1 score in
certain focus areas
Change in OHC score 2020/2021;
15.0
financial year. In this context, the target value is aligned with
the strategic target return of the Hannover Re Group at the
time when it was determined.
2
Successful launch of strategy cycle 2021-2023 with
concentration on implementation of strategic initiatives
Client Excellence and innovation und digital strategy
IVC2 Property & Casualty
reinsurance
Silke Sehm
IVC2 Property & Casualty
reinsurance
Individual contribution to the result
Dividend continuity/
distribution
Dividend continuity of
Hannover Rück SE
Dividend continuity of
Hannover Rück SE
Dividend continuity of
Hannover Rück SE
1 OHC (Organisational Health Check) = Employee survey that measures the health of an organisation and hence provides an indicator of how an
organisation aligns itself, optimally executes its plans and innovates in order to achieve its targets on a lasting basis.
Dividend continuity of
Hannover Rück SE
Dividend continuity of
Hannover Rück SE
Dividend continuity of
Hannover Rück SE
Strategic target
Successful launch of strategy cycle 2021-2023;
Implementation of the strategic initiatives
Successful launch of strategy cycle 2021-2023
with concentrations on ongoing development of
P&C³ strategy, implementation of strategic initiative
APAC 4 P & C³
Successful launch of strategy cycle 2021-2023 with
concentrations on implementation of strategic initiative
APAC 4 L&H6, Client Excellence, innovation & digital
strategy
Successful launch of strategy cycle 2021-2023 with
concentrations on implementation of IFRS 17, develop-
ment of IT strategy and support for HDI Global Specialty
Successful launch of strategy cycle 2021-2023 with
concentration on expansion of Financial Solutions
business, inforce management
Successful launch of strategy cycle 2021-2023 with
concentration on implementation of strategic initiative
Client Excellence
Dividend continuity of
Hannover Rück SE
Target attainment Group RoE in the 2021 financial year
The target value for the Group-RoE as well as the target
corridor with upper and lower thresholds are in each case
defined in advance by the Supervisory Board for the coming
The determinative financial performance criterion for the STI
is - with a weighting of 100% - the Group RoE for the finan-
cial year in comparison with a strategic target return, which
is established on the basis of the risk-free interest rate on a
5-year average plus an ambitious spread. The risk-free inter-
est rate is the average market rate over the past five years for
ten-year German government bonds, with the average being
calculated on the basis of the respective interest rate at year-
end. The Group RoE is one of the central performance indica-
tors in Hannover Re's management system and as such is also
implemented in the remuneration of the Executive Board.
Hannover Re pursues the goal of generating a high return on
equity. The Group's focus here is on long-term value en-
hancement. The use of the Group RoE as a determinative
performance criterion for the STI creates incentives for
accomplishment of this goal.
Strategy relevance/Promotion of long-term development
M 76
component
Group ROE
Short-term
•
ROE: one of Hannover Re's strategic KPIs
.
Performance criterion/aspect
Target value consistent with the target set for attainment of sustainable
value creation
(STI)
Individual targets
(premium/deduction)
•
Allocation value depending on STI
target attainment
•
Higher incentivising for target attainment in the STI
•
incentive
Share performance
Remuneration
The performance criteria for measuring and evaluating target
attainment are derived from Hannover Re's corporate strate-
gy. To this end, the variable remuneration components are
structured in such a way as to promote the long-term devel-
opment of the Hannover Re Group. The following overview
shows the close linkage between the performance criteria
and other aspects of the variable remuneration and the corpo-
rate strategy and explains how the variable remuneration pro-
motes Hannover Re's long-term development.
Recognising the performance in the
financial year
Incentivising the creation of long-term
shareholder value
Motivating outperformance of peers
Limiting the total remuneration promised
for a financial year
Fulfilment of regulatory standards of the
Stock Corporation Act (AktG)
Strengthening the position of the
Supervisory Board in the event of severe
compliance violations
Further provisions
Performance criteria for the variable remuneration and their relevance to the corporate strategy/development
In addition, reduction or elimination of the variable
remuneration is possible if required by the regulator
Fixed remuneration
The fixed remuneration is paid out in cash in twelve equal
monthly instalments. It is aligned in particular with the scope
of tasks and professional experience of the respective mem-
ber of the Executive Board.
Fringe benefits
The members of the Executive Board additionally receive cer-
tain non-performance-based fringe benefits in the customary
scope; these are reviewed at regular intervals. A vehicle is
made available for company and personal use for the duration
of the Board appointment. The member of the Executive
Board is responsible for paying tax on the pecuniary advan-
tage associated with personal use of the company car. In ad-
dition, the company grants the members of its Executive
Board an appropriate amount of insurance protection under
group policies (accident, luggage and D&O insurance).
Retirement provision
With the exception of Dr. Pickel, whose annual pension is
based on a defined benefit commitment, the members of the
Executive Board have defined contribution commitments.
Further information in this regard is provided in the subsec-
tion "Benefits on leaving the company".
Variable remuneration components
The variable remuneration components consist of a short-
term incentive (STI), which is assessed on the basis of the
respective financial year, and a long-term incentive (LTI) with
a performance period of four years.
Fixed remuneration components
relative improvement of the OHC¹ score in
certain focus areas
•
Long-term
Group ROE
(strategic target return)
STI target amount
+
in EUR
Premium / deduction
based on individual
performance
Amount paid out
in EUR
(Cap: 200% of the
Possible target attainment
Calculation of the short-term incentive (STI)
+/- 25 percentage points
0-200%
Measurement period = financial year
Possible overall target attainment incl. premium / deduction 0-200%
M 77
132
Hannover Re | Annual Report 2021
Target attainment
II. Financial performance criterion
STI target amount)
Linkage of share performance and Board remuneration
The basis for payment of the STI consists of the contractually
defined STI target amount, which is based on overall target
attainment of 100%. The overall target attainment (including
the individual premium or deduction) can reach values be-
tween 0% and 200% of the STI target amount. The amount
that can be paid out under the STI is thus limited to 200% of
the target amount.
The STI is geared to Hannover Re's commercial success in
the relevant financial year. In addition to the financial perfor-
mance criterion of the return on equity (RoE) generated by
the Hannover Re Group pursuant to the consolidated finan-
cial statement of Hannover Rück SE ("Group RoE"), an indi-
vidual premium or deduction is considered in the determina-
tion of the amount paid out which comprises both financial
and non-financial performance criteria, in particular sustain-
ability targets, and makes allowance for the respective divi-
sional responsibilities of the individual members of the Exec-
utive Board in addition to the overall responsibility of the
•
• Allowance for the individual contribution made by Board members and the
results of the areas under their responsibility
Implementation of sustainability targets in Board remuneration
Strengthening of the pay-for-performance concept
Harmonisation of the interests of the Board and those of shareholders
incentive
(LTI)
Four-year performance period
Executive Board. In this way, the STI addresses the goal of a
high and stable return on equity for the Hannover Re Group,
promotes action on Board- or division-specific focus topics
and integrates the interests of our clients, employees and oth-
er key stakeholders.
•
Relative TSR
•
Incentivising long-term outperformance of relevant peers on the capital
market
Hannover Re | Annual Report 2021
131
Combined management report
Short-Term Incentive (STI)
I. Fundamentals
Orientation towards long-term success and assuring the long-term
development of Hannover Re
Change in OHC score 2020/2021;
Combined management report
Change in OHC score 2020/2021;
0.0%
120.5%
312
Dr. Klaus Miller
325.2
135.5%
15.0%
120.5%
240
Clemens Jungsthöfel
391.6
125.5%
5.0%
120.5%
312
Claude Chèvre
422.8
135.5%
15.0%
120.5%
120.5%
Dr. Michael Pickel
120.5%
relative improvement of the OHC¹ score in
certain focus areas
Hannover Re | Annual Report 2021
136
The following chart provides an overview of the multi-year
variable remuneration components that are still to be paid out
in subsequent years:
Within the 2021 financial year, payments due under multi-
year variable remuneration components of the legacy remu-
neration system were made. The Hannover Re share awards
allocated on the basis of the target attainment for the 2016
financial year in the 2017 financial year (Hannover Re share
awards 2016) as well as the amount contributed to the bonus
bank on the basis of the target attainment for the 2017 finan-
cial year in the 2018 financial year (bonus bank 2017) were
paid out. Details are provided under “Amounts paid out under
multi-year variable remuneration components” on page 140
et seq.
In the new remuneration system the multi-year variable re-
muneration consists of a long-term incentive (LTI), which is
structured as a Performance Share Plan. The amount of the
LTI allocation depends on the overall target attainment deter-
mined for the respective financial year in connection with the
short-term incentive (STI). The allocation of the LTI tranche
2021 (Hannover Re Performance Share Awards 2021) there-
fore takes place at the beginning of the 2022 financial year.
The LTI tranche 2022 will be paid out in the 2026 financial
year following the four-year performance period.
Multi-year variable remuneration components
2,915.3
2,232
Total
325.2
135.5%
15.0%
120.5%
240
Silke Sehm
391.6
125.5%
5.0%
312
312
376.0
682.9
Hannover Re | Annual Report 2021
15.0
Promoting sustainability in the action fields
"ESG5 in insurance business" and "Sustainable
protection"
5.0
Promoting sustainability in the action fields
"ESG5 in insurance business" and "Sustainable
protection"
0,0
Promoting sustainability in the action fields
"ESG5 in insurance business" and "Sustainable
protection"
Promoting sustainability in the action field
"ESG5 in asset management"
5.0
135
Promoting sustainability in the action fields
"ESG5 in insurance business" and "Sustainable
protection"
Promoting sustainability in the action fields
"ESG5 in insurance business" and "Sustainable
protection"
measures
Ongoing development of the HR sustainability
strategy; Implementation of catalogue of
Contribution to the sustainability strategy
Sustainability
relative improvement of the OHC¹ score in
certain focus areas
Change in OHC score 2020/2021;
Sven Althoff
relative improvement of the OHC¹ score in
certain focus areas
15.0
M 79
15.0
Combined management report
135.5%
15.0%
120.5%
504
Jean-Jacques Henchoz
in EUR thousand
attainment
Overall target
Target attainment Individual premium/
deduction
Group RoE
Amount paid out
Target amount
M 80
Executive Board
Member of the
Overall target attainment and amount paid out under STI 2021
The following table shows the overall target attainment as
well as the resulting amount paid out to each member of the
Executive Board for the STI 2021:
in EUR thousand
the STI 2021
IV. Overall target attainment and amount paid out under
100%
200%
Target attainment curve relative TSR
Combined management report
140
0%
Hannover Re | Annual Report 2021
139
Target attainment
-100 percentage points
M 86
+100 percentage points
The target attainment for the LTI tranche 2021 will be dis-
closed in the 2026 remuneration report after the end of the
performance period.
II. Amounts paid out from multi-year variable
remuneration components
In the old remuneration system that applied until the end of
the 2020 financial year, the variable remuneration for a finan-
cial year consisted of a Group bonus and an individual bonus
as well as - in the case of members of the Executive Board
with responsibility for a certain division - a divisional bonus.
60% of the amount determined for each member of the Exec-
utive Board was paid out after the end of the respective finan-
cial year, while 20% was allocated as virtual shares (Han-
nover Re share awards) and a further 20% was contributed to
a so-called bonus bank. The Hannover Re share awards allo-
cated in the 2017 financial year on the basis of the target at-
tainment for the variable remuneration of the 2016 financial
year (Hannover Re share awards 2016) as well as the amount
contributed to the bonus bank in the 2018 financial year on
the basis of the target attainment for the variable remunera-
tion of the 2017 financial year (bonus bank 2017) were paid
out in 2021.
a) Hannover Re share awards 2016
After the variable remuneration had been established for the
2016 financial year, Hannover Re share awards were auto-
matically allocated in the equivalent amount of 20% of the
determined variable remuneration. The value per share upon
allocation in 2017 was established on the basis of the un-
weighted arithmetic mean of the XETRA closing prices over a
period of five trading days before to five trading days after the
meeting of the Supervisory Board that approved the consoli-
dated financial statement in March 2017. After a vesting peri-
od of four years the value of the Hannover Re share awards
calculated at the payment date was paid out in 2021. In this
context, the value of the share was established on the basis of
the unweighted arithmetic mean of the XETRA closing prices
over a period of five trading days before to five trading days
after the meeting of the Supervisory Board that approved the
consolidated financial statement in March 2021. In addition,
the sum total of all dividends per share distributed during the
vesting period was paid out in accordance with the remuner-
ation system.
The following table provides an overview of the Hannover Re
share awards 2016:
Hannover Re | Annual Report 2021
1
If the TSR of the Hannover Re share corresponds to the un-
weighted average TSR of the peer group, the target attain-
ment for the relative TSR amounts to 100%. Each percentage
point by which the TSR of the Hannover Re share exceeds or
falls short of the unweighted average TSR of the peer group
results in a corresponding increase or reduction in the target
attainment (linear scaling). If the TSR of the Hannover Re
share exceeds the unweighted average TSR of the peer group
by 100 percentage points or more, the target attainment for
the relative TSR amounts to 200%. Any further increase in
the relative TSR will not lead to a further increase in the tar-
get attainment. If the TSR of the Hannover Re share is 100
percentage points or more below the unweighted average
TSR of the peer group, the target attainment for the relative
TSR amounts to 0%.
HR Share Awards (HR SA) 2016
0 percentage points
TSR outperformance
RGA (Reinsurance Group of America)
SCOR
138
•
Performance period = 4 years
Member of the
Executive Board
Ø share price
plus dividends
(at the end of the
performance period)
Hannover Re | Annual Report 2021
The final amount to be paid out is determined from the base
payment amount and the target attainment of the relative to-
tal shareholder return ("relative TSR") measured against a
peer group. The amount paid out for the LTI is limited to
200% of the LTI allocation value and can thus amount to alto-
gether at most 400% of the LTI target amount (max. 200%
Calculation of the LTI amount paid out
LTI allocation value + max. 200% measured by the relative
TSR) - provided that the sum total of all remuneration compo-
nents does not exceed the maximum remuneration pursuant
to § 87a Para. 1 Sentence 2 No. 1 Stock Corporation Act
(AktG).
M 85
Base payment
amount
•
in EUR
(measured against individual peer group)
Possible target attainment 0 - 200%
Performance period = 4 years
Amount paid out
in EUR
(Cap: 400% of the
LTI target amount)
b) Financial performance criterion
The determinative performance criterion for the final LTI
amount to be paid out is the relative TSR. By means of the
relative TSR, an external performance criterion geared to the
capital market is integrated into the variable remuneration
that facilitates relative performance measurement as well as
alignment of the interests of the Executive Board and those of
shareholders. The relative TSR maps the development of the
Hannover Re share price during the four-year performance
period including gross dividends in comparison with a peer
group comprised of relevant competitors in the insurance in-
dustry. In this way, the LTI creates incentives for the strong
performance of the Hannover Re share on the capital market
on a long-term and sustainable basis.
The target attainment for the relative TSR is established by
comparing the TSR of the Hannover Re share with the shares
of companies in the peer group during the four-year perfor-
mance period. For this purpose, the TSR of the Hannover Re
share in the respective performance period is compared with
the unweighted average TSR of the peer group. The Supervi-
sory Board reviews the peer group before the start of each
performance period of a new LTI tranche. For the LTI tranche
2021 it is composed of the following companies:
Munich Re
• Swiss Re
• Everest Re
Relative TSR
Jean-Jacques Henchoz
150.42
Average share
price on
allocation 2017
150.42
20.75
252.5
Clemens Jungsthöfel
since 1 September 2020
Dr. Klaus Miller
130.6
107.15
1,219
150.42
1,475
20.75
Dr. Michael Pickel
136.0
107.15
1,270
Number of allocated HR performance share awards
20.75
217.4
Silke Sehm1
since 6 March 2019
Total
208.7
Allocation value
20% of the variable
remuneration 2016
in EUR thousand
107.15
193.8
Number of
Average Total distributed
allocated
HR SA
share price on
dividends
payout 2021
per share
in EUR
in EUR
in EUR
158.0
M 87
out 2021
in EUR
thousand
since 1 April 2019
Sven Althoff
Claude Chèvre
121.2
107.15
1,132
150.42
20.75
Amount paid
Ø share price
(at the beginning of the
performance period)
Bonus bank 2019
in EUR
The LTI tranche 2021 is allocated in the 2022 financial year
on the basis of the overall target attainment for the STI 2021
(Hannover Re performance share awards). The number of al-
located Hannover Re performance shares is determined from
the LTI allocation value as well as the average Hannover Re
share price over a period extending from 15 trading days be-
fore to 15 trading days after the meeting of the Supervisory
Board that approves the consolidated financial statement.
The Hannover Re performance shares have a total term of
four years ("performance period”). The LTI tranche 2021 will
be paid out in the 2026 calendar year following the four-year
performance period.
Combined management report
M 81
137
LTI
allocation value
(Cap: 200% of the
LTI target amount)
Possible overall target attainment incl. premium/deduction 0-200%
Measurement period = financial year
Hannover Re | Annual Report 2021
+/- 25 percentage points
0-200%
The following table presents the most important aspects of
the allocation of the LTI tranche 2021.
Possible target attainment
+
☑
LTI target amount
in EUR
Group RoE
(strategic target return)
M 82
The LTI is structured in the form of a performance share plan
and thereby incentivises increases in the value of the Han-
nover Re share in the interests of our investors. The amount
of the LTI allocation value is based on the contractually agreed
LTI target amount (target attainment 100%) and depends on
the target attainment for the financial performance criterion
Group RoE determined in the context of the STI for the re-
spective financial year as well as the individual premium or
deduction defined by the Supervisory Board for the financial
year.
Calculation of the long-term incentive (LTI) allocation value
The LTI plays a key role in aligning the interests of the Exe-
cutive Board with those of our shareholders. Through relative
measurement of the Hannover Re share performance incen-
tives are created for long-term outperformance of our com-
petitors on the capital market.
a) Fundamentals
I. Long-Term Incentive (LTI)
Premium deduction
based on individual
performance
(Hannover Re performance share awards 2021)
LTI 2021 allocation
M 83
545.8
120.5%
468.0
Dr. Klaus Miller
487.8
135.5%
360.0
Clemens Jungsthöfel
587.3
125.5%
Member of the
Executive Board
468.0
634.1
135.5%
468.0
1,024.4
135.5%
756.0
Jean-Jacques Henchoz
Sven Althoff
Allocation
Target Overall target
amount attainment of
in EUR the STI 2021
thousand
amount
in EUR
thousand
Claude Chèvre
M 84
LTI tranche 2021
Hannover Re share awards 2020
2019
2018
2017
2016
Multi-year variable remuneration components
Dr. Michael Pickel
Silke Sehm
468.0
125.5%
587.3
360.0
2020
135.5%
Total
3,348.0
4,372.6
Calculation of the LTI base payment amount
LTI
allocation value
(Cap: 200% of the
LTI target amount)
At the end of the four-year performance period the base pay-
ment amount is initially calculated on the basis of the Han-
nover Re share price performance. This base amount is deter-
mined from the allocated number of Hannover Re performance
shares and the average share price of Hannover Rück SE over
a period extending from 15 trading days before to 15 trading
days after the meeting of the Supervisory Board that approves
the consolidated financial statement in the year when the per-
formance period ends plus the dividends paid out during the
performance period. The performance thus fully reflects the
total shareholder return.
Base payment
amount
487.8
STI
2021
2021
2023
2020
Bonus bank 2020
Variable
remuneration
Hannover Re share awards 2019
2019
Variable
remuneration
Hannover Re share awards 2018
2018
Bonus bank 2018
Variable
remuneration
2022
Hannover Re share awards 2017
Bonus bank 2017
Variable
remuneration
Hannover Re share awards 2016
2016
Bonus bank 2016
Variable
-remuneration
2026
2025
2024
563.9
2017
5,096
726.2
1,014.0
Current members of the Executive Board
The following tables set out the remuneration granted and
owing to the individual members of the Executive Board pur-
suant to § 162 Para. 1 Sentence 2 No. 1 Stock Corporation Act
(AktG). Remuneration granted refers to remuneration for
which the activity was performed in full in the year under re-
view. Remuneration owing encompasses remuneration that is
due but has not yet actually been received. In this context, the
disclosure for the 2021 financial year covers:
•
•
•
•
the fixed remuneration paid out in
the 2021 financial year
the fringe benefits accruing in the 2021 financial year
the STI determined for the 2021 financial year with
payment in 2022
the amount contributed to the bonus bank for the 2017
financial year, which was paid out in the 2021 financial
year
the 2021 financial year
the share awards allocated for the 2016 financial year,
which were paid out in the 2021 financial year
The tables also show the relative shares of the individual re-
muneration components in the total remuneration granted
and owing.
Hannover Re | Annual Report 2021
143
Combined management report
Remuneration granted and owing in the 2021 financial year
Jean-Jacques Henchoz
(Chief Executive Officer)
M 90
Sven Althoff
(Board member with
divisional responsibility/
Coordinator of the Property & Casualty
In addition, the service cost for the pension commitments for
the 2021 financial year is disclosed in the tables as part of the
Executive Board remuneration.
reinsurance business group)
Remuneration granted and owing in
Severance pay
1,257.6
1,194.5
564.2
1,284.3
968.9
11,024.0
10,916.8
1
2
3
The service contracts of the Executive Board make no provi-
sion for claims to severance pay. Commitments to benefits in
connection with the early termination of employment on the
Executive Board as a consequence of a change of control are
similarly not envisaged in the service contracts of the mem-
bers of the Executive Board.
Mr. Althoff and Ms. Sehm were first granted a pension commitment prior to 2001 on the basis of their service to the company before their appointment
to the Executive Board; the earned portion of the defined benefit obligation is therefore established as a proportion (in the ratio [currently attained
service years since entry]/[attainable service years from entry to exit age]) of the final benefit. The values shown include the entitlements prior to
appointment to the Executive Board, which in accordance with a resolution of the company's Supervisory Board shall remain unaffected by the pension
commitment as a member of the Executive Board.
The personnel expense includes a past service cost due to a premium increase and change in measurement of EUR 259.5 thousand (2020) and
EUR 144.9 thousand (2021).
142
Hannover Re | Annual Report 2021
Variable remuneration in case of early termination of the
employment relationship
I.
58
Short-Term Incentive (STI)
If the employment relationship of a member of the Executive
Board ends during a financial year for a compelling reason
that is not the responsibility of the member of the Executive
Board in accordance with § 626 Para. 1 Civil Code (BGB), the
participant in the plan has an entitlement to a pro rata tempo-
ris STI for this financial year. If the employment relationship
is terminated by the company without notice prior to the end
of the financial year for a compelling reason that is the re-
sponsibility of the member of the Executive Board in accord-
ance with § 626 Para. 1 Civil Code (BGB), the entitlement to
STI for this financial year shall be cancelled without replace-
ment or compensation.
II. Long-Term Incentive (LTI)
If the employment relationship or the term of office on the
Executive Board ends prior to the end of the performance
period for a reason other than those specified below before
the end of a financial year, the participant in the plan has an
entitlement to a pro rata temporis LTI for this financial year.
In this event, the determination and payment of the variable
remuneration components is normally made in accordance
with the provisions of the plan conditions for the LTI. Early
payment prior to the end of the respective performance peri-
od of the LTI is not envisaged in such instances. If the em-
ployment relationship or the term of office on the Executive
Board ends during the financial year due to resignation from
office or notice given by the member of the Executive Board
(exception: resignation from office or notice given by the
member of the Executive Board for a compelling reason), the
refusal by the member of the Executive Board to accept an
offer of extension on at least equal contractual conditions (ex-
ception: the member of the Executive Board has reached the
age of 60 and served as a member of the Executive Board for
two terms of office), extraordinary termination without notice
of the service contract of the member of the Executive Board
by the company for a compelling reason or revocation of the
appointment of the member of the Executive Board for a com-
pelling reason as defined by § 84 Para. 3 Stock Corporation
Act (AktG) (exception: vote of no confidence passed by the
General Meeting), all conditionally allocated Hannover Re
performance shares shall be cancelled without replacement
or compensation.
The personnel expense includes a past service cost due to a premium increase of EUR 88.5 thousand (2020) and EUR 211.9 thousand (2021).
326.2
2021
2021
425.3
One-year variable remuneration (STI) 2
682.9
805.8
422.8
409.8
Multi-year variable remuneration
303.4
318.1
Bonus bank 2017/2016 (3 years)
Share Awards 2016/2015 (4 years)
42
109.6
193.8
196.9
Variable remuneration components
Total remuneration
Service cost 3
1
2
Excluding insurance under group contracts
682.9
41
805.8
121.2
2020
910.9
984.1
2020
in EUR
in %
thousand
in EUR
thousand
in EUR
thousand
in %
in EUR
thousand
Basic remuneration
840.0
59
750.0
408.8
Fringe benefits 1
14.1
30.9
16.1
16.5
Signing bonuses
130.0
130.0
Fixed remuneration components
520.0
141.6
188.7
65.8
615.9
118.6
118.6
Silke Sehm
since 6 March 2019
Total
Malus and clawback, risk adjustment
459.8
459.8
If a member of the Executive Board intentionally violates one
of their fundamental due diligence obligations pursuant to §
93 Stock Corporation Act (AktG), a cardinal obligation under
their service contract or other fundamental company princi-
ples governing conduct, e.g. from the Code of Conduct or the
compliance guidelines, the Supervisory Board may, at its dis-
cretion, withhold in part or in full variable remuneration that
has not yet been paid out ("malus") or reclaim in part or in
full the gross amount of the variable remuneration already
paid out ("clawback"). A clawback of remuneration is exclud-
ed if the significant breach occurred more than five years ago.
In making its discretionary decision, the Supervisory Board
considers the severity of the violation, the degree of fault on
the part of the member of the Executive Board as well as the
material and immaterial damage incurred by the company.
Hannover Re | Annual Report 2021
Dr. Michael Pickel
141
Furthermore, a member of the Executive Board shall pay back
variable remuneration already paid out to them in the event
that, and insofar as, it emerges after payment has been made
that the audited and adopted consolidated financial statement
used as a basis for the calculation of the amount paid out was
incorrect and must therefore be corrected according to perti-
nent financial reporting standards and a lower amount – or no
amount at all - would have been owed from the variable remu-
neration on the basis of the corrected and audited consolidat-
ed financial statement and the relevant remuneration system.
In addition, a restriction or complete omission of payment of
the variable remuneration components is permissible in the
event of a final or immediately enforceable ruling of the Fed-
eral Financial Supervisory Authority (BaFin) in which the pay-
ment is prohibited or restricted (such as: if the equity capital
is lower or at risk of becoming lower than the solvency capital
requirement), and also if this is required in accordance with
Art. 275 Para. 2 letter e of the Delegated Regulation (EU)
2015/35 of 10 October 2014.
No clawback or reduction occurred in the 2021 financial year,
nor was there any restriction or omission of payment of vari-
able remuneration components.
Benefits on leaving the company
Retirement provision
The members of the Executive Board, with the exception of
Dr. Pickel, have been granted defined contribution pension
commitments through retirement, surviving dependants' and
disability benefits. At the request of the member of the Exec-
utive Board the retirement benefit is paid as a one-time lump
sum. The pension benefits are provided through HDI Unter-
stützungskasse e.V. The latter takes out insurance covers with
HDI Lebensversicherung AG to fund the benefits. The amount
of the pension benefits corresponds to the payments under
the insurance covers on the basis of the funding contributions
rendered annually by the company in an amount of 25% of
the pensionable income (annual fixed remuneration). Regular
annuities are increased annually by at least 1% of their last
(gross) amount.
Dr. Pickel was granted a pension commitment through a life-
long pension and a surviving dependants' benefit. The
amount of the pension benefits is calculated according to a
length-of-service-based percentage ranging from 25% to at
most 50% of the pensionable income (last monthly salary re-
ceived). In conjunction with the remuneration structure valid
from 2011 onwards a non-pensionable fixed remuneration
component was implemented. Of the fixed remuneration
amounting to altogether EUR 520 thousand, EUR 320 thou-
sand carries a pension entitlement. If the pension is drawn
before reaching the age of 65 50% of other income received
is counted towards the pension. Regular pensions are adjust-
ed annually according to changes in the consumer price in-
dex for Germany.
The pension entitlements pursuant to IAS 19 for the active
members of the Executive Board are set out in the following
table.
Pension commitments
M 89
Combined management report
2021
105.8
Dr. Klaus Miller
The amount paid out to Ms. Silke Sehm refers to HR SA that were allocated to her for her work as a senior executive before her appointment
as a member of the Executive Board.
b) Bonus bank 2017
Following determination of the variable remuneration for the
2017 financial year, 20% of this remuneration was contribut-
ed to a bonus bank in the 2018 financial year.
The positive amount contributed to the bonus bank in 2018
was due to be paid out in 2021, insofar as it did not exceed
the balance of the bonus bank after allowance for credits/deb-
its during the three-year performance period (2018 - 2020).
The variable total bonus could be negative in the remunera-
tion system applicable until 2020. This minus value would
potentially have been carried over in full to the bonus bank,
meaning that the level of the bonus bank could be reduced
even without an amount being paid out.
The amounts contributed for 2017 were paid out in full. Pend-
ing payments not covered by a positive balance in the bonus
bank would have lapsed.
The amounts paid out correspond to the values contributed in
2018 (20% of the variable remuneration for 2017) because
the level of the bonus bank at the time of payment in 2021
was sufficient for the contributed values to be paid out in full.
The following table provides an overview of the bonus bank
2017:
Bonus bank 2017
M 88
Amount contributed
(2018) (20% of the
105.8
Amount paid
Jean-Jacques Henchoz
since 1 April 2019
Sven Althoff
Claude Chèvre
2017 variable
remuneration)
in EUR thousand
out 2021
in EUR
thousand
109.6
109.6
125.8
125.8
Clemens Jungsthöfel
since 1 September 2020
Member of the
Executive Board
58.6
2020
Sven Althoff 1,2
72.4
1,473.2
1,565.5
46.1
26.2
103.2
33.6
256.0
166.0
61.5
148.7
58.1
76.5
1,150.2
1,118.3
160.0
160.0
203.9
180.5
4,087.7
4,235.9
Total
136.1
in EUR thousand
Jean-Jacques Henchoz
100.0
2,265.9
Claude Chèvre
Clemens Jungsthöfel
Dr. Klaus Miller
Dr. Michael Pickel
Silke Sehm 1,3
Attainable annual pension
2021
Personnel expense
IAS 19
2020
2021
2020
DBO 31.12.
106.1
(age 65)
52.8
215.0
127.9
509.3
370.7
118.2
108.5
288.7
151.8
2,290.0
58.2
536.1
in %
2020
in EUR
thousand
in EUR
thousand
in %
in EUR
thousand
in EUR
thousand
thousand
in %
in EUR
2020
2021
2020
2021
(Board member with
divisional responsibility)
Dr. Michael Pickel
Basic remuneration
Dr. Klaus Miller
(Board member with
divisional responsibility)
1
3
4
Hannover Re | Annual Report 2021
144
The disclosure in the 2020 financial year refers to amounts paid out from the one-year variable remuneration for 2020 that was received in 2021.
For details of the service cost see the table "Pension commitments"
Excluding insurance under group contracts
3
2
1
33.6
103.2
227.7
2
100
520.0
520.0
136.0
118.6
130.6
105.8
Bonus bank 2017/2016 (3 years)
360.6
336.0
342.4
314.5
Multi-year variable remuneration
434.4
391.6
469.2
420.0
376.0
445.6
42
527.0
420.9
43
520.7
Fixed remuneration components
5.6
7.0
0.9
0.7
Fringe benefits 1
440.0
One-year variable remuneration (STI) 2,3
Share Awards 2016/2015 (4 years)
733.2
148.7
Fixed remuneration components
2.8
8.0
15.4
15.0
Fringe benefits 1
106.7
400.0
440.0
520.0
Basic remuneration
thousand
in %
535.0
in EUR
2021
Clemens Jungsthöfel
(Chief Financial Officer)
since 1 September 2020
2021
Claude Chèvre
(Board member with
divisional responsibility)
The disclosure in the 2020 financial year refers to amounts paid out from the one-year variable remuneration for 2020 that was received in 2021.
For details of the service cost see the table "Pension commitments"
151.8
288.7
1,153.2
100
1,262.3
1,716.7
127.9
100
1,667.0
215.0
727.9
2020
1,353.1
72.4
41
408.0
Service cost 3
100
1,304.9
Total remuneration
118.2
44
in EUR
thousand
325.2
897.7
59
769.9
Variable remuneration components
251.9
455.4
252.5
158.0
125.8
Bonus bank 2017/2016 (3 years)
409.9
378.3
Multi-year variable remuneration
118.2
325.2
487.8
391.6
One-year variable remuneration (STI) 2
109.5
56
Share Awards 2016/2015 (4 years)
208.7
3
217.4
166.0
Bonus bank 2017 (3 years)
608.8
386.0
0
0
Fixed remuneration components
Multi-year variable remuneration1
in %
in EUR
thousand
in %
in EUR
thousand
in %
in EUR
thousand
224.0
2021
André Arrago
Ulrich Wallin
(until 5 May 2019)
2021
2021
Roland Vogel
(until 30 September 2020)
M 91
Former members of the Executive Board - remuneration granted and owing
The remuneration granted and owing to former members of
the Executive Board of Hannover Re in the 2021 financial
year pursuant to § 162 Stock Corporation Act (AktG) is shown
below.
Former members of the Executive Board
Combined management report
145
Hannover Re | Annual Report 2021
For details of the service cost see the table "Pension commitments"
3
(until 31 August 2014)
The disclosure in the 2020 financial year refers to amounts paid out from the one-year variable remuneration for 2020 that was received in 2021.
Share Awards 2016 (4 years)
384.8
211.8
Hannover Re | Annual Report 2021
146
In the case of Mr. Vogel remuneration for seats held on Group bodies is counted in an amount of EUR 30 thousand.
1
100
100
867.1
100
66.9
1,340.6
Service cost
Total target remuneration
220.0
100
30
258.3
in EUR
thousand
Pension payments
71
954.6
the service contract
Payment to compensate claims under
70
608.8
29
386.0
Variable remuneration components
128.9
2
128.9
1
in EUR
thousand
2020
2021
Silke Sehm
(Board member with
divisional responsibility)
For details of the service cost see the table "Pension commitments"
Payments for seats held on Group bodies received in 2021 are counted towards the one-year variable remuneration (STI 2021) to be paid out in
April 2022. Allowance for seats on Group bodies: Dr. Miller EUR 75 thousand, Dr. Pickel EUR 5 thousand.
The disclosure in the 2020 financial year refers to amounts paid out from the one-year variable remuneration for 2020 that was received in 2021,
incl. seats held on Group bodies that were counted towards the amount paid out. Allowance for seats on Group bodies: Dr. Miller: EUR 75 thousand,
Dr. Pickel EUR 4.4 thousand.
Excluding insurance under group contracts
180.5
203.9
76.5
136.1
Service cost 4
in %
1,240.6
1,254.6
1,232.5
100
1,211.2
Total remuneration
795.0
58
727.6
57
690.5
Variable remuneration components
Excluding insurance under group contracts
224.6
100
in EUR
thousand
811.6
400.0
Basic remuneration
Service cost³
793.5
877.2
Total remuneration
458.7
53
326.2
466.8
Variable remuneration components
135.3
141.6
Share Awards 2016/2015 (4 years)
Bonus bank 2017/2016 (3 years)
100
141.6
320.0
135.3
Fringe benefits 1
10.4
14.8
Fixed remuneration components
188.7
47
410.4
323.4
325.2
One-year variable remuneration (STI) 2
Multi-year variable remuneration
334.8
386.8
Profit for the year of Hannover Rück SE according to HGB in EUR million
Group net income in EUR million
Earnings trend
889.0
107.7
108.5
Average
Employees in Germany
-2.5
81.3
701.2
0.8
1,320.3
1.5
-1.2
130.4
128.9
1,340.6
Roland Vogel (until 30 September 2020)
André Arrago (until 31 August 2014)
Former members of the Executive Board
10.5
793.5
1,231.3
877.2
Silke Sehm
867.1
Ulrich Wallin (until 5. May 2019)
The measurement of the variable remuneration is based on
three elements: Group net income, targets in the Property &
Casualty and Life & Health business groups and individual tar-
gets. The weighting of the elements is dependent upon
39.4
Hannover Re Group
Number of eligible participants in the variable
remuneration system
1.1
Group Performance Bonus
(GPB)
M 94
Variable
remuneration system
Cash bonus and
Share Award Plan
Management level 2
Management level 3
If the three-year average RoE above the risk-free interest rate
reaches the expected minimum return on equity of 750 basis
points, target attainment stands at 85%. Target attainment of
100% is recorded at 882 basis points. The maximum possible
target attainment is 200%. A lower limit is placed on target
attainment of -50% (malus) for management level 2 (Manag-
ing Director) and 0% for management level 3 (Director and
General Manager).
The Group net income is measured by the three-year average
return on equity (ROE) of the Hannover Re Group above the
risk-free interest rate. Target attainment is calculated as fol-
lows: for each individual financial year of the last three finan-
cial years it is calculated by how many percentage points the
RoE of the Hannover Re Group exceeds the risk-free interest
rate. The average of these three differences determines the
three-year average RoE above the risk-free interest rate. The
risk-free interest rate is the average market interest rate over
the past five years for 10-year German government bonds.
whether responsibility is carried in a treaty/regional depart-
ment or in a service department. In the treaty/regional de-
partments the measurement of the variable remuneration is
based on weightings of 20% for Group net income, 40% for
target attainment in the respective Property & Casualty or
Life & Health business group and 40% for individual target
attainment. In service departments the variable remuneration
is based on Group net income and the individual targets with
a corresponding weighting of 40% and 60%. The degree of
target attainment is defined for both the Group net income
and the business groups. Individual targets and the degree of
target attainment are agreed between the senior executive
and their supervisor.
Senior Manager
Manager
Chief Manager
883.1
General Manager
Group of participants and total number of eligible participants
in variable remuneration systems - valid: 31 December 2021
Participants
Measurement of variable remuneration for
senior executives
The group of participants and the total number of eligible
participants in the variable remuneration system of Hannover
Re are set out in the following table.
Members of staff on the levels of Chief Manager, Senior Man-
ager and Manager are also able to participate in a variable
remuneration system through the Group Performance Bonus
(GPB). The GPB is a remuneration model launched in 2004
that is linked to the success of the company. This tool is
geared to the minimum return on equity of 750 basis points
above the risk-free interest rate and the actually generated
return on equity. For those participating in the GPB 14.15
monthly salary payments are guaranteed; a maximum of
16.7 salary payments is attainable.
The remuneration system for senior executives below the Ex-
ecutive Board (management levels 2 and 3) and for key func-
tion holders in Germany belonging as a matter of principle to
the ranks of senior executives consists of a fixed annual sala-
ry and variable remuneration. This is comprised of short-term
variable remuneration, the annual cash bonus and long-term
share-based remuneration, the Share Award Plan. This varia-
ble remuneration has been uniformly applied worldwide
since 1 January 2012 to all Group senior executives (i.e. Man-
aging Directors, Directors and General Managers).
Structure and system
Remuneration of staff and senior executives
Combined management report
Hannover Re | Annual Report 2021
150
2 Employee representative
1 Amounts excluding reimbursed VAT
Managing Director
Director
1,240.6
63.4
Dr. Michael Pickel
81.4
108.0
24.6
63.4
79.0
24.6
63.4
79.0
24.6
63.4
79.0
37.6
32.7
135.5
40.8
249.7
351.5
in %
Change
2020/2021
M 93
2020
in EUR
thousand
2021
in EUR
thousand
Dr. Erhard Schipporeit
Dr. Andrea Pollak
All 157 Group senior executives worldwide
receive a cash bonus upon corresponding target
attainment and participate in the Share Award
Plan.
Dr. Ursula Lipowsky
Dr. Michael Ollmann
186.5
1,254.6
79.0
79.0
-1.7
1,232.5
1,211.2
Dr. Klaus Miller
222.0
227.7
733.2
Clemens Jungsthöfel (since 1 September 2020)
-3.6
1,353.1
1,304.9
Claude Chèvre
24.6
9.5
1,262.3
Sven Althoff
-2.9
1,716.7
1,667.0
Jean-Jacques Henchoz
Active members of the Executive Board
33.5
71.9
96.0
24.6
63.4
1,153.2
Hannover Office
5.0
-
Germany
Despite the elimination of fiscal supports, GDP growth in the
United Kingdom will likely show another robust increase of
4.5% in 2022 (6.9%). The economy will, however, have to
find a fresh footing in international trade following the exit
from the European Single Market. With inflation expected to
come in at 4.1%, monetary policy will probably also be
appreciably tightened.
After a modest contraction during the six winter months, IfW
estimates suggest that economic activity in the Eurozone will
pick up again in the spring. The supply shortages will proba-
bly ease gradually and enable vigorous value-added growth
in manufacturing industry. Growth of 3.5% (5.0%) is expect-
ed for the full year. Expenditures for consumption are fore-
cast to rise by 4.5% (3.3%). While growth in exports and
imports at 4.3% and 4.2% respectively - will probably be
softer than in the previous year (9.5% and 7.1%), it should
remain robust. The pricing pressure on energy costs will like-
ly fade. At the same time, the price buoyancy on industrial
goods will probably intensify, with the result that inflation in
2022 at 2.8% - will likely be significantly higher than the
central bank's inflation target. Unemployment is forecast to
fall to 6.9% and hence the lowest level since the existence of
monetary union. With the Pandemic Emergency Purchase
Programme for bonds set to expire in March, however, a re-
duction in the supply of liquidity is planned.
-
Europe
Faced with an inflation rate most recently in excess of 6%,
the US Federal Reserve plans to scale back its bond buying
programme faster than anticipated and progressively raise its
key interest rate. Parallel to this, the Biden administration is
planning for approval of the Build Back Better Plan. Overall,
the IfW expects economic output to grow by 4.4% (5.6%) in
2022. The propensity towards private consumption should re-
main intact, but the gain of 4.0% will be lower than in the
previous year (8.0%). Capital investment will likely also fall
short of the previous year at 3.0% (7.9%). In foreign trade
the tendency is reversing: while exports should rise by 9.1%
(4.0%), import growth is expected to soften to 5.4% (13.2%).
The recovery on the labour market is set to continue, with the
jobless rate expected to fall from 5.4% to 3.8% and hence
return to virtually the pre-crisis level.
United States
Combined management report
153
4.0
2.6
3.1
2.8
1.5
3.7
11.7
7.6
11.6
4.1
7.8
9.2
4.4
5.6
3.7
3.5
As in the previous year, the German economy's recovery has
been interrupted by a softer winter half-year. In addition to
the pandemic, economic activity has initially been impacted
by supply shortages. The moderating effect cannot, however,
be compared to the previous year. For the year as a whole, the
IfW anticipates growth of 4.0% (2.6%). Industry should
move forward in its recovery process, and this is also likely to
be reflected in more upbeat corporate investments. Activity in
the building sector is favourably poised and expected to re-
main intact: construction investments should increase by
2.9% (1.6%).
The price buoyancy in international trade should continue to
intensify. Exports will likely rise at a pace of 6.0% (7.5%) as
bottlenecks constraining output ease and new business out-
side Germany grows. Imports are benefiting from, among
other things, the resurgence in travel and will probably rise
by 6.3% (7.8%).
The labour market will see only a short interruption in em-
ployment growth. The upturn from the spring onwards is ex-
pected to coincide with an increase in the minimum wage to
EUR 12 effective 1 July 2022. This will to some extent put the
brakes on employment growth. Looked at over the year as
whole, the working population is expected to grow by
386,000. The jobless rate is forecast to fall from 5.7% to
5.2%. At 3.1%, inflation is expected to remain on the high
level of the previous year and only come down going forward.
Supply chain constraints are continuing to push up manufac-
turing costs and restrict the availability of consumer goods.
At the same time, the purchasing power of EUR 200 billion
that has built up among consumers since the start of the pan-
demic is running up against tight supply.
Ilka Hundeshagen²
Expectations for the development of individual markets and
lines in property and casualty reinsurance are described in
greater detail below.
In part because of the ongoing considerable losses from nat-
ural catastrophes, the renewal of our retrocession covers
proved challenging. Based on our long-standing cooperation
with our retrocessionaires, we were nevertheless again able
to arrange a well-diversified retrocession programme. We
thus covered our requirements according to our risk appetite,
even though the capacity of the retrocession programme was
smaller than in the previous year.
Of the EUR 7,808 million up for renewal, a premium volume
of EUR 7,284 million was renewed, while treaties worth EUR
524 million were either cancelled or renewed in modified
form. Including increases of EUR 1,176 million from new
treaties and from changes in prices and treaty shares, the to-
tal renewed premium volume came in at EUR 8,460 million
and was thus 8.3% higher than the previous year's level.
Of the total premium volume booked in the previous year on
an underwriting-year basis amounting to EUR 13,801 million
in traditional property and casualty reinsurance (excluding
facultative reinsurance, ILS business and structured reinsur-
ance), treaties with a volume of altogether EUR 7,808 million
- or 62% of the business - were up for renewal as at 1 Janu-
ary 2022. The premium volume due for renewal has been ad-
justed for a reinsurance cession of EUR 1,107 million received
by Hannover Re from HDI Global Specialty. This was reduced
to EUR 576 million in the 1 January 2022 renewals in connec-
tion with the sale of the participation.
The treaty renewals in property and casualty reinsurance as
at 1 January 2022 passed off satisfactorily. Hannover Re again
wrote more business at sometimes substantially better prices
and conditions. The inflation- and risk-adjusted price in-
crease on the renewed business averaged 4.1%, with prices
in non-proportional reinsurance rising by 6.1% and hence
more strongly than in proportional reinsurance, where they
improved by 3.4%.
Overview
Property & Casualty reinsurance
155
Hannover Re | Annual Report 2021
Digitalisation and hence also the cyber risks segment are
therefore creating a basis for new insurance products. The
industry will increasingly partner with insurtechs. Not only
that, global climate change is generating a greater need for
insurance solutions across a wide range of lines and regions.
The digital transformation will continue to shape the insur-
ance industry in 2022 and has gained added impetus from the
pandemic. Working from home has become the norm and
permanently changed the world of work. Covid-19 has led to
greater agility, which will be manifested in the work environ-
ment on a lasting basis. In this context, the acceptance of
online offerings and digital communication with customers
have also continued to grow and will play an even more prom-
inent role going forward.
4.9
In 2022 the global insurance industry will once again find it-
self faced with a myriad of already known as well as new chal-
lenges. The Covid-19 pandemic is ongoing and continues to
affect the insurance sector, although the associated uncer-
tainties appear more manageable and Covid-19 will become
easier to deal with. This is made possible by the numerous
vaccines and advances in the development of additional vac-
cines and medications. Higher inflation rates as well as ongo-
ing climate change - together with the associated increase in
extreme climate events - pose further challenges.
vest major parts of our asset portfolio conservatively. At the
same time, due consideration will be paid to the economic
prospects offered by certain markets and countries by enter-
ing into commensurate risks. However, we are not planning
any significant changes in our asset allocation. We shall con-
tinue to attach great importance to broad diversification. The
interest rate risk will be tightly managed through as neutral a
modified duration as possible.
As a consequence of the unusual capital market constella-
tions seen in recent years, the behaviour of capital market
participants can no longer be consistently explained by mar-
ket fundamentals. With this in mind, we shall continue to in-
We expect the advance of digitalisation to inject fresh, posi-
tive stimuli into the economy. As far as capital markets are
concerned, we initially anticipate a higher level of interest
rates and rising volatility on equity and credit markets. With
regard to alternative and real asset classes, upward revalua-
tions are likely to be significantly constrained. Should interest
rates move lower again as the year progresses, however, ap-
preciation pressure in these asset classes can be expected to
intensify. It is our expectation that catch-up effects on the
consumption side will fade. On the other hand, we expect to
see a revival in investment demand from the corporate sector
as well as positive developments in the service sector.
In this context, the support provided by central banks will re-
main a key pillar of stability for the moment. The US Federal
Reserve has announced its intention to progressively taper its
measures throughout the spring. It is our expectation that the
ECB to follow suit in the course of the year. As far as govern-
ment support programmes around the world are concerned,
we expect stimulus to be substantially phased out. The extent
to which the existing measures will be conducive on a lasting
basis to inflationary tendencies, market overheating or even
instances of countries becoming insolvent remains to be
seen. The concerns of market players about systemic inflation
currently still appear fragile in terms of their potential longev-
ity. It is too soon to draw any definitive conclusions at the
present time as to whether we will have to live with higher
inflation as a structural and more protracted phenomenon. As
the demand for goods normalises and the kinks in supply
chains are ironed out again, we anticipate that inflation may
fade and secondary effects such as wage pressures could be
curbed. Furthermore, it should not be forgotten that even be-
fore the pandemic geopolitical and populist currents were
fanning uncertainty on the markets. These will continue to be
an influencing factor going forward.
The course of the pandemic and its scope and impacts on
economies around the world will continue to affect 2022 - al-
beit on a significantly lesser scale than in the two previous
years. Easing production bottlenecks and supply chain issues
will still come up against robust demand for the time being,
while the growth already observed in the year under review
will soften but should nevertheless remain on an adequate
level.
Capital markets
Combined management report
Hannover Re | Annual Report 2021
154
Japan's growth rate should reach 2.8% (1.5%) in the current
year, thereby confirming the positive economic trend. Expan-
sion will be helped by corporate investments with an expect-
ed gain of 5.0%, private consumption with growth of 2.9%
and foreign trade, with exports and imports forecast to grow
by 3.6% and 4.1% respectively. Inflation should remain low
at 1.0%. For Japan, therefore, there is no end in sight to the
extremely accommodative monetary policy.
Output in Asia is estimated to grow by 6.3% in 2022 (6.9%).
This will be driven in part by India (11.7%), although other
Asian emerging economies such as Indonesia (6.4%), Thai-
land (5.7%) and the Philippines (7.6%) are also expecting
clearly favourable growth numbers. In China, steps taken to
contain the pandemic, an energy crisis and consolidation in
the real estate sector will suppress total economic output and
hence restrict the growth in gross domestic product to 4.1%.
In December the central bank cut the reserve requirement
ratio and eased economic conditions for small and mid-sized
business in an effort to support the economy.
Asia
Insurance industry
4.5
5.7
6.1
•
•
•
•
•
Forecast
Outlook
Hannover Re | Annual Report 2021
152
Refinement of the system of remuneration for
senior executives effective 1 January 2022
In the 2021 financial year the modifications made to its sys-
tem of remuneration prompted the Executive Board of Han-
nover Rück SE to review and overhaul the system of remuner-
ation for senior executives (management levels 2 and 3). With
effect from 1 January 2022 the Executive Board therefore
approved refinements to the measurement bases and their
weighting, while the amount of variable remuneration includ-
ing share awards continues to be determined by the degree of
overall target attainment. No change was made to the split of
cash bonus/share awards.
The cash bonus for the 2020 financial year was paid out in
June 2021. The share awards for the 2020 financial year were
also allocated in June 2021; they will be paid out in the spring
of 2025 including dividends paid for the 2020, 2021, 2022
and 2023 financial years.
In the case of the allocation and payment of share awards to
participants in the Share Award Plan who are located abroad,
the rate of exchange used to convert the average share price
is the average of the relevant exchange rate in a period from
20 trading days before to ten trading days after the meeting
of the Supervisory Board that approves the consolidated fi-
nancial statement. For payment of the dividend to partici-
pants in the Share Award Plan who are located abroad, the
rate of exchange used to convert the dividend per share is the
average of the relevant exchange rate in a period from 20
trading days before to ten trading days after the Annual Gen-
eral Meeting that approves the dividend payment for the fi-
nancial year just ended.
Group net income guidance: EUR 1.4 billion to EUR 1.5 billion
Following expiry of a vesting period of four years the value of
one Hannover Re share calculated at the disbursement date is
paid out for each share award. The value of the Hannover Re
share is again determined from the average of the closing
prices of the shares in a period from 20 trading days before to
ten trading days after the meeting of the Supervisory Board
that approves the consolidated financial statement. In addi-
tion, a sum in the amount of the dividend is paid out for each
share award, insofar as dividends were distributed to share-
holders. The level of the dividend payment is the sum total of
all dividends per share paid out during the period of the share
awards multiplied by the number of share awards.
The total number of share awards allocated is determined ac-
cording to the value per share of Hannover Re. This value is
arrived at from the average of the closing prices of the shares
Allocation and payment of share awards for
senior executives
In view of the fact that outperformance of up to 200% is pos-
sible for Group net income and up to 150% for business
group targets, a maximum degree of overall target attainment
of 140% can be attained in both treaty/regional departments
and service departments. Given outperformance of all tar-
gets, a maximum of 140% of the variable remuneration can
therefore be attained on management levels 2 and 3.
On management level 3 (Director and General Manager), the
minimum variable remuneration amounts to EUR 0 based on
the premise that the degree of attainment for all targets is
0%. For management level 2 (Managing Director) in treaty/
regional departments, the minimum limit for the variable re-
muneration is set at -10% if the degree of target attainment
for Group net income is -50% while at the same time target
attainment of 0% is determined for the divisional targets and
individual targets. For management level 2 (Managing Direc-
tor) in service departments, -20% of the variable remunera-
tion is possible as the lower limit if the degree of target attain-
ment for Group net income is -50% and at the same time
target attainment of 0% is determined for the individual tar-
gets.
The degree of overall target attainment determines the
amount of variable remuneration including share awards. On
management level 2 (Managing Director) 60% of the variable
remuneration is paid out annually in cash and 40% is granted
in the form of share awards. On management level 3 (Director
and General Manager) the variable remuneration is split into
65% cash payment and 35% granted as share awards.
Amount and payment of variable remuneration for
senior executives
Individual targets are agreed and measured for a period of
one year. The degree of target attainment is between 0% and
100%.
or Life & Health reinsurance, is therefore taken as a one-
year measurement basis. The xRoCA describes the IVC in re-
lation to the allocated capital and shows the relative excess
return generated above and beyond the weighted cost of
capital. Target attainment of 100% exists if the XROCA in
Property & Casualty reinsurance reaches 2% and the xRoCA
in Life & Health reinsurance reaches 2%. Negative perfor-
mance contributions are excluded; the minimum target at-
tainment is 0%. The maximum possible target attainment is
150%.
151
Hannover Re | Annual Report 2021
value created. The Excess Return on Capital Allocated
(XROCA) of the business group encompassing the respective
area of responsibility, namely Property & Casualty reinsurance
The measurement of the business group targets
which in
the case of the treaty/regional departments accounts for
40% of overall target attainment - is geared to the economic
in a period extending from 20 trading days before to ten trad-
ing days after the meeting of the Supervisory Board that ap-
proves the consolidated financial statement. The number of
share awards is established by dividing the specified portion
of the total bonus (40% or 35%) by the value per share,
rounded up to the next full share.
Of the altogether 1,477 employees at the
Hannover Office (incl. 90 senior executives),
891 staff (excl. seconded employees) are
GPB-eligible.
Gross premium for the Group expected to grow by at least 5%
Major loss budget for property and casualty reinsurance raised to EUR 1.4 billion
2022
(forecast)
2021
(provisional
calculation)
2021
(forecast from
previous year)
M 95
Hannover Re | Annual Report 2021
Source: Kiel Institute for the World Economy
adjusted for price, calendar and seasonal effects
1
Japan
Germany1
India
China
United States
Property and casualty reinsurance: target for combined ratio of no more than 96%
Selected countries
World economy
Economic areas
in %
The Kiel-based experts expect the elevated level of inflation
to retreat slightly on account of falling energy prices. It should
still remain appreciably above the pre-crisis level. With a view
to putting the brakes on soaring prices, central banks in the
advanced economies such as the United States, United
Kingdom and also Central and Eastern European countries -
are moving to tighten monetary policy. This will likely con-
strict the financial framework conditions in emerging econo-
mies. At the same time, high commodity prices serve as a
stimulating factor for many emerging countries, with the re-
sult that further economic recovery in this group of countries
should be sustained.
and entertainment will step up their activities back towards a
normal level. Similarly, the supply shortages will ease gradu-
ally as production capacities are increasingly adjusted.
Growth in gross domestic product (GDP)
The economic impacts of the new waves of infections will
probably be less marked than in the previous year. In some
countries the vaccination rates are high and a large propor-
tion of the population has already come into contact with the
virus. Against this backdrop, sectors such as tourism, travel
Faced with rising infections and supply chain bottlenecks in
industry, the global economic rebound lost impetus in the
second half of 2021. The Chinese economy is also currently
growing only at a relatively modest pace. The upswing in the
early months of 2022 will therefore likely remain muted until
the economy rallies over the remainder of the year. The Kiel
Institute for the World Economy (IfW) expects output for the
full year to grow by 4.5% (previous year: 5.7%).
Global economy
Economic developments
Return on investment target of at least 2.3% for assets under own management
Life and health reinsurance: sustained strong demand for financial solutions
Eurozone
Frauke Heitmüller²
73
Herbert K. Haas
29.4
- 0
30.0
69
75.0
Finance and Audit Committee
-
- Supervisory Board
Member of the
29.4
0
30.0
95
75.0
Member of the Supervisory Board
29.4
0
30.0
95
75.0
Member of the Supervisory Board
Dr. Ursula Lipowsky
Ilka Hundeshagen²
Frauke Heitmüller²
29.4
Dr. Michael Ollmann
Dr. Andrea Pollak
Member of the Supervisory Board
75.0
95
2 Employee representative
1 Amounts excluding reimbursed VAT
308.5
0
315.0
4
825.0
Total
29.4
- 0
30.0
78
0
75.0
Dr. Erhard Schipporeit Member of the
29.4
- 0
30.0
95
75.0
Nomination Committee
Supervisory Board
Member of the
29.4
-0
30.0
Supervisory Board
Standing Committee
30.0
95
75.0
2020
2021
Variable remuneration
Remuneration for Supervisory Board work
Fixed remuneration
M 92
Member of the Finance and
Nomination Committee
· Standing Committee
-
- Supervisory Board
Chairman of the
2021
Torsten Leue
Combined management report
147
Hannover Re | Annual Report 2021
In the year under review no remuneration was paid to the
members of the Supervisory Board for services provided indi-
vidually outside the committee work described above, e.g. for
consulting or mediation services, with the exception of the
remuneration paid to employee representatives on the basis
of their employment contract.
The individualised presentation of the remuneration shows
the remuneration actually due in the respective year under
review for the year under review as well as the attendance
allowances granted in the year under review. Value-added tax
payable on the remuneration, insofar as it accrues, is reim-
bursed by the company.
In addition to the specified remuneration for participation in
the meetings of the Supervisory Board and the Committees,
each member of the Supervisory Board receives an attend-
ance allowance of EUR 1,000 per meeting. If a meeting of the
Supervisory Board and one or more Committee meetings fall
on the same day, the attendance allowance for this day is only
paid once in total.
Members who have only belonged to the Supervisory Board
or one of its Committees for part of the financial year receive
the remuneration amounts pro rata temporis.
The members of the Finance and Audit Committee formed by
the Supervisory Board additionally receive remuneration of
EUR 25,000 (until 31 December 2020: EUR 15,000) for their
committee work and the members of the Standing Committee
formed by the Supervisory Board receive remuneration of
EUR 15,000 (until 31 December 2020: EUR 7,500). The Chair
of each Committee receives twice the stated amounts. No
remuneration is envisaged for the Nomination Committee.
A new resolution was adopted on the Supervisory Board re-
muneration with effect from 1 January 2021; in accordance
with the amended version of § 14 of the Articles of Associa-
tion as amended on 5 May 2021, the members of the Supervi-
sory Board receive fixed annual remuneration of EUR 75,000
(until 31 December 2020: EUR 30,000) in addition to reim-
bursement of their expenses. The Chairman of the Superviso-
ry Board receives two-and-a-half times (until 31 January
2020: twice) the aforementioned remuneration amounts and
the Deputy Chairman one-and-a-half times the amounts. Var-
iable remuneration, formerly limited to at most EUR 30,000
annually, is no longer granted under the amendment of § 14
of the Articles of Association with effect from the 2021 finan-
cial year onwards.
Against this backdrop, the remuneration system was refined
and the variable remuneration of the Supervisory Board was
eliminated. With a view to strengthening the independence of
the Supervisory Board and ensuring the objective perfor-
mance of its monitoring and advisory role, the members of
the Supervisory Board are granted a customary fixed remu-
neration in the new remuneration system. In addition, the
members of the Supervisory Board receive committee remu-
neration to recompense the increased time required for mem-
bership of committees as well as an attendance allowance for
participation in meetings.
In view of amendments to the Stock Corporation Act, the
Annual General Meeting in 2021 was also required to adopt a
resolution on the remuneration system of the Supervisory
Board. The existing remuneration system of the Supervisory
Board dated back to a resolution of the General Meeting in
2011 and had since remained unchanged.
Remuneration of the Supervisory Board
Individual remuneration of the members of the Supervisory Board
148
2020
in %
Member of the Supervisory Board
Natalie Bani Ardalan²
44.0
0
45.0
60
112.5
Nomination Committee
-
Standing Committee
Member of the
Audit Committee
in EUR
thousand¹
Chairman of the Finance and
Deputy Chairman of the
Herbert K. Haas
58.7
0
60.0
55
187.5
Audit Committee
in EUR
thousand¹
in %
in EUR
thousand¹
in EUR
thousand
Supervisory Board
Hannover Re | Annual Report 2021
Supervisory board remuneration
from Group entities
63.4
79.0
0
4.0
5
4.0
63.4
79.0
0
4.0
81.4
108.0
40
- 0-
63.4
79.0
63.4
79.0
135.5
186.5
I
I
0
O O O
0
0
7.0
4.0
I
15.0
160.0
Torsten Leue
Active members of the Supervisory Board¹
Comparative presentation
The presentation of the average remuneration of the employ-
ees is geared to the workforce of Hannover Re in Germany.
The employee remuneration shown encompasses the person-
nel expense (excluding the expense for Executive Board re-
muneration) for wages and salaries, employer contributions
to social security, the variable remuneration components
allocable to the financial year as well as - in the case of share-
based payment - the amounts received in the financial year.
The presentation of the remuneration of the Executive Board
and the Supervisory Board is geared to the remuneration
granted and owing pursuant to § 162 Stock Corporation Act
(AktG).
In conformity with the requirements of § 162 Para. 1 Sen-
tence 2 No. 2 Stock Corporation Act (AktG), the following ta-
ble presents a comparison of the change in the remuneration
of the members of the Executive Board, the members of the
Supervisory Board as well as the employees and the earnings
trend of the company.
Comparative presentation of the change in remuneration and earnings trend
149
Hannover Re | Annual Report 2021
855.5
1,137.0
92.0
0
71.9
Combined management report
09
100.0
50.0
5.0
65
52.0
90.0
14
6.0
7.5
16
96.0
Natalie Bani Ardalan²
4.0
0
30.0
16
55.0
in EUR
thousand¹
in EUR
thousand
thousand¹
in %
in EUR
2020
2021
2021
Attendance allowances
9.0
Remuneration for committee work
in EUR
in EUR in EUR
thousand¹ thousand¹
in %
in EUR
thousand¹
in EUR
thousand
in %
2020
2021
2020
2021
2020
Total remuneration
thousand 1
4.0
3
100.0
9.0
75
5555
4.0
|
8.0
15.0
30
23
25.0
4.0
4.0
9.0
I
☐
0
4.0
0
9.0
37.5
35
65.0
249.7
351.5
92.0
28
0
M 96
On the investment side, the insurance industry remains pre-
occupied with the continued low level of interest rates. In our
main currency areas, however, sometimes appreciable in-
creases in interest rates were recorded in the reporting peri-
od a trend that could be sustained in 2022. It is our expec-
tation, however, that this will go hand-in-hand with sharply
higher volatility. We anticipate this development in the Euro-
zone, too, albeit with a time delay and on a lower level -
meaning that the Eurozone will continue to see rates that are
on the low side overall. Hardest hit here are life insurers: they
find themselves challenged to adjust their business models
and develop new products tailored to market circumstances.
Volume 1
+/-
+
+
+/-
+
+/-
Decrease due to reduced obligatory cession from HDI Global Specialty
Regional Markets
Europe, Middle East and Africa
In the markets of Continental Europe we again achieved
broadly higher prices in the 1 January treaty renewals. We are
looking for a continued favourable development in the pricing
momentum. Demand for superlative reinsurance protection
also remains on a high level and is especially sought-after
during the pandemic.
The generally favourable premium growth in the region is op-
posed by a reduced reinsurance cession from HDI Global
Specialty, which was scaled back as planned in conjunction
with the sale of the participating interest.
For 2022 Hannover Re expects a return to stronger growth on
the primary market in Germany compared to the previous
year. With an eye to the considerable expenditures in 2021
caused by fire losses in industrial insurance and the strain
from natural catastrophe events, sizeable growth can be ex-
pected again in the property line- which will likely get a fur-
ther boost from the increasing inclusion of natural perils cov-
ers in the private segment. In the motor line, on the other
hand, growth will be on the moderate side in 2022 despite
rising average claims owing to continuing restrictions on mo-
bility put in place to fight the pandemic.
After the heavy losses due to natural perils events in 2021, we
benefited from greater risk awareness and rising prices when
156
Hannover Re | Annual Report 2021
+
+
Property & Casualty reinsurance:
Forecast development for 2022
- below the cost of capital
3 All lines of business except those stated separately
Profitability2
Europe, Middle East and Africa
(including CIS countries) 3,4
Americas ³
Asia-Pacific ³
Worldwide Markets
Structured Reinsurance and
Insurance-Linked Securities
Facultative Reinsurance
Credit, Surety and Political Risks
Aviation and Marine 4
Regional Markets
In EUR, development in original currencies can be different
Agricultural Risks
+above the cost of capital
++= significantly above the cost of capital
+/- = cost of capital earned
1
2
Other technical income
146,047
129,034
Net income from investments under own management
7.2
1,674,762
1,463,703
Income/expense on funds withheld and contract deposits
7.2
268,250
Net investment income
1,943,012
221,765
1,685,468
Total revenues
23,046,278
16,782,658
114
15
26,086,778
Claims and claims expenses
7.3
18,617,725
Other investment expenses
Change in benefit reserves
7.3
(298,645)
(103,487)
Commission and brokerage, change in deferred acquisition costs
7.3
5,788,582
7.3
129,393
329,610
7.2
Notes
1.1.-31.12.2021
1.1.-31.12.20201
7.1
27,762,314
24,770,342
2,905,054
2,442,720
(737,631)
(1,028,172)
24,023
24,143,652
61,345
21,360,795
Ordinary investment income
87,665
7.2
1,240,420
Profit/loss from investments in associated companies
7.2
35,743
88,129
Realised gains and losses on investments
7.2
281,026
5,111,753
Change in fair value of financial instruments
7.2
36,114
63,971
Total depreciation, impairments and appreciation of investments
1,555,591
Other acquisition costs
22,273,572
7.3
Non-controlling interest in profit and loss
6.14
Group net income
68,887
1,231,334
35,712
883,073
Earnings per share (in EUR)
8.5
Basic earnings per share
10.21
7.32
10.21
7.32
Diluted earnings per share
thereof
1 Restated pursuant to IAS 8
Hannover Re | Annual Report 2021
Accounts receivable
164
at 31 December 2021
Consolidated balance sheet as
Consolidated financial statements
Combined management report
161
Hannover Re | Annual Report 2021
Hannover Re | Annual Report 2021
160
Hannover Re aims to pay an ordinary dividend that at least
remains stable compared to the previous year. This will be
supplemented by a special dividend provided the capitalisa-
tion exceeds the capital required for future growth and the
earnings guidance is achieved.
As usual, all forward-looking statements regarding future tar-
gets are based on the premise that there are no unforeseen
distortions on capital markets, that major loss expenditure
remains within the budgeted level and that the Covid-19 pan-
demic does not significantly affect the result in life and health
reinsurance.
In view of the sharply higher business volume and marginally
increased retention in property and casualty reinsurance,
Hannover Re raised its net major loss budget for 2022 to EUR
1.4 billion (EUR 1.1 billion).
166
Administrative expenses
Net income
918,785
4,767
510,707
4,466
478,182
Total technical expenses
24,623,136
Net premium earned
Other income
Other expenses
Other income and expenses
Operating profit/loss (EBIT)
Financing costs
Net income before taxes
7.4
774,816
823,391
Taxes
7.4
382,022
7.4
271,185
441,369
1,734,827
1,214,075
6.12
83,037
90,204
1,651,790
1,123,871
7.5
351,569
1,300,221
205,086
503,631
Change in ceded unearned premium
165
Ceded written premium
Provisions for pensions
Taxes
Deferred tax liabilities
Other liabilities
Financing liabilities
Total liabilities
Shareholders' equity
Common shares
Nominal value: 120,597
Conditional capital: 24,119
Additional paid-in capital
Common shares and additional paid-in capital
Cumulative other comprehensive income
Notes
Reinsurance payable
31.12.2021
6.7
40,777,703
33,929,230
6.7
7,541,881
7,217,988
6.7
6,195,961
5,070,009
6.7
841,591
701,577
6.8
632,195
31.12.20201
582,316
Contract deposits
Other technical provisions
6.4
7,207,750
5,605,803
Goodwill
Deferred tax assets
Other assets
Accrued interest and rent
Total assets
1
Restated pursuant to IAS 8
6.5
83,933
80,965
7.5
Funds withheld
676,344
6.6
972,167
859,136
18,248
18,264
82,902,252
71,437,475
164
Hannover Re | Annual Report 2021
Liabilities
in EUR thousand
Loss and loss adjustment expense reserve
Benefit reserve
Unearned premium reserve
597,986
Change in gross unearned premium
6.9
3,255,453
(8,618)
(8,678)
Other changes in cumulative other comprehensive income
(71,851)
(83,792)
Total other comprehensive income
2,054,074
1,852,773
Retained earnings
8,985,770
8,297,114
Equity attributable to shareholders of Hannover Rück SE
11,885,003
10,995,046
Changes from hedging instruments
Non-controlling interests
Total shareholders' equity
Total liabilities
871,228
12,756,231
82,902,252
844,370
11,839,416
71,437,475
1
Restated pursuant to IAS 8
Hannover Re | Annual Report 2021
Annual financial statements
N 02
Consolidated statement of income 2021
in EUR thousand
Gross written premium
Group net income is expected to be in the range of EUR 1.4
billion to EUR 1.5 billion.
3,586,740
(330,693)
Cumulative foreign currency translation adjustment
2,380,681
1,777,761
6.10
208,750
229,252
7.5
92,023
132,736
7.5
2,836,374
2,731,648
6.11
681,867
538,813
366,231
6.12
3,431,276
70,146,021
59,598,059
6.13
120,597
120,597
6.13
724,562
724,562
845,159
845,159
Unrealised gains and losses on investments
1,768,312
2,275,936
4,370,255
6.14
1,106
3,073,117
Contract deposits
6.1
Cash and cash equivalents
327,426
443,793
6.1
Short-term investments
2,794,016
2,941,633
6.1
361,617
238,110
6.1
Other invested assets
Investments in associated companies
582,296
805,912
6.1
Real estate funds
1,589,238
1,355,114
1,278,071
Total investments and cash under own management
56,213,248
6.7
Prepaid reinsurance premium
192,135
192,039
6.7
Reinsurance recoverables on benefit reserve
2,674,107
6.7
Reinsurance recoverables on unpaid claims
1,818,754
58,959,777
Total investments
298,344
503,412
6.3
9,659,807
10,803,071
6.2
Funds withheld
49,001,626
67,519,731
204,597
6.1
234,689
Fixed-income securities - loans and receivables
Fixed-income securities – held to maturity
in EUR thousand
Assets
Consolidated balance sheet as at 31 December 2021
Annual financial statements
173
statements 2021
Notes to the consolidated financial
170
Consolidated cash flow statement 2021
168
shareholders' equity 2021
Consolidated statement of changes in
167
income 2021
Consolidated statement of comprehensive
166
Consolidated statement of income 2021
N 01
Notes
31.12.2021
31.12.20201
248,233
6.1
Other financial assets - at fair value through profit or loss
378,422
314,453
6.1
Equity securities - available for sale
105,711
81,308
Investment property
6.1
38,851,723
45,473,677
6.1
Fixed-income securities - available for sale
185,577
2,312,840
2,443,629
6.1
48,632
6.1
Fixed-income securities - at fair value through profit or loss
165,916
1,883,270
6.7
Considerable growth potential is identified in Asia. We intend
here to step up our participation in the associated business
opportunities and will expand our activities in the region ac-
cordingly. Yet in other regions, too, we shall press ahead on
our growth track in facultative business.
Sustainability is an increasingly prominent issue that is very
much in keeping with our corporate strategy and our corpo-
rate values. At the heart of our approach is our striving to
avoid facilitating unsustainable practices in economic activity
through our reinsurance support and to actively assist the
transformation to a sustainable economy through facultative
reinsurance coverage.
Credit, Surety and Political Risks
A gradual economic recovery is anticipated for 2022 and par-
allel to this a progressive elimination of government supports.
Against this backdrop, loss ratios will likely rise moderately
from a comparatively low level and prices on both the insur-
ance and reinsurance side will remain broadly stable. A good
result is expected for 2022.
Aviation and Marine
For 2022 we expect rates for aviation business to stabilise on
the primary market for airline risks, insofar as the further
course of the pandemic allows a return to the largely orderly
transportation of passengers. As for the other segments (gen-
eral aviation and product liability), we anticipate continued
rate increases albeit on a lower level than in the previous
year. The positive pricing trend in the space market should be
sustained, additionally influenced by a sharp rise in launch
activity.
-
Based on the combination of these effects - and allowing for
a reduced reinsurance cession from HDI Global Specialty
we expect an increased premium volume in this segment. The
reinsurance cession from HDI Global Specialty to Hannover
Re was scaled back as planned in conjunction with the sale of
the participating interest.
All in all, we are looking for another rise in the absolute mar-
ket premium for aviation and space insurance. Hannover Re
will participate directly in this development through its expo-
sure in proportional reinsurance. As for non-proportional
covers, the trend towards price increases will continue to lev-
el off. Given that losses from the previous years have not yet
been fully compensated, we are still seeking to push through
higher rates.
After promising improvements in the previous year, initial
tendencies towards consolidation already emerged in marine
business in 2021. Customers were prepared to carry more
risk themselves and a surplus of reinsurance capacity was still
available. This trend continued in the treaty renewals as at 1
January 2022. Based on our market position and long-stand-
ing customer relationships, we anticipate a stable portfolio
with adequate prices in the marine and offshore reinsurance
lines despite the competitive landscape.
Agricultural Risks
We anticipate further growth in our portfolio of agricultural
risks. The increasing need for agricultural commodities and
foodstuffs as well as the more widespread prevalence of ex-
treme weather events, particularly in emerging and develop-
158
Reinsurance recoverables on other technical reserves
ing markets, are generating stronger demand for correspond-
ing reinsurance covers. We engage both in traditional
reinsurance and in intensified cooperation with our custom-
ers and partners on the development of innovative tools for
primary insurance. Index-linked products and parametric
covers, which can also be used to mitigate adverse impacts of
climate change, offer growth potential. In addition, the more
widespread implementation of public-private partnerships
opens up new opportunities to write profitable business in
markets that have still to establish themselves as well as to
close protection gaps, especially in emerging and developing
countries.
The cooperation entered into in 2019 with Global Paramet‐
rics, a provider of parametric covers, the Federal Ministry of
Economic Cooperation and Development, Kreditanstalt für
Wiederaufbau and the UK Department for International De-
velopment continues to represent a promising initiative for
our company. Together, we have developed an innovative
concept for the protection of climate risks in developing
countries on the basis of parametric indices.
In the area of Mortality and Morbidity Solutions, the pan-
demic will likely continue to negatively affect results – at least
in the first half of 2022. Due to the elevated mortality we an-
ticipate further loss expenditures. The strains from the pan-
demic may be opposed by the effect of an extreme mortality
cover that we have placed on the capital market in regular
tranches since 2013. It is not yet possible, however, to quan
tify the income that this will generate.
In the area of Underwriting Services it is our expectation
that our automated underwriting systems "hr | ReFlex" and
"hr | Quirc" will continue to stimulate considerable interest
among our customers as part of the progressive march to-
wards digitalisation.
Our customers increasingly see Hannover Re no longer as
just a pure risk carrier, but rather as an expert and financially
strong partner that stands ready to support them with its
worldwide know-how as they face up to a diverse range of
issues.
We expect to see a stable continuation of the current market
development in facultative reinsurance over the coming
12 months. In the 2022 financial year we anticipate further
strong demand for facultative reinsurance.
Facultative Reinsurance
In the area of insurance-linked securities (ILS) we anticipate
rising demand over the long term. Investors are seeking a
minimal correlation with other financial investments and
hence greater diversification. We are responding to this de-
mand with a strong emphasis on service, offering individually
tailored solutions for the transfer of property and life reinsur-
ance risks to the capital market. Over the coming years we
expect further growth in business volumes not only in collat-
eralised reinsurance but also when it comes to supporting
catastrophe bond issues and the transfer of life reinsurance
risks. All in all, we are looking for our ILS activities to deliver
a positive and consistently rising profit contribution. The cap-
ital market also remains an important element in our own ret-
rocession protection.
Structured Reinsurance and Insurance-Linked Securities
Given the improvements in market conditions benefiting rein-
surers, we expect further growth in demand in structured
reinsurance. The considerable expenditures incurred by in-
surers in North America and Europe from natural catastrophe
losses are facilitating the shift towards a provider market.
Based on new business written and the favourable develop-
ment of the already existing portfolio, we are looking for sig-
nificantly stronger growth than in traditional reinsurance for
2022.
Combined management report
reinsurance treaties were renewed as at 1 January 2022. In so
doing, we maintained our leadership position and obtained
improved prices and conditions in many instances.
Along with opportunities in emerging segments such as tele-
matics or cyber, we see new developments first and foremost
in the motor segment. Market players are increasingly re-
sponding actively to changes in their customers' mobility
habits and developing new concepts. We bring our expertise
to bear as we support our clients with these issues and with
the development of modified or new coverage concepts.
In the United Kingdom, Ireland and the London Market we
achieved price increases in all major reinsurance lines in the
treaty renewals as at 1 January 2022. Continued hardening,
albeit less marked, is expected on the original market in
2022. Our customer base has continued to grow through the
formation of various Lloyd's syndicates, giving us additional
opportunities to profitably expand our book of business. Es-
pecially where cyber covers are concerned, we shall discuss
and implement capacity restrictions under proportional trea-
ties in cooperation with our long-standing clients.
Our premium volume in the Middle East and in our retakaful
business should remain stable. We nevertheless anticipate
moderate growth in conjunction with the economic rebound
after the pandemic as well as through new initiatives. For
2022 we are planning to further enlarge our product range in
collaboration with our market experts. We shall also continue
to stress the importance of selective underwriting in order to
preserve the profitability of our portfolio.
In South Africa the 1 January 2022 treaty renewals brought
further improvements in conditions. This enabled us to write
a number of new shares in reinsurance programmes that we
had declined in recent years owing to inadequate margins.
The business generated through our managing general
agents (MGAs) and Compass Insure nevertheless still makes
up the bulk of our property and casualty reinsurance portfo-
lio.
Americas
Building on the improvements in conditions achieved in pre-
vious years, the treaty renegotiations in North America for
1 January 2022 brought additional adjustments, thereby
making it possible to further boost the profitability of the
business. With the return to normalisation of raw materials
availability and supply chains, together with the resulting
economic upswing, Hannover Re expects to book solid
growth from the written portfolio for 2022. We anticipate at
least stable or slightly stronger earnings potential. Our broad
and diversified positioning combined with close customer re-
lationships will help us to continue to act on market opportu-
nities as the reinsurance partner of choice for our customers
and reinsurance brokers.
Life & Health reinsurance:
Forecast development for 2022
In Latin America we continue to see heightened awareness
of the exposure to natural catastrophes. This is joined by new
products aimed at end consumers as well as stronger interest
in parametric covers. Large parts of the portfolio in Latin
America are, however, only renewed by Hannover Re later in
the year. All in all, we are looking to a further improvement in
conditions on the reinsurance market.
The Asia-Pacific region is developing into one of the largest
insurance markets globally. This growth is opening up further
significant business opportunities, not least because the in-
surance density is still lower than in more mature markets.
We therefore anticipate substantial growth rates both in prop-
erty and casualty reinsurance and in the area of health and
provision in the APAC region over the medium and long term.
Following the launch of our Asia-Pacific growth initiative,
Hannover Re should be superbly placed to share in the fur-
ther above-average growth of the APAC region.
For the renewals as at 1 April 2022 Hannover Re anticipates
stable or improved reinsurance conditions and prices. Trea-
ties affected by the pandemic or other losses should see
clearly positive changes.
The hardening tendencies on other markets were evident to
only a limited extent in Greater China. All in all, a stable to
positive development can be observed. Over the year as a
whole we intend to cement our position a reinsurer of choice
in the region. This also includes expanding our book of busi-
ness through initiatives and close cooperation with our cus-
tomers.
The major reinsurers have recalibrated their risk models and
hence their risk assessment and exposures for the coverage
of typhoons in Japan. The increase in rates for industrial and
fire business recorded on the primary insurance side estab-
lishes a favourable basis for Hannover Re to maintain its sus-
tainable positioning in the market.
In Australia we anticipate further rate adjustments for 2022,
above all in natural catastrophe business including corre-
sponding frequency covers, in part as a reflection of the in-
creased exposures. Additional rate increases are to be ex-
pected in the primary market, which should have positive
implications for proportional reinsurance treaties.
Hannover Re | Annual Report 2021
157
Worldwide Markets
Asia-Pacific
M 97
Hannover Re | Annual Report 2021
For the 2022 financial year we anticipate additional pandem-
ic-related strains in life and health reinsurance. We have
placed an extreme mortality cover on the capital market as
partial protection against extreme mortality. Aside from the
challenges associated with the pandemic and the persistent
intense competition, we nevertheless still see attractive op-
portunities for life and health reinsurance. The low interest
rate environment continues to adversely impact the invest-
ment income generated by the insurance industry – a scenar-
io that opens up additional opportunities for financially ro-
bust reinsurers such as Hannover Re, including for example
in the financial solutions segment.
Given the uncertainties associated with geopolitical develop-
ments and the pandemic, we shall continue to invest major
parts of our asset portfolio conservatively. Nevertheless, we
also envisage appropriate risk-taking in response to the re-
cently increased albeit still low overall - level of interest
rates against the backdrop of a likely acceleration effect trig-
gered by more extensive containment of the pandemic's im-
pacts. Our emphasis on broad diversification will remain in
place. By maintaining the most neutral possible modified du-
ration, we shall ensure that the interest rate risk is tightly
managed.
Hannover Re | Annual Report 2021
159
Combined management report
The further enlargement of the asset portfolio, supported by
a good operating cash flow from the favourable development
of business, is expected to have a positive effect on invest-
ment income. The interest rate increases observed during the
reporting period in our main currency areas will prove bene-
ficial in this respect. In view of the generally low returns on
high-quality investments, we shall press ahead with our activ-
ities relating to products offering attractive credit spreads.
With this in mind, we shall somewhat expand the portfolio of
real assets or financing of such asset classes, although we
shall maintain a particular focus on attractive risk-return pro-
files going forward. We also intend to selectively grow our
exposure, as appropriate, to the areas of private equity and
emerging markets.
Life & Health reinsurance
Given the persistent low level of interest rates, we anticipate
an average return of at least 2.3% on our investments for
2022.
Outlook for the 2022 financial year
Based on the sustained improvement in prices and conditions
in primary insurance and reinsurance, we are looking to book
growth of at least 5% in Group gross premium for total busi-
ness at constant exchange rates.
Based on the satisfactory treaty renewals as at 1 January
2022, we expect further growth in gross premium in property
and casualty reinsurance in the current financial year adjust-
ed for exchange rate effects. We shall retain unchanged our
selective underwriting policy, under which in large part we
write only business that satisfies our margin requirements.
Thanks to our good rating, our long-standing stable customer
relationships and our low expense ratio, we should be able to
generate another good result in property and casualty rein-
surance, provided the burden of large losses remains within
our expectations. We continue to aim for a combined ratio of
no more than 96%.
In life and health reinsurance we expect to generate further
growth in gross premium for the current financial year based
on constant exchange rates. The value of new business should
amount to at least EUR 250 million.
With regard to the IVC targets that we use to map economic
value creation, it remains our expectation that a minimum
XROCA of 2% will be generated for property and casualty re-
insurance and for life and health reinsurance.
In view of the expected positive cash flow that we generate
from the technical account and the investments themselves,
and assuming roughly stable exchange rates and interest rate
levels, our portfolio of investments should continue to grow.
We are looking to deliver a return on investment of at least
2.3% for 2022.
For the 2022 financial year we again expect to achieve a re-
turn on equity above our minimum target, which we define as
an additional 900 basis points above the five-year average
return on ten-year German government bonds. As far as the
solvency ratio is concerned, we continue to anticipate a level
in excess of our minimum 200% target.
3,350,633
6.4
Deferred acquisition costs
2,703
-
Investments
If the valuation levels of listed equities experience significant
corrections and stabilise, we are prepared to moderately in-
crease the equity portfolio.
- below the cost of capital
In Financial Solutions business it is our assumption that the
favourable trend on markets such as Asia will continue. Spe-
cial mention should be made here of China, where - as in the
preceding years - we see considerable potential for 2022. We
similarly take an optimistic view of the Latin American market
and are looking forward to healthy demand and opportunities
to write new business.
Turning to the Longevity Solutions reporting category, it is
our expectation that coverage of longevity-related risks will
remain a focus of attention and interest in corresponding
solutions will continue to grow - not only in the leading UK
market. Along with declining interest rates, a major driver
here is the exacting capital requirements placed on primary
insurers and pension funds in connection with such business.
Including contracts for which no premium income is booked
2
3
Financial Solutions
Risk Solutions
Longevity
Mortality
Morbidity
Volume1
Profitability2
1
++
3
cost of capital earned
+above the cost of capital
++= significantly above the cost of capital
+/-
In EUR, development in original currencies can be different
+
7
Gains (losses) recognised directly in equity
Gains (losses) recognised directly in equity
(272)
96
(272)
Income and expense recognised directly in equity that cannot be reclassified
96
19,387
13,293
(6,094)
(28,614)
9,020
(19,594)
Reclassifiable to the consolidated statement of income
Gains (losses) recognised directly in equity
Unrealised gains and losses on investments
Changes from the measurement of associated companies
Tax income (expense)
9,020
(19,322)
Tax income (expense)
(6,094)
12,756,231
Transferred to the consolidated statement of income
Consolidated statement of comprehensive income 2021
in EUR thousand
1.1.-31.12.2021
1,300,221
N 03
13,197
1.1.-31.12.2020
Net income
Not reclassifiable to the consolidated statement of income
Actuarial gains and losses
Gains (losses) recognised directly in equity
Tax income (expense)
19,291
(28,342)
918,785
Transferred to the consolidated statement of income
Tax income (expense)
1,547,846
Continuation: Other reserves
Hannover Re | Annual Report 2021
168
366,231
1,768,312
724,562
696,924
(507,624)
696,924
(507,624)
Gains (losses) recognised directly in equity
(cumulative other
comprehensive income)
| | | | | |
2,275,936
724,562
120,597
Balance as at 31.12.2021
Acquisition/disposal of treasury shares
Capital repayments
Capital increases/additions
Changes in the consolidated group
Changes in ownership interest with no
change of control status
Dividends paid
Total recognised income and expense
(330,693)
Total income and expense recognised in
equity
Hedging
(1,276)
(7,402)
274,486
27,420
247,066
(17,715)
(7,402)
918,785
35,712
883,073
883,073
11,354,479
instruments
826,490
8,077,123
(66,077)
shareholders'
equity
interests
Total
Non-controlling
Equity attributable to
shareholders of
Hannover Rück SE
earnings
Retained
N 04
Other
10,527,989
(17,715)
Net income
(330,693)
Balance as at 1.1.2020
in EUR thousand
Common
Consolidated statement of changes in
shareholders' equity 2021
Annual financial statements
167
Hannover Re | Annual Report 2021
63,132
1,130,139
1,432,309
Attributable to shareholders of Hannover Rück SE
72,507
Net income
Attributable to non-controlling interests
1,193,271
1,504,816
274,486
204,595
(192,034)
178,547
(235,899)
(253,582)
702,419
279,630
Total recognised income and expense
thereof
Balance as at 1.1.2021
Total income and expense recognised directly
Total recognised income and expense
2,275,936
724,562
120,597
Balance as at 31.12.2020
Acquisition/disposal of treasury shares
Capital repayments
Annual financial statements
change of control status
Changes in ownership interest with no
Dividends paid
(715,846)
in equity
(715,846)
385,153
translation
Currency
I
Unrealised
gains/losses
1,287,907
724,562
120,597
Additional
paid-in capital
shares
comprehensive income)
Other reserves
(cumulative other
988,029
988,029
(537,235)
883,073
63,132
(238)
3,247
61
871,228
(7,495)
Reclassifiable income and expense recognised directly in equity
Gains (losses) recognised directly in equity
Transferred to the consolidated statement of income
Tax income (expense)
260,243
731,033
(10,742)
(253,582)
184,641
(201,054)
191,302
294,080
Total income and expense recognised directly in equity
11,885,003
8,985,770
(71,851)
(8,618)
(49)
(49)
(235,899)
(49)
299
Gains (losses) recognised directly in equity
(254,497)
(235,899)
277,353
(282,509)
(514,379)
1,029,438
Currency translation
Gains (losses) recognised directly in equity
798,672
(804,401)
Tax income (expense)
Tax income (expense)
(92,474)
706,198
(726,193)
Changes from the measurement of associated companies
Gains (losses) recognised directly in equity
Transferred to the consolidated statement of income
(1,493)
(1,670)
915
(578)
(1,670)
Changes from hedging instruments
78,208
1,130,139
(341)
313
(341)
(83,792)
(8,678)
11,839,416
844,370
10,995,046
8,297,114
(83,792)
(8,678)
(33)
(33)
(33)
8,297,114
(115)
31
31
620
385
235
235
(708,837)
(45,553)
(663,284)
(663,284)
1,193,271
(115)
313
10,995,046
11,839,416
556
172
384
(326)
326
384
(588,480)
(45,793)
(542,687)
(542,687)
1,504,816
844,370
72,507
1,231,334
11,615
204,595
3,620
200,975
11,615
60
60
1,300,221
68,887
1,231,334
1,231,334
1,432,309
120,597
Capital increases/additions
1.1.-31.12.2021
7.5
198
Major disposals and retirements
4.4
245
Other income/expenses
7.4
Major acquisitions and new formations 198
Taxes on income
4.3
Reinsurance result
7.3
189
complete list of shareholdings
242
Investment income
7.2
Consolidated companies and
244
247
5. Segment reporting
199
6.2 Funds withheld (assets)
256
Share-based payment
8.3
204
Investments under own management
6.1
253
Related party disclosures
8.2
204
the balance sheet
250
financial guarantees
6. Notes on the individual items of
Derivative financial instruments and
8.1
250
8. Other notes
4.2
219
241
7.1
Financing liabilities
6.12
234
6.11 Other liabilities
174
2. Accounting principles
230
6.10 Provisions for pensions and other
post-employment benefit obligations
236
174
financial statements 2021
Notes to the consolidated
Hannover Re | Annual Report 2021
The income taxes paid, dividend receipts as well as interest received and paid are included entirely in the cash flow from operating activities.
Including dividend-like profit participations from investment funds
3
2
Restated pursuant to IAS 8
1
1. Company information
3. Accounting policies
177
6.13
188
Consolidation principles
4.1
241
the statement of income
188
4. Consolidation
7. Notes on the individual items of
186
estimates
239
6.14 Non-controlling interests
3.2 Major discretionary decisions and
238
treasury shares
178
Summary of major accounting policies
3.1
Shareholders' equity and
Gross written premium
8.4
Staff and expenditures on personnel
260
The transition to the new interest rate benchmarks has been
implemented progressively since 2021. Measurement effects
above a previously defined de minimis/materiality limit are
offset through the exchange of compensatory payments with
the respective counterparties.
A separate implementation project was initiated to explore
the implications of the IBOR reform for Hannover Re and en-
sure a smooth transition to alternative interest rate bench-
marks. The investigation was conducted at the level of indi-
vidual contracts. The implications for the measurement of
financial assets and the corresponding adjustments that need
to be made in the IT systems were also considered. In addi-
tion to a status assessment, the effects on the accounting and
financial reporting were analysed as at 31 December 2021
and our investment strategy was modified accordingly. Fur-
thermore, Group-wide communication took place and we also
communicated with counterparties and issuers.
In the context of Phase 2 of the Interest Rate Benchmark Re-
form project the IASB published "Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Re-
form” in August 2020. The amendments to these standards
were adopted by the EU in January 2021 and are effective for
financial years beginning on or after 1 January 2021. The
changes address specific issues that may arise in connection
with replacement of an existing interest rate benchmark with
an alternative reference interest rate.
New accounting standards or accounting standards applied for the first time
The present consolidated financial statement was released for
publication by a resolution of the Executive Board on 4 March
2022.
sions of the German ESEF Implementation Act (European
Single Electronic Format).
Hannover Re is publishing its consolidated financial state-
ment as at 31 December 2021 in accordance with the provi-
ency to EUR millions. Figures indicated in brackets refer to
the previous year.
It should be pointed out that measurement effects may also
arise with respect to certain assets in our portfolio whose
contractual terms do not make explicit reference to the re-
formed interest rate benchmarks if the determination of
their fair value draws on such reference interest rates.
Hannover Re | Annual Report 2021
The consolidated financial statement was drawn up in euros
(EUR), the amounts shown have been rounded to EUR
thousands and provided this does not detract from transpar-
The annual financial statements of all companies were drawn
up in accordance with standard Group accounting and meas-
urement rules pursuant to IFRS.
The annual financial statements included in the consolidated
financial statement were for the most part drawn up as at
31 December. Pursuant to IFRS 10 "Consolidated Financial
Statements" there is no requirement to compile interim ac-
counts for Group companies with diverging reporting dates
because their closing dates are no earlier than three months
prior to the closing date for the consolidated financial state-
ment. Insofar as no interim accounts were drawn up, allow-
ance has been made for the effects of significant transactions
between the diverging reporting dates and the closing date
for the consolidated financial statement.
The declaration of conformity required pursuant to § 161
Stock Corporation Act (AktG) regarding compliance with the
German Corporate Governance Code has been submitted
and, as described in the Declaration of the Executive Board
regarding the Corporate Governance of the Company, made
permanently available on the Hannover Re website.
In view of the fact that reinsurance contracts, in conformity
with IFRS 4 "Insurance Contracts", are recognised according
to the pertinent provisions of United States Generally Accept-
ed Accounting Principles (US GAAP) as applicable on the
date of initial application of IFRS 4 on 1 January 2005, we cite
individual insurance-specific standards of US GAAP using the
designation "Statement of Financial Accounting Standard
(SFAS)" that was valid at that time.
tion in the notes. We refer the reader accordingly to the cor-
responding remarks in the risk report and the notes.
-
E+S Rückversicherung AG. Hannover Rück SE is a European
Company, Societas Europaea (SE), which has its registered
office at Karl-Wiechert-Allee 50, 30625 Hannover, Germany,
and is entered in the commercial register of Hannover County
Court under the number HR Hannover B 6778. 50.2% (round-
ed) of the shares of Hannover Rück SE are held by Talanx AG,
Hannover, which in turn is majority-owned – with an interest
of 79% - by HDI Haftpflichtverband der Deutschen Industrie
V.a.G. (HDI), Hannover.
174
-
At the reporting date Hannover Re's portfolio contained 337
contracts with a fair value of altogether EUR 709.2 million
that make reference in their contractual terms to the interest
rate benchmarks that are to be transitioned and will be affect-
ed by the interest rate benchmark transition. It is our assump-
tion that the transition will not have any appreciable effects
on net income.
In March 2021 the IASB issued "Amendment to IFRS 16
'Leases': Covid-19-Related Rent Concessions beyond 30 June
2021" in order to facilitate for lessees the accounting of con-
cessions, e.g. deferral of rent payments and rent reductions,
granted in connection with the outbreak of the coronavirus
pandemic. The amendment is applicable to financial years
beginning on or after 1 April 2021 and was adopted by the EU
in August 2021. Earlier application is permitted. Hannover Re
did not apply the amendment in the financial year.
Hannover Re | Annual Report 2021
Hannover Re | Annual Report 2021
176
In July 2014 the IASB published the first version of IFRS 9
"Financial Instruments" (last amended in October 2017),
which supersedes all previous versions of this standard and
replaces the existing IAS 39 “Financial Instruments: Recogni-
tion and Measurement". The standard contains requirements
governing classification and measurement, impairment based
on the new expected credit loss impairment approach and
general hedge accounting. The new classification require-
ments result in more financial instruments being measured at
fair value through profit or loss. Initial mandatory application
of the standard, which was endorsed by the EU in November
2016, is set for annual periods beginning on or after 1 Janu-
ary 2018. In September 2016, however, the IASB published
"Applying IFRS 9 Financial Instruments with IFRS 4 Insur-
ance Contracts (Amendments to IFRS 4)" and in June 2020
"Amendments to IFRS 4: Extension of the Temporary Exemp-
tion from Applying IFRS 9". Under the deferral approach pro-
vided for in the amendments, entities whose predominant
activity is issuing insurance and reinsurance contracts within
the scope of IFRS 4 are granted an optional temporary ex-
emption from recognising their financial instruments in ac-
cordance with IFRS 9 until probable entry into force of IFRS
17 on 1 January 2023. Hannover Re reviewed the application
requirements based on the consolidated financial statement
as at 31 December 2015 with a positive outcome and decided
to make use of the deferral approach. Since the review of the
application requirements there has been no change in busi-
ness activity that would have necessitated a re-evaluation of
the predominant activity.
Given that the standard affects Hannover Re's core business
activity, major implications are expected for the consolidated
financial statement. In view of the special significance of the
new accounting rules, a multi-year implementation project
was launched back in 2017 to explore the implications of the
standard for the consolidated financial statement - including
the interdependency with IFRS 9 - and the necessary imple-
mentation steps were defined and initiated. Analyses of the
implications of the standard for Group financials were carried
out in the year under review. The implementation of the fi-
nancial reporting standard is expected to have effects that
reduce total shareholders' equity, especially in life and health
reinsurance, and more than offset the positive effect in prop-
erty and casualty reinsurance, above all from the discounting
of loss reserves. At this point in time, however, it is not yet
possible to determine in detail the specific quantitative ef-
fects on the consolidated financial statement.
In December 2021 the IASB issued "Amendment to IFRS 17
Insurance Contracts; Initial Application of IFRS 17 and IFRS 9
· Comparative Information". The amendment is a transition
option relating to comparative information about financial as-
sets presented on initial application of IFRS 17. The amend
ment is aimed at helping entities to avoid temporary account-
ing mismatches between financial assets and insurance
contract liabilities, and therefore improve the usefulness of
comparative information for users of financial statements.
The amendment is similarly effective for annual reporting pe-
riods beginning on or after 1 January 2023.
The exemption from initial application of IFRS 9 "Financial
Instruments" granted to insurance and reinsurance entities
has similarly been extended until 1 January 2023, thereby
continuing to facilitate first-time application of both stand-
ards at the same time. In this connection we would also refer
to our remarks on IFRS 9 in this section.
Initial application of the standard was originally mandatory
on a retrospective basis for annual reporting periods begin-
ning on or after 1 January 2021. In view of the considerable
complexity of the rules and the associated implementation
effort, the IASB published an exposure draft of proposed
amendments to IFRS 17 in June 2019, including deferral of
the date of the standard's initial application to annual report-
ing periods beginning on or after 1 January 2022 and other
content-related changes. Based on this draft and having re-
gard to additional content-related changes, the IASB issued
"Amendments to IFRS 17" in June 2020, thereby deferring
the date of initial application of the standard including the
changes for another year, i.e. to financial years beginning on
or after 1 January 2023. The standard was endorsed by the
EU in November 2021.
Changes in assumptions that do not relate to interest rates or
financial risks are not recognised directly in the statement of
income but are booked against the contractual service margin
and hence spread across the remaining coverage period. Rec-
ognition in profit or loss is only immediate in the case of those
groups of insurance contracts that are expected to be
loss-making.
revenue or as profit or loss in the statement of income. Insur-
ance finance income and expenses result from discounting
effects and financial risks. In accordance with the transition
choices offered by IFRS 17, for each portfolio of insurance
contracts they may be recognised either in profit or loss in the
statement of income or directly in equity.
Annual financial statements
175
Hannover Re | Annual Report 2021
Furthermore, the standard fundamentally changes the pres-
entation in the consolidated statement of income and intro-
duces the new concept of insurance revenue instead of the
disclosure of gross written premium. Insurance revenue is
reported when it is earned by recognising in each period the
changes in the liability for providing coverage for which the
insurance entity receives compensation as well as the part of
the premiums that covers acquisition costs. Receipts and pay-
ments relating to savings components are not recognised as
tractual service margin, representing the expected (i.e. un-
earned) profit for the provision of insurance coverage in the
future.
The measurement model of IFRS 17 requires entities to meas-
ure groups of insurance contracts based on estimates of dis-
counted future cash flows with an explicit risk adjustment for
non-financial risks ("fulfilment cash flows") as well as a con-
With the publication of IFRS 17 "Insurance Contracts" in May
2017, the IASB issued a standard that replaces the existing
transitional arrangements of IFRS 4 and for the first time es-
tablishes a single common framework for the recognition,
measurement and disclosure of insurance contracts, reinsur-
ance contracts and investment contracts with discretionary
participation features. In addition, IFRS 17 requires extensive
new disclosures in the notes.
Standards or changes in standards that have not yet entered into force or
are not yet applicable
Apart from the above, there were no other amendments to
existing standards that would have had to have been applied
in the 2021 financial year.
The consolidated financial statement reflects all IFRS in force
as at 31 December 2021 as well as all interpretations issued
by the International Financial Reporting Interpretations Com-
mittee (IFRIC), application of which was mandatory for the
year under review. IFRS 4.38 et seq. “Insurance Contracts”
requires disclosures on the nature and extent of risks stem-
ming from reinsurance contracts, while IFRS 7.31-42 "Finan-
cial Instruments: Disclosures” requires similar information on
risks from financial instruments. Furthermore, § 315 Para. 2
Number 1 German Commercial Code (HGB) also contains re-
quirements for insurance undertakings with regard to infor-
mation on the management of underwriting and financial
risks that is to be provided in the management report. The
disclosures resulting from these requirements are included in
the risk report. With regard to the disclosures required by
IFRS 4 and IFRS 7, we would refer in particular to pages 98 to
103 "Underwriting risks in property and casualty reinsur-
ance/Underwriting risks in life and health reinsurance" and
to pages 104 to 108 "Market risks" respectively. We have dis-
pensed with an additional presentation of the same content in
the notes. In order to obtain a comprehensive overview of the
risks to which Hannover Re is exposed it is therefore neces-
sary to consider both the risk report and the relevant informa-
Pursuant to EU Regulation (EC) No. 1606/2002, the present
consolidated financial statement and group management re-
port of Hannover Re have been drawn up in accordance with
the International Financial Reporting Standards (IFRS) that
are to be applied within the European Union. In addition, we
have made allowance for the regulations that are also applica-
ble pursuant to § 315e Para. 1 German Commercial Code
(HGB) and the supplementary provisions of the Articles of As-
sociation of Hannover Re.
Hannover Rück SE and its subsidiaries are required to pre-
pare a consolidated financial statement and group manage-
ment report in accordance with § 290 German Commercial
Code (HGB).
2. Accounting principles
222
Other assets
6.6
261
Lawsuits
8.6
221
Goodwill
6.5
260
dividend proposal
220
Technical assets
6.4
Earnings per share and
8.5
220
Contract deposits (assets)
6.3
8.7
(439,884)
Contingent liabilities and commitments 261
Technical provisions
Hannover Rück SE and its subsidiaries (collectively referred
to as the "Hannover Re Group" or "Hannover Re") transact
all lines of property & casualty and life & health reinsurance.
With gross premium of approximately EUR 27.8 billion,
Hannover Re is the third-largest reinsurance group in the
world. The company's network consists of more than 170
subsidiaries, affiliates, branches and representative offices
worldwide with a total workforce of roughly 3,300. The
Group's German business is conducted by the subsidiary
1. Company information
Annual financial statements
265
Events after the balance sheet date
8.10
230
Contract deposits (liabilities)
6.9
264
Fee paid to the auditor
8.9
230
Funds withheld (liabilities)
6.8
263
Leases
8.8
225
6.7
Consolidated cash flow statement 2021
(418,895)
1,538,887
Purchases
Maturities, sales
Fixed-income securities - loans and receivables
Maturities
Fixed-income securities - held to maturity
II. Cash flow from investing activities
in EUR thousand
Hannover Re | Annual Report 2021
1.1.-31.12.2021
170
4,940,462
(231,439)
132,538
(407,067)
(844,022)
75,532
104,705
(295,722)
3,018,271
1.1.-31.12.20201
135,125
34,895
25,719
154,476
Sales
Equity securities - available for sale
(673,087)
(6,970)
1,131,435
39,192
Purchases
Maturities, sales
Fixed-income securities - at fair value through profit or loss
14,227,952
(15,774,256)
(23,910,783)
Purchases
18,401,741
Maturities, sales
Fixed-income securities - available for sale
367,534
(527,266)
310,648
(345,506)
(106,018)
2,867,687
4,312,687
(691,060)
(9,906)
Realised gains and losses on deconsolidation
(63,971)
(36,114)
Change in fair value of financial instruments (through profit or loss)
(329,610)
(281,026)
Realised gains and losses on investments
165,100
150,664
Appreciation/depreciation
918,785
1,300,221
Net income
Cash flow from operating activities
I.
1.1.-31.12.20201
in EUR thousand
N 05
Amortisation
Purchases
(45,907)
Changes in funds withheld
(136,539)
(65,753)
241,332
966,827
713,607
(108,890)
(41,422)
111,208
(514,338)
Cash flow from operating activities
Change in other assets and liabilities
Change in accounts receivable/payable
Change in other technical provisions
Change in deferred acquisition costs
Change in claims reserves
Change in benefit reserve
Change in tax assets/provisions for taxes
Changes in prepaid reinsurance premium
Net changes in contract deposits
106,644
1,595,027
(25,144)
Other financial assets - at fair value through profit or loss
(33)
(49)
509,001
(526,712)
(15,592)
Cash flow from financing activities
Other changes (net)
Repayment of long-term debts
881,102
277,509
Proceeds from long-term debts
(588,480)
Dividends paid
620
556
Structural change without loss of control
(112)
(341)
Payment on capital measures
(708,837)
(726,042)
IV. Exchange rate differences on cash
120,134
176,068
326,072
(268,859)
(137,064)
Interest paid
Interest received
Dividend receipts ³
Income taxes paid (on balance)
Supplementary information on the cash flow statement²
172
1,278,071
187,219
77,043
1,355,114
Cash and cash equivalents at the end of the period
Change in cash and cash equivalents (I.+II.+III. + IV.)
1,090,852
1,278,071
Cash and cash equivalents at the beginning of the period
(73,190)
31
(269,983)
313
1.1.-31.12.20201
Cash flow from investing activities
Other changes
Changes
Short-term investments
Purchases
Sales
Real estate and real estate funds
Purchases
Sales
Affiliated companies and participating interests
Purchases
Sales
Other invested assets
(127,143)
(25,815)
148,255
58,999
Purchases
Sales
1,551,915
(1,356,674)
Contribution from capital measures
1,456,900
224,603
1.1.-31.12.2021
III. Cash flow from financing activities
in EUR thousand
Annual financial statements
171
Hannover Re | Annual Report 2021
(2,031,820)
(5,261,062)
(2,011,242)
(77,924)
106,915
(100,508)
(196,588)
(558,290)
199,743
249,030
(73,958)
(87,164)
279
30,063
169
186
Hannover Re | Annual Report 2021
Financing liabilities consist of liabilities from lease contracts
and above all long-term debt and notes payable. In some in-
stances these involve subordinated liabilities that can only be
satisfied after the claims of other creditors in the event of
liquidation or bankruptcy. Both long-term debt and notes
payable are measured at amortised cost using the effective
interest rate method. The transaction costs as well as premi-
ums/discounts arising in connection with the issuance of
bonds are amortised and recognised together with the nomi-
nal interest as financing costs.
Financial assets classified as available for sale are carried at
fair value; accrued interest is recognised in this context. We
allocate to this category those financial instruments that do
not satisfy the criteria for classification as held to maturity,
loans and receivables, at fair value through profit or loss, or
trading. Unrealised gains and losses arising out of changes in
the fair value of securities held as available for sale are recog-
nised directly in shareholder's equity after deduction of de-
ferred taxes.
nised in investment income. The classification of financial
assets at fair value through profit or loss is compatible with
Hannover Re's risk management strategy and investment
strategy, which are oriented extensively towards economic
fair value variables.
Financial assets at fair value through profit or loss consist
of securities held for trading and those classified as measured
at fair value through profit or loss since acquisition. This re-
fers principally to unsecured debt instruments issued by cor-
porate issuers and derivative financial instruments. Within
the scope of the fair value option provided under IAS 39 “Fi-
nancial Instruments: Recognition and Measurement", ac-
cording to which financial assets may be carried at fair value
on first-time recognition subject to certain conditions, all
structured securities that would have needed to have been
broken down had they been recognised as available for sale
or under loans and receivables are also recognised here. Han-
nover Re makes use of the fair value option solely for selected
subportfolios of its financial assets. Securities held for trading
and securities classified as measured at fair value through
profit or loss since acquisition are carried at their fair value
on the balance sheet date. If stock market prices are not avail-
able for use as fair values, the carrying amounts are deter-
mined using generally acknowledged measurement methods.
All changes in fair values from this measurement are recog-
Present value method
Present value method
Present value method
Fair values, actuarial parameters, yield curve
Yield curve, currency spot rates
Listing of underlying, yield curve
Cross-currency swaps
Total return swaps
Insurance derivatives
Black-Scholes
Interest parity model
Net asset value method
Capitalised earnings method,
discounted cash flow method,
multiple-based approaches
Net asset value method
Hull-White, Black-Karasinski,
LIBOR market model etc.
Present value method
Present value method
Pricing Model
Listing of the underlying share, implicit
volatilities, money-market interest rate,
dividend yield
Yield curves, spot and forward rates
OTC stock options, OTC stock index
options
Unlisted ABS/MBS, CDO/CLO
Other invested assets
Unlisted equities and equity investments
Private equity funds, private equity real
estate funds
Unlisted bond, equity and
real estate funds
Establishment of the fair value of financial instruments
carried as assets or liabilities: we establish the fair value of
financial instruments carried as assets or liabilities using the
methods and models described below. The fair value of a fi-
Parameter
Yield curve, volatility surfaces
Risk premiums, default rates, prepayment
speed and recovery rates
Acquisition cost, cash flows, EBIT multiples,
as applicable book value
Audited net asset values (NAV)
Audited net asset values (NAV)
Other financial assets - at fair value through profit or loss
Forward exchange transactions, foreign
exchange swaps, non-deliverable forwards
Yield curve
interest rate swaps
Unlisted structured bonds
Hannover Re | Annual Report 2021
N 08
Right-of-use assets from lease contracts are measured at
amortised cost in the amount of the initial measurement of
the lease liability (cf. here the paragraph below), adjusted by
prepaid lease payments, lease incentives received, initial
direct costs incurred and probable restoration costs.
Own-use real estate: the portfolio of own-use real estate is
measured at cost less straight-line depreciation over a useful
life of no more than 50 years. The fair values are determined
for comparative purposes using the discounted cash flow
method.
to be expected - either to bring about the settlement of the
actual taxes owing and refund claims on a net basis or to dis-
charge the liabilities at the same time as the claims are real-
ised.
Deferred tax assets may only be netted with deferred tax lia-
bilities if an enforceable right exists to net actual tax refund
claims with actual taxes owing. A precondition here is that
the deferred tax assets and deferred tax liabilities refer to in-
come taxes that are levied by the same revenue authority ei-
ther for (i) the same taxable entity or for (ii) different taxable
entities. In this regard, there must be an intention – in every
future period in which the discharge or realisation of substan-
tial amounts of deferred tax liabilities/deferred tax assets is
Deferred tax assets are also recognised on tax loss carry-for-
wards and tax credits. Insofar as the deferred taxes refer to
items carried directly in equity, the resulting deferred taxes
are also recognised directly in equity. Value adjustments are
taken on deferred tax assets as soon as realisation of the re-
ceivable no longer appears likely. Deferred taxes are meas-
ured according to the tax regulations specific to the country
concerned that are applicable or have been adopted as at the
closing date.
Deferred tax assets: IAS 12 "Income Taxes" requires that as-
sets-side deferred taxes be established if assets have to be
recognised in a lower amount or liabilities in a higher amount
in the consolidated balance sheet than in the tax balance
sheet and if these temporary differences will lead to reduced
tax burdens in the future. In principle, temporary differences
result from the valuation differences between the tax balance
sheets drawn up in accordance with national standards and
the IFRS balance sheets of the companies included in the
consolidated financial statement drawn up in accordance
with uniform group standards as well as from consolidation
processes. Deferred tax assets and liabilities are not estab-
lished if they arise out of assets or liabilities, the book value
of which upon first-time recognition diverges from their ini-
tial tax base.
Purchased and proprietary software is recognised at acquisi-
tion cost less depreciation. Intangible assets are regularly
tested for impairment and an impairment loss is recognised
where necessary.
from the acquired blocks of business disregarding new busi-
ness and tax effects. Amortisation is taken according to the
periods of the underlying acquired contracts. The PVFP is
regularly tested for impairment using a liability adequacy test
and impairment losses are taken if necessary. In this regard
please see section 3.2 "Major discretionary decisions and es-
timates". Separately identifiable intangible assets in connec-
tion with business combinations, such as customer base or
contractual/legal rights, are also recognised under this item.
Annual financial statements
181
Hannover Re | Annual Report 2021
The other intangible assets include the expected profits from
acquired life reinsurance portfolios. These are carried at the
present value of future profits (PVFP) at time of acquisition,
which is calculated as the present value of profits expected
Intangible assets: in accordance with IFRS 3 "Business Com-
binations" goodwill is not amortised; instead, impairments
may be taken after an annual impairment test or as indicated.
For the purposes of the impairment test, goodwill is to be al-
located pursuant to IAS 36 “Impairment of Assets" to so-
called "cash generating units" (CGUs). Each CGU to which
goodwill is allocated should represent the lowest level on
which goodwill is monitored for internal management pur-
poses and may not be larger than a segment. Following allo-
cation of the goodwill it is necessary to determine for each
CGU the recoverable amount, defined as the higher of the
value in use and the fair value less costs to sell. For impaired
goodwill the recoverable amount is to be stated. The recover-
able amount is to be compared with the book value of the
CGU including goodwill. When the latter exceeds the recov-
erable amount, an impairment expense is to be recognised.
For detailed information on the impairment method used and
the goodwill recognised as at the balance sheet date, please
see section 6.5 "Goodwill".
Reinsurance recoverables on technical reserves: shares of
our retrocessionaires in the technical reserves are calculated
according to the contractual conditions on the basis of the
gross technical reserves. An appropriate impairment is taken
to allow for objective substantial indications of credit risks
that are based on an event after initial recognition and sug-
gest impairment, insofar as this can be reliably measured.
Deferred acquisition costs principally consist of commis-
sions and other variable costs directly connected with the ac-
quisition or renewal of existing reinsurance contracts. These
acquisition costs are capitalised and amortised over the ex-
pected period of the underlying reinsurance contracts. De-
ferred acquisition costs are regularly tested for impairment.
Accounts receivable: the accounts receivable under reinsur-
ance business and the other receivables are carried at nomi-
nal value; value adjustments are made where necessary on
the basis of a case-by-case analysis. We use adjustment ac-
counts for value adjustments taken on reinsurance accounts
receivable, while all other write-downs are booked directly
against the underlying position.
The payment flows resulting from these contracts are shown
in the cash flow statement under operating activities.
Annual financial statements
nancial instrument corresponds to the amount that Hannover
Re would receive or pay if it were to sell or settle the said fi-
nancial instrument on the balance sheet date. Insofar as mar-
ket prices are listed on markets for financial assets, their bid
price is used; financial liabilities are valued at ask price. In
other cases the fair values are established on the basis of the
market conditions prevailing on the balance sheet date for
financial assets with similar credit rating, duration and return
characteristics or using recognised models of mathematical
finance. Hannover Re uses a number of different valuation
models for this purpose. The details are set out in the table
above. Financial assets for which no publicly available prices
or observable market data can be used as inputs (financial
instruments belonging to fair value hierarchy level 3) are for
the most part measured on the basis of proven valuations
drawn up by knowledgeable, independent experts, e. g. audit-
ed net asset value, the plausibility of which has previously
been subjected to systematic review. For further information
please see our explanatory remarks on the fair value hierar-
chy in section 6.1 "Investments under own management".
Impairments: As at each balance sheet date we review our
financial assets with an eye to the need to take impairments.
Permanent impairments on all invested assets are recognised
directly in the statement of income. In this context we take as
a basis the same indicators as those subsequently discussed
for fixed-income securities and securities with the character
of equity. Qualitative case-by-case analysis is also carried out.
IAS 39 "Financial Instruments: Recognition and Measure-
ment” contains a list of objective, substantial indications for
impairments of financial assets. In the case of fixed-income
securities and loans reference is made, in particular, to the
rating of the instrument, the rating of the issuer/borrower as
well as the individual market assessment in order to establish
whether they are impaired. With respect to held-to-maturity
instruments as well as loans and receivables recognised at
amortised cost, the level of impairment is arrived at from the
difference between the book value of the asset and the pres-
ent value of the expected future cash flows. The book value is
reduced directly by this amount which is then recognised as
an expense. With the exception of value adjustments taken on
accounts receivable, we recognize impairments directly on
the assets side - without using an adjustment account – sep-
arately from the relevant items. If the reasons for the write-
down no longer apply, a write-up is made in income up to at
most the original amortised cost in the case of fixed-income
securities.
With respect to impairments on securities with the character
of equity, IAS 39 “Financial Instruments: Recognition and
Measurement" states, in addition to the aforementioned prin-
ciples, that a significant or prolonged decrease in fair value
below acquisition cost constitutes objective evidence of im-
pairment. Hannover Re considers equity securities to be im-
paired under IAS 39 if their fair value falls significantly, i. e.
by at least 20%, or for a prolonged period, i. e. at least nine
months, below acquisition cost. In accordance with IAS 39
the reversal of impairment losses on equities to the statement
of income once impairment has been taken is prohibited, as is
adjustment of the cost basis. Impairment is tested in each
reporting period using the criteria defined by Hannover Re. If
an equity security is considered to be impaired on the basis of
these criteria, IAS 39 requires that a value adjustment be rec-
ognised in the amount of the fair value less historical cost and
less prior value adjustments, meaning that depreciation is
taken on the fair value as at the closing date – if available, on
the publicly quoted stock exchange price. We also apply this
method to participations in funds that invest in private equity.
In order to reflect the specific character of these funds (in this
case initially negative yield and liquidity flows from the so-
called "J curve" effect during the investment period of the
funds), we take an impairment to net asset value as an ap-
proximation of the fair value for the first time after a two-year
waiting period if there is a significant or prolonged decrease
in value. If, however, significant changes in value occur with-
in the funds during this period that are not attributable to the
J curve effect in addition to the increased investment expens-
es, the resulting impairment is recognised directly as a write-
down.
Netting of financial instruments: financial assets and liabili-
ties are only netted and recognised in the appropriate net
amount if a corresponding legal claim (reciprocity, similarity
and maturity) exists or is expressly agreed by contract, in oth-
er words if the intention exists to offset such items on a net
basis or to effect this offsetting simultaneously.
Other invested assets are for the most part recognised at
nominal value. Insofar as such financial assets are not listed
on public markets (e g. participating interests in private equi-
ty firms), they are carried at the latest available net asset val-
ue as an approximation of the fair value. Loans included in
this item are recognised at amortised cost.
179
Investments in associated companies are valued at equity
on the basis of the proportionate shareholders' equity attrib-
utable to the Group. Further information is provided in sec-
tion 4.1 "Consolidation principles".
Hannover Re | Annual Report 2021
Investment property is valued at cost less depreciation and
impairment. Straight-line depreciation is taken over the ex-
pected useful life - at most 50 years. Under the impairment
test the market value of investment property (recoverable
amount) is determined using accepted valuation methods,
compared with the book value and, where necessary, impair-
ments are recognised. Maintenance costs and repairs are ex-
pensed. Value-enhancing expenditures are capitalised if they
extend the useful life.
Cash and cash equivalents are carried at face value. Cash
collateral that we have received for the hedging of positive
fair values of derivatives is shown under other liabilities.
Repurchase agreements (repo transactions): fully collateral-
ised, term repurchase agreements (repos) are entered into as
a supplementary liquidity management tool. In this context
the Group sells securities and at the same time commits to
repurchase them at a later date for an agreed price. Given
that the material risks and opportunities associated with the
financial instruments remain within the Group, we continue
to recognise these assets. The repurchase commitment aris-
ing out of the payment received is accounted for under “sun-
dry liabilities"; any difference between the amount received
for the transfer of the securities and the amount agreed for
their repurchase is spread across the term of the repo using
the effective interest rate method and shown in investment
income.
Funds withheld: are receivables due to reinsurers from their
clients in the amount of the cash deposits contractually with-
held by such clients; they are recognised at acquisition cost
(nominal amount). Appropriate allowance is made for credit
risks.
Contract deposits: under this item we report receivables and
liabilities under insurance contracts that satisfy the test of a
significant risk transfer to the reinsurer as required by IFRS 4
"Insurance Contracts" but fail to meet the risk transfer re-
quired by US GAAP. IFRS 4 in conjunction with SFAS 113 re-
quires insurance contracts that transfer a significant techni-
cal risk from the ceding company to the reinsurer to be
differentiated from those under which the risk transfer is of
merely subordinate importance. Since the risk transfer under
the affected transactions is of subordinate importance, these
contracts are recognised using the "deposit accounting"
method and hence eliminated from the technical account.
The compensation for risk assumption booked to income un-
der these contracts is netted under other income/expenses.
180
Right-of-use assets are amortised on a straight-line basis over
the term of the lease contract.
Unlisted plain vanilla bonds,
Financial instrument
In view of this change in the presentation of the transaction,
the comparative figures for previous periods were restated.
The effects of this change on the individual items of the con-
solidated balance sheet and the consolidated statement of
In accordance with this perspective, the transaction is equiv-
alent overall to an insurance contract in its economic effect
and with its payment flows. The commission payment is
therefore capitalised under the balance sheet item “Deferred
acquisition costs" and amortised in line with the business ex-
perience.
After fresh, in-depth analysis of the contractual details of the
transaction, however, we consider a combined view of the
components of the transaction from the perspective of the
Hannover Re Group as unified reporting subject matter to be
a more appropriate presentation for providing reliable and
relevant information with respect to the financial implications
of the transaction.
Annual financial statements
Hannover Re | Annual Report 2021
In the 2020 consolidated financial statement the portfolio of
life insurance portfolios, on the one hand, and the securities
taken up, on the other, were presented separately in accord-
ance with the provisions of IFRS 4 and IAS 39.
payment was financed through the involvement of a cell of a
segregated accounts company, which issued suitably struc-
tured securities. Some of these securities were taken up by
Hannover Rück SE.
to participate in the opportunities and risks associated with
the future development of the portfolio, the commission
-
In the fourth quarter of 2020 Hannover Re wrote a portfolio of
life insurance policies through its Australian subsidiary. The
mediation and administration of the policies as well as sales
and marketing of new business in this connection are handled
by a specialised company. Payment of a commission for the
mediation of existing and future policies was agreed based on
the projected experience of this portfolio. With a view to ena-
bling other interested investors along with Hannover Re-
Change in accounting policies
3. Accounting policies
1 January 2023 (still to be endorsed by the EU)
1 January 2023 (still to be endorsed by the EU)
1 January 2023 (still to be endorsed by the EU)
1 January 2023 (still to be endorsed by the EU)
Initial application to annual periods beginning on or
after the following date:
Hannover Re primarily anticipates implications for the classi-
fication of financial instruments. The portfolio of financial in-
struments to be recognised at fair value through profit or loss
will increase as a consequence of the new classification rules.
In addition, the Group expects the new impairment model to
have implications for debt instruments. Based on initial test
calculations, the risk provision as at 31 December 2021 is ex-
pected to be in the mid-double-digit millions. What is more,
the final implications of IFRS 9 can only be fully determined
by taking into consideration the interaction with the financial
reporting standard IFRS 17. Consequently, it was not yet pos-
sible to reliably establish the effects on the net assets, finan-
cial position and results of operations at the time when this
consolidated financial statement was published.
The IFRS 9 implementation project is running parallel to and
in close coordination with the IFRS 17 implementation pro-
ject. Disclosures regarding the fair values of financial instru-
Further IFRS Amendments and Interpretations
ments currently in the portfolio split according to the cash
flow criterion as well as disclosures about the credit risks of
securities that solely generate payments of principal and in-
terest are provided in section 6.1 of the notes to the consoli-
dated financial statement "Investments under own manage-
ment". This information is intended to facilitate some
comparability with entities that are already applying IFRS 9.
In addition to the accounting principles described above, the
IASB has issued the following standards, interpretations and
amendments to existing standards with possible implications
for the consolidated financial statement of Hannover Re,
application of which was not yet mandatory for the year
under review and which are not being applied early by
Hannover Re. Initial application of these new standards
is not expected to have any significant implications for
Hannover Re's net assets, financial position or results of
operations:
N 06
income are shown in the following table. There were no impli-
cations for Group net income.
Published
January/July 2020
February 2021
May 2021
Title
Amendments to IAS 1 Presentation of Financial
Statements: Classification of Liabilities as Current or
Non-current and Classification of Liabilities as
Current or Non-current - Deferral of Effective Date
Amendments to IAS 1 Presentation of Financial
Statements and IFRS Practice Statement 2: Disclo-
sure of Accounting Policies
Amendments to IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors: Definition of
Accounting Estimates
Amendments to IAS 12 Income Taxes: Deferred Tax
related to Assets and Liabilities arising from a Single
Transaction
February 2021
Fixed-income securities
Restatements pursuant to IAS 8
Consolidated balance sheet
Valuation models
is taken only to the extent that repayment of a loan is unlikely
or no longer expected in the full amount. Please refer to our
comments on impairments in this section.
Premiums or discounts are deducted or added within the
statement of income using the effective interest rate method
until the amount repayable becomes due. An impairment loss
Hannover Re | Annual Report 2021
178
Loans and receivables are non-derivative financial instru-
ments that include fixed or determinable payments on a de-
fined due date, are not listed on an active market and are not
sold at short notice. They are carried at amortised cost.
Financial assets held to maturity are comprised of non-de-
rivative assets that entail fixed or determinable payments on
a defined due date and are acquired with the intent and abili-
ty to be held until maturity. They are measured at amortised
cost. The corresponding premiums or discounts are recog‐
nised in profit or loss across the duration of the instruments
using the effective interest rate method. An impairment loss
is taken in the event of permanent impairment. Please refer to
our comments on impairments in this section.
Financial assets: as a basic principle we recognise the
chase and sale of directly held financial assets including de-
rivative financial instruments as at the settlement date. The
recognition of fixed-income securities includes apportionable
accrued interest.
pur-
the amendments to IFRS 17 published in June 2019 and June
2020, the IASB ultimately proposed a deferral of the date of
initial application to 1 January 2023 as well as further con-
tent-related amendments to the standard.
IFRS 4 "Insurance Contracts" represents the outcome of
Phase I of the IASB project “Insurance Contracts” and consti-
tutes a transitional arrangement. IFRS 17, which was issued
by the IASB in May 2017, establishes binding principles for
the measurement of insurance contracts effective for annual
reporting periods beginning on or after 1 January 2021. With
IFRS 4 contains fundamental rules governing specific circum-
stances, such as the separation of embedded derivatives and
unbundling of deposit components, but it does not set out any
more extensive provisions relating to the measurement of in-
surance and reinsurance contracts. In conformity with the
basic rules of IFRS 4 and the IFRS Framework, reinsur-
ance-specific transactions therefore continue to be recog-
nised in accordance with the pertinent provisions of US GAAP
(United States Generally Accepted Accounting Principles) as
applicable on the date of initial application of IFRS 4 on 1
January 2005.
Reinsurance contracts: IFRS 4 sets out basic principles for
the accounting of insurance contracts. Underwriting business
is to be subdivided into insurance and investment contracts.
Contracts with a significant insurance risk are considered to
be insurance contracts, while contracts without significant
insurance risk are to be classified as investment contracts.
The standard is also applicable to reinsurance contracts.
3.1 Summary of major accounting policies
(2.225)
(2.655)
4.880
Fixed-income securities -
loans and receivables
Deferred acquisition costs
Other assets
Other liabilities
in EUR thousand
N 07
31.12.2020
in EUR thousand
(219.306)
966
(2.294)
1.1.2020-31.12.2020
Consolidated statement of income
Gross written premium
Ordinary investment income
Commission and brokerage, change in
deferred acquisition costs
Group net income
216.046
Revenue from contracts with customers is realised when
control of the promised goods or services is transferred to the
customer. The amount of revenue realised corresponds to the
consideration that the Group expects to receive in return for
the transfer of goods or services to the customer. Under its
contracts that fall within the scope of application of IFRS 15
the Group generally acts as a principal, because it normally
controls the services or goods before transferring them to the
customer.
177
Technical reserves: the technical reserves are shown for
gross account in the balance sheet, i. e. before deduction of
the share attributable to our reinsurers; cf. here the remarks
concerning the corresponding assets. The reinsurers' portion
is calculated and accounted for on the basis of the individual
reinsurance contracts.
1,335.8500
1,348.4900
84.5591
87.5195
90.1030
84.3918
8.8827
9.2128
9.5286
8.8474
0.8869
0.8617
0.9041
0.8393
7.8887
7.6408
8.0199
on the balance sheet date
1.5596
1.6030
1.5800
1.6533
0.4277
1,352.9939
0.4634
0.4320
1.4491
1.5704
1.4882
1.5326
7.2297
0.4469
Average rate of exchange
1,346.0585
4.9613
Other assets are accounted for at amortised cost.
The Covid-19 pandemic heavily influenced the entire global
economy in the year under review and hence also had impli-
cations for Hannover Re's consolidated financial statement.
Against the backdrop of the pandemic, the critical issues in
Estimates and assumptions are also significant in connection
with the ongoing Covid-19 pandemic. Key facts and circum-
stances subject to such assumptions and estimates include,
for example, the recoverability of contingent reinsurance lia-
bilities, the recoverability of investments in associated com-
panies, the valuation of derivative financial instruments as
well as assets and liabilities relating to employee benefits.
The actual amounts may diverge from the estimated amounts.
All in all, the evaluation of climate risks is considered inter
alia in the context of the impairment test for non-financial
assets, including goodwill pursuant to IAS 36, in the determi-
nation of the useful life and residual value of assets pursuant
to IAS 16 or IAS 38 as well as in the establishment of provi-
sions and the disclosure of contingent liabilities pursuant to
IAS 37 and IFRS 4.
transition is initiated and supported by political regulatory
policies. Insofar as such regulatory measures negatively af-
fect, for example, issuers of shares or corporate bonds in our
asset portfolio, there are corresponding implications for the
measurement of these instruments.
Along with the influence of these physical risks, the measure-
ment of our investment portfolio is also subject to transition
risks as a consequence of climate change. Transition risks re-
fer to those risks connected with the effects of climate change
that result from the shift towards a low-carbon economy. This
Risks connected with the impacts of climate change are of
great significance to a reinsurance company's business mod-
el. The estimation of occurrence probabilities and loss
amounts for climate-related storms, floods or droughts is a
major integral component of our risk management system. It
exerts a considerable influence on our underwriting policy
for catastrophe-exposed risks and requires appropriate risk
capital to be kept available. Physical risks such as extreme
weather events and their consequences as well as long-term
changes in climatic and environmental conditions, such as
precipitation amounts, the rise in sea levels or the increase in
average temperatures, can also affect the value of our real
estate holdings or the measurement of securities in our in-
vestment portfolio.
In the consolidated financial statement it is to some extent
necessary to make estimates and assumptions which affect
the assets and liabilities shown in the balance sheet, the in-
formation on contingent claims and liabilities as at the bal-
ance sheet date and the disclosure of income and expenses
during the reporting period.
3.2 Major discretionary decisions and estimates
Non-current assets held for sale and discontinued opera-
tions: in accordance with IFRS 5 "Non-current Assets Held
for Sale and Discontinued Operations", non-current assets
and disposal groups are classified as held for sale if the rele-
vant book value is realised largely through sale rather than
through continued use. Components of an entity that can be
clearly distinguished from the rest of the entity for operation-
al and accounting purposes and were classified as sold or for
sale are recognised as discontinued operations. Measure-
ment is at the lower of book value and fair value less costs to
sell. Depreciation or amortisation is not taken on non-current
assets as long as they are classified as held for sale. Impair-
ment losses on fair value less costs to sell are recognised in
profit or loss; a gain for any subsequent increase in fair value
less costs to sell leads to the realisation of profit up to the
amount of the cumulative impairment. If the impairment loss
to be taken on a disposal group exceeds the book value of the
corresponding non-current assets, the need to establish a
provision within the meaning of IAS 37 “Provisions, Contin-
gent Liabilities and Contingent Assets" is reviewed.
Taxes: the taxes are comprised of the actual tax load on cor-
porate profits of the Group companies, to which the applica-
ble local tax rates are applied, as well as changes in deferred
tax assets and liabilities. Income and expenses arising out of
interest or penalties payable to the revenue authorities are
shown under other income/expenses. The calculation of the
deferred tax assets and liabilities is based on tax loss car-
ry-forwards, unused tax credits and temporary differences
between the book values of assets and liabilities in the consol-
idated balance sheet of the Hannover Re Group and their car-
rying amounts in the tax balance sheet. Further information
on deferred taxes is provided in our remarks on deferred tax
assets and liabilities.
ognised in conformity with the pertinent standards of US
GAAP. In this context, assumptions are to be made if the data
required for a calculation pro rata temporis is not available.
The unearned premium corresponds to the insurance protec-
tion afforded in future periods.
Annual financial statements
185
Hannover Re | Annual Report 2021
Premiums for reinsurance treaties are booked to income as
earned across the period of the contracts in proportion to the
insurance protection already provided or when they become
due. Unearned premiums are calculated individually for each
treaty in order to establish the portion of the premium volume
that is not booked to income. This applies principally to prop-
erty and casualty reinsurance and parts of accident and health
reinsurance. Premiums already collected that are attributable
to future risk periods are deferred pro rata temporis and rec-
and expenses in connection with reinsurance treaties are rec-
ognised on a basis consistent with the underlying risk of the
reinsured business.
4.8966
4.7958
10.2351
10.0560
10.1461
10.4782
4.7381
1.1344
1.2291
18.0114
1.1449
17.6160
18.6678
Earned premium and unearned premium: assumed reinsur-
ance premiums, commissions and claim settlements as well
as assumed portions of the technical reserves are recognised
according to the terms and conditions of the reinsurance trea-
ties, giving due consideration to the underlying contracts for
which reinsurance was taken out.
Ceded reinsurance premiums are deducted from the gross
written premium for the purpose of reconciliation to net pre-
mium earned. Assets and liabilities in connection with rein-
surance ceded are recognised on a gross basis. The reinsured
portions of the reserves are estimated on a basis consistent
with the reserves attributable to the reinsured risk. Income
18.0275
Mean rate of exchange
1.1853
2021
• Real estate funds
at fair value through profit or loss
• Other financial assets -
variable-yield securities
Equities, equity funds and other
Fixed-income securities
•
•
Disclosures about financial instruments: IFRS 7 "Financial
Instruments: Disclosures" requires more extensive disclo-
sures according to classes of financial instruments. In this
context, the term "class" refers to the classification of finan-
cial instruments according to their risk characteristics. A min-
imum distinction is required here between measurement at
amortised cost or at fair value. A more extensive or divergent
distinction should, however, be geared to the purpose of the
corresponding disclosures in the notes. In contrast, the term
"category" is used within the meaning of the measurement
categories defined in IAS 39 “Financial Instruments: Recog-
nition and Measurement" (held to maturity, loans and receiv-
ables, available for sale and financial assets at fair value
through profit or loss with the subcategories of trading and
designated financial instruments). Essentially, the following
classes of financial instruments are established:
Further information is provided in section 6.14 “Non-con-
trolling interests".
Non-controlling interests are shares in the equity of affiliat-
ed companies not held by companies belonging to the Group.
IAS 1 “Presentation of Financial Statements” requires that
non-controlling interests be recognised separately within
Group shareholders' equity. The non-controlling interest in
profit or loss is shown separately following the net income.
Shareholders' equity: the items “common shares" and "addi-
tional paid-in capital" are comprised of the amounts paid in
by the shareholders of Hannover Rück SE on its shares. In
addition to the statutory reserves of Hannover Rück SE and
the allocations from net income, the retained earnings consist
of reinvested profits generated by the Hannover Re Group
companies in previous periods. What is more, in the event of
a retrospective change of accounting policies, the adjustment
for previous periods is recognised in the opening balance
sheet value of the retained earnings and comparable items of
the earliest reported period. Unrealised gains and losses from
the fair value measurement of financial instruments held as
available for sale are carried in cumulative other comprehen-
sive income under unrealised gains and losses on invest-
ments. Translation differences resulting from the currency
translation of separate financial statements of foreign subsid-
iaries are recognised under cumulative foreign currency
translation adjustments.
Financial liabilities at fair value through profit or loss:
Hannover Re does not make use of the fair value option pro-
vided by IAS 39 “Financial Instruments: Recognition and
Measurement" to classify financial liabilities in this category
upon first-time recognition.
Lease liabilities are initially measured at the present value of
essentially all lease payments that are not variable or depend-
ent on an index or (interest) rate. The discount factor used is
the implicit interest rate of the lease contract or the lessee's
incremental borrowing rate.
date and at the settlement date. All changes in fair value are
recognised in profit or loss for the period.
Annual financial statements
183
Loss and loss adjustment expense reserves are constituted
for payment obligations from reinsurance losses that have oc-
curred but have not yet been settled. They are subdivided into
reserves for reinsurance losses reported by the balance sheet
date and reserves for reinsurance losses that have already
been incurred but not yet reported (IBNR) by the balance
sheet date. The loss and loss adjustment expense reserves
are based on estimates that may diverge from the actual
amounts payable. In reinsurance business a considerable pe-
riod of time may elapse between the occurrence of an insured
loss, notification by the insurer and pro-rata payment of the
2020
182
Hannover Re | Annual Report 2021
loss by the reinsurer. For this reason the realistically estimat-
ed future settlement amount based on long-standing estab-
lished practice is carried. Recognised actuarial methods are
used for estimation purposes. In this regard we make allow-
ance for past experience, currently known facts and circum-
stances, the expertise of the market units as well as other as-
sumptions relating to the future development, in particular
economic, social and technical influencing factors. Subse-
quently, based on Group-wide analyses, we give separate
consideration in this context to the inherent volatility of the
reserves constituted for the reinsurance business, e. g. due to
large losses. The interest rate-induced portion of the change
in the reserve is shown in the statement of income on a con-
sistent Group basis.
Benefit reserves are comprised of the underwriting reserves
for guaranteed claims of ceding companies in life and health
reinsurance. Benefit reserves are determined using actuarial
methods on the basis of the present value of future payments
to cedants less the present value of premium still payable by
cedants. The calculation includes assumptions relating to
mortality, disability, lapse rates and the future interest rate
development. The actuarial bases used in this context allow
an adequate safety margin for the risks of change, error and
random fluctuation. They correspond to those used in the
premium calculation and are adjusted if the original safety
margins no longer appear to be sufficient.
• Other invested assets
Provisions for pensions are established in accordance with
IAS 19 "Employee Benefits" using the projected unit credit
method. They are calculated according to actuarial principles
and are based upon the commitments made by the Hannover
Re Group for retirement, disability and widows' benefits. The
amount of the commitments is determined according to
length of service and salary level. The pension plans are de-
fined benefit plans. The basis of the valuation is the estimated
future increase in the rate of compensation of the pension
beneficiaries. The benefit entitlements are discounted by ap-
plying the capital market rate for highest-rated securities. All
changes in valuation, especially actuarial gains and losses,
are captured immediately in cumulative other comprehensive
income. Service cost and interest cost are recognised in the
statement of income. Returns on plan assets are determined
using the same interest rate as that used in the calculation of
the present value of the defined benefit obligation.
Deferred tax liabilities: in accordance with IAS 12 "Income
Taxes" deferred tax liabilities must be recognised if assets are
to be recognised in a higher amount or liabilities in a lower
amount in the consolidated balance sheet than in the tax bal-
ance sheet and if these temporary differences will lead to ad-
ditional tax loads in the future; please see our explanatory
remarks on deferred tax assets.
Under the balance sheet item Other liabilities we recognise
not only the sundry non-technical provisions but also minori-
ty interests in partnerships. Direct minority interests in part-
nerships, i. e. liabilities to holders of minority shares in part-
nerships arising out of long-term capital commitments, which
are puttable at fair value by the holder of the interest, are
recognised as debt pursuant to IAS 32 and measured at the
fair value of the redemption amount as at the balance sheet
date.
Sundry non-technical provisions are established according
to a realistic estimate of the amount required and shown un-
der the balance sheet item “Other liabilities". Allocation to
such provisions is conditional upon the Group currently
having a legal or actual obligation that results from a past
event and in respect of which utilisation is probable and the
amount can be reliably estimated.
Restructuring provisions are recognised if a detailed formal
plan for restructuring measures exists and steps to imple-
ment it have already begun or if key details of the restructur-
ing have been published. The provisions cover only expendi-
tures arising directly as a consequence of restructuring that
are not connected with the company's regular activities.
Partial retirement obligations are carried at present value
according to actuarial principles. During the phase when the
employee is still working a provision is set aside to cover the
liability amounting to the working hours not yet compensat-
ed. Top-up payments are accumulated in instalments until the
end of the work phase. In periods when the employee is re-
munerated according to the partial retirement arrangements
without performing any work, the provision is released.
Hannover Re | Annual Report 2021
Contributions to defined contribution plans are expensed
when the beneficiary of the commitment has performed the
work that entitles them to such contributions.
•
Share-based payments: The share-based payment models
existing within the Hannover Re Group are remuneration
plans with cash settlement. In accordance with the require-
ments of IFRS 2 "Share-based Payments", the services ren-
dered by the eligible beneficiaries and the resulting liability
are to be recognised at the fair value of the liability and ex-
pensed over the vesting period. Until settlement of the liabil-
ity the fair value of the liability is remeasured at each closing
Short-term investments
AUD
BHD
31.12.2020
CAD
CNY
GBP
HKD
KRW
MYR
SEK
USD
ZAR
N 09
•
31.12.2021
1 EUR corresponds to:
Currency translation differences resulting from long-term
loans or lendings without specified maturity between Group
companies are similarly recognised outside the statement of
income in a separate item of shareholders' equity.
INR
Key exchange rates
The individual companies' statements of income prepared in
the local currencies are converted into euro at the average
functional currency at the transaction rate. In accordance
with IAS 21 "The Effects of Changes in Foreign Exchange
Rates" the recognition of exchange differences on translation
is guided by the nature of the underlying balance sheet item.
Exchange differences from the translation of monetary assets
and liabilities are recognised directly in the statement of in-
come. Currency translation differences from the translation of
non-monetary assets measured at fair value via the statement
of income are recognised as profit or loss from fair value
measurement changes. Exchange differences from non-mon-
etary items such as equity securities - classified as available
for sale are initially recognised outside income in a separate
item of shareholders' equity and only booked to income when
such non-monetary items are settled.
Hannover Re | Annual Report 2021
• Certain financial assets in the balance sheet item
"Other liabilities"
184
Transactions in foreign currencies reported in Group compa-
nies' individual financial statements are converted into the
Currency translation: financial statements of Group subsidi-
aries were drawn up in the currencies corresponding to the
economic environment in which each subsidiary primarily
operates. These currencies are referred to as functional cur-
rencies. The euro is the reporting currency in which the con-
solidated financial statement is prepared.
rates of exchange and transferred to the consolidated finan-
cial statement. The conversion of foreign currency items in
the balance sheets of the individual companies and the trans-
fer of these items to the consolidated financial statement are
effected at the mean rates of exchange on the balance sheet
date. In accordance with IAS 21 “The Effects of Changes in
Foreign Exchange Rates" differences from the currency
translation of financial statements of foreign Group compa-
nies must be recognised in the consolidated financial state-
ment as a separate item in shareholders' equity.
This grouping into classes is not, however, solely determina-
tive for the type and structure of each disclosure in the notes.
Rather, guided by the underlying business model of reinsur-
ance, the disclosures are made on the basis of the facts and
circumstances existing in the financial year and in light of the
principle of materiality.
Notes payable
Certain financial assets in the balance sheet item
"Other assets
Long-term debt
•
•
N/K->
Yours sincerely,
That we are staying the course is borne out by the good result for the financial year just ended
with Group net income up by 39 percent to EUR 1.23 billion and a solid capital adequacy ratio
under Solvency II of 243 percent. We are further underscoring our financial stability and profitability
by adjusting our dividend policy, which sees us aiming for at least a stable ordinary dividend going
forward. Our dividend proposal for the financial year just ended therefore amounts to EUR 5.75.
This consists of an unchanged ordinary dividend of EUR 4.50 and a special dividend of EUR 1.25.
The message is clear: we offer our capital providers, our customers and our business partners
reliability in an uncertain world.
In closing, I would like to express the hope that in the coming year I will only be reporting in passing
on Covid-19 and that we will all be living with fewer restrictions. I would also like to thank you most
sincerely for the trust that you, our valued shareholders as well as our clients and business partners,
place in us each and every day. I do this on behalf of the entire Executive Board and all the employees
of Hannover Re.
Jean-Jacques Henchoz
At Hannover Re we shall therefore continue to do everything in our power to preserve our major
strengths: profitable growth and successful cycle management, long-term and partnership-based
customer relationships, a lean operating model and highly efficient capital management.
For our investors
We shall continue to do our utmost to ensure that Hannover Re remains just the way it is: reliable,
profitable and "somewhat different".
Chairman of the Executive Board
12
Hannover Re | Annual Report 2021
Hannover Re, with gross premium of more than EUR 27 billion, is the third-largest
reinsurer in the world.
About us
Hannover Re | Annual Report 2021
Beyond risk sharing – we team
up to create opportunities.
-
growth, driven by innovation. From modest
beginnings we have transformed a success-
ful business approach into what it is today.
Within just 50 years we have become the
third-largest reinsurer in the world. Now we
want to celebrate good ideas: not merely our
own, but also those of our customers and
partners. We grow together through the
development of individual and innovative.
solutions, but also by adapting ideas to fit
other markets, regions and risks.
11
15
Hannover Re's success story is one of
16
Hannover Re | Annual Report 2021
For our investors
We are conscious of the responsibility for our planet. Now that Hannover Re has joined the UN-con-
vened Net-Zero Insurance Alliance we have taken the next concrete step in the progressive expansion
of our commitment to sustainability. We support the transition to a climate-friendly economy.
For our investors
Letter from the Chairman of the
Executive Board
9604
Executive Board of Hannover Rück SE
The Hannover Re share
14
18
20
100 2
Jean-Jacques Henchoz,
Chairman of the
Executive Board
Dear Shareholders,
Ladies and Gentlemen,
When I wrote to you here last year the world was in the grips of an "exceptional situation". One
year on and Covid-19 is still affecting our everyday lives. Faced with new variants and waves of the
virus, it seems as if we are still far removed from the long-awaited return to normality. Yet considerable
progress has certainly been made in fighting the virus. Multiple vaccines offering robust protection
against the most severe disease are now available, and there are effective treatment methods and drug
therapies. Nevertheless, we have still to put the pandemic behind us and the coronavirus continues to
take a toll on human life.
As a reinsurer, our task is to make the financial impacts of such catastrophic events manageable. In the
2021 financial year Hannover Re consequently made significant payments to its customers in connec-
tion with the pandemic. Additional expenditures were incurred for losses from devastating natural
disasters such as the flash floods in Germany caused during the summer by the low-pressure system
"Bernd" or hurricane "Ida" in the United States.
14
Hannover Re | Annual Report 2021
Our sympathies go out to all those who have lost family or friends to the pandemic or natural catastro-
phes or who have been otherwise impacted by them. Hannover Re will continue to play its part in
mitigating the financial impacts of such misfortunes. I would like to take this opportunity to expressly
extend my thanks to our employees, whose dedication has been a crucial factor in our success and
helps to ensure that we - as a company - are able to operate in such a seamless, prudent and reliable
manner.
Hannover Re's commercial success is the cornerstone that puts us in a position to fulfil our commit-
ments to our customers at all times. Hannover Re is well placed, in both operational and financial
terms. In these challenging times we are thus able to support our customers through both our advice
and our actions. We shall further step up our efforts in matters of risk protection, for example by
contributing our risk management expertise to debates and ideas centred around preventing future
losses and by helping to design innovative coverage concepts.
Despite all this, though, we cannot lose sight of the greatest challenge of our time: global warming.
The disastrous flooding in Europe, record high temperatures and the series of damaging tornados in
North America have once again shown us in 2021 what lies ahead if the change in the climate contin-
ues to progress. On a positive note, we have seen that the Climate Change Conference in Glasgow
brought the fight against climate change back into sharper focus. The fact that the insurance industry
is increasingly moving towards greater sustainability also gives me a sense of optimism. As one of the
largest reinsurers in the world, we shall work with our customers to actively shape this change.
With a successful business policy and solid results we establish the foundation that gives us the
greatest possible scope for action when it comes to sustainability. This is all the more important
in times of uncertainty. In addition to the pandemic and natural disasters, the world economy is
facing new challenges. The sharp rise in inflation appears to be bringing to an end the policy of
quantitative easing pursued by central banks for more than a decade. It remains to be seen what
the consequences of this will ultimately be.
Hannover Re | Annual Report 2021
7
innovation, the solutions are always individual."
The current loss situation reduces the capacity of
the traditional market and generally leads to con-
siderable earnings volatility, which insurers are
required to cushion with a corresponding capital
base on account of local regulatory requirements.
As an internationally operating reinsurer we can
help with traditional reinsurance solutions, but also
through structured reinsurance.
Increasing access to capital
Securitisation of natural
catastrophe risks
Hannover Re | Annual Report 2021
We take "solutions business" to mean contracts, products
or transactions that are individually tailored to the needs of
our customers. Here, too, our reinsurance expertise - the
assessment of risks – constitutes the basis for our growth.
When the task at hand is developing bespoke solutions that
respond to our customers' specific needs, our approach is
highly flexible: multiline covers, structured reinsurance,
financial solutions, special transactions for the coverage of
longevity risks and a wide range of capital market trans-
actions (cat bonds, insurance-linked securities). To do this
we not only need an intimate knowledge of our markets, we
also have to keep close track of major trends and upcoming
developments such as an evolving regulatory environment.
8
Growth through individual
solutions - beyond risk
sharing
Hannover Re | Annual Report 2021
Digitalisation - Identifying risks and
opportunities from advances in digitalisa-
0011 tion in all areas as well as developing and
delivering appropriate products
1010
0010
its range of cyber products and is continuously ex-
panding its expert network in this field. Furthermore,
it seeks to encourage digital innovations by bringing
together potential partners and their specialist know-
how on its platform "hr|equarium".
Insurers already have robust insurance products that
Hannover Re supports through obligatory and facul-
tative arrangements. They have, however, imple-
mented exclusions for non-modelled risks (silent
cyber exposures) on account of the potential for
systemic losses. Hannover Re would like to extend
Unlike the traditional line of marine insurance, for ex-
ample, protecting against cyber risks is a very new
risk scenario that has become even more acute since
the onset of the pandemic in 2020. The number of
cyber attacks and the volume of ransom demands
rose sharply in 2021. According to figures provided
by the Federal Office for Information Security (BSI),
in February 2021 alone an average of 553,000 new
malware variants were detected every day.
(Sven Althoff, member of the Executive Board)
"With greater availability of data resources
and more accurate empirical values, we can
better evaluate cyber exposures and develop
products that adequately reflect the risk."
་་་་་་་
Risks from digitalisation
and cyber crime
Cyber risks
The rating agencies most relevant to the insurance industry have awarded both
Hannover Re and E+S Rück very good financial strength ratings: Standard & Poor's
AA- "Very Strong" and A.M. Best A+ "Superior".
(Claude Chèvre, member of the Executive Board)
tors on the capital market. Examples include cover-
age for flood risks, liability risks from wildfires or
earthquake risks by means of catastrophe bonds,
which we support in the role of securitisation partner.
One way of leveraging additional risk capital for our
customers is risk sharing with institutional inves-
Climate change - designing innovative
solutions for risk coverage
"Financial Solutions business is pure
Regulatory issues - finding answers to
evolving regulatory environments
APAC growth - maximising economic
opportunities in booming markets
Furthermore, Financial Solutions can also help our
customers to grow – whether it be through new busi-
ness financing or through acquisitions. Particularly
in the booming Asia-Pacific economic region, both
aspects coincide - and we are booking substantial
growth here together with our customers.
-
Financial Solutions are structured reinsurance solu-
tions under which the risk transfer takes the back
seat. The goals pursued are primarily financial. In the
first place, they help our customers to manage their
capital competitively in an increasingly complex reg-
ulatory environment. Regulatory requirements and
their implications vary sometimes considerably -
from market to market and can change. We therefore
keep close track of their development so as to make
potential solutions available to our customers in a
timely fashion.
The pursuit of competitive
capital management
Financial Solutions
Regulatory issues - finding answers to
evolving regulatory environments
10
Hannover Re | Annual Report 2021
annuity insurance solutions developed in the past
primarily for the UK market to other regions of the
world. Our customers testify to our long-standing
expertise in dealing with longevity risks in a recent
study conducted by an international consulting firm.
The associated risk cannot be absorbed through
traditional reinsurance alone. Hannover Re is there-
fore working on suitable types of financial instru-
ments to enable placement on the capital market with
the goal of serving the longevity market not only as
risk carrier but also as facilitator. A further focus is on
the development of individual annuity products that
increase policyholders' willingness to retire. This is a
decisive contribution to the avoidance of poverty in
old age. Today, we have successfully transferred
Longevity is a traditional biometric risk. Many mar-
kets are experiencing the demographic shift, people
are living longer, the savings phase ends, the payout
phase begins. Our customers want solutions that
make their payments more predictable.
Refining innovative solutions
Longevity
(Claude Chèvre, member of the Executive Board)
"Innovation has always been fundamental
to the life sector, you don't get any
business without it."
(Silke Sehm, member of the Executive Board)
"More and more customers are drawing on
our expertise and strong track record in the
securitisation of natural catastrophe risks."
Demographics - creating innovative
products for longevity risks
We transact all lines of property & casualty and life & health reinsurance and are
present on all continents with more than 3,000 staff. Established in 1966, the
Hannover Re Group today has a network of more than 170 subsidiaries, branches
and representative offices worldwide. The German business of the Hannover Re
Group is transacted by our subsidiary E+S Rück.
Highgate sp. z o.O.,
Warsaw/Poland
Hamilton/Bermuda
Kaith Re Ltd.,
HR GLL Europe Holding S.à r.I.,
Mumbai/India
Warsaw/Poland
87.67
Dynastic Underwriting Limited,
92601 BTS s.r.o.,
London/United Kingdom
100.00
Bratislava/Slovakia
87.67
Bristol Re Ltd.,
Akvamarín Beta s.r.o.,
Hamilton/Bermuda
100.00
100.00
Prague/Czech Republic
Hannover Re Services Italy S.r.l.,
Limited,
Milan/Italia
99.65
Luxembourg/Luxembourg
87.67
Associated companies
HR GLL CDG Plaza S.r.l.,
Monument Insurance Group Limited 4,
Bucharest/Romania
87.67
Hamilton/Bermuda
87.67
New Delhi/India
ODPOWIEDZIALNOŚCIĄ,
Private Limited,
100.00
90.40
Hannover Services (México) S.A. de C.V.,
Mexico City/Mexico
100.00
87.67
Hannover Re Services USA, Inc.,
Itasca/USA
100.00
Prague/Czech Republic
87.67
Hannover Mining Engineering Services LLC,
HR GLL Roosevelt Kft,
Itasca/USA
100.00
Budapest/Hungary
87.67
Hannover Rück SE Escritório de Representação
HR GLL Liberty Corner SPÓŁKA Z OGRAN-
no Brasil Ltda.,
ICZONĄ ODPOWIEDZIALNOŚCIĄ,
Rio de Janeiro/Brasil
100.00
Warsaw/Poland
87.67
Hannover Re Risk Management Services India
HR GLL Griffin House SPÓŁKA Z OGRANICZONĄ
3541 PRG s.r.o.,
93.77
Real Assist (Pty) Ltd.,
Hannover Re Consulting Services India Private
calculated
tionally
tionally
Propor-
Propor-
Annual financial statements
191
Hannover Re | Annual Report 2021
94.72
George Town/Cayman Islands
100.00
Johannesburg/South Africa
ASF Spectrum Limited,
Hannover Re South Africa Limited,
94.72
Singapore/Singapore
100.00
Johannesburg/South Africa
Ubitech Hub Pte. Ltd.,
Hannover Reinsurance Group Africa (Pty) Ltd.,
94.72
George Town/Cayman Islands
100.00
Burlington/USA
PAG Real Estate Asia Select Fund Limited,
Sand Lake Re, Inc.,
94.72
Sydney/Australia
20.00
calculated
Tokyo/Japan
participation
Name and registered office of the company
Rocky G.K.,
100.00
Tokyo/Japan
93.77
Tokyo/Japan
Hannover Re Services Japan,
Morea Limited Liability Company,
100.00
Madrid/Spain
93.77
Tokyo/Japan
HR Hannover Re, Correduría de Reaseguros, S.A.,
Peace G.K.,
Affiliated non-consolidated companies
94.39
Seoul/South Korea
38.15
Pretoria/South Africa
Estate Investment LLC,
Orion No.1 Professional Investors Private Real
45.85
Bloemfontein/South Africa
94.71
George Town/Cayman Islands
Landmark Underwriting Agency (Pty) Ltd.,
HR US Infra Debt LP,
in %
Name and registered office of the company
in %
participation
Commercial & Industrial Acceptances (Pty) Ltd.,
LifeQ Global Limited,
Johannesburg/South Africa
Sureify Labs, Inc.,
1.71
Dublin/Ireland
10.28
Johannesburg/South Africa
100.00
Pineapple Tech (Pty) Ltd,
3.30
Nicosia/Cyprus
11.70
Hamilton/Bermuda
Liberty Life Insurance Public Company Ltd,
Somerset Reinsurance Ltd.,
6.56
The Sociotech Institute Proprietary Limited,
Cape Town/South Africa
15.00
in %
Name and registered office of the company
in %
Hamilton/Bermuda
Mosaic Insurance Holdings Limited,
Name and registered office of the company
participation
participation
calculated
calculated
tionally
tionally
Propor-
B3i Services AG,
Propor-
Wilmington/USA
Zurich/Switzerland
2020
Gross written premium¹
2021
N 12
Hannover Rück SE
Figures in EUR thousand
Group Company/Branch
Material branches within the Group
Hannover Rück SE maintains branches that are listed below
according to the amount of gross written premium in the cur-
rent financial year.
Material branches within the Group
5 The company is in liquidation.
The company is included in measurement at equity through a
consolidated financial statement.
Investment fund
6.90
4
Olathe/USA
Centaur Animal Health, Inc.,
3
8.61
Johannesburg/South Africa
The company is inactive.
2
Different Technology (Pty) Ltd,
altogether EUR 0.7 million.
The company holds 45 subsidiaries with capital and reserves of
9.38
1
Schiltigheim/France
Acte Vie S.A.,
1.46
10.03
Monument Midco Limited 4,
Hannover Re | Annual Report 2021
15.00
Transit Underwriting Managers (Pty) Ltd.,
Reaseguradora del Ecuador S.A.,
68.18
Johannesburg/South Africa
Other participations
Film & Entertainment Underwriters SA (Pty) Ltd.,
14.72
Port Elizabeth/South Africa
70.00
Johannesburg/South Africa
Inqaku FC (Pty) Ltd,
(Pty) Ltd.,
22.87
Johannesburg/South Africa
Firedart Engineering Underwriting Managers
(Pty) Ltd.,
70.00
Johannesburg/South Africa
Clarendon Transport Underwriting Managers
SUM Holdings (Pty) Ltd.,
26.35
Johannesburg/South Africa
70.00
Johannesburg/South Africa
Investsure Technologies Proprietary Limited,
Lireas Holdings (Pty) Ltd.,
24.35
Hamilton/Bermuda
74.80
Guayaquil/Equador
192
30.00
63.00
Freienbach/Switzerland
(CH) AG,
SWISS INSUREVOLUTION PARTNERS Holding
49.00
Johannesburg/South Africa
Thatch Risk Acceptances (Pty) Ltd.,
15.00
Triesen/Liechtenstein
(FL) AG,
59.50
Johannesburg/South Africa
Underwriting Managers (Pty) Ltd.,
SWISS INSUREVOLUTION PARTNERS Holding
Hospitality Industrial and Commercial
18.96
St. Helier/Jersey
Meribel Mottaret Limited,
59.50
Cape Town/South Africa
MUA Insurance Acceptances (Pty) Ltd.,
20.34
Johannesburg/South Africa
Kopano Ventures (Pty) Ltd 25,
63.00
Johannesburg/South Africa
20.37
Toronto/Canada
Trinity Underwriting Managers Ltd.,
Garagesure Consultants and Acceptances (Pty)
Ltd.,
Durban/South Africa
Wilmington/USA
Compass Insurance Company Limited,
Hannover Finance, Inc.,
87.68
Hannover Life Re of Australasia Ltd,
HR GLL Central Europe GmbH & Co. KG,
Sydney/Australia
100.00
Munich/Germany
87.67
Hannover Re (Bermuda) Ltd.,
Hannover/Germany
Hamilton/Bermuda
HR GLL Central Europe Holding GmbH,
Munich/Germany
87.67
Hannover ReTakaful B.S.C. (c),
Manama/Bahrain
100.00
HAPEP II Komplementär GmbH,
Hannover/Germany
100.00
82.40
Hannover Re Euro RE Holdings GmbH,
Dublin/Ireland
95.42
Hannover Life Reassurance Company of America,
HAPEP II Holding GmbH,
Orlando/USA
100.00
Hannover/Germany
95.42
Hannover Re Global Alternatives GmbH & Co. KG,
100.00
Hannover Life Reassurance Company of America
(Bermuda) Ltd.,
94.72
Hamilton/Bermuda
100.00
Hannover Re Euro PE Holdings GmbH & Co. KG,
Hannover Re (Ireland) Designated Activity
Hannover/Germany
91.20
Company,
Hannover/Germany
Hannover Services (UK) Limited,
London/United Kingdom
100.00
HANNOVER Finanz GmbH,
Hannover/Germany
27.78
APCL Corporate Director No.1 Limited,
London/United Kingdom
100.00
Other participations
APCL Corporate Director No.2 Limited,
100.00
myKonzept Holding
100.00
Deutschland GmbH & Co. KG AG,
Fountain Continuity Limited,
Göttingen/Germany
15.00
Edinburgh/United Kingdom
100.00
Neue SEBA Beteiligungsgesellschaft mbH,
London/United Kingdom
London/United Kingdom
Argenta Private Capital Limited,
32.96
E+S Rückversicherung AG,
Hannover/Germany
64.79
Inter Hannover (No. 1) Limited,
London/United Kingdom
100.00
Affiliated non-consolidated companies
Integra Insurance Solutions Limited,
HILSP Komplementär GmbH,
Hannover/Germany
100.00
Bradford/United Kingdom
100.00
Associated companies
Argenta Holdings Limited,
London/United Kingdom
100.00
WeHaCo Unternehmensbeteiligungs-GmbH,
Hannover/Germany
Hannover/Germany
100.00
London/United Kingdom
GmbH & Co. KG,
Consolidation of business transactions within the Group
Receivables and liabilities between the companies included
in the consolidated financial statement were offset against
each other. Profits and expenses from business transactions
within the Group were also eliminated. Transactions between
a disposal group and the continuing operations of the Group
were similarly eliminated in accordance with IFRS 10.
4.2 Consolidated companies and complete list of shareholdings
In addition to Hannover Rück SE as the parent company of
the Group, the scope of consolidation of the Hannover Re
Group encompasses the companies listed in the table below.
Information on subsidiaries
Scope of consolidation
Number of companies
Hannover Re | Annual Report 2021
Consolidated companies (Group companies)
Abroad
Total
Companies included at equity
Germany
Abroad
Total
N 10
2021
Germany
188
Only subsidiaries which are of minor importance - both indi-
vidually and in their entirety - for the net assets, financial
position and results of operations of the Hannover Re Group
are exempted from consolidation. Hannover Re assesses
whether a subsidiary is of minor importance on the basis of
the company's total assets and net income relative to the cor-
responding values for the Group as a whole on average over
the last three years. For this reason 12 (12) companies at
home and abroad were not consolidated in the year under
review. A further 3 (2) individual companies were not includ-
ed at equity in the consolidated financial statement for the
same reason. The business object of these altogether 15 (14)
companies is for the most part the rendering of services for
reinsurance companies within the Group.
-
the areas of investments, goodwill impairment and reinsur-
ance obligations, in particular, were subjected to closer anal-
ysis. For further information we would refer to our explanato-
ry remarks in section 6.5 "Goodwill", 7.2 "Investment
income" and 7.3 “Reinsurance result".
Supplementary or complete estimates of the corresponding
profit and loss items, assets and liabilities including relevant
retrocessions are made where ceding company accounts with
substantial premium income are missing. Missing ceding
company accounts with a low premium volume are included
in the following year.
In order to measure the ultimate liability in property and
casualty reinsurance the expected ultimate loss ratios are cal-
culated for all lines. Actuarial methods such as the "chain lad-
der" method provide the starting point for these calculations.
The realistically estimated future settlement amount is recog-
nised in the balance sheet. The development until completion
of the run-off is projected on the basis of statistical triangles
from the original notifications of ceding companies. The more
recent underwriting years in actuarial projections are of
course subject to greater uncertainty, although this can be
considerably reduced with the aid of a variety of additional
information on improvements in the rates and conditions of
the business written and on loss trends. The amounts arrived
at as the difference between the ultimate losses and the re-
ported losses are set aside as the IBNR reserve for losses that
have been incurred but are not yet known or have still to be
reported. In applying statistical methods, separate considera-
tion is given to large losses.
By analysing a broad range of observable information it is
possible to classify losses as major individual loss events.
Measurement of the obligations existing in this connection is
carried out using a separate process, which is based largely
on contract-specific estimates.
For further particulars, including information required by
IFRS 4, the reader is referred to our remarks on the under-
writing risks in property and casualty reinsurance on page 98
et seq. of the management report - for example, with regard
to the modelling of natural catastrophe scenarios and the as-
sumptions relating to asbestos and pollution risks. We would
further refer to our explanatory remarks on the technical re-
serves in section 3.1 “Summary of major accounting policies"
and section 6.7 "Technical provisions".
In life and health reinsurance, too, the calculation of reserves
and assets is crucially dependent on actuarial projections of
the covered business. So-called model points are defined ac-
cording to the type of business covered. The main distin-
guishing criteria are the age, sex and (non-)smoker status of
the insured, tariff, policy period, period of premium payment
and amount of insurance. The portfolio development is simu-
lated for each model point, in which regard the key input pa-
rameters are either predefined by the tariff (e.g. allowance
for costs, amount of premium, actuarial interest rate) or need
to be estimated (e. g. mortality or disability rates, lapse rates).
These assumptions are heavily dependent on country-specific
parameters and on the sales channel, quality of the cedant's
underwriting and claims handling, type of reinsurance and
other framework conditions of the reinsurance treaty. The su-
perimposition of numerous model points gives rise to a pro-
jection, which incorporates inter alia assumptions concerning
the portfolio composition and the commencement of covered
policies within the year. Such assumptions are estimated at
the inception of a reinsurance treaty and subsequently adjust-
ed to the actual projection.
The projections, which cover various model scenarios ("con-
servative assumptions” versus “best estimate"), constitute
the starting point for numerous areas of application encom-
passing quotation, the determination of carrying amounts
and embedded values as well as contract-specific analyses,
e. g. regarding the appropriateness of the recognised reinsur-
ance liabilities ("liability adequacy test"). In this context we
would refer the reader to our comments on technical assets
and provisions in section 3.1 “Summary of major accounting
policies" and on the liability adequacy test in section
6.7 "Technical provisions".
In determining the carrying amounts for certain financial as-
sets it is sometimes necessary to make assumptions in order
to calculate fair values. In this regard we would refer the
reader to our remarks in section 3.1 "Summary of major ac-
counting policies" concerning financial assets at fair value
through profit or loss and securities held as available for sale
as well as in section 6.7 "Technical provisions" concerning
investment property. Assumptions concerning the appropri-
ate applicability criteria are necessary when determining the
need for impairments on non-monetary financial assets held
as available for sale. In this regard we would again refer the
reader to our explanatory remarks in section 3.1 "Summary
of major accounting policies".
Hannover Re | Annual Report 2021
187
Annual financial statements
4. Consolidation
4.1 Consolidation principles
Capital consolidation
The capital consolidation is carried out according to the re-
quirements of IFRS 10 "Consolidated Financial Statements"
on the basis of a consistent consolidation model for all enti-
ties that identifies control as the single basis for verifying the
consolidation requirement, irrespective of whether control is
substantiated in company law, contractually or economically.
Group companies are consolidated from the point in time
when Hannover Re gains control over them. Control exists if
Hannover Re directly or indirectly has decision-making pow-
er over a Group company on the basis of voting rights or oth-
er rights, if it has exposure or rights to positive and negative
variable returns from its involvement with the Group compa-
ny and if it can use its power to influence these returns. All of
these criteria must be met. Other circumstances may also
give rise to control, for example the existence of a princi-
pal-agent relationship. In this case a party outside the Group
with decision-making powers (agent) acts for Hannover Re,
but does not control the company since it merely exercises
decision-making powers that have been delegated by
Hannover Re (principal). These principles are also applied to
structured entities, on which further information is provided
in section 4.2 “Consolidated companies and complete list of
shareholdings". Group companies are consolidated until the
Hannover Re Group loses control over them. The accounting
policies of Group companies are adjusted, where necessary,
in order to ensure consistent application of the Hannover Re
Group's accounting policies.
The capital consolidation is based on the acquisition method.
Goodwill derives from the acquisition of subsidiaries and cor-
responds to the sum of the consideration rendered, the
amount of all non-controlling interests in the acquired com-
pany and the fair value of the equity interests previously held
in the acquired company less the fair value of the acquired
net assets. Under IFRS 3 goodwill is not amortised, but in-
stead impairment is taken where necessary on the basis of
annual impairment tests. Immaterial and negative goodwill
are recognised in the statement of income in the year of their
occurrence. Costs associated with acquisition are expensed.
Companies over which Hannover Re is able to exercise a sig-
nificant influence are consolidated as associated companies
using the equity method of accounting. We therefore meas-
ure investments in associated companies with the proportion
of the shareholders' equity attributable to the Group. Accord-
ing to the proportionate interest method required by IAS 28
“Investments in Associates and Joint Ventures", the goodwill
attributable to associated companies is recognised together
with the investments in associated companies. The share of
an associated company's year-end profit or loss relating to
the Group is included in the income from investments and
shown separately in the consolidated statement of income.
Shareholders' equity and profit or loss are taken from the
associated company's latest available financial statement. A
significant influence is presumed to exist if a company be-
longing to the Hannover Re Group directly or indirectly holds
at least 20% - but no more than 50% of the voting rights.
We also derive evidence of significant influence over an asso-
ciated company from representation on a governing body of
such company, participation in its policy-making processes -
e.g. with respect to dividends or other distributions -,
the existence of material inter-company transactions, the
possibility of interchanging managerial personnel or the pro-
vision of key technical information for the company. Further
particulars on companies consolidated using the equity meth-
od of accounting are provided in section 6.1 "Investments
under own management" under the subsection "Associated
companies".
2020
Names Taxation Service Limited,
11
104
in %
Domestic companies
Name and registered office of the company
Foreign companies
calculated
participation
in %
Affiliated consolidated companies
Hannover Rück Beteiligung Verwaltungs-GmbH,
Hannover/Germany
100.00
Name and registered office of the company
Affiliated consolidated companies
Hannover Finance (Luxembourg) S.A.,
Leudelange/Luxembourg
FUNIS GmbH & Co. KG,
Hannover Finance (UK) Limited,
Hannover/Germany
100.00
London/United Kingdom
100.00
Hannover America Private Equity Partners II
Hannover Re Holdings (UK) Ltd.,
100.00
Propor-
tionally
tionally
calculated
participation
Propor-
102
115
113
2
4
6
36
9
Information on the non-controlling interests in shareholders'
equity and profit or loss as well as on the major non-con-
trolling interests is provided in section 6.14 “Non-controlling
interests". On the balance sheet date there were no signifi-
cant restrictions on access to or the use of Group assets due
to protective rights in favour of non-controlling interests.
The sale or transfer of shares of E+S Rückversicherung AG
takes place by way of an endorsement and is permissible only
with the approval of the company's Supervisory Board. The
Supervisory Board enjoys the right to grant or deny approval
unconditionally, without being obliged to state reasons in the
event of denial.
National provisions of company law or requirements of super-
visory law may in certain countries limit the ability of the
Hannover Re Group to transfer assets between companies
belonging to the Group. These limitations result principally
from local minimum capital and solvency requirements as
well as to a lesser extent from foreign exchange restrictions.
Hannover Re | Annual Report 2021
189
Annual financial statements
List of shareholdings
The following information is the list of shareholdings in ac-
cordance with § 313 Para. 2 German Commercial Code (HGB).
We make use of the exemptions pursuant to § 313 Para. 3
German Commercial Code (HGB). The stipulations of IFRS
List of shareholdings
12.10 and IFRS 12.21 have also been observed. With regard
to the major acquisitions and disposals in the year under re-
view, please see our remarks in the following subsections of
this section.
N 11
11
Markham Real Estate Partners (KSW) Pty Limited,
Nürnberg/Germany
London/United Kingdom
100.00
Wilmington/USA
95.15
Residual Services Corporate Director Limited,
975 Carroll Square, LLC,
London/United Kingdom
100.00
Wilmington/USA
London/United Kingdom
95.15
Broadway 101, LLC,
Singapore/Singapore
100.00
Wilmington/USA
95.15
Argenta Underwriting Labuan Ltd²,
River Terrace Parking, LLC,
Labuan/Malaysia
Argenta Underwriting Asia Pte. Ltd.,
100.00
590ATL LLC,
95.15
95.15
Argenta Underwriting No.9 Limited,
140EWR LLC,
London/United Kingdom
100.00
Wilmington/USA
95.15
Argenta Underwriting No.10 Limited,
Residual Services Limited',
75501AD LLC,
100.00
Wilmington/USA
95.15
Argenta Underwriting No.11 Limited,
Nashville West, LLC,
London/United Kingdom
100.00
Wilmington/USA
London/United Kingdom
Wilmington/USA
95.15
Glencar Underwriting Managers, Inc.,
Leine Investment SICAV-SIF,
7659BWI LLC,
Luxembourg/Luxembourg
100.00
Wilmington/USA
95.15
LI RE,
7653BWI LLC,
95.15
Hamilton/Bermuda
Paris/Frannce
100.00
Wilmington/USA
95.15
M8 Property Trust,
100.00
Sydney/Australia
94.72
Fracom FCP³,
Wilmington/USA
100.00
Luxembourg/Luxembourg
3290ATL LLC,
Chicago/USA
100.00
Wilmington/USA
95.15
Glencar Insurance Company,
1600FLL LLC,
Orlando/USA
100.00
Wilmington/USA
95.15
Kubera Insurance (SAC) Ltd,
2530AUS LLC,
Hamilton/Bermuda
100.00
Wilmington/USA
95.15
Leine Investment General Partner S.à r.I.,
7550BWI LLC,
Wilmington/USA
100.00
London/United Kingdom
1110RD LLC,
calculated
tionally
calculated
participation
participation
Name and registered office of the company
Argenta General Partner II Limited,
Edinburgh/United Kingdom
in %
tionally
Name and registered office of the company
Hannover Africa Limited,
100.00
Johannesburg/South Africa
100.00
Argenta LLP Services Limited,
Net income¹
2021
London/United Kingdom
100.00
in %
Propor-
Propor-
Hannover Re | Annual Report 2021
100.00
Internationale Schule Hannover Region GmbH,
Hannover/Germany
9.17
Argenta Secretariat Limited,
London/United Kingdom
100.00
FinLeap GmbH,
Berlin/Germany
8.41
Argenta Continuity Limited,
London/United Kingdom
100.00
ELEMENT Insurance AG,
Berlin/Germany
6.08
Argenta General Partner Limited,
Edinburgh/United Kingdom
100.00
190
Johannesburg/South Africa
12.07
100.00
Annuity Reinsurance Cell A1,
GLL HRE CORE Properties, L.P.,
London/United Kingdom
100.00
Wilmington/USA
95.15
Argenta Underwriting No.3 Limited,
101BOS LLC,
London/United Kingdom
Argenta Underwriting No.2 Limited,
100.00
95.15
Argenta Underwriting No.4 Limited,
402 Santa Monica Blvd, LLC,
London/United Kingdom
100.00
Wilmington/USA
95.15
Argenta Underwriting No.7 Limited,
Wilmington/USA
95.15
Wilmington/USA
100.00
Edinburgh/United Kingdom
100.00
Hamilton/Bermuda
100.00
Argenta Syndicate Management Limited,
Hannover Re Real Estate Holdings, Inc.,
London/United Kingdom
100.00
Orlando/USA
95.25
Argenta Tax & Corporate Services Limited,
HR US Infra Equity LP,
London/United Kingdom
100.00
Wilmington/USA
95.24
Argenta Underwriting No.1 Limited,
320AUS LLC,
London/United Kingdom
Argenta SLP Continuity Limited,
2020
551,028
Shanghai/China
Hannover Re participates through its subsidiary Leine Invest-
ment SICAV-SIF, Luxembourg, in a number of structured en-
tities that issue catastrophe bonds for the securitisation of
catastrophe risks by investing in such bonds. Leine Invest-
ment General Partner S.à.r.l. is the managing partner of the
asset management company Leine Investment SICAV-SIF, the
business object of which is to build, hold and manage a port-
folio of insurance-linked securities (catastrophe bonds) - in-
cluding for third-party investors outside the Group. The vol-
ume of these transactions is derived from the book values of
the respective investments and amounted to EUR 77.5 million
(EUR 100.5 million) as at the balance sheet date. The maxi-
mum risk of loss corresponds to the book values.
Retrocession and securitisation of reinsurance risks
The securitisation of reinsurance risks takes place largely
through the use of structured entities.
By way of its "K" transactions Hannover Re has raised un-
derwriting capacity for catastrophe risks on the capital mar-
ket. The "K Cession", which was placed with investors in
North and South America, Europe and Asia, involves a quota
share cession on worldwide natural catastrophe business as
well as aviation and marine risks. Of the total volume of the
"K Cession", a large part equivalent to EUR 398.5 million
(EUR 432.3 million) was securitised via structured entities as
at the balance sheet date. The transaction has an indefinite
term and can be cancelled annually by the investors. Segre-
gated accounts of Kaith Re Ltd. are used for transformer
purposes for part of this transaction. Hannover Re also uses
further segregated accounts of Kaith Re Ltd. and other struc-
tured entities outside the Group for various retrocessions of
both its traditional and ILS covers, which in each case are
passed on to institutional investors in securitised form. The
volume of these transactions is measured by the ceded expo-
sure limit of the underlying retrocession agreements and
amounted to altogether EUR 4,730.9 million (EUR 4,063.4
million) as at the balance sheet date. The structured entities
are in all cases fully funded by contractually defined invest-
ments in the form of cash and equivalent liquid assets. Given
that the entire exposure limit of the structured entities is
therefore wholly collateralised in each case, there is no risk of
loss for Hannover Re.
Hannover Re | Annual Report 2021
195
Annual financial statements
Collateralised fronting (ILS)
As part of its extended insurance-linked securities (ILS) activ-
ities, Hannover Re has concluded so-called collateralised
fronting arrangements under which risks assumed from ced-
ing companies are passed on to institutional investors outside
the Group using structured entities. The purpose of such
transactions is to directly transfer clients' business. The vol-
ume of the transactions is derived from the ceded exposure
limit of the underlying retrocession agreements and amount-
ed to EUR 4,550.0 million (EUR 3,919.9 million) as at the bal-
ance sheet date. Part of the ceded exposure limit is funded
and collateralised by contractually defined investments in the
form of cash and equivalent liquid assets; a further part re-
mains uncollateralised or is collateralised by less liquid as-
sets. The maximum risk of loss from the uncollateralised ex-
posure limit amounted to EUR 1,174.1 million (EUR 1,365.6
million) as at the balance sheet date. This does not, however,
correspond to the economic risk of loss, which is established
using recognised actuarial methods. The expected loss on a
modelled basis in a worst-case scenario of 10,000 years
amounts to at most EUR 38.4 million (EUR 35.9 million).
The book values of the assets and liabilities from the specified
transactions with unconsolidated structured entities were as
follows as at the balance sheet date:
Book values from business relations with unconsolidated structured entities
N 13
in EUR thousand
Assets
Investing activities and investments in catastrophe bonds (ILS)
Within the scope of its investment activities Hannover Re par-
ticipates inter alia in numerous structured entities. These are
predominantly special purpose entities in the form of funds,
which for their part transact certain types of equity and debt
capital investments. These investments encompass private
equity funds, fixed income funds, collateralised debt obliga-
tions, real estate funds, index funds and other public funds.
The volume of these transactions is derived from the book
values of the respective investments and amounted to EUR
4,587.4 million (EUR 3,799.9 million) as at the balance sheet
date. The maximum risk of loss corresponds to the book
values.
Fixed-income securities - held to maturity
The business relations of Hannover Re Group companies with
structured entities set out below do not give rise to consolida-
tion because the criteria for control pursuant to IFRS 10 con-
tained in our consolidation principles are not met.
Hannover Re | Annual Report 2021
without subordinated financial support;
Consolidated structured entities
The following structured entities were consolidated as at the
balance sheet date:
• Kaith Re Ltd., Hamilton, Bermuda
•
Kubera Insurance (SAC) Ltd, Hamilton, Bermuda
• LI RE, Hamilton, Bermuda
Kaith Re Ltd. is a so-called segregated accounts company
(SAC), the sole object of which is the securitisation of reinsur-
ance risks in the form of investment products. Under this
transformation a complete underwriting risk transfer always
takes place to the investor in question. In a SAC further seg-
regated accounts exist under a general account; it is in these
segregated accounts, which for liability purposes are entirely
separate from one another and from the general account, that
the aforementioned securitisations take place for the inves-
tors.
Kubera Insurance (SAC) Ltd is similarly a segregated ac-
counts company, the object of which is to establish segregat-
ed accounts that are made available to non-Group companies
for structured finance transactions.
•
financing in the form of multiple contractually linked
instruments issued to investors that create concentra-
tions of credit or other risks (tranches).
In accordance with the consistent consolidation model, a
structured entity - just like a subsidiary - must be consolidat-
ed if Hannover Re gains control over the said entity. With
regard to the criteria for control please see also section
4.1 "Consolidation principles". Within the Hannover Re
Group the requirement to consolidate structured entities is
examined as part of an analysis that encompasses both trans-
actions in which a structured entity is initiated by us with or
without the involvement of third parties and those in which
we enter into contractual relations with an already existing
structured entity with or without the involvement of third par-
ties. Consolidation decisions are reviewed as necessary and
at least once a year. The list of all consolidated structured
entities forms part of the list of shareholdings.
Pursuant to IFRS 10 we consider the general account and the
segregated accounts to be separate units to which the princi-
ples of so-called "silo accounting" are applied. In accordance
with this concept, Hannover Re is required to consolidate the
general account of Kaith Re Ltd. and Kubera Insurance (SAC)
Ltd and is contractually responsible for the fees due to exter-
nal service providers that are to be covered from the general
account's own funds. Each individual segregated account is
to be examined separately with an eye to a consolidation re-
quirement and consolidated according to the particular con-
tractual arrangements in each case.
LI RE is a segregated account of Kaith Re Ltd., the purpose of
which as with all segregated accounts under Kaith Re Ltd.
- is the securitisation of underwriting risks. In contrast to the
other segregated accounts, the sole investor and hence the
risk carrier of LI RE is the Hannover Re Group through its
subsidiary Leine Investment SICAV-SIF, Luxembourg.
As at the balance sheet date Hannover Re had not rendered
any financial or other support for a consolidated structured
entity. Hannover Re does not intend to render financial or
other support for one or more of such entities without being
contractually required to do so.
194
Unconsolidated structured entities
31.12.2021
General investing
activities
Investment in
catastrophe bonds
(ILS)
Reinsurance payable
Total liabilities
212
1,230,181
76,735
209,570
285,581
4,587,363
77,518
1,802,279
782,835
782,835
196
Hannover Re | Annual Report 2021
Hannover Rück SE Shanghai Branch,
Liabilities
Total assets
Accounts receivable
Deferred acquisition costs
Retrocession incl.
securitisations and
ILS transactions
346
Fixed-income securities - loans and receivables
438
Fixed-income securities - available for sale
Fixed-income securities - at fair value through profit or loss
a narrow and well-defined business objective;
insufficient equity to allow it to finance its activities
77,518
Real estate and real estate funds
314,453
525,148
Other invested assets
1,726,487
Contract deposits
Reinsurance recoverables on unpaid claims
Prepaid reinsurance premium
Equity securities - available for sale
restricted activities;
2,020,491
•
540,523
5,563
9,886
Hannover Rück SE Canadian Branch,
Toronto/Canada
433,932
65,541
(1,194)
Hannover Rück SE, Tyskland Filial,
Stockholm/Sweden
430,680
400,662
36,072
7,604
Hannover Re UK Life Branch,
649,229
London/United Kingdom
Sydney/Australia
32,658
2,024,182
•
2,186,683
22,122
(13,535)
Hannover Rueck SE Malaysian Branch,
Kuala Lumpur/Malaysia
941,784
606,071
(38,410)
38,612
Hannover Rück SE Succursale Francaise,
Paris/France
874,728
934,771
Hannover Rueck SE Australian Branch,
353,285
(6,621)
(35,657)
(29,911)
Hannover Rück SE Korea Branch,
Seoul/South Korea
46,936
47,634
1,368
2,586
15,651
IFRS figures before consolidation.
193
Annual financial statements
In addition, other companies belonging to the Hannover Re
Group maintain further branches that both individually and
collectively are to be classified as immaterial to the Group.
Consolidation of structured entities
Business relations with structured entities are to be examined
in accordance with IFRS 10 with an eye to their implications
for consolidation. In the context of their operational activities
some companies belonging to the Hannover Re Group enter
into business relations with structured entities that are to be
analysed and accounted for according to these new provi-
sions.
288,609
Structured entities are entities designed in such a way that
voting or similar rights are not the dominant factor in decid-
ing who controls the entity, such as when any voting rights
relate to administrative tasks only and the relevant activities
are directed by means of contractual arrangements. A struc-
tured entity frequently has some or all of the following fea-
tures or attributes:
Hannover Re | Annual Report 2021
137,951
1
Manama/Bahrain
15,568
Hannover Rück SE, Hong Kong Branch,
124,701
Wanchai/Hongkong
265,118
292,796
(24,918)
862
Hannover Rück SE - India Branch,
•
Mumbai/India
199,076
125,322
13,398
5,669
Hannover Rueck SE Bahrain Branch,
286,294
654,345
668,913
191,024
200,587
due after two through three years
348,624
355,108
597,031
613,668
147,510
136,589
due after one through two years
92,742
99,564
152,813
due after four through five years
453,370
136,620
due after five through ten years
due after three through four years
404,066
due after five through ten years
273,701
139,574
48,287
315,823
50,020
due after two through three years
due after three through four years
due after four through five years
48,284
51,684
due after more than ten years
Total
345
277,587
128
217
48,632
50,148
185,577
191,475
Loans and receivables
due in one year
195,267
198,864
600
674,921
3,485,182
due after more than ten years
due after three through four years
3,318,090
3,368,832
2,919,887
3,077,189
due after four through five years
5,197,728
5,393,570
3,347,071
due after five through ten years
15,819,565
16,239,970
14,567,732
15,567,648
due after more than ten years
9,166,253
9,683,145
6,397,959
7,236,121
Total
136,693
3,413,253
778,086
3,294,465
3,545,176
418,444
450,179
346,801
395,661
Total
2,443,629
2,589,767
2,312,840
2,517,966
Available for sale
due in one year²
5,364,684
5,385,051
4,304,412
4,318,468
due after one through two years
3,561,972
3,597,590
3,278,457
3,359,359
due after two through three years
3,604,426
Fair value 3
68,887
Fair value
328,878
(47,721)
(60,583)
1,231,334
883,073
Hannover Re | Annual Report 2021
203
Annual financial statements
6. Notes on the individual items of the balance sheet
196,610
6.1 Investments under own management
The investments under own management also encompass in-
vestments in associated companies, real estate and real es-
tate funds (also includes: investment property), other invest-
ed assets, short-term investments and cash. The recognition
and measurement of these items is based on the respective
applicable IFRS for this type of assets.
The following table shows the regional origin of the invest-
ments under own management.
Investments
in EUR thousand
Regional origin
Germany
United Kingdom
France
Other
Hannover Re classifies investments according to the follow-
ing categories: held-to-maturity, loans and receivables, finan-
cial assets at fair value through profit or loss and availa-
ble-for-sale. The allocation and measurement of investments
are determined by the investment intent and comply with the
requirements of IAS 39 “Financial Instruments: Recognition
and Measurement".
35,712
45,973,468
1,785
86,596
221,756
391,505
(80,170)
(88,562)
83,037
1,651,790
90,204
1,123,871
24,107
60,842
(32,449)
(27,979)
351,569
205,086
197,649
330,663
(47,721)
(60,583)
1,300,221
918,785
1,039
Europe
N 16
2021
20201
5,044,810
3,156,317
2,982,749
9,457,452
8,027,559
359,741
2,616,142
335,887
2,517,490
Total
56,213,248
49,001,626
1 Restated pursuant to IAS 8
204
Hannover Re | Annual Report 2021
Maturities of the fixed-income and variable-yield securities
in EUR thousand
Held to maturity
due in one year
due after one through two years
N 17
2021
Amortised cost¹
6,301,135
2020
Amortised cost 1,3
Other
Australasia
7,520,389
8,206,449
3,525,675
3,673,652
2,113,298
1,439,647
7,888,908
6,814,913
21,048,270
20,134,661
USA
19,839,869
15,621,305
Other
2,891,774
2,364,724
North America
22,731,643
17,986,029
Asia
Australia
Africa
47,272,584
48,632
40,457,220
semi-governmental entities
846,636
12,514
80,541
927,177
Corporate securities
1,219,874
35,135
26,286
Debt securities issued by
1,325
Covered bonds/asset-backed securities
370,427
6,337
41,646
1,010
411,063
Other
6,692
78
1,244,835
interest
Fair value
Unrealised
losses
Covered bonds/asset-backed securities
114,032
2,627
2,327
383
115,976
Total
185,577
4,049
6,281
383
191,475
The carrying amount of the portfolio held to maturity is
arrived at from the amortised cost plus accrued interest.
Amortised cost, unrealised gains and losses and accrued interest on loans and
receivables as well as their fair value
in EUR thousand
Loans and receivables
N 20
2021
Amortised cost thereof accrued
including accrued
interest
Unrealised
gains
6,692
Total
2,443,629
54,064
Prepaid reinsurance premium
Reinsurance recoverables on unpaid claims
Contract deposits
1,232,162
Other invested assets
403,740
Real estate and real estate funds
377,799
Equity securities - available for sale
100,488
Fixed-income securities - at fair value through profit or loss
1,784,580
Fixed-income securities - available for sale
1,060
Fixed-income securities - loans and receivables
600
Investment in
catastrophe bonds
(ILS)
General investing
activities
31.12.2020
Fixed-income securities - held to maturity
Assets
Deferred acquisition costs
51,685
Accounts receivable
Liabilities
148,473
2,335
2,589,767
206
Hannover Re | Annual Report 2021
The income and expenses from business relations with un-
consolidated structured entities are shown in investment in-
come insofar as they result from general investment activities
or investments in catastrophe bonds and are recognised in
the technical account insofar as they are attributable to retro-
cessions and securitisations.
552,360
552,360
1,265,554
100,488
3,799,941
126,630
217,012
74,090
5,545
842,277
ILS transactions 1
Retrocession incl.
securitisations and
N 14
1 Restated pursuant to IAS 8
Total liabilities
Reinsurance payable
Total assets
38,109,983
3,400
48,285
due after five through ten years
4,606
4,606
4,232
4,232
due after more than ten years
Total
1,172
1,172
As at the balance sheet date Hannover Re had not rendered
any financial or other support for an unconsolidated struc-
tured entity. Hannover Re does not intend to render financial
or other support for one or more of such entities without be-
ing contractually required to do so.
3,757
81,308
105,711
105,711
1
Including accrued interest
2 Including short-term investments, cash and cash equivalents
3 Restated pursuant to IAS 8
The stated maturities may in individual cases diverge from
the contractual maturities because borrowers may have the
right to call or prepay obligations with or without penalty.
Variable-rate bonds (so-called "floaters") are shown under
the maturities due in one year and constitute an interest-re-
lated, within-the-year reinvestment risk.
81,308
3,757
due after four through five years
9,122
Financial assets at fair value through
profit or loss
due in one year
8,882
8,882
29,009
29,009
due after one through two years
25,999
25,999
28,145
28,145
due after two through three years
37,144
37,144
31,446
31,446
due after three through four years
3,505
3,505
9,122
Hannover Re | Annual Report 2021
205
Annual financial statements
Amortised cost, unrealised gains and losses and accrued interest on
1,733
217
128
50,148
Amortised cost, unrealised gains and losses and accrued interest on
the portfolio of investments classified as held to maturity as well as their fair value
in EUR thousand
Investments held to maturity
Fixed-income securities
Amortised cost thereof accrued
including
interest
accrued interest
N 19
2020
Unrealised
gains
Unrealised
losses
Fair value
Debt securities issued by
semi-governmental entities
23,260
130
554
23,814
Corporate securities
1,293
1,292
79,454
217
the portfolio of investments classified as held to maturity as well as their fair value
in EUR thousand
Investments held to maturity
Fixed-income securities
Amortised cost thereof accrued
including
accrued interest
interest
N 18
2021
Unrealised
gains
Unrealised
Fair value
losses
Corporate securities
48,287
1,292
1,733
50,020
Covered bonds/asset-backed securities
345
1
Total
1,512
67,848
1,214,075
Consolidation
Total
31.12.20201
31.12.2021
31.12.20201
31.12.2021
N 15
31.12.20201
346
31.12.2021
45,710
299,180
10,620,228
9,429,038
15,049
15,810
15,049
48,632
2,443,629
45,473,677
185,577
2,312,840
38,851,723
314,453
474,123
Life and health reinsurance
Hannover Re | Annual Report 2021
200
Reinsurance payable
1,630,320
1
Financing liabilities
Other liabilities in the segment
Total liabilities
Restated pursuant to IAS 8
5,795,849
4,709,229
513,280
395,296
383,106
342,420
28,221
1,157,650
590,751
420,348
2,587,905
2,478,161
46,618,855
38,777,827
378,422
242,138
230,096
329,541
500,122
292,940
503,412
298,344
20,644,195
18,762,504
44,876
41,958
67,519,731
58,959,777
146,191
152,763
2,674,107
1,883,270
192,039
192,135
192,039
192,135
141
1,257
82
204,597
9,659,807
Contract deposits
1,278,071
49,001,626
7,090,387
340,400
753,655
920,960
22,068
5,804,409
5,327,167
62,923
82,221
1,433
731
443,793
327,426
434,657
371,972
12,584
4,110
12,588,070
11,379,177
44,876
41,958
7,556,003
1,355,114
56,213,248
10,803,071
165,916
Funds withheld
Unearned premium reserve
Hannover Re | Annual Report 2021
199
Annual financial statements
Consolidated segment report
Segmentation of assets
in EUR thousand
Assets
Fixed-income securities - held to maturity
Fixed-income securities - loans and receivables
The business activity of Annuity Reinsurance Cell A1, Hamil-
ton/Bermuda, which was consolidated for the first time in the
reporting period, is allocable to the life and health reinsur-
ance segment.
Property and casualty reinsurance
31.12.20201
48,286
1,954,457
Fixed-income securities - available for sale
34,837,639
139,867
1,998,611
29,422,685
Equity securities - available for sale
314,453
378,422
31.12.2021
The acquisitions of real estate companies referred to in the
subsection on major acquisitions and new formations are al-
located to the property and casualty reinsurance segment.
The same is true of the shares in HDI Global Specialty Hold-
ing GmbH, Hannover, which have now been sold.
There are no cross-segment gross premiums between the two
segments of property & casualty reinsurance and life & health
reinsurance. To this extent, the gross premiums shown are
exclusively amounts from business with external third par‐
ties.
During the financial year no material changes occurred in the
organisational structure that could have influenced the com-
position of the segments. Since the performance indicators
used to steer the segments correspond to the system accord-
ing to which the consolidated financial statement is prepared,
a separate reconciliation of the segment results with the
Group result is not provided.
in EUR thousand
In September 2020 Kubera Insurance (SAC) Ltd established a
segregated account that gathered investor capital by means
of issued bonds which was made available to an Australian
intermediary of insurance business under a swap agreement
for the financing of the latter's business. Repayment of the
bonds is contingent on the development of the intermediary's
business. Hannover Rück SE is an investor in the bond along
with other external parties. The segregated account can be
used flexibly for additional rounds of financing. Hannover Re
is not the owner of the segregated account.
With regard to commitments and obligations that we do not
consider to be support, particularly outstanding capital com-
mitments from special investments, please see our remarks in
section 8.7 "Contingent liabilities and commitments".
Hannover Re | Annual Report 2021
197
Annual financial statements
4.3 Major acquisitions and new formations
Within the 95.2%-owned US subgroup Hannover Re Real Es-
tate Holdings, Inc., Orlando/USA, the special purpose proper-
ty company 7653BWI LLC established in the third quarter of
2021 for the purpose of real estate acquisition by the subsid-
iary GLL HRE Core Properties, LP, both Wilmington/USA, was
consolidated for the first time. A property was placed with the
new company.
In the third quarter of 2021 Hannover Re participated in
the newly established special purpose property company
Rocky G. K., Tokyo/Japan, with a share of 99% through its
94.7%-owned subsidiary PAG Real Estate Asia Select Fund
Limited, George Town/Cayman Islands. The company
acquired a logistics property. In the third quarter PAG also
established the holding company ASF Spectrum Limited,
4.4 Major disposals and retirements
With economic effect from 31 December 2021 Hannover Re
sold the entire 49.8% interest that it held in HDI Global Spe-
cialty SE, Hannover, for a price of EUR 159 million to HDI
Global Specialty Holding GmbH, Hannover. The purchase
price was paid in January 2022. Deconsolidation of the com-
pany previously recognised at equity gave rise to income of
George Town/Cayman Islands, which acquired all shares in
the special purpose property company Ubitech Hub Pte. Ltd.,
Singapore/Singapore. The acquired company holds an office
building. A total amount of roughly EUR 245.3 million was
invested.
In the fourth quarter Hannover Re gained control over Annu-
ity Reinsurance Cell A1 through its wholly owned subsidiary
Hannover Life Reassurance Company of America (Bermuda)
Ltd., both Hamilton/Bermuda (ARCA1), because 100% of the
voting shares were acquired. ARCA1 is a segregated account
of Kubera Insurance (SAC) Ltd, Hamilton/Bermuda. The pur-
pose of the cell is to assume reinsurance portfolios and per-
form transformation services for the capital market.
EUR 9.9 million, which was recognised under profit or loss
from investments in associated companies. This includes cu-
mulative other comprehensive income of EUR -0.9 million,
which was realised. In addition, actuarial gains and losses of
EUR -0.3 million were recognised directly in equity.
198
Hannover Re | Annual Report 2021
5. Segment reporting
Based on the “management approach" of IFRS 8, which
requires segment information to be presented as it is re
ported internally to management and normally used by the
chief operating decision maker to decide upon the allocation
of resources to a segment and evaluate its performance,
Hannover Re has identified the reportable segments of
property & casualty reinsurance and life & health reinsurance.
With regard to the object of business operations within the
two segments please see our explanatory remarks on Han-
nover Re's business model on page 26 of the management
report. The report on economic position on page 31 et seq.
contains remarks on the economic environment in which the
Group operates.
The segment information shown follows the system used for
internal reporting purposes, on the basis of which the full Ex-
ecutive Board regularly evaluates the performance of seg-
ments and decides on the allocation of resources to them.
The "Consolidation” column includes not only the elimination
of cross-segment transactions but also, more significantly,
companies whose business operations cannot be unambigu-
ously allocated to property and casualty reinsurance or life
and health reinsurance. These are principally the service and
financing companies belonging to the Group.
Financial assets at fair value through profit or loss
87,403
110,304
Other invested assets
1,446
165,834
562
Deferred acquisition costs
1,474,442
1,169,521
Accounts receivable
5,637,585
4,155,372
Other assets in the segment
3,157,485
2,788,243
Total assets
59,833,990
50,165,354
Segmentation of liabilities
in EUR thousand
Liabilities
Loss and loss adjustment expense reserve
35,089,423
29,194,354
Benefit reserve
Reinsurance recoverables on other reserves
Provisions for contingent commissions
204,456
Reinsurance recoverables on benefit reserve
5,050,754
4,384,139
Short-term investments
379,437
244,474
Cash
907,873
901,989
Total investments and cash under own management
43,580,302
37,580,491
Funds withheld
3,247,068
2,569,420
Contract deposits
3,290
Total investments
46,830,660
2,527,916
5,404
40,155,315
1,730,507
Reinsurance recoverables on unpaid claims
Prepaid reinsurance premium
1,501
544
1,106
Restated pursuant to IAS 8
202
Hannover Re | Annual Report 2021
Life and health reinsurance
Consolidation
1.1.-31.12.2021
1.1.-31.12.2020
1.1.-31.12.2021
1.1.-31.12.2020
1
8,538,140
7,519,457
7,155,189
332
598,759
695,260
1,197
N 15
Total
1.1.-31.12.2021
8,026,284
33,927
614,778
1,082,445
Non-controlling interest in profit or loss
Group net income
245,050
223,557
Other income and expenses
(165,713)
109,495
Operating profit/loss (EBIT)
Financing costs
1,512,286
823,024
2,082
2,096
Net income before taxes
1,510,204
820,928
Taxes
359,911
172,223
1,150,293
648,705
Net income
thereof
1.1.-31.12.20201
27,762,314
24,770,342
226
1,263,718
1,204,764
5,793,235
5,116,204
265,243
254,107
414
518
510,707
478,182
438,729
336,267
(1,831)
(4,393)
271,185
441,369
223,257
393,017
(716)
(1,966)
1,734,827
(103,487)
Administrative expenses
(298,645)
(298,645)
24,143,652
21,360,795
2,719
1,943,012
1,685,468
33,835
63,007
36,114
63,971
31
1,793
87,665
129,393
219,723
171,313
268,250
221,765
7,103,372
6,438,315
18,617,725
16,782,658
(103,487)
2,703
3,911,440
other technical income/expenses
400,112
360,780
40,777,703
7,541,881
33,929,230
7,217,988
6,195,961
5,070,009
328,311
306,281
7,217,988
841,591
249,089
239,896
632,195
582,316
3,558,519
3,175,084
3,586,740
3,255,453
750,361
37,787
701,577
7,541,881
4,734,876
5,688,280
1,876,191
1,903,596
3,350,633
3,073,117
1,570,165
1,450,628
(197)
7,207,750
5,605,803
526,930
470,282
(1,933,723)
(1,702,174)
1,750,692
1,556,351
24,957,109
22,932,534
(1,888,847)
(1,660,413)
82,902,252
71,437,475
620,111
2,380,681
1,777,761
35,010
19,224,174
16,623,863
1,343,056
1.1.-31.12.20201
16,744,058
14,205,380
987,489
thereof
Change in fair value of financial instruments
Total depreciation, impairments and appreciation of investments
Income/expense on funds withheld and contract deposits
Claims and claims expenses
2,279
964
87,634
127,600
48,527
11,514,353
50,452
10,344,343
Change in benefit reserve
Commission and brokerage, change in deferred acquisition costs and
1.1.-31.12.2021
4,529,517
Property and casualty reinsurance
Net premium earned
3,741,717
2,975,918
4,370,255
3,431,276
3,188,682
21,743,022
2,863,934
19,553,960
(1,957,573)
(1,709,646)
3,819,014
3,632,449
1,784,144
1,266,272
70,146,021
59,598,059
Hannover Re | Annual Report 2021
201
Annual financial statements
Consolidated segment report
Segment statement of income
in EUR thousand
Gross written premium
Net investment income
Book values from business relations with unconsolidated structured entities
80,369
Income and expenses from level 3 financial assets and liabilities
2021
361,617
2020
245,478
(2)
(182)
361,615
245,296
75,048
31,334
214,154
35,743
88,129
19,682
1,236
(482)
(1,942)
22
36
238,110
361,617
N 31
Net book value at 31 December of the year under review
Currency translation at 31 December
Change recognised outside income
2021
2020
Group share of net income from continuing operations
35,743
88,129
Group share of income and expense recognised directly in equity
Group share of total recognised income and expense
(482)
(1,942)
35,261
No discontinued operations existed in the year under review
among the companies measured at equity. Insofar as there
are commitments from contingent liabilities of associated
companies, the Hannover Re Group shares in such commit-
ments in proportion to its respective shareholding.
86,187
Investments in associated companies
in EUR thousand
Net book value at 31 December of the previous year
Currency translation at 1 January
Net book value after currency translation
Additions
Disposals
Profit or loss on investments in associated companies
Dividend payments
The carrying amount of the investments in associated com-
panies changed as follows in the year under review:
Additions of EUR 73.1 million and disposals of EUR 54.2 mil-
lion result from a conversion of preference shares in connec-
tion with a restructuring measure at Monument Insurance
Group Limited, Hamilton, Bermuda. Further disposals are
attributable in an amount of EUR 159.0 million to HDI Global
Specialty SE, Hannover, Germany (HGS).
The profit or loss on investments in associated companies in-
cludes income from deconsolidation of HGS amounting to
EUR 9.9 million.
61,528
Disposals
Currency translation at 31 December
123,413
107,641
3,958
(3,760)
2,083,011
1,797,761
334,889
Gross book value at 31 December of the year under review
208,523
185,691
Currency translation at 1 January
10,452
(10,002)
Cumulative depreciation after currency translation
218,975
175,689
Disposals
Cumulative depreciation at 31 December of the previous year
N 30
Additions
1,867,577
Public price listings are not available for companies valued at
equity. The net book value of associated companies includes
goodwill in the amount of EUR 11.7 million (EUR 17.7 mil-
lion). For further details please see section 4 "Consolidation".
Real estate
Real estate is divided into real estate for own use and invest-
ment property. Own-use real estate is recognised under other
assets.
The investment property in the portfolio which is used to gen-
erate income is shown under the investments. Income and
expenses from rental agreements are included in the invest-
ment income.
Real estate is valued at cost of acquisition less depreciation
with useful lives of at most 50 years.
212
Hannover Re | Annual Report 2021
Development of investment property
1,847,634
N 32
2021
2020
Gross book value at 31 December of the previous year
1,797,761
1,935,208
Currency translation at 1 January
69,816
(87,574)
Gross book value after currency translation
in EUR thousand
in EUR thousand
Financial information on investments in associated companies
The following table shows combined financial information on
the Hannover Re Group's individually non-material invest-
ments in associated companies.
securities - at fair value
through profit or loss
Equity securities -
available-for-sale
N 29
2020
AUD
CAD
CNY
Fixed-income
EUR
USD
ZAR
Other
Total
163,071
13,783
8,723 ___- _—___________- 185,577
421,977 1,519,178
5,591
GBP
366,094
available-for-sale
Fixed-income
45,800 161,715 96,990
2,372,401
1,879 2,909,642
1,433 248,233
6,548
429,045 5,804,409
cash
Total
180,001
3,653,292
50,479 139,572 226,890 142,309 761,654
1,738,744 2,556,420 16,366,648 3,638,524 24,857,869
76,483
417,473 2,984,278 56,213,248
securities -
221,519 1,798,907
Hannover Re | Annual Report 2021
Breakdown of investments by currencies
in EUR thousand
Fixed-income
securities -
held to maturity
Fixed-income
securities -
loans and receivables1
210
10,029
-- 2,312,840
306,424 2,151,438 38,851,723
1 Restated pursuant to IAS 8
The maximum credit risk of the items shown here corre-
sponds to their carrying amounts.
Associated companies
The associated companies included at equity in the consoli-
dated financial statement that both on an individual basis and
in their entirety are not material for the Hannover Re Group
pursuant to IFRS 12 are comprised of
•
WeHaCo Unternehmensbeteiligungs-GmbH,
Hannover, Germany,
HANNOVER Finanz GmbH, Hannover, Germany,
•
Monument Insurance Group Limited,
98,413 285,529 1,605,497
411,376 2,648,462 49,001,626
Hamilton, Bermuda,
•
•
•
Clarendon Transport Underwriting Managers (Pty) Ltd.,
Johannesburg, South Africa,
Inqaku FC (Pty) Ltd, Port Elizabeth, South Africa,
Investsure Technologies Proprietary Limited,
Johannesburg, South Africa,
Information on the percentage share held by the Hannover Re
Group in the capital of the associated companies is provided
in the list of shareholdings in section 4.2 “Consolidated com-
panies and complete list of shareholdings".
Hannover Re | Annual Report 2021
211
Annual financial statements
as well as the following companies included at equity within
the subgroup Hannover Reinsurance Group Africa (Pty) Ltd.,
Johannesburg, South Africa:
3,176,026 1,374,374 1,374,186 11,054,552 3,141,105 16,273,618
539,512
3,747,753 20,204,539
3,395,934 1,411,655
105,711
-- 105,711
- - - 120,102
9,697 248,623
378,422
Other financial assets -
at fair value through
profit or loss
(9,766)
Other invested assets
77,627 104,174 314,490
1,873,790 15,308,117
81,203
50,873
80,489 2,611,385
234
6,539 211,261
234,689
5,327,167
Short-term investments,
cash
138,705
47,047
Total
10,750 182,598
2,336,290
(57,705)
84,894
8,099
38,402
Total financial liabilities
58,798
26,488
85,286
The following table provides a reconciliation of the fair values
of financial assets and liabilities included in level 3 at the be-
ginning of the financial year with the fair values as at 31 De-
cember of the financial year.
Movements in level 3 financial assets and liabilities
N 35
2021
in EUR thousand
Equity
securities
Other
financial assets
Real
estate funds
Other
invested assets
Other
liabilities
Net book value at 31 December of
the previous year
154,689
85,286
26,488
58,798
Other liabilities
38,957,434
Equity securities
378,422
Other financial assets
80,000
154,689
234,689
Real estate funds
582,296
Currency translation at 1 January
582,296
1,982,592
1,982,592
Short-term investments
Total financial assets
327,426
728,149
327,426
39,015,133
2,719,577
42,462,859
Other invested assets
12,921
582,296
23,279
1,982,592
77,362
465,770
562,687
1,124
Transfers to level 3
Transfers from level 3
Currency translation at 31 December
(607)
5,981
4,437
35,836
(338)
the year under review
161,024
805,911
2,297,589
22,240
Hannover Re | Annual Report 2021
215
Annual financial statements
Movements in level 3 financial assets and liabilities
Net book value at 31 December of
Total
223,401
Purchases
26,488
105,313
2,212
167,610
605,575
2,087,905
28,700
Net book value after currency
translation
Sales
Income and expenses
income
29,857
(7,905)
83,778
(7,246)
recognised directly in
shareholders' equity
56,221
218,386
recognised in the statement of
N 34
378,422
Level 3
management costs. The valuation result is also influenced by
increases and reductions based on specific property circum-
stances (upkeep, vacancies, rent divergences from the market
level, etc.). The evaluation of international real estate also
draws primarily on the discounted cash flow method. The
main feature of this method is the present value estimation of
projected annual free cash flows.
Real estate which is held for sale as defined by IFRS 5 is rec-
ognised separately in the consolidated balance sheet. Inten-
tions to sell are substantiated by individual real estate market
conditions and specific property circumstances, taking into
consideration current and future opportunity/risk profiles. In
the year under review no properties were reclassified to as-
sets held for sale.
In addition, we held indirect real estate investments meas-
ured at fair values in an amount of EUR 805.9 million (EUR
582.3 million) in the year under review, the amortised costs of
which amounted to EUR 691.6 million (EUR 527.9 million).
The differences between the carrying amounts and amortised
costs were recognised as unrealised gains of EUR 118.7 mil-
lion (EUR 58.6 million) and unrealised losses of EUR 4.4 mil-
lion (EUR 4.2 million) under cumulative other comprehensive
income.
Hannover Re | Annual Report 2021
213
Annual financial statements
Other invested assets
The other invested assets consisted largely of participating
interests in partnerships measured at fair value in an amount
of EUR 2,228.9 million (EUR 1,867.7 million), the amortised
cost of which amounted to EUR 1,605.8 million (EUR 1,493.1
million). The differences between the carrying amounts and
the amortised costs were recognised as unrealised gains of
EUR 638.8 million (EUR 415.8 million) and unrealised losses
of EUR 15.7 million (EUR 41.1 million) under cumulative oth-
er comprehensive income.
Short-term investments
The real estate in the investment portfolio is normally subject
to internal and external valuation by an appraiser as at the
balance sheet date. The two analyses do not differ from one
another in the methodology used, which means that the find-
ings are comparable at all times and on a continuous basis.
Generally speaking, the fair value of the real estate is deter-
mined using the discounted cash flow (DCF) method, with
rental income capitalised in consideration of the associated
This item comprises investments with a maturity of up to one
year at the time of investment. This includes overnight and
For the purposes of the disclosure requirements pursuant to
IFRS 13 "Fair Value Measurement”, financial assets and lia-
bilities are to be assigned to a three-level fair value hierarchy.
The fair value hierarchy, which reflects characteristics of the
price data and inputs used for measurement purposes, is
structured as follows:
•
Level 1: Assets or liabilities measured at (unadjusted)
prices quoted directly in active and liquid markets.
Level 2: Assets or liabilities which are measured using
observable market data and are not allocable to level 1.
Measurement is based, in particular, on prices for
comparable assets and liabilities that are traded on
active markets, prices on markets that are not consid-
ered active as well as inputs derived from such prices
or market data.
• Level 3: Assets or liabilities that cannot be measured or
can only be partially measured using observable market
inputs. The measurement of such instruments draws
principally on valuation models and methods.
In addition, acquired life insurance policies measured at fair
value through profit or loss were recognised under the other
invested assets in an amount of EUR 14.2 million (EUR 16.6
million). Loans granted in an amount of EUR 362.1 million
(EUR 183.5 million) were similarly recognised under other
invested assets.
time deposits as well as shares in investment funds that invest
in such securities.
If input factors from different levels are used to measure a fi-
nancial instrument, the level of the lowest input factor mate-
rial to measurement is determinative.
The operational units responsible for coordinating and docu-
menting measurement are organisationally separate from the
operational units that enter into investment risks. All relevant
valuation processes and valuation methods are documented.
Decisions on fundamental valuation issues are taken by a val-
uation committee that meets monthly.
Fair value hierarchy
In the financial year just ended, as in the previous year, no
investments were allocable to another level of the fair value
hierarchy.
Changes in this item are attributable to investment activities
at the relevant real estate companies belonging to the
Hannover Re Group.
The fair value of investment property excluding capitalised
right-of-use assets amounted to EUR 2,266.6 million (EUR
1,897.4 million) as at the balance sheet date.
36,609
Impairments
16,873
6,069
Appreciation
1,145
Currency translation at 31 December
1,181
(1,745)
In terms of diversification across various real estate sectors,
the focus is on office buildings (58%), complemented by
logistics properties (23%) and retail (17%). In geographical
terms, exposures are spread across the United States (38%),
Europe (excluding Germany; 18%) as well as Germany (21%)
and Asia (23%).
Cumulative depreciation at 31 December of the year under review
208,523
Net book value at 31 December of the previous year
Net book value at 1 January of the year under review
Net book value at 31 December of the year under review
1,589,238
1,749,517
1,648,602
1,671,945
1,818,754
1,589,238
With regard to the right-of-use assets included as part of the
accounting of leases, please see section 8.8 "Leases".
264,257
Depreciation
The following table shows the breakdown of financial assets
and liabilities recognised at fair value into the three-level fair
value hierarchy.
N 33
75,084
75,084
in EUR thousand
Fixed-income securities
Equity securities
Other financial assets
Real estate funds
Other invested assets
Short-term investments
443,793
22,240
22,240
Other assets
Other liabilities
Total financial liabilities
214
Hannover Re | Annual Report 2021
Fair value hierarchy of financial assets and liabilities recognised at fair value
in EUR thousand
Fixed-income securities
Level 1
22,301
2020
Level 2
38,935,133
Total financial assets
Fair value hierarchy of financial assets and liabilities recognised at fair value
52,844
2,012
49,666,976
2021
Level 1
30,051
Level 2
45,524,934
Level 3
Total
45,554,985
314,453
314,453
52,844
87,209
248,233
805,912
2,297,588
805,912
2,297,588
443,793
2,012
788,297
45,614,155
3,264,524
161,024
Other invested assets
Short-term investments,
profit or loss
at fair value through
36,504,341
257,925
2,387,486
40,104
143,264
38,851,723
Equity securities
Shares
587
36
623
Investment funds
267,442
268,029
110,357
110,393
377,799
378,422
Short-term investments
327,571
1,655
282
14,726
128,820
Investment funds
3,859,554
Debt securities issued by
semi-governmental entities
5,870,954
46,222
400,193
3,523
6,267,624
Corporate securities
54
12,140,504
818,711
8,595
12,950,620
Covered bonds/asset-backed securities
2,390,407
18,538
102,621
8,271
2,484,757
116,310
199
327,426
Total
80,696
105,007
612
704
81,308
105,711
80,696
105,007
612
accrued interest
704
105,711
Other financial assets
Derivatives
248,248
234,728
(15)
(39)
248,233
234,689
81,308
6,671
Fair value
Fair value before
37,099,941
259,580
2,497,933
40,303
39,557,571
The carrying amounts of the fixed-income securities and
equity securities classified as available for sale as well as the
short-term investments allocated to this category correspond
to their fair values, in the case of interest-bearing assets
including accrued interest.
Fair value of financial assets at fair value through profit or loss before and
after accrued interest as well as accrued interest on such financial assets
N 24
Accrued interest
in EUR thousand
profit or loss
Fixed-income securities
Corporate securities
2021
2020
2021
2020
2021
2020
Financial assets at fair value through
165,774
31,029
3,700,451
15,822,175
140,205
436,579
145,887
16,112,867
Covered bonds/asset-backed securities
3,011,312
20,188
56,351
Corporate securities
17,154
Investment funds
150,968
9,107
44,174,602
295,556
1,570,958
1,876
271,883
158,199
45,473,677
3,050,509
Equity securities
6,902,702
238,642
341,147
23,036
5,539,200
US Treasury notes
9,198,765
29,293
380,096
11,937
9,566,924
43,138
Other foreign government debt
4,063,095
29,735
109,036
28,855
4,143,276
Debt securities issued by
semi-governmental entities
6,707,198
56,544
securities
248,248
Investment funds
Total
Amortised cost thereof accrued
including accrued
interest
Unrealised
gains
Unrealised
losses
Fair value
interest
Fixed-income securities
Government debt securities of
EU member states
5,012,966
2020
20,970
1,540
US Treasury notes
7,260,239
24,856
505,067
11,222
5,391,820
7,754,084
Other foreign government debt
securities
380,394
Short-term investments
N 23
in EUR thousand
Hannover Re | Annual Report 2021
183,529
183,529
130,924
130,924
314,453
314,453
443,752
1,375
138
Available for sale
97
44,801,883
296,931
1,702,020
271,980
46,231,923
207
Annual financial statements
Amortised cost, unrealised gains and losses and accrued interest on
the portfolio of investments classified as available for sale as well as their fair value
443,793
234,728
(15)
(39)
185,577
securities -
loans and receivables 1 1,453,828
40,844 432,361 259,619
30,114
96,074 2,312,840
Fixed-income
securities -
available-for-sale
48,284
17,200,308 5,677,906 6,787,056 7,020,943 1,077,843
15,340
774,897 38,851,723
Fixed-income
securities at fair value
through profit or loss
105,711
105,711
Total fixed-income
securities
18,754,999 5,755,180 7,267,701 7,280,562 1,107,957
297,430
297,430
36,430
Total
81,308
23,027 1,468,072 48,047,246
209
Annual financial statements
Rating structure of fixed-income securities
in EUR thousand
Fixed-income
securities -
held-to-maturity
100,863
Fixed-income
2020
AAA
AA
A
BBB
BB
B
C
Other
N 27
81,308
15,340
1 Restated pursuant to IAS 8
Fixed-income
securities - at fair value
through profit or loss
Equity securities -
available-for-sale
48,286
753,113 1,417,682
346
243,063
available-for-sale
48,632
3,416,331 1,688,265 1,663,735 12,157,995 3,324,741 20,555,887
334,442 2,332,281 45,473,677
81,308
- - 81,308
314,453
97,594
7,880
208,979
Other financial assets -
2,443,629
976,682 41,455,851
securities -
29,771
The maximum credit risk of the items shown here corre-
sponds to their carrying amounts.
Breakdown of investments by currencies
in EUR thousand
Fixed-income
securities -
held to maturity
Fixed-income
N 28
2021
Fixed-income
AUD
CNY
EUR
GBP
USD
ZAR
Other
Total
securities -
loans and receivables
CAD
in EUR thousand
Hannover Re | Annual Report 2021
Total fixed-income
securities
Impairment
Fixed-income securities - held to maturity
48,632
185,577
Fixed-income securities -
loans and receivables1
2,443,629
2,312,840
Fixed-income securities - available for sale
Carrying amount
before impairment
45,473,910
38,863,495
11,772
Short-term investments
443,916
123
327,554
128
Equity securities - available for sale
314,453
233
378,422
Impairment
in EUR thousand
248,233
234,689
Total
208
328,944
339,735
597
665
329,541
Carrying amount
before impairment
340,400
The carrying amounts of the financial assets at fair value
through profit or loss correspond to their fair values including
accrued interest.
Hannover Re recognised in this category as at the balance
sheet date designated fixed-income securities amounting to
EUR 81.3 million (EUR 105.7 million) as well as derivative fi-
nancial instruments in an amount of EUR 248.2 million (EUR
234.7 million) that are originally allocable to this item.
Analysis of the fair value changes in the portfolio of fixed-in-
come securities at fair value through profit or loss indicated
Carrying amounts before impairment
that, just as in the previous year, no fair value changes were
attributable to a changed credit risk. We additionally use an
internal rating method to back up this analysis. Our internal
rating system is based on the corresponding credit ratings of
securities assigned by the agencies Standard & Poor's and
Moody's and in each case reflects the lowest of the available
ratings.
For further information please see the explanatory remarks in
section 8.1 "Derivative financial instruments and financial
guarantees".
N 25
2021
2020
Hannover Re | Annual Report 2021
20,836,704 6,085,424 8,901,166 8,945,362 1,432,590 354,901
Participating interests and other
Total
Total
346
48,286
48,632
Fixed-income
securities -
loans and receivables
1,175,987
40,638 759,735 244,565
Other
43,430
Fixed-income
securities -
available-for-sale
19,660,717 6,044,440 8,093,145 8,700,797 1,389,160
354,901
23,027 1,207,490 45,473,677
Fixed-income
securities - at fair value
through profit or loss
179,274 2,443,629
invested assets, real estate funds
C
BB
3,780,794
52,505,334
33,249
3,451,555
75,243
33,605
45,519,443
87,143
1 Restated pursuant to IAS 8
For further explanatory remarks on the impairment criteria
please see section 3.1 "Summary of major accounting poli-
cies".
B
Rating structure of fixed-income securities
Fixed-income
securities -
held-to-maturity
N 26
2021
AAA
AA
A
BBB
in EUR thousand
in EUR thousand
5,221,089
Fair value
216
Hannover Re | Annual Report 2021
19,591
Government debt securities of
Fixed-income securities
Available for sale
(24,931)
Fair value
2021
Unrealised
gains
N 22
interest
Amortised cost thereof accrued
in EUR thousand
the portfolio of investments classified as available for sale as well as their fair value
Unrealised
losses
(7,905)
Total depreciation, impairments and
appreciation of investments
29,857
7,246
Change in fair value of financial
instruments
29,857
Total depreciation, impairments and
appreciation of investments
(7,905)
(24,931)
Thereof attributable to financial
instruments included in the portfolio
at 31 December the year under
review
(266)
7,246
Ordinary investment income
(23)
Change in fair value of financial
instruments
Amortised cost, unrealised gains and losses and accrued interest on
from the amortised cost plus accrued interest.
The carrying amount of the loans and receivables is arrived at
1 Restated pursuant to IAS 8
1,117,235
Corporate securities¹
semi-governmental entities
Debt securities issued by
Loans and receivables
in EUR thousand
interest
losses
Unrealised
Unrealised
gains
Amortised cost thereof accrued
including accrued
interest
2020
N 21
Amortised cost, unrealised gains and losses and accrued interest on loans and
receivables as well as their fair value
EU member states
17,285
(878)
124,022
817,108
2,517,966
2,312
207,438
35,520
2,312,840
Total
437,157
58,660
6,399
378,497
Covered bonds/asset-backed securities
839,552
2,312
24,756
11,836
1,241,257
109,610
including
accrued interest
Other
liabilities
(147)
shareholders' equity
(6,563)
(53,155)
(12,936)
37,895
147
recognised directly in
income
recognised in the statement of
27,349
1,732,302
511,156
146,042
(2,693)
(2,934)
(109,090)
65,668
Sales
The breakdown of income and expenses recognised in the
statement of income in the financial year in connection with
financial assets and liabilities assigned to level 3 is as follows:
the year under review
Net book value at 31 December for
of the year under review
(23)
Transfers from level 3
Transfers to level 3
425
165,302
45,170
90,714
5,154
416,927
135,059
56,397
Purchases
(23,583)
Currency translation at 31 December
30,042
5,069
(2,879)
(13,848)
973
154,689
582,296
1,982,592
26,488
N 37
2021
Equity
securities
financial assets
Real
estate funds
Other
invested assets
- (14,376)
Realised gains and losses on invest-
ments
Ordinary investment income
Other
Net book value at 31 December of
Total in the financial year
534,739
160,418
Other
liabilities
Other
invested assets
estate funds
Real
1,841,392
Equity
securities
2020
N 36
Income and expenses
Net book value after currency
translation
Currency translation at 1 January
Other
financial assets
the previous year
Currency translation at 31 December
(108)
145
Cumulative depreciation at 31 December of the year under review
121,818
27,003
Net book value at 31 December of the previous year
31,318
Net book value at 31 December of the year under review
1
31,318
With regard to the measurement of fixtures, fittings and
equipment, the reader is referred to our explanatory notes on
the other assets in section 3.1 "Summary of major accounting
policies".
122,498
35,529
133,300
10,311
122,498
With regard to the leased assets contained in this table we
would refer to section 8.8 "Leases".
Cumulative depreciation at 31 December of the previous year
137,167
Currency translation at 1 January
3,052
Changes in the consolidated group
(3,867)
125,550
Disposals
15,729
21,259
Depreciation
12,105
Cumulative depreciation after currency translation
224
Additions
Other intangible assets
153,816
(1,733)
1,194
Currency translation at 1 January
259,996
262,307
Cumulative depreciation at 31 December of the previous year
394,002
422,221
Gross book value at 31 December of the year under review
12
17,008
2,483
Currency translation at 31 December
Disposals
23,819
23,104
Development of other intangible assets
N 52
in EUR thousand
2021
2020
Gross book value at 31 December of the previous year
Hannover Re | Annual Report 2021
394,002
Currency translation at 1 January
7,586
(6,897)
Gross book value after currency translation
401,588
387,191
394,088
157,347
Level 3
238
94,043
101,891
(366)
97
5,344
2,166
89,065
99,628
(6,270)
5,585
95,335
94,043
119,850
127,591
25,807
25,700
(9,300)
2020
129,150
2021
119,850
N 50
Net book value at 31 December of the year under review
Net book value at 31 December of the previous year
Cumulative depreciation at 31 December of the year under review
Currency translation at 31 December
Amortisation
Cumulative depreciation after currency translation
Currency translation at 1 January
Cumulative depreciation at 31 December of the previous year
Gross book value at 31 December of the year under review
Currency translation at 1 January
Cumulative depreciation after currency translation
7,741
33,815
25,807
This item comprises the present value of future cash flows
recognised on business acquired in 2009 in the context of the
acquisition of the ING life reinsurance portfolio. This intan-
gible asset is amortised over the term of the underlying rein-
surance contracts in proportion to the future premium in-
93
Currency translation at 31 December
2
Changes in the consolidated group
21,583
16,053
Disposals
15,483
15,694
Additions
159,676
157,613
Gross book value after currency translation
(4,494)
3,797
Currency translation at 1 January
164,170
Insurance for pension commitments
Effective 1 July 2003 Hannover Rück SE took out insurance
for pension commitments. The commitments involve deferred
annuities with regular premium payment under a group in-
surance policy. In accordance with IAS 19 "Employee Bene-
fits" they were carried as a separate asset at fair value as at
the balance sheet date in an amount of EUR 102.5 million
(EUR 100.0 million).
come. The period of amortisation amounts to altogether
30 years. For further information please refer to our explana-
tory notes on intangible assets in section 3.1 "Summary of
major accounting policies".
Hannover Re | Annual Report 2021
223
Annual financial statements
Gross book value at 31 December of the year under review
Fixtures, fittings and equipment
N 51
in EUR thousand
2021
2020
Gross book value at 31 December of the previous year
153,816
Fixtures, fittings and equipment
263,501
Net book value after currency translation
Disposals
Specific value adjustment for retrocessions
(216,675) (3,972,596)
(1,829,034) (9,930,631)
(2,045,709) (13,903,227)
(4,189,271)
(11,759,665)
(15,948,936)
(910,023) (3,899,052)
(1,039,301) (10,405,986)
(1,949,324) (14,305,038)
(4,809,075)
(11,445,287)
(16,254,362)
Previous years
Year under review
Claims and claims expenses paid (net) 1
Less:
3,441,693
16,782,658
2,012,537
18,795,195
1,178,440
4,620,133
Reversal of impairments
13,340,965
14,175,062
2,002,255 14,749,253
611,254 3,868,472
2,613,509 18,617,725
16,751,508
4,479,726
21,231,234
Previous years
Year under review
(net) 1
Incurred claims and claims expenses
2,050,114 30,946,117
(139,593) (1,744,111)
1,910,521 29,202,006
32,996,231
(1,883,704)
31,112,527
1,883,270 32,045,960
110,411 1,650,008
1,993,681 33,695,968
1,760,419
35,689,649
Gross book value at 31 December of the previous year
Currency translation at 1 January
33,929,230
834,097
Net book value at 31 December of the
previous year
40
315
637
Hannover Re | Annual Report 2021
226
The run-off triangles show the run-off of the net loss reserve
(loss and loss adjustment expense reserve) established as at
each balance sheet date, this reserve comprising the provi-
sions constituted in each case for the current and preceding
occurrence years.
The run-off triangles provided by the reporting units are
shown after adjustment for the currency effects arising out of
translation of the respective transaction currency into the lo-
cal reporting currency. The run-off triangles of the reporting
units delivered in foreign currencies are translated to euro at
the current rate on the balance sheet date in order to show
run-off results after adjustment for currency effects. In cases
where the originally estimated ultimate loss corresponds to
the actual ultimate loss in the original currency, it is ensured
that also after translation to the Group reporting currency
(EUR) a run-off result induced purely by currency effects is
not shown.
Run-off of the net loss reserve in the property and casualty reinsurance segment
To some extent the loss and loss adjustment expense reserves
are inevitably based upon estimations that entail an element
of uncertainty. The difference between the loss reserves con-
stituted in the previous year and the losses paid out of these
reserves is reflected in the net run-off result. In this regard,
owing to the fact that the period of some reinsurance treaties
is not the calendar year or because they are concluded on an
underwriting-year basis, it is frequently impossible to make
an exact allocation of claims expenditures to the current fi-
nancial year or the previous year.
The total amount of the net reserve before specific value ad-
justments was EUR 38,047.8 million (EUR 31,994.0 million)
as at the balance sheet date.
On balance, cumulative specific value adjustments of EUR
55.8 million (EUR 52.0 million) were recognised in these re-
insurance recoverables as at the balance sheet date.
excluding effects from portfolio entries/exits recognised in income
1
32,045,960
1,883,270
33,929,230
38,103,596
(40)
(315)
2,674,107
Net book value at 31 December of the
year under review
(19,978)
11,168
(11,744)
(9,002)
(20,746)
(8,810)
95,216
15,966
111,182
Currency translation at 31 December
Portfolio entries/exits
(4,392)
4,392
(637)
40,777,703
net
retro
gross
net
retro
gross
in EUR thousand
2020
2021
N 53
Technical provisions
In order to show the net technical provisions remaining in the
retention, the following table compares the gross provisions
with the corresponding retrocessionaires' shares, which are
shown as assets in the balance sheet.
6.7 Technical provisions
Credit risks may result from other financial assets that were
not overdue or adjusted as at the balance sheet date. In this
regard, the reader is referred in general to our comments on
the credit risk contained in the risk report on page 98 et seq.
The gross book values include rights from long-term reinsur-
ance treaties still existing as at the balance sheet date. The
intangible assets resulting from these rights were recognised
in the context of business acquisitions in the years 1997 and
2002 and were written off in full as at the balance sheet date.
The item includes EUR 30.4 million (EUR 32.5 million) for
purchased software as at the balance sheet date, on which
depreciation is taken over useful lives of three to ten years. Of
the additions, an amount of EUR 6.8 million (EUR 7.0 million)
is attributable to purchased software. Among other things,
the amortised cost of the intangible assets identified in
connection with the acquisition of Argenta Holdings Limited
in an amount of EUR 81.2 million (EUR 76.8 million) is also
recognised under other intangible assets.
131,695
Loss and loss adjustment expense reserve
138,487
131,695
262,307
283,734
(60)
159
20,198
21,406
16,094
1,332
Net book value at 31 December of the year under review
Net book value at 31 December of the previous year
Cumulative depreciation at 31 December of the year under review
Currency translation at 31 December
Depreciation
134,092
40,777,703
Benefit reserve
7,541,881
net
2020
retro
gross
2021
in EUR thousand
N 54
serve is shown in the following table. Commencing with the
gross reserve, the change in the reserve after deduction of the
reinsurers' portions is shown in the year under review and
the previous year.
Loss and loss adjustment expense reserve
The loss and loss adjustment expense reserves are in princi-
ple calculated on the basis of the information supplied by
ceding companies. Additional IBNR reserves are established
for losses that have been incurred but not as yet reported.
The development of the loss and loss adjustment expense re-
Annual financial statements
225
Hannover Re | Annual Report 2021
700,471
44,676,377
1,106
2,242,427
701,577
46,918,804
838,888
52,283,690
Unearned premium reserve
6,195,961
Other technical provisions
Total
841,591
55,357,136
2,674,107
192,039
204,597
2,703
3,073,446
258,263
38,103,596
7,349,842
5,991,364
retro
net
1,883,270
192,135
32,045,960
7,025,853
165,916
4,904,093
gross
33,929,230
7,217,988
5,070,009
248,694
in EUR thousand
Present value of future profits (PVFP) on acquired life reinsurance portfolios
805,912
101,348
356,184
2,448
2,249,029
295,855
443,793
(440)
290,131
48,203,559
(65,490)
(32,891)
34,426
4,716,976
414,325
218
Hannover Re | Annual Report 2021
Fair value disclosures for financial assets
Financial assets that give rise to
solely payments of principal and
interest (SPPI criterion)
2020
All other financial assets
N 42
in EUR thousand
Fixed-income securities - held to maturity
2,071
Fixed-income securities -
231,707
314,453
at fair value through profit or loss
Equity securities - available for sale
Other financial assets -
at fair value through profit or loss
Real estate funds
Other invested assets
Short-term investments
Other assets
Total
2021
56,757
All other financial assets
Fair value at 31.12.
Fair value change in
the financial year
(46,109)
7,129
(247)
(17,277)
549,219
(8,213)
81,308
85
N 41
loans and receivable 1
Fair value at 31.12.
191,475
582,296
16,107
389,585
4,961
1,970,964
(14,830)
327,426
(3,069)
Total
93,721
41,492,650
Other assets
21,791
4,165,961
161,194
1 Restated pursuant to IAS 8
Rating structure of financial assets that give rise to solely payments of principal and interest
in EUR thousand
AAA
AA
A
BBB
BB or lower
258,068
Short-term investments
Other invested assets
Real estate funds
Fair value change in
the financial year
(2,657)
Fair value at 31.12.
Fair value change in
the financial year
2,516,906
(26,081)
1,061
(205)
Fixed-income securities - available for sale
38,300,963
281,845
550,760
(5,316)
Fixed-income securities -
at fair value through profit or loss
Equity securities - available for sale
Other financial assets -
at fair value through profit or loss
105,711
22,782
378,422
104,396
227,530
41,329
Fixed-income securities -
44,924,458
Fixed-income securities - available for sale
2,582,638
2,639,915
2,266,593
Total
Level 3
330,542
2,266,593
Level 2
2,309,373
Level 1
2021
Hannover Re | Annual Report 2021
Total financial liabilities
Financing liabilities
Total financial assets
4,016
4,016
Other invested assets
Fixed-income securities
in EUR thousand
N 39
Fair value hierarchy of financial assets and liabilities measured at amortised cost
for measurement as at the balance sheet date, the fair values
for these items would amount to EUR 2,731.4 million. The
remaining financial assets included in level 3 with a volume of
EUR 229.7 million (EUR 269.6 million) relate to investments,
the valuation of which is based inter alia on technical param-
eters. Derivative financial instruments in connection with the
reinsurance business were recognised under the other liabil-
ities included in level 3 in the year under review. Their perfor-
mance is dependent upon lapse rates within an underlying
primary insurance portfolio. The application of alternative
inputs and assumptions has no material effect on the consol-
idated financial statement.
If models are used to measure financial assets and liabilities
included in level 3 under which the adoption of alternative
inputs leads to a material change in fair value, IFRS 13 re-
quires disclosure of the effects of these alternative assump-
tions. Of the financial assets included in level 3 with fair val-
ues of altogether EUR 3,264.5 million (EUR 2,719.6 million)
as at the balance sheet date, Hannover Re measures financial
assets with a volume of EUR 3,034.9 million (EUR 2,450.0
million) using the net asset value method. These items con-
sist principally of shares in private equity and real estate
funds. Assuming that the present values of the assets and lia-
bilities contained in the funds would be 10% lower than used
(52,724)
(12,936)
6,989
- (289)
Total
2,709,441
6,467
633,520
644,003
2020
Level 2
2,460,747
Level 1
1 Restated pursuant to IAS 8
Total financial liabilities
Financing liabilites
Total financial assets
Other invested assets
Investment property
Fixed-income securities¹
in EUR thousand
N 40
Fair value hierarchy of financial assets and liabilities measured at amortised cost
Annual financial statements
217
4,398,740
238,127
4,160,613
4,398,740
238,127
4,160,613
5,550,511
3,230,655
2,315,840
- 37,895
No rating
(52,724)
6,989
1,897,351
87,260
725,062
812,322
2,548,007
2,871,107
5,419,114
3,518,114
3,518,114
110,444
110,444
1,897,351
3,628,558
3,628,558
shares in investment funds that by their very nature cannot
fulfil the cash flow criterion enshrined in IFRS 9. The cash
flow criterion is met if the contractual conditions of the finan-
cial instrument give rise to cash flows at set times that are
solely payments of principal and interest (SPPI test).
Fair value disclosures for financial assets
Financial assets that give rise to
solely payments of principal and
interest (SPPI criterion)
Fair value change in
the financial year
(4,552)
in EUR thousand
Fair value at 31.12.
Fixed-income securities - held to maturity
50,148
Fixed-income securities -
loans and receivables
Disclosures relating to deferred adoption of IFRS 9
The table below shows the financial assets that are to be rec-
ognised in future in accordance with IFRS 9 and splits them
into a group that satisfies the cash flow criterion for financial
assets as well as all other financial assets. The latter encom-
pass the financial assets currently measured at fair value
through profit or loss, especially equity instruments held and
Ordinary investment income
Realised gains and losses on invest-
ments
Change in fair value of financial
instruments
(289)
(426)
(151)
37,895
-- 9
147
Other
liabilities
invested assets
estate funds
financial assets
Other
Real
Other
Equity
securities
2020
N 38
Total depreciation, impairments and
appreciation of investments
Change in fair value of financial
instruments
Ordinary investment income
at 31 December the year under
review
instruments included in the portfolio
Thereof attributable to financial
Total depreciation, impairments and
appreciation of investments
(12,936)
low credit risk
more than a low credit risk¹
Total
1 Restated pursuant to IAS 8
84,658
3,935
83,933
242
80,965
This item principally includes the goodwill from the acquisi-
tions of E+S Rückversicherung AG (EUR 36.1 million, pre-
vious year: EUR 36.1 million)), Integra Insurance Solutions
Limited (EUR 11.4 million, previous year: EUR 10.6 million)
and Argenta Holdings Limited (EUR 30.1 million, previous
year: 28.0 million).
For the purposes of the impairment test, the goodwill was al-
located to the cash-generating units (CGUs) that represent
the lowest level on which goodwill is monitored for internal
management purposes. In the instances of goodwill recog-
nised as at the balance sheet date, the CGUS are the respec-
tive legal entities. The recoverable amount is established on
Hannover Re | Annual Report 2021
221
Annual financial statements
the basis of the value in use, which is calculated using the
discounted cash flow method. In this context, the detailed
planning phase draws on the planning calculations of the
CGUS/companies covering the next five years. These plan-
ning calculations represent the outcome of a detailed plan-
ning process in which all responsible members of manage-
ment are involved and where allowance is made for the latest
market developments affecting the relevant entity (in relation
to the sector and the economy as a whole). The subsequent
perpetuity phase is guided by the profit margins and revenue
growth rates that management believes can be sustainably
generated. The capitalisation rate is based on the Capital As-
set Pricing Model (CAPM) as well as growth rates that are
considered realistic in light of the specific market environ-
ment. The risk-free basic interest rate is determined, where
possible, using corresponding yield curve data from the re-
83,933
Capitalisation rates
The following capitalisation rates and growth rates were rec-
ognised for the individual cash-generating units:
in EUR thousand
Argenta Holdings Limited
E+S Rückversicherung AG
Integra Insurance Solutions Limited
N 48
2021
Capitalisation rate
2020
2021
2020
spective national banks. If this data cannot be obtained or can
only be obtained with a disproportionately high effort, refer-
ence is made to the yields of the respective 30-year govern-
ment bonds. Both the yield curves and the government bonds
reflect the current interest rate trend on financial markets.
The selection of the market risk premium is guided by the
ranges currently recommended by the Institute of Public
Auditors in Germany (IDW). The beta factor is calculated for
Hannover Rück SE on the basis of publicly accessible capital
market data. The foreign exchange rates used for currency
translation correspond to the situation on the balance sheet
date.
(3,645)
2,968
88,303
36,549
24,943
7,244,299
5,630,746
36,549
7,207,750
24,943
5,605,803
In addition, we took specific value adjustments on reinsur-
ance recoverables on unpaid claims in the year under review.
We would refer the reader to the corresponding remarks on
the loss and loss adjustment expense reserve in section 3.1
"Summary of major accounting policies". With regard to the
credit risks resulting from technical assets we would also re-
fer the reader to our comments on page 108 et seq. of the risk
report.
6.5 Goodwill
In accordance with IFRS 3 "Business Combinations" amorti-
sation is not taken on goodwill. Goodwill was subject to an
impairment test.
Development of goodwill
in EUR thousand
Net book value at 31 December of the previous year
Currency translation at 1 January
Net book value after currency translation
Value adjustments
Currency translation at 31 December
Net book value at 31 December of the year under review
N 47
2020
2021
80,965
Growth rate
Cumulative value adjustments at 31 December of the year under review
Gross book value of accounts receivable at 31 December of the year under review
Cumulative value adjustments at 31 December of the year under review
Net book value of accounts receivable at 31 December of the year under review
6.93%
5.65%
1.00%
105,168
Tax refund claims
196,826
304,288
Fixtures, fittings and equipment
35,529
31,318
Receivables from advance payments and services
87,997
69,282
129,806
Sundry1
91,584
972,167
859,136
Total
1 Restated pursuant to IAS 8
222
Hannover Re | Annual Report 2021
With regard to the right-of-use assets from lease contracts
included in the items "Own-use real estate", "Fixtures, fit-
tings and equipment” and “Sundry”, please see section 8.8
"Leases".
The purchase price receivable from the sale of HDI Global
Specialty SE in an amount of EUR 159.0 million is included in
the sundry assets. For details we would refer to section 4.4
"Major disposals and retirements". The sundry assets contain
unadjusted other receivables of EUR 0.4 million (EUR 0.3 mil-
lion) that were overdue by more than twelve months as at the
balance sheet date.
255,292
Own-use real estate
99,994
102,530
1.00%
5.38%
0.00%
0.00%
6.64%
6.36%
1.00%
1.00%
The capitalisation rates as well as material/value-influencing
items of the respective planning calculations (inter alia pre-
mium volumes, investment income or loss ratios) were varied
as part of sensitivity analyses. In this context, individual pa-
rameters were changed within appropriate bands that can be
expected in light of the current market situations and devel-
opments. It was established that where changes were made
to parameters in areas that could reasonably occur, the values
in use were above the corresponding book values. We would
also refer to our basic remarks in section 3.1 “Summary of
major accounting policies".
6.6 Other assets
Other assets
N 49
in EUR thousand
2021
2020
Present value of future profits on acquired life reinsurance portfolios
25,700
25,807
Other intangible assets
138,487
131,695
Insurance for pension commitments
6.66%
Development of the present value of future profits (PVFP) on acquired life reinsurance portfolios
7,903
7,058
The contract deposits on the assets side increased by EUR
205.1 million in the year under review from EUR 298.3 mil-
lion to EUR 503.4 million.
6.4 Technical assets
The retrocessionaires' portions of the technical provisions are
based on the contractual agreements of the underlying
reinsurance treaties. For further details please refer to our
comments in section 6.7 “Technical provisions”. With regard
to the nature and scope of risks arising out of insurance
contracts we would also refer to the explanatory remarks on
page 94 et seq. of the risk report.
SFAS 60 requires that acquisition costs be capitalised as as-
sets and amortised in proportion to the earned premium.
In the case of reinsurance treaties for unit-linked life insur-
ance policies classified as "universal life-type contracts" pur-
suant to SFAS 97, the capitalised acquisition costs are amor-
tised on the basis of the estimated gross profit margins from
the reinsurance treaties, making allowance for the period of
Development of deferred acquisition costs
in EUR thousand
Net book value at 31 December of the previous year
Currency translation at 1 January
Net book value after currency translation
6.3 Contract deposits (assets)
Additions
Currency translation at 31 December
Net book value at 31 December of the year under review
1 Restated pursuant to IAS 8
For further explanatory remarks please see section 3.1 "Sum-
mary of major accounting policies".
the insurance contracts. A discount rate based on the interest
for medium-term government bonds was applied to such con-
tracts. In the case of annuity policies with a single premium
payment, these values refer to the expected policy period or
period of annuity payment.
In life and health reinsurance the deferred acquisition costs
associated with life and annuity policies with regular premi-
um payments are determined in light of the period of the con-
tracts, the expected surrenders, the lapse expectancies and
the anticipated interest income.
In property and casualty reinsurance acquisition costs direct-
ly connected with the acquisition or renewal of contracts are
deferred for the unearned portion of the premium.
N 44
2021
20201
Amortisations
Annual financial statements
219
Hannover Re | Annual Report 2021
The fair value for financial assets that meet the cash flow cri-
terion and have more than a low credit risk corresponds to
the carrying amount before impairment shown in the table.
N 43
2021
Total in the financial year
2020
20,805,954
18,731,863
6,385,404
6,045,082
8,861,601
7,136,068
8,721,294
7,081,788
1,695,478
1,320,595
1,120,019
183,731
47,773,481
727,536
128,690
41,171,622
6.2 Funds withheld (assets)
The funds withheld totalling EUR 10,803.1 million (EUR
9,659.8 million) represent the cash deposits furnished by our
company to our cedants that do not trigger any cash flows
and cannot be realised by cedants without our consent. The
maturities of these deposits are matched to the correspond-
ing provisions. In the event of default on such a deposit our
reinsurance commitment is reduced to the same extent.
3,073,117
886
2,931,722
(140,130)
The default risks associated with accounts receivable under
reinsurance business are determined and recognised on the
basis of case-by-case analyses.
The value adjustments on accounts receivable that we recog-
nise in adjustment accounts changed as follows in the year
under review:
Value adjustments on accounts receivable
in EUR thousand
Cumulative value adjustments at 31 December of the previous year
Currency translation at 1 January
Cumulative value adjustments after currency translation
Value adjustments
Reversal
Utilisation
Within the scope of our management of receivables we ex-
pect to receive payment of accounts receivable within three
months of the date of creation of the debit entry unless other-
wise agreed
- a period for which we also make allowance in
our risk analysis. Please see our comments on the counter-
party default risk within the risk report on page 108 et seq.
N 46
2020
24,943
33,840
1,008
(1,516)
25,951
32,324
15,139
7,580
3,655
2021
Hannover Re | Annual Report 2021
174,921
339,613
3,221,438
2,791,592
1,617,119
1,494,109
1,511,101
1,198,387
23,177
3,350,633
(14,197)
3,073,117
The age structure of the accounts receivable which were un-
adjusted but classified as overdue at the balance sheet date is
presented below.
Age structure of overdue accounts receivable
in EUR thousand
Accounts receivable
220
N 45
2021
2020
Three months to
one year
479,549
More than
one year
271,037
Three months to
one year
More than
one year
148,321
Investment property
Income and expenses from level 3 financial assets and liabilities
in EUR thousand
481
208,750
229,252
Of the total provisions for pensions, an amount of EUR
205.8 million (EUR 226.0 million) is attributable to employ-
er-funded obligations and EUR 3.0 million (EUR 3.3 million)
to employee-funded obligations.
Sensitivity analysis
An increase or decrease in the key actuarial assumptions
would have the following effect on the present value of the
defined benefit obligation as at the balance sheet date:
Effect on the defined benefit obligation
in EUR thousand
Discount rate
Rate of compensation increase
Pension indexation
In the current financial year Hannover Re anticipates contri-
bution payments of EUR 5.9 million under the plans set out
above. The weighted average duration of the defined benefit
obligation is 17.8 (18.7) years.
N 63
(+/- 0.5%)
Parameter increase
(22,548)
Parameter decrease
25,486
(+/- 0.25%)
(+/- 0.25%)
1,410
8,088
(1,406)
229,252
(7,745)
208,269
56,910
269,961
286,162
61,699
56,910
7
The actuarial gain from change in financial assumptions re-
sults primarily from an increase in the discount rate, which to
some extent is offset by the increase in the rate of compensa-
tion and the pension progression.
The plan assets contain assets held by a long-term employee
benefit fund and qualifying insurance policies as defined by
IAS 19. The plan assets are attributable in an amount of EUR
21.4 million (EUR 18.3 million) to assets with quoted market
prices.
232
Hannover Re | Annual Report 2021
The reconciliation of the projected benefit obligations with
the recognised provisions for pensions is as follows:
Provisions for pensions
in EUR thousand
Projected benefit obligations at 31 December of the financial year
Fair value of plan assets at 31 December of the financial year
Effect of minimum funding requirement on asset ceiling
Recognised pension obligations at 31 December of the financial year
thereof: Capitalised assets
Provisions for pensions
N 62
2021
269,961
2020
286,162
61,699
7
Furthermore, a change is possible with respect to the as-
sumed mortality rates and lifespans. The underlying mortality
tables were adjusted by reducing the mortalities by 10% in
order to determine the longevity risk. Extending the lifespans
Defined contribution plans
In addition to the defined benefit plans, some Group compa-
nies have defined contribution plans that are based on length
of service and the employee's income or level of contribu-
tions. The expense recognised for these obligations in the fi-
nancial year in accordance with IAS 19 “Employee Benefits”
was EUR 23.5 million (EUR 22.2 million), none of which (EUR
0 million) was attributable to commitments to employees in
key positions. Of the expense for defined contribution plans,
an amount of EUR 10.2 million (EUR 10.3 million) relates to
state pension schemes, thereof EUR 7.7 million (EUR 8.0 mil-
lion) to contributions to the statutory pension insurance
scheme in Germany.
144,329
96,919
182,623
175,892
239,230
145,758
681,867
538,813
2.3 million) from interests in private equity funds that had still
to be recognised in income as at the balance sheet date.
We enter into term repurchase agreements (repos) as a sup-
plementary liquidity management tool. The asset portfolios
exchanged in this context are fully collateralised. As at the
balance sheet date the liabilities from repos recognised in the
sundry liabilities amounted to EUR 89.8 million (EUR 24.1
million).
in EUR thousand
Provisions for
Balance at
31 December 2020
Currency
Balance at
translation at 1 January of the
1 January year under review
Audits and costs of publishing the annual financial statements
Consultancy fees
6,775
164
6,939
34,958
40,601
85,286
75,084
in this way would have produced a EUR 10.1 million (EUR
10.1 million) higher pension commitment at the end of the
financial year.
Hannover Re | Annual Report 2021
233
Annual financial statements
6.11 Other liabilities
Other liabilites
N 64
2020
in EUR thousand
Position at 31 December of the
financial year
Liabilities from derivatives
Deferred income and prepayments received
Sundry non-technical provisions
Sundry liabilities1
Total
1 Restated pursuant to IAS 8
With regard to the liabilities from derivatives in an amount of
EUR 75.1 million (EUR 85.3 million), please see our explana-
tory remarks on derivative financial instruments in section
8.1 "Derivative financial instruments and financial guaran-
tees".
The sundry liabilities include, among other things, trade ac-
counts payable and clearing balances. In addition, they in-
clude distributions within the year of EUR 11.0 million (EUR
Development of sundry non-technical provisions
2021
Interest
5,411
5,406
(5,350)
Recognised in profit or loss
Current service costs
8,172
5,502
Past service cost and plan curtailments
357
2,761
Net interest component
1,151
2,163
440
641
9,680
10,426
440
641
Recognised in cumulative other
comprehensive income
Actuarial gain (-)/loss (+) from change in
47,759
56,910
249,636
286,162
2.85
2.49
1.96
1.69
Hannover Re | Annual Report 2021
231
Annual financial statements
The movements in the net pension liability for the Group's
various defined benefit plans were as follows:
Movements in net liability from defined benefit pension plans
biometric assumptions
N 61
2020
2021
2020
Defined benefit obligation
Fair value of plan assets
in EUR thousand
2021
Impact of minimum funding
requirement/asset ceiling
2020
Position at 1 January of the financial year
2021
3,038
838
financial assumptions
5,834
5,745
compensation
Benefit payments
(5,148)
(5,233)
(347)
(352)
Additions and disposals
(88)
(61)
(81)
(8)
Changes in the consolidated group
Effects of plan settlements
(90)
(56)
26
(5,326)
Employer contributions and deferred
Employer contributions
Other changes
7
(23,389)
29,205
Experience gains (-)/losses (+)
663
3,117
Return on plan assets, excluding amounts
included in interest income
Change in asset ceiling
Exchange differences
Actuarial gain (-)/loss (+) from change in
(2,320)
7
1,333
(872)
1,263
(832)
(20,555)
31,450
(1,057)
3,099
3,931
226
The following table shows the net loss reserve for the proper-
ty and casualty reinsurance business group in the years 2011
to 2021 as well as the run-off of the reserve (so-called run-off
triangle). The figures reported for the 2011 balance sheet
Suppliers' invoices
cost
Fair value
measure-
ment
Accrued
interest
Fair value
in EUR thousand
Notes payable
Hannover Rück SE, 2021
1.375
2042
EUR
743,257
(7,237)
5,227
741,247
Hannover Rück SE, 2020
1.75
2040
EUR
495,433
Amortised
Currency
Maturity
Coupon
102,920
61,932
38,674
111
182,623
Hannover Re | Annual Report 2021
235
Annual financial statements
6.12 Financing liabilities
15,112
On 22 March 2021 Hannover Rück SE placed subordinated
debt in the amount of EUR 750.0 million on the European
capital market. The bond has a total maturity of around 21
years and a first scheduled call option on 30 December 2031.
It carries a fixed coupon of 1.375% p.a. in the first roughly
eleven years, after which the interest rate basis changes to a
floating rate of 3-month EURIBOR +233 basis points.
On 9 October 2019 Hannover Rück SE placed subordinated
debt in the amount of EUR 750 million on the European cap-
ital market. The bond has a total maturity of 20 years with a
first scheduled call option on 9 July 2029. It carries a fixed
coupon of 1.125% p.a. in the first ten years, after which the
interest rate basis changes to a floating rate of 3-month EU-
RIBOR +238 basis points.
On 18 April 2018 Hannover Rück SE placed a senior bond
with a volume of EUR 750.0 million on the European capital
Long-term debt and notes payable
market. The bond has a maturity date of 18 April 2028 and
may be redeemed at any time from 18 January 2028 onwards,
although not later than 18 April 2028. It carries a fixed cou-
pon of 1.125% p. a.
On 15 September 2014 Hannover Rück SE placed a EUR
500.0 million subordinated bond on the European capital
market. The issue has a perpetual maturity with a first sched-
uled call option on 26 June 2025 and may be redeemed at
each coupon date thereafter. It carries a fixed coupon of
3.375% p. a. until 26 June 2025, after which the interest rate
basis changes to 3-month EURIBOR +325 basis points.
On 20 November 2012 Hannover Rück SE placed a EUR 500.0
million subordinated bond on the European capital market via
its subsidiary Hannover Finance (Luxembourg) S.A. The
bond has a maturity of approximately 30 years with a first
scheduled call option on 30 June 2023 and may be redeemed
at each coupon date thereafter. It carries a fixed coupon of
5.00% p. a. until this date, after which the interest rate basis
changes to a floating rate of 3-month EURIBOR +430 basis
points.
Altogether six (five) bonds were recognised as at the balance
sheet date with an amortised cost of EUR 3,722.3 million
(EUR 2,975.7 million).
N 67
2021
On 8 July 2020 Hannover Rück SE placed subordinated debt
in the amount of EUR 500.0 million on the European capital
market. The bond has a total maturity of around 20 years with
a first scheduled call option on 8 July 2030. It carries a fixed
coupon of 1.75% p.a. in the first roughly ten years, after
which the interest rate basis changes to a floating rate of
3-month EURIBOR +300 basis points.
54,838
2,038
Hannover Rück SE, 2019
(Luxembourg) S.A., 2012
5.00
2043
EUR
499,239
36,151
12,603
547,993
3,722,316
134,331
36,420
3,893,067
Long-term debt
Total
236
535,386
4,257,702
6,707
141,038
1,008
37,428
543,101
4,436,168
Hannover Finance
556,602
8,692
50,420
1.125
2039
EUR
741,983
(6,406)
1,919
737,496
Hannover Rück SE, 2018
1.125
512,583
2028
744,914
46,291
5,941
797,146
Hannover Rück SE, 2014
3.375
n/a
EUR
497,490
EUR
Rate of compensation increase
Pension indexation
164
9,601
175,892
4,306
180,198
The maturities of the sundry non-technical provisions as at
the balance sheet date are shown in the following table:
Maturities of the sundry non-technical provisions
in EUR thousand
Due in one year
Due after one through five years
Due after five years
Total
234
N 66
2021
2020
135,874
99,441
39,714
70,198
7,035
Total
74,588
722
73,866
4,538
161
4,699
Partial retirement arrangements and early retirement obligations
1,900
4
1,904
Holiday entitlements and overtime
13,197
6,253
183
Anniversary bonuses
5,575
92
5,667
Management and staff bonuses
67,003
2,754
69,757
Other
13,380
36,472
182,623
Hannover Re | Annual Report 2021
(186)
129
4
2,344
8,194
7,514
8
14,068
687
11
137
4
6,210
42,417
33,605
507
(446)
77,616
26,159
379
17,705
448
608
Additions
Utilisation
Release
Currency
N 65
Balance at
translation at 31 December 2021
31 December
6,162
175,892
5,743
(2)
7,044
2,747
2,635
509
(69)
2,798
16,175
3,009
312
3,264
1.12
Discount rate for current service costs
23,507
463,624
Due after ten through twenty years
3,596,204
203,007
3,393,197
489,823
1,611
488,212
Due after twenty years
1,532,264
Deposits
Total
38,419,155
2,358,548
40,777,703
74,750
2,675,923 35,743,232
54,016
2,729,939
1,457,514
1,598,438
3,115
1,595,323
487,131
4,175,093
5,633,143
6,099,433
retro
net
Due in one year
11,505,643
604,687
10,900,956
gross
1,035,542
retro
net
1,460
1,034,082
Due after one through five years
15,685,611
1,327,189
14,358,422
564,159
6,049
558,110
Due after five through ten years
466,290
35,742
4,139,351
2,304,532
38,047,764
1,126
914,897
Due after one through five years
13,080,012
973,471
12,106,541
668,698
5,832
662,866
Due after five through ten years
5,027,070
318,810
4,708,260
489,109
33,802
455,307
Due after ten through twenty years
2,887,331
144,737
916,023
9,227,642
403,350
9,630,992
3,366,788
156,297
3,210,491
7,541,881
192,039
7,349,842
Maturities of the technical reserves
N 57
2020
gross
Loss and loss adjustment
expense reserves
in EUR thousand
gross
retro
net
gross
retro
net
Due in one year
Benefit reserve
in EUR thousand
N 56
Benefit reserve
Seven years later
8,581.9
8,547.2 9,193.2 9,532.7
Eight years later
8,882.8
9,057.8 9,448.0
Nine years later
9,313.1
9,260.5
Ten years later
9,472.2
Loss and loss adjustment expense reserve (net) for the year in question and previous years plus payments made to date on
the original reserve
End of year
One year later
Two years later
Three years later
Four years later
Five years later
16,597.7 17,221.6 17,788.1 19,697.5 21,709.2 22,663.5 22,814.8 24,252.7 26,489.9 27,902.3 32,561.5
16,308.8 16,739.3 17,602.5 19,191.3 20,837.5 21,496.6 22,070.1 23,411.9 25,878.8 27,054.4
8,070.6 8,075.0 8,609.2 9,201.8 8,997.3
7,474.6 7,384.6 8,026.5 8,452.8 8,555.2 8,977.0
Six years later
Five years later
year also include the amounts for previous years that are no
longer shown separately in the run-off triangle. The run-off
results shown reflect the changes in the ultimate loss arising
in the 2021 financial year for the individual run-off years.
Net loss reserve and its run-off in the property and casualty reinsurance segment
N 55
31.12. 31.12. 31.12. 31.12.
2011 2012 2013 2014
31.12. 31.12. 31.12. 31.12. 31.12.
2015 2016 2017 2018 2019
31.12.
2020
31.12.
2021
One year later
15,914.6 16,385.8 16,962.0 18,061.1 19,403.3 20,511.9 20,768.9 22,503.9 24,749.2
Two years later
Four years later
5,738.7 6,122.9 6,533.8 6,663.3 7,262.0 8,519.0 8,999.5
6,753.8 6,590.9 7,119.9
in EUR million
Loss and loss adjustment expense reserve (from balance sheet)
16,597.7 17,221.6 17,788.1 19,697.5 21,709.2 22,663.5 22,814.8 24,252.7 26,489.9 27,902.3 32,561.5
Cumulative payments for the year in question and previous years
3,139.4 2,913.3 3,197.1 3,515.1 3,275.4 3,754.3 4,795.1 4,874.7 5,599.1 5,466.0
4,878.1 4,539.5 5,002.5 5,262.9 5,192.0 6,010.7 6,855.9 7,573.2 7,900.5
5,814.9
7,614.2 7,650.5 8,366.1 9,436.1
Three years later
2,742,594
15,468.0 15,867.7 15,912.5 17,109.4 18,408.0 19,437.5 20,008.7 21,657.2
14,172.2 14,456.2 14,294.7 15,390.5 16,760.0 18,073.0
0.1
0.4
0.4
0.3
0.2
0.8
1.1
(1.0)
The run-off profit of altogether EUR 848.0 million (EUR 590.5
million) in the 2021 financial year derives above all from pos-
Maturities of the technical reserves
IFRS 4 “Insurance Contracts” requires information which
helps to clarify the amount and timing of cash flows expected
from reinsurance contracts. In the following tables we have
shown the future maturities of the technical provisions bro-
ken down by the expected remaining times to maturity. As
part of our maturity analysis we have immediately deducted
itive run-offs of reserves in the areas of property business as
well as marine and aviation.
the deposits put up as collateral for these reserves, since the
cash inflows and outflows from these deposits are to be allo-
cated directly to the ceding companies. For further explana-
tion of the recognition and measurement of the reserves
please see section 3.1 “Summary of major accounting poli-
cies".
Hannover Re | Annual Report 2021
227
Annual financial statements
Maturities of the technical reserves
Loss and loss adjustment
expense reserves
2021
0.3
1.9
As percentage of
original loss reserve
(281.6)
13,534.3 13,769.0 13,491.1 14,746.0 16,219.4
12,849.0 13,164.3 12,959.5 14,302.7
Six years later
Seven years later
Eight years later
12,315.3 12,749.5 12,590.0
Nine years later
12,028.9 12,391.0
11,715.3
14,846.1 15,156.2 15,057.4 16,225.0 17,431.7 18,683.2 19,347.8
Ten years later
Change relative to
previous year
313.7
44.8
11.0
73.9
97.2
69.6
50.7
185.8
282.9
Net run-off result
0.56
326,997
325,004
116,176
(9,212)
4,275,672
(267,587)
106,964
4,008,085
1,028,172
(73,212)
61,345
(2,393)
966,827
(70,819)
Net book value at 31 December of the
year under review
6,195,961
204,597
5,991,364
5,070,009
165,916
4,904,093
The adequacy of the technical liabilities arising out of our re-
insurance treaties is reviewed as at each balance sheet date.
In the context of the adequacy testing of technical liabilities
(liability adequacy test pursuant to IFRS 4 in conjunction with
loss recognition test as per US GAAP) the anticipated future
contractual payment obligations are compared with the antic-
ipated future income. Should the result of the test indicate
that the anticipated future income will not be sufficient to
fund future payments, the entire shortfall is recognised in in-
come by first writing off capitalised present values of future
profits on acquired life reinsurance portfolios and acquisition
costs corresponding to the shortfall. Any remaining differ-
ence is constituted as an additional provision.
Hannover Re | Annual Report 2021
4,391,848
(276,799)
4,115,049
229
4,904,093
307,895
5,211,988
713,608
65,768
737,631
68,310
unearned premium was estimated using suitable methods.
Premium paid for periods subsequent to the date of the
balance sheet was deferred from recognition within the state-
ment of income.
N 59
in EUR thousand
2021
gross
retro
2020
net
gross
retro
net
Net book value at 31 December of the
previous year
5,070,009
Currency translation at 1 January
320,011
Net book value after currency translation
5,390,020
Changes
Currency translation at 31 December
165,916
12,116
178,032
24,023
2,542
Annual financial statements
6.8 Funds withheld (liabilities)
The funds withheld under reinsurance treaties totalling EUR
632.2 million (EUR 582.3 million) represent the cash and se-
curities deposits furnished to our company by our retroces-
sionaires that do not trigger any cash flows and cannot be
realised without the consent of our retrocessionaires. The
pension progression
The pension progression entails the risk that the anticipated
development of the consumer price index factored into the
trend assumptions was too low and that increased benefit ob-
ligations arise on account of pension indexation required by
law.
The rate of compensation increase entails the risk that the
increases in pensionable salaries factored into the trend as-
sumptions on a parallel basis do not adequately reflect the
actual developments. In addition, in the case of plans under
which the determinative income components above and be-
low the income threshold for contributions to the statutory
pension insurance scheme are differently weighted for the
purpose of calculating the benefit, there is a risk of a diverg-
ing trend in the future with respect to salary and income
threshold.
The calculation of the provisions for pensions is based upon
the following assumptions:
rate of compensation increase
Longevity entails the risk that the mortality contained in the
actuarial bases does not correspond to the actual mortality
and that pension payments have to be rendered and funded
for a longer duration than had been assumed.
Disablement entails the risk that the assumed number of re-
tirements from the subportfolio of eligible beneficiaries on
grounds of disability does not correspond to the actual expe-
rience and for this reason increased benefit obligations have
to be met.
Measurement assumptions
in %
A 60
2021
2020
Discount rate for defined
benefit obligation
1.20
0.56
Discount rate for net interest component
0.68
0.86
•
disablement
•
• interest rate
maturities of these deposits are matched to the correspond-
ing shares of the reinsurers in the technical provisions. If
such a share no longer exists the corresponding funds with-
held are reduced to the same extent.
6.9 Contract deposits (liabilities)
The contract deposits on the liabilities side increased by EUR
331.2 million in the year under review from EUR 3,255.5 mil-
lion to EUR 3,586.7 million. The contract deposits item on the
liabilities side essentially encompasses balances deriving
from non-traditional life insurance contracts that are to be
carried as liabilities.
6.10 Provisions for pensions and other post-employment benefit obligations
Pension commitments are given in accordance with the rele-
vant version of the pension plan as amended. The 1968 pen-
sion plan provides for retirement, disability, widows' and or-
phans' benefits. The pension entitlement is dependent on
length of service; entitlements under the statutory pension
insurance scheme are taken into account. The pension plan
was closed to new participants with effect from 31 January
1981.
On 1 April 1993 (1 June 1993 in the case of senior executives)
the 1993 pension plan came into effect. This pension plan
provides for retirement, disability and surviving dependants'
benefits. The scheme is based upon annual determination of
the pension contributions, which are calculated according to
the pensionable employment income and the company's per-
formance. The pension plan was closed to new participants
with effect from 31 March 1999.
Insurance coverage has been taken out for both the afore-
mentioned pension plans.
From 1997 onwards it has been possible to obtain pension
commitments through deferred compensation. The employ-
ee-funded commitments included in the provisions for ac-
crued pension rights are protected by an insurance contract
with HDI Lebensversicherung AG, Cologne.
Development of the unearned premium reserve
As at 1 July 2000 the 2000 pension plan came into force for
the entire Group. Under this plan, new employees included in
the group of beneficiaries are granted an indirect commit-
ment from HDI Unterstützungskasse e. V. This pension plan
provides for retirement, disability and surviving dependants'
benefits. The provident fund takes out insurance coverage
with HDI Lebensversicherung AG that maps the entire spec-
trum of benefits (matching coverage). These pension commit-
ments are considered to be contribution-based pension bene-
fits under German employment law, and for economic
purposes the pension scheme is classified as a defined bene-
fit plan. The relevant assets of the provident fund are recog-
nised as plan assets.
In addition to these pension plans, senior executives and
members of the Executive Board, in particular, enjoy individ-
ual commitments as well as commitments given under the
benefits plan of the Bochumer Verband.
The commitments to employees in Germany predominantly
comprise benefit obligations financed by the Group compa-
nies. The provisions for pensions in Germany and abroad
230
Hannover Re | Annual Report 2021
were calculated on the basis of uniform standards according
to prevailing economic circumstances.
Provisions for pensions are established in accordance with
actuarial principles and are based upon the commitments
made by the Hannover Re Group for retirement, disability and
widows' benefits. The Heubeck "2018 G standard tables"
were used as the biometric actuarial basis for pension
commitments in Germany. The amount of the commitments is
determined according to length of service and salary level.
The defined benefit plans expose Hannover Re to the follow-
ing actuarial risks:
longevity
currency
Employees also have the option to accumulate additional, in-
surance-type retirement provision by way of deferred com-
pensation. Pension provisions are not recognised in this re-
gard.
The unearned premium reserve derives from the deferral of
reinsurance premium. The unearned premium is determined
by the period during which the risk is carried and established
in accordance with the information supplied by ceding
companies. In cases where no information was received, the
7,025,853
192,135
The parameters used to calculate the benefit reserve are in-
terest income, lapse rates and mortality/morbidity rates.
The values for the first two components (interest income and
lapse rates) differ according to the country concerned, prod-
uct type, investment year etc.
The mortality and morbidity rates used are chosen on the ba-
sis of national tables and the insurance industry standard.
228
Hannover Re | Annual Report 2021
Empirical values for the reinsured portfolio, where available,
are also taken into consideration. In this context insights into
the gender, age and smoker structure are incorporated into
the calculations, and allowance is also made for factors such
as product type, sales channel and the frequency of premium
payment by policyholders.
At the inception of every reinsurance contract, assumptions
are made about the aforementioned three parameters and
locked in for the purpose of calculating the benefit reserve. At
the same time, safety/fluctuation loadings are built into each
Development of the benefit reserve
of these components. In order to ensure at all times that the
originally chosen assumptions continue to be adequate
throughout the contract, checks are made on a regular - nor-
mally annual basis in order to determine whether these as-
sumptions need to be adjusted ("unlocked").
The benefit reserve is established in accordance with the
principles set out in SFAS 60. The provisions are based on the
Group companies' information regarding mortality, interest
and lapse rates.
N 58
2021
in EUR thousand
gross
retro
2020
net
gross
retro
ness.
A benefit reserve is established for life, annuity, personal ac-
cident and health reinsurance contracts. Based on the dura-
tion of these contracts, long-term reserves are constituted for
life and annuity policies and predominantly short-term re-
serves are set aside for health and personal accident busi-
amounts realised. Liabilities in liability and motor reinsur-
ance traditionally have long durations, sometimes in excess
of 20 years, while liabilities in property business are settled
within the first ten years.
The payment patterns are determined with the aid of actuari-
al estimation methods and adjusted to reflect changes in pay-
ment behaviour and outside influences. The calculations can
also be distorted by major losses, and these are therefore
considered separately using reference samples or similar
losses. The payment patterns used can be compared year for
year by contrasting the projected payments with the actual
Due after twenty years
1,090,257
31,715,662
Deposits
Total
2,213,568
33,929,230
48,143
1,888,511 29,827,151
46,719 2,166,849
1,935,230 31,994,000
1,042,114
1,240,193
net
2,665
3,641,020
45,418
3,576,968
7,217,988
146,717
192,135
3,595,602
3,430,251
7,025,853
The average maturity of the loss and loss adjustment expense
reserves was 4.8 years (4.6 years), or 4.8 years (4.6 years)
after allowance for the corresponding retrocession shares.
The benefit reserve had an average maturity of 14.5 years
(13.1 years) - or 14.5 years (13.2 years) on a net basis.
The average maturity of the reserves is determined using ac-
tuarial projections of the expected future payments. A pay-
ment pattern is calculated for each homogenous category of
our portfolio making allowance for the business sector, ge-
ographical considerations, treaty type and the type of reinsur-
ance and applied to the outstanding liabilities for each un-
derwriting year and run-off status.
-
1,237,528
1,993
Net book value at 31 December of the
7,217,988
Portfolio entries/exits
162,110
4
162,106
(826,518)
(238,945)
(587,573)
Currency translation at 31 December
(7,177)
(240)
(6,937)
58,900
42,015
16,885
Net book value at 31 December of the
year under review
7,541,881
192,039
7,349,842
7,217,988
(103,487)
(391,427)
(494,914)
(298,645)
Currency translation at 1 January
482,845
Net book value after currency translation
7,700,833
192,135
15,380
207,515
7,025,853
9,028,000
852,598
8,175,402
previous year
467,465
(72,106)
(475,374)
7,493,318
8,480,520
780,492
7,700,028
Changes
(313,885)
(15,240)
(547,480)
Hannover Re | Annual Report 2021
three months
(298,645)
Sundry expenses
Expenses for the company as a whole
Expenses for services
18,952
31,859
Separate value adjustments on receivables
2,181
985
Expenses from contracts recognised in accordance with the deposit accounting method
131,165
217,739
Exchange losses
12,443
15,283
Other interest expenses
Other expenses
823,391
774,816
17,191
80,616
99,842
89,666
68,786
73,855
Brokerage commissions, performance fees and similar forms of remuneration
Revenue realised at a point in time
2020
N 84
2021
in EUR thousand
Revenue categories
Annual financial statements
245
Sundry income
Hannover Re | Annual Report 2021
The other income includes revenues from contracts with cus-
tomers set out below in accordance with IFRS 15.
The sharp decline in exchange gains and the increase in ex-
change losses are essentially the result of the US dollar's up-
ward revaluation against the euro. The sundry income in-
cludes a fee for early contract termination in our US mortality
portfolio amounting to EUR 59.1 million. The sundry expens-
es include the amortisation of the PVFP in an amount of EUR
2.2 million (EUR 5.3 million). For details we would refer to
section 6.6 "Other assets".
441,369
271,185
Total
382,022
503,631
53,760
69,137
With regard to the fundamental approach adopted for app-
lication of IFRS 15 we would refer to the remarks in section
3.1 "Summary of major accounting policies".
38,521
54,562
Other interest income
(8,159)
1,568
67,373
106,273
Reinsurance recoverables
Change in provision for contingent commissions (gross)
(35,726)
(3,192)
259,996
102,826
236,042
283,639
5,567,985
6,073,534
20201
2021
N 82
Reinsurance recoverables
Change in deferred acquisition costs (gross)
Commissions and brokerage, change in deferred acquisition costs (net)
5,788,582
5,111,753
1
115,281
112,326
Income from services
344,592
387,663
Income from contracts recognised in accordance with the deposit accounting method
11,465
3,970
Reversals of impairments on receivables
50,036
280,300
Exchange gains
2020
N 83
2021
Other income
in EUR thousand
Other income/expenses
7.4 Other income/expenses
Restated pursuant to IAS 8
140,205
Reinsurance recoverables
47,717
6,913
Fixed-income securities - held to maturity
Fixed-income securities - loans and receivables1
Fixed-income securities - available for sale
Financial assets - at fair value through profit or loss
Other
Total
1 Restated pursuant to IAS 8
The net gains and losses on investments held to maturity,
loans and receivables and the available-for-sale portfolio
shown in the following table are composed of interest in-
come, realised gains and losses as well as impairments and
appreciation. In the case of the fixed-income securities at fair
value through profit or loss designated in this category and
the other financial assets, which include the technical deriva-
tives, income and expenses from changes in fair value are
also recognised.
N 77
2021
2020
4,207
8,211
81,041
82,175
897,154
862,853
4,198
13,275
20,295
1,006,895
23,732
990,246
in EUR thousand
Interest income on investments
The portfolio did not contain any overdue, unadjusted assets
as at the balance sheet date since overdue securities are writ-
ten down immediately.
The impairments taken on fixed-income securities amounted
to just EUR 0.2 million (EUR 11.8 million).
233
11,772
Impairments on participating interests and other financial assets
25,397
62,006
Other investment expenses
146,047
129,034
Net income from assets under own management
Making allowance for the other investment expenses of EUR
146.0 million (EUR 129.0 million), net income from assets un-
der own management of altogether EUR 1,674.8 million (EUR
1,463.7 million) was recognised in the year under review.
1,674,762
Interest income on funds withheld and contract deposits
462,812
347,788
Interest expense on funds withheld and contract deposits
Total investment income
194,562
1,943,012
126,023
1,685,468
1 Restated pursuant to IAS 8
Of the impairments totalling EUR 50.4 million (EUR 92.8 mil-
lion), an amount of EUR 24.9 million (EUR 32.3 million) was
attributable to private equity. An impairment loss of EUR 24.8
million (EUR 19.0 million) was recognised on real estate and
real estate funds.
1,463,703
Other insurance-related services
242
Net gains and losses on investments
Further revenues of EUR 0.0 million (EUR 0.1 million) were
generated in this revenue category.
An amount of EUR 0.5 million (EUR 1.1 million) was also
earned on the North American market from the performance
of administrative activities. The transaction price corresponds
to the agreed contract price. The performance obligation is
deemed to be satisfied when the administrative activities
specified in the contract were carried out.
In this context revenues of EUR 6.4 million (EUR 5.7 million)
were realised on the South African market which are connect-
ed with commission-based business but cannot be character-
ised as commissions. The transaction price is arrived at as a
percentage of the underlying gross premium share. The per-
formance obligation is deemed to be fulfilled at a point in
time upon issuance of the insurance certificate for the end
customer.
In addition, revenues of EUR 6.9 million (EUR 6.9 million)
were realised at a point in time in the year under review from
other insurance-related services.
Further revenues of EUR 0.8 million (EUR 1.1 million) were
generated in this revenue category.
An amount of EUR 5.2 million (EUR 3.5 million) was earned
on the UK and Swedish markets from the performance of
management services. The performance obligation is consid-
ered to have been fulfilled when the administrative activities
specified in the contract were carried out. The transaction
prices in this regard are measured essentially by the underly-
ing general fee scales.
tractually agreed services. Further revenues as defined by
IFRS 15 were generated from the transfer of use of applica-
tion software used for the underwriting of insurance risks.
These amounted to EUR 4.1 million (EUR 3.5 million) in the
year under review and are deemed to be earned over a period
of time when the customer makes use of the software. In both
cases the transaction price is derived from the contractually
agreed contract prices.
On the North American market revenues of EUR 3.6 million
(EUR 3.8 million) were earned from the assumption of admin-
istrative tasks. The performance obligation is considered to
have been fulfilled when the company has rendered the con-
On the German market revenues of EUR 8.6 million
(EUR 7.9 million) were generated. These relate in large part
to transfers of use for IT. The underlying transaction prices
are derived from the contractually agreed contract prices and
are realised pro rata temporis as the customer makes use of
the IT.
In addition, other revenues known as "binder fees" were
earned from administrative activities on the South African
market in an amount of EUR 16.1 million (EUR 14.1 million).
The transaction price is calculated from a percentage rate in
relation to the gross premium of the underlying insurance
contracts. Binding fees are earned over a period of time.
This involves revenues from administrative services amount-
ing to EUR 28.0 million (EUR 25.4 million) that were generat-
ed on the Lloyd's markets in the United Kingdom and in the
Asia-Pacific region. The transaction prices are essentially cal-
culated according to the underlying general fee scales as well
as a percentage share of the gross premium. The revenues
from the administrative services described here are largely
earned over a period of three to four years and realised pro
rata temporis in accordance with the contractual term.
An amount of EUR 66.4 million (EUR 59.3 million) was real-
ised over time in the current financial year in connection with
other insurance-related services.
Further revenues of EUR 0.8 million (EUR 0.8 million) were
generated in this revenue category.
The brokerage commissions, performance fees and similar
forms of remuneration in an amount of EUR 38.5 million
(EUR 47.7 million) were realised at a point in time. Of this
amount, EUR 37.7 million (46.9 million) is attributable to bro-
kerage commissions earned by Group-internal insurance in-
termediaries.
59,330
113,981
66,429
111,863
Other insurance-related services
Total
Revenue realised over time
6,934
246
Hannover Re | Annual Report 2021
966,293
76,711
PN 78
in EUR thousand
Ordinary
investment
income 1
Realised gains
and losses
2021
Impairments/
appreciation
fair value
Change in
Hannover Re | Annual Report 2021
Net income from
assets under own
Held to maturity
Fixed-income securities
4,169
(183)
3,986
Loans and receivables
Fixed-income securities
76,558
153
management²
Commissions paid (gross)
in EUR thousand
Commission and brokerage, change in deferred acquisition costs
789,598
Fixed-income securities
Available for sale
81,781
4,003
77,778
Fixed-income securities 3
Loans and receivables
7,802
(61)
7,863
Fixed-income securities
Held to maturity
Net income from
assets under own
management2
N 79
fair value
Change in
Impairments/
appreciation
and losses
293,281
11,772
1,071,107
Equity securities
Total
Other
Other invested assets
Other financial assets
13,275
Fixed-income securities
At fair value through profit or loss
19,297
115,544
Realised gains
8,129
105
19,321
Short-term investments
75,243
(65)
190,852
Other invested assets
6,736
1,393
129
228,469
1,328,549
Ordinary
investment
income 1
in EUR thousand
Fixed-income securities
At fair value through profit or loss
11,021
123
127
11,017
Short-term investments
470,181
33,250
149,528
353,903
Other invested assets
49,858
49,296
562
Equity securities
989,027
233
22,967
4,198
384
4,582
Other financial assets
Net gains and losses on investments
1 Including income from associated companies, for reconciliation with the consolidated statement of income
2 Excluding other investment expenses
1,820,809
36,114
87,665
281,026
177,055
(360)
54,059
2020
56,840
Total
Other
4,917
4,897
20
Other invested assets
33,471
31,193
2,278
174,634
1,591,334
1,752
18,568
65,461
Net technical result
Administrative expenses
Other acquisition costs
Change in provision for contingent commissions
295,722
106,018
Change in deferred acquisition costs
5,331,943
5,789,895
(103,487)
(298,645)
Commissions
Net change in benefit reserve
(103,487)
Available for sale
Change in benefit reserve
16,782,658
18,617,725
Claims and claims expenses
104,705
75,532
4,767
510,707
(479,370)
4,466
Hannover Re | Annual Report 2021
244
15
114
15
114
2020
2021
N 81
2,879,431
Other technical income (net)
Other technical income (gross)
in EUR thousand
Other technical income
ment.
The effects of the Covid-19 pandemic increased the losses in
the year under review by altogether EUR 582.0 million. They
are entirely allocable to the life and health reinsurance seg-
With regard to the claims and claims expenses as well as the
change in the benefit reserve, the reader is also referred to
section 8.1 “Derivative financial instruments and financial
guarantees". The change in the benefit reserve relates exclu-
sively to the life and health reinsurance segment. The admin-
istrative expenses amounted to altogether 2.1% (2.2%) of
net premium earned.
Restated pursuant to IAS 8
1
478,182
(912,762)
Reinsurance recoverables
4,312,687
Change in loss and loss adjustment expense reserve
13,903,227
7.3 Reinsurance result
Annual financial statements
243
Hannover Re | Annual Report 2021
3,541
3 Restated pursuant to IAS 8
Including income from associated companies, for reconciliation with the consolidated statement of income
2 Excluding other investment expenses
1
1,592,737
Reinsurance result
63,971
329,610
199,515
(3,988)
42,249
17,283
5,533
746
4,787
65,461
129,393
Impairments on fixed-income securities
in EUR thousand
Ceded written premium
14,305,038
Claims and claims expenses paid
21,360,810
24,143,766
Total net technical income
15
114
61,345
21,360,795
24,023
24,143,652
Gross written premium
(1,028,172)
2,442,720
20201
24,770,342
N 80
27,762,314
2,905,054
2021
Other technical income
Net premium earned
Change in ceded unearned premium
Change in unearned premium
(737,631)
55,615
Fixed-income securities
Impairments on real estate
25,154
137,169
372,705
2,975,730
82,841
3,431,276
ber 2021
31 Decem-
Balance at
N 72
Other
Changes
Rate
Difference
Non-cash items
Exchange
Cash Flow
Balance at
Lease liabilities
Total
Notes payable
in EUR thousand
Long-term Debt
Reconciliation of financing liabilities
Total
Lease liabilities
Notes payable
742,807
(14,466)
865,510
5,803
30,957
(5,091)
(27,464)
(12,177)
(17,711)
3,461,968
89,201
(5,256)
2,977,724
(22,373)
(278)
395,043
Long-term Debt
31 Decem-
ber 2020
Other
Changes
Non-cash items
Exchange
Rate
Difference
2019
Cash Flow
Balance at
31 December
Balance at
N 73
535,386
3,722,316
112,553
4,370,255
358
3,779
38,375
42,512
1,099,165
313
3,262
10,908
14,483
in EUR thousand
The following table shows the movements in long-term debt,
notes payable and other long-term liabilities with respect to
cash and non-cash changes.
One to
Three
months to
one year
172,851
101,438
Other financial liabilities¹
in EUR thousand
Less than
N 71
2020
Maturities of financial liabilities
Annual financial statements
237
Hannover Re | Annual Report 2021
Excluding sundry non-technical provisions and derivative financial instruments; the maturities of these items are broken down separately
497,490
1,278,064
1,269,850
497,490
1,242,496
35,568
28,945
1,237,416
3,489
Five to
five years
ten years
Ten to
twenty years
1 Excluding sundry non-technical provisions and derivative financial instruments; the maturities of the these items are broken down separately
496,844
531,425
1,238,209
32,566
496,844
498,859
1,235,915
99,666
744,112
13,578
857,356
Reconciliation of financing liabilities
29,757
306,142
2,690
104,128
Total
Lease liabilities
Notes payable
2,294
3,346
273,039
Long-term debt
No maturity
More than
twenty years
4,250
177,101
153,642
744,914
33,733
933,000
372,705
2,975,730
82,841
3,431,276
Shareholders' equity is shown as a separate component of the
financial statement in accordance with IAS 1 "Presentation of
Financial Statements" and subject to IAS 32 "Financial In-
struments: Disclosure and Presentation” in conjunction with
IAS 39 "Financial Instruments: Recognition and Measure-
ment". The change in shareholders' equity comprises not
only the net income deriving from the statement of income
but also the changes in the value of asset and liability items
not recognised in the statement of income.
Cash flow from financing activities
(152,497)
(455,683)
275,181
563,547
8,486,738
9,713,753
10,644,455
11,819,576
Cash flow from investing activities
Cash flow from operating activities
Liabilities
Assets
44,011
44,011
125,000
125,000
thereof attributable to non-controlling interests
Dividends paid
(125,000)
(125,000)
240
Hannover Re | Annual Report 2021
63,180
1,034,597
3,406,117
3,722,549
1,753,635
1,998,499
2020
N 75
2021
759,698
Europe
France
United Kingdom
Germany
Regional origin
in EUR thousand
Gross written premium
The following table shows the breakdown of the gross written
premium according to regional origin.
7.1 Gross written premium
7. Notes on the individual items of the statement of income
Other
6.13 Shareholders' equity and treasury shares
741,427
2,157,717
in EUR thousand
Subsidiaries with material non-controlling interests
Annual financial statements
239
Hannover Re | Annual Report 2021
ditions. These shares are blocked until 31 May 2025. This
transaction resulted in an expense of EUR 0.5 million (EUR
0.5 million), which was recognised under personnel expendi-
ture, as well as a negligible change in retained earnings rec-
ognised in equity. The company was no longer in possession
of treasury shares as at the balance sheet date.
The disclosures on capital management arising out of IAS
1.134 136 "Presentation of Financial Statements" are pro-
vided in the "Financial position and net assets" subsection of
the management report, to which the reader is referred. This
includes both a presentation of our capital management ob-
jectives and procedures (page 57 et seq., subsection entitled
"Investment policy”) and a description of our policyholders'
surplus (page 59 et seq., subsection entitled "Management of
policyholders' surplus"), together with a summary of the di-
verse external capital requirements to which we are subject.
The Solvency II regulatory framework, in particular, gives rise
to capital requirements and consequences for capital man-
agement, which we discuss more closely on pages 87 et seq.
of the risk report.
The increase in the other reserves arising out of currency
translation, which is recognised in equity, was attributable in
a net amount of EUR 97.1 million (decrease of EUR 61.2 mil-
lion in the previous year) to the translation of long-term debt
or loans with no maturity date extended to Group companies
and branches abroad.
Non-controlling interests in partnerships are reported in ac-
cordance with IAS 32 "Financial Instruments: Presentation"
under long-term liabilities. The non-controlling interest in
profit or loss, which forms part of net income and is shown
separately after net income as a "thereof" note, amounted to
EUR 68.9 million (EUR 35.7 million) in the year under review.
Non-controlling interests in the shareholders' equity of sub-
sidiaries are reported separately within Group shareholders'
equity in accordance with IAS 1 “Presentation of Financial
Statements”. They amounted to EUR 871.2 million (EUR
844.4 million) as at the balance sheet date.
6.14 Non-controlling interests
IAS 1 requires separate disclosure of treasury shares in share-
holders' equity. As part of this year's employee share option
plan Hannover Rück SE acquired altogether 15,766 (16,511)
treasury shares during the second quarter of 2021 on the le-
gal basis of § 71 Para. 1 No. 2 Stock Corporation Act (AktG)
and delivered them to eligible employees at preferential con-
Treasury shares
The Annual General Meeting of Hannover Rück SE resolved
on 5 May 2021 that a gross dividend of EUR 4.50 per share
should be paid for the 2020 financial year, corresponding to a
total distribution of EUR 542.7 million (EUR 633.3 million).
The Executive Board is further authorised, with the consent
of the Supervisory Board, to acquire treasury shares - includ-
ing through the use of derivatives - up to an amount of 10%
of the share capital. The authorisation has a time limit of 5
May 2025.
Conditional capital of up to EUR 24,119 thousand is available.
It can be used to grant shares to holders of bonds and/or
profit-sharing rights with conversion rights and warrants and
has a time limit of 4 May 2026. In addition, authorised capital
is available in an amount of up to EUR 24,119 thousand,
which similarly has a time limit of 4 May 2026. The subscrip-
tion right of shareholders may be excluded with the consent
of the Supervisory Board under certain conditions. The Exec-
utive Board is authorised, with the consent of the Supervisory
Board, to use an amount of up to EUR 1,000 thousand of the
existing authorised capital to issue employee shares.
Hannover Re | Annual Report 2021
238
The common shares (share capital of Hannover Rück SE)
amount to EUR 120,597,134.00. They are divided into
120,597,134 voting and dividend-bearing registered ordinary
shares in the form of no-par-value shares. The shares are paid
in full. Each share carries an equal voting right and an equal
dividend entitlement.
Participation of non-controlling interests
Voting rights of non-controlling interests
2021
E+S Rückversicherung AG,
Hannover, Germany
2,105,823
Shareholder's equity
165,558
73,106
93,955
(73,518)
Total recognised income and expense
Income/expense recognised directly in equity
25,210
thereof attributable to non-controlling interests
51,624
71,603
146,624
Net income
35.21%
35.21%
2020
N 74
35.21%
35.21%
thereof attributable to non-controlling interests
31,277
364,171
31 December
2020
3,961
119,382
2,751,329
10,008,840
9,010,246
USA
8,194,528
7,059,536
Other¹
1,494,412
1,126,354
North America
9,688,940
8,185,890
Asia
Australia
Australasia
Africa
Other
Total
1 Restated pursuant to IAS 8
3,253,195
1
Long-term debt and notes payable
N 68
537,493
2,038
40,513
494,942
EUR
2040
1.75
Hannover Rück SE, 2020
Notes payable
4,463,120
in EUR thousand
Accrued
interest
measure-
ment
cost
Fair value
Amortised
Currency
Maturity
Coupon
2020
Fair value
4,340,543
1,848,562
1,653,305
Other investment income
365,224
81,214
Ordinary investment income
1,555,591
1,240,420
Profit or loss on investments in associated companies
35,743
88,129
990,246
Appreciation
Realised gains on investments
506,893
399,832
Realised losses on investments
225,867
70,222
Change in fair value of financial instruments
36,114
63,971
1,145
Hannover Rück SE, 2019
1,006,895
6,363
6,311,682
5,993,848
622,441
518,085
1,130,411
27,762,314
1,062,273
24,770,342
Hannover Re | Annual Report 2021
241
4,532
4,525
332,458
Investment income
in EUR thousand
Income from real estate
Dividends
Interest income1
2021
177,109
N 76
2020
164,428
7.2 Investment income
1.125
Annual financial statements
EUR
(79,331)
(8,881)
(10,062)
(313)
(3,262)
(358)
(3,779)
(4,137)
(91,901)
(85,256)
(83,333)
(8,568)
(9,704)
(75,552)
Net result
Amortisation
Ordinary income/expenses
2020
2021
2020
2021
2020
2021
(86,595)
(3,575)
(89,393)
(95,476)
711
2039
3,410
329,484
No maturity
More than
twenty years
Ten to
twenty years
Five to
ten years
One to
five years
Three
months to
one year
304,618
23,315
Total
115,421
2021
N 70
Total
Lease liabilities
Notes payable
Long-term debt
Other financial liabilities1
Maturities of financial liabilities
The ordinary expenses principally include interest expenses
of nominally EUR 75.6 million (EUR 83.3 million) resulting
from the issued subordinated and senior bonds.
Less than
three months
Notes payable
in EUR thousand
in EUR thousand
572,297
8,692
66,761
496,844
EUR
n/a
3.375
Hannover Rück SE, 2014
828,901
Hannover Finance
(Luxembourg) S.A., 2012
78,848
EUR
2028
1.125
Hannover Rück SE, 2018
769,319
1,919
Long-term debt
26,427
740,973
744,112
5.00
5,941
EUR
Net gains and losses from long-term debt and notes payable
2043
The aggregated fair value of the extended subordinated loans
is based on quoted, active market prices. If such price infor-
mation was not available, fair value was determined on the
basis of the recognised effective interest rate method or esti-
381,586
3,660,694
32,136
280,123
7,938
372,705
3,348,435
N 69
943
mated using other financial assets with similar rating, dura-
tion and return characteristics. Under the effective interest
rate method the current market interest rate levels in the rel-
evant fixed interest periods are always taken as a basis.
3,279,108
31,193
272,185
2,975,730
571,098
12,603
Long-term debt
Total
498,859
59,636
187,742
Other technical/non-technical provisions
71,671
70,567
1,820
96,924
Deferred acquisition costs
11,462
65,986
Funds withheld
90,229
2020
504,809
653,572
Loss and loss adjustment expense reserves
409,274
422,689
Tax loss carry-forwards
Deferred tax assets
2021
in EUR thousand
N 87
The following table presents a breakdown of the deferred tax
assets and liabilities into the balance sheet items from which
they are derived.
Accounts receivable/reinsurance payable
Deferred tax assets and deferred tax liabilities of all Group companies
Benefit reserve
712,092
29,222
Valuation differences relating to investments
Total
Annual financial statements
Other valuation differences
Valuation differences relating to investments
Accounts receivable/reinsurance payable
Deferred acquisition costs
Funds withheld
Equalisation reserve
Other technical/non-technical provisions
42,668
1,213,550
1,577,804
Benefit reserve
505,768
39,957
Deferred tax liabilities
1,800,518
2,099,668
(87,571)
(75,962)
Total
Value adjustments¹
50,843
62,886
Other valuation differences
57,395
87,990
Loss and loss adjustment expense reserves
247
Actual tax for other periods
205,086
Germany
Deferred taxes
Abroad
Germany
Current taxes
in EUR thousand
Domestic/foreign breakdown of recognised tax expenditure/income
Total
Value adjustments on deferred taxes
Change in deferred taxes due to changes in tax rates
Deferred taxes from loss carry-forwards
Deferred taxes due to temporary differences
Abroad
Actual tax for the year under review
Income tax
Deferred tax liabilities on profit distributions of significant af-
filiated companies are established in the year when they are
received.
Tax-relevant bookings on the Group level are made using the
Group tax rate unless they refer specifically to individual
companies.
tax rates.
16.8%. This therefore gives rise to a Group tax rate (rounded)
of 32.7% (32.7%). The deferred taxes at the companies
abroad were calculated using the applicable country-specific
The breakdown of actual and deferred income taxes was as
follows:
Breakdown of taxes on income
An unchanged tax rate of 32.63% was used to calculate the
deferred taxes of the major domestic companies. It is arrived
at from the corporate income tax rate of 15.0%, the German
solidarity surcharge of 5.5% and a trade earnings tax rate of
The reader is referred to the remarks in section 3.1 "Summa-
ry of major accounting policies” regarding the basic approach
to the recognition and measurement of deferred taxes.
Actual taxes on income at the domestic companies, compara-
ble actual taxes on income at foreign subsidiaries as well as
deferred taxes in accordance with IAS 12 "Income Taxes" are
recognised under this item.
7.5 Taxes on income
Deferred tax liabilities
in EUR thousand
Total
N 85
2021
351,569
96,818
(39,225)
122,873
200,429
(18,940)
112,764
4,335
77,601
2020
N 86
2021
205,086
351,569
19,651
(22,719)
8,601
22,134
(27,436)
28,313
218,875
133,476
(72,172)
(59,664)
57,567
250,029
2020
Hannover Re | Annual Report 2021
1,502,324
N 89
1,263
The Hannover Re Group provides reinsurance protection for
the HDI Group. To this extent, numerous underwriting busi-
ness relations exist with related parties in Germany and
abroad that are not included in the Hannover Re Group's con-
solidation. This includes business both assumed and ceded
at usual market conditions. By far the bulk of the premium
from business assumed in an amount of EUR 1.4 billion
(EUR 1.3 billion) - is attributable to Hannover Rück SE and its
subsidiaries.
addition, Hannover Rück SE and E+S Rückversicherung AG
are able to participate in the protection covers on the reten-
tion of Group cedants and share in the protection afforded by
them. In certain circumstances Hannover Rück SE and E+S
Rückversicherung AG are obliged to assume unplaced shares
of the reinsurance of Group cedants from Talanx Reinsurance
Broker GmbH or Talanx AG.
Business assumed and ceded in Germany and abroad
Talanx Reinsurance Broker GmbH and Talanx AG grant Han-
nover Rück SE and E+S Rückversicherung AG a preferential
position as reinsurers of cedants within the Talanx Group. In
Companies belonging to the Talanx Group granted the
Hannover Re Group insurance protection inter alia in the are-
as of public liability, building, contractors all risks, group ac-
cident and business travel insurance. Divisions of Talanx AG
also performed services for the Hannover Re Group in the
areas of taxes and general administration. Divisions of
Hannover Rück SE performed services in connection with the
insurance and reinsurance business of HDI Global Specialty
SE, a joint venture of Hannover Rück SE and HDI Global SE.
The business relationship between Hannover Rück SE and its
subsidiary E+S Rückversicherung AG is based on a coopera-
tion agreement. A retrocession by Hannover Rück SE to E+S
Rückversicherung AG exists in property and casualty reinsur-
ance. E+S Rückversicherung AG and Hannover Rück SE bear
exclusive responsibility for German business and for interna-
tional markets respectively.
Annual financial statements
253
Hannover Re | Annual Report 2021
Talanx AG holds an unchanged majority interest of 50.22% in
Hannover Rück SE. For its part, Haftpflichtverband der
Deutschen Industrie Versicherungsverein auf Gegenseitigkeit
(HDI), Hannover, holds a stake of 79.0% in Talanx AG.
The reinsurance relationships with related parties in the year
under review and the previous year are shown with their total
amounts in the following table.
der review the following significant business relations existed
with related parties.
8.2 Related party disclosures
Under IAS 39 these transactions are to be recognised at fair
value as financial guarantees. To this end Hannover Re uses
the net method, according to which the present value of the
agreed fixed swap premiums is netted with the present value
of the guarantee commitment. The fair value on initial recog-
nition therefore amounted to zero. The higher of the fair value
and the amount carried as a provision on the liabilities side
pursuant to IAS 37 is recognised at the point in time when
utilisation is considered probable. This was not the case as at
the balance sheet date.
swaps in the event of a claim are reimbursed by the parent
companies of the cedants by way of compensation agree-
ments. In this case the reimbursement claims from the com-
pensation agreements are to be capitalised separately from
and up to the amount of the provision.
All in all, application of the standards governing the account-
ing for derivatives in connection with the technical account
led to recognition of assets totalling EUR 231.9 million (EUR
227.5 million) as well as recognition of liabilities in an amount
of EUR 22.6 million (EUR 33.7 million) from the derivatives
resulting from technical items as at the balance sheet date.
Improvements in investment income amounting to EUR 90.6
million (EUR 82.5 million) as well as charges to income of
EUR 50.2 million (EUR 7.6 million) were recognised in the
year under review from all separately measured derivatives in
connection with the technical account.
At the end of the 2017 financial year an index-linked cover
was written for longevity risks. The resulting derivative was
recognised as at the balance sheet date with a positive fair
value of EUR 4.6 million under other financial assets at fair
value through profit or loss (EUR 2.2 million under other lia-
bilities). The change in the fair value of the derivative gave
rise to income of EUR 9.6 million (expense of EUR 1.6 mil-
lion) in the course of the year.
Structured transactions were entered into in the life and
health reinsurance business group in order to finance statuto-
ry reserves (so-called Triple-X or AXXX reserves) of US ced-
ing companies. In each case such structures necessitated the
involvement of a special purpose entity. The special purpose
entities carry extreme mortality risks securitised by the ced-
ants above a contractually defined retention and transfer
these risks by way of a fixed/floating swap to a member com-
pany of the Hannover Re Group. The total amount of the con-
tractually agreed capacities of the transactions is equivalent
to EUR 2,651.7 million (EUR 2,447.3 million); an amount
equivalent to EUR 1,988.1 million (EUR 1,901.8 million) had
been taken up as at the balance sheet date. The variable pay-
ments to the special purpose entities that are guaranteed by
the Hannover Re Group cover their payment obligations. Un-
der some of the transactions the payments resulting from the
Financial guarantees
In the area of life and health reinsurance a reinsurance treaty
with a financing component was also written in the past un-
der which the amount and timing of the return flows are de-
pendent on lapse rates within an underlying primary insur-
ance portfolio. This treaty and a corresponding retrocession
agreement, which were classified as financial instruments
pursuant to IAS 39, resulted in the recognition of other liabil-
ities of EUR 22.2 million (EUR 26.5 million) and other finan-
cial assets at fair value through profit or loss in an amount of
EUR 135.8 million (EUR 123.1 million). Altogether, these ar-
rangements gave rise to an improvement in income of EUR
2.3 million (EUR 6.3 million) in the year under review.
tastrophes or terrorist attacks. The risk swap is indexed
against a weighted combination of US, UK and Australian
population mortality. Payment under the cover is triggered
proportionately between 110% and 120% of the mortality
index. The derivative was recognised with a positive fair val-
ue of EUR 39.2 million (EUR 4.7 million under other liabili-
ties) under other financial assets at fair value through profit
or loss. The change in the fair value of the derivative gave rise
to income of EUR 43.9 million (EUR 3.7 million) in the course
of the year.
Hannover Re | Annual Report 2021
IAS 24 "Related Party Disclosures” defines related parties as
group entities of a common parent, associated entities, legal
entities under the influence of key management personnel
and the key management personnel of the entity itself. Trans-
actions between Hannover Rück SE and its subsidiaries,
which are to be regarded as related parties, were eliminated
through consolidation and are therefore not discussed in the
notes to the consolidated financial statement. In the year un-
N 95
in EUR thousand
Material items in the statement of
134,007
19,853
1,673,324
(105,557)
1,947,051
(18,919)
142,586
19,099
1,804,465
(38,018)
Total
20201
Life and
health
reinsurance
Property and
casualty
reinsurance
Total
Life and
health
reinsurance
Property and
casualty
reinsurance
2021
Material items in the balance sheet
Underwriting result
Premium
Total
Underwriting result
Premium
Business ceded
Underwriting result
Premium
Business assumed
income
252
1,807,331
(85,704)
The portfolio contains a hedge against an extreme increase in
mortality that protects the Hannover Re Group against a rise
in mortality rates, for example due to pandemics, natural ca-
A derivative financial instrument was also unbundled from
another similarly structured transaction in previous years.
This gave rise to recognition of other financial assets at fair
value through profit or loss in an amount of EUR 26.0 million
(EUR 57.6 million). The performance of this derivative re-
duced the result by EUR 35.2 million (improvement of EUR
33.9 million) in the financial year.
5,585
18,122
received/
furnished
furnished
received/
Net amount
Other collateral
Cash collateral
Netting
agreement
Fair value
6,640
2021
Derivative liabilities
Derivative receivables
in EUR thousand
Derivative liabilities
Derivative receivables
in EUR thousand
Netting agreements
Annual financial statements
251
Hannover Re | Annual Report 2021
N 93
5,897
49,253
5,585
course of the year gave rise to an expense of EUR 15.0 million
before tax (EUR 6.0 million).
reinsurance
Hannover Re calculates the fair values of the embedded de-
rivatives in ModCo treaties using the market information
available on the valuation date on the basis of a credit spread
method. Under this method the derivative has no value on the
date when the contract commences and its value then fluctu-
ates over time according to changes in the credit spreads of
the securities. The derivative had a positive value of EUR 1.0
million (EUR 15.2 million) as at the balance sheet date and
was recognised under other financial assets at fair value
through profit or loss together with an amount of EUR 0.4
million (EUR 0.3 million) recognised under other liabilities. In
total, the change in the fair value of the derivative over the
Within the scope of the accounting of "modified coinsurance"
and "coinsurance funds withheld" (ModCo) reinsurance trea-
ties, under which securities deposits are held by the ceding
companies and payments rendered on the basis of the income
from certain securities of the ceding company, the inter-
est-rate risk elements are clearly and closely related to the
underlying reinsurance arrangements. Embedded derivatives
consequently result solely from the credit risk of the underly-
ing securities portfolio.
Derivative financial instruments in connection with
A number of treaties in life and health reinsurance meet crite-
ria which require application of the stipulations contained in
IFRS 4 "Insurance Contracts” governing embedded deriva-
tives. These accounting regulations require that certain deriv-
atives embedded in reinsurance contracts be separated from
the underlying insurance contract (“host contract"), reported
separately at fair value in accordance with IAS 39 "Financial
Instruments: Recognition and Measurement" and recognised
under investments. Fluctuations in the fair value of the deriv-
ative components are to be recognised through profit and
loss in subsequent periods.
4,248
17,620
18,625
5,975
1,184
5,975
7,159
46,468
Net amount
Other collateral
received/
furnished
received/
furnished
Cash collateral
Netting
agreement
Fair value
2020
N 94
3,464
34,416
5,788
A number of transactions concluded in the Life & Health rein-
surance business group in previous years, under which Han-
nover Re companies offer their contracting parties coverage
for risks from possible future payment obligations arising out
of hedging instruments, are also to be classified as derivative
financial instruments. The payment obligations result from
contractually defined events and relate to the development of
an underlying group of primary insurance contracts with stat-
utory reserving requirements. The contracts are to be catego-
rised and recognised as stand-alone credit derivatives pursu-
ant to IAS 39. These derivative financial instruments were
carried in equity on initial recognition. Please see section 6.6
"Other assets". The fair value of these instruments was EUR
25.3 million (EUR 31.6 million) on the balance sheet date and
was recognised under other financial assets at fair value
through profit or loss. The change in value in subsequent pe-
riods is dependent upon the risk experience and led to an
improvement in investment income of EUR 34.8 million (EUR
38.6 million) in the financial year.
mally do not meet the criteria for netting in the balance sheet,
since Hannover Re has no legal right whatsoever at the pres-
ent moment in time to netting of the recognised amounts. The
right to netting can, as a matter of principle, only be enforced
upon occurrence of certain future defined events. Collateral
furnished or received is recognised per counterparty up to at
most the amount of the respective net liability or net asset.
13,299
(71,924)
(11,160)
tract.
Actuarial opinions with respect to the pension commitments
given to staff are drawn up for Hannover Rück SE and E+S
Rückversicherung AG by HDI Pensionsmanagement AG and
HDI Lebensversicherung AG under an actuarial service con-
Furthermore, IT and management services were performed
for Talanx Reinsurance Broker GmbH, Hannover, under ser-
vice contracts.
Under long-term lease arrangements companies belonging to
the Hannover Re Group rented out business premises in 2015
to HDI Service AG, Hannover.
With effect from 1 January 2021 the variable component of
the Executive Board remuneration is split into a short-term
incentive (40%) and a long-term incentive (60%) (HR perfor-
Remuneration and shareholdings of the management
A provision of altogether EUR 9.4 million (EUR 8.6 million)
was established for the remuneration of the active members
of the Executive Board of Hannover Re. Of this, EUR 3.8 mil-
lion (EUR 3.5 million) is fixed remuneration and an anticipat-
ed EUR 5.6 million (EUR 5.1 million) variable remuneration.
In the event of 100% target attainment the remuneration of
the Executive Board consists of a 40% short-term fixed com-
ponent and a 60% variable component. Each member of the
Executive Board receives a contractual commitment to cus-
tomary target remuneration which is aligned with their scope
of responsibility and their expertise and experience of rele-
vance to the position. The long-term incentive is paid out at
the end of the four-year performance period in the 2026
financial year.
Hannover Rück SE has concluded agreements with Ampega
Asset Management GmbH, HDI Global Specialty SE, Talanx
Reinsurance Broker GmbH and Svedea AB that enable these
companies to use software for screening sanctions lists.
Within the contractually agreed framework Ampega Asset
Management GmbH performs investment and asset manage-
ment services for Hannover Rück SE and the vast majority of
its subsidiaries. A total amount of EUR 52.6 million (EUR 48.7
million) was expensed for the rendering of these services in
the financial year just ended. Ampega Real Estate GmbH also
performed services for Hannover Re until June 2021 under a
number of management contracts, although in the course of
the year it was merged into Ampega Asset Management
GmbH. These contracts have been continued by Ampega As-
set Management GmbH.
HDI Lebensversicherung AG, Cologne, participated in a nom-
inal amount of EUR 50.0 million in the subordinated bond is-
sued by Hannover Rück SE in September 2014 with a coupon
of 3.375%.
In the context of a bond issue by Talanx AG the Group com-
panies Hannover Rück SE and E+S Rückversicherung AG in-
vested in a nominal amount of EUR 47.0 million in the issued
bearer debt, which has a coupon of 3.125%. The carrying
amount of the instrument, which is recognised under fixed-in-
come securities held to maturity, was EUR 48.3 million (EUR
48.3 million) including accrued interest of EUR 1.3 million
(EUR 1.3 million).
Talanx AG performs various services in the area of taxes for a
number of investment vehicles of the Hannover Re Group in
the asset classes of private equity and real estate. In this re-
gard corresponding agreements have been concluded with
altogether nine Hannover Re companies.
In addition, other assets of EUR 162.0 million (EUR 3.0 mil-
lion) as well as other liabilities of EUR 33.8 million (EUR 36.3
million) exist with respect to Talanx AG and its subsidiaries
which are not part of the scope of consolidation of Hannover
Re.
Restated pursuant to IAS 8 for own additional reserves not recognised in the prior year that were established in previous years supplementary to the
actual figures provided by cedants.
254
1
43,043
18,676
24,367
663,479
663,479
828,212
95,746
Hannover Re | Annual Report 2021
Since 2012 a service agreement has existed between Han-
nover Rück SE and Talanx AG regarding the use of data ac-
quisition software for Group accounting purposes.
Hannover Rück SE has concluded a service contract with HDI
Service AG in the area of flight services as well as a contract
regarding the reciprocal provision of business continuity
management services.
Since 2004 a service agreement has existed between Han-
nover Rück SE, E+S Rückversicherung AG and Talanx Rein-
surance Broker GmbH regarding the use of market security
services and access to the business partner information sys-
tem of Hannover Rück SE.
Hannover Re | Annual Report 2021
256
The term of the stock appreciation rights is ten years, com-
mencing at the end of the year in which they are awarded.
Stock appreciation rights which are not exercised by the end
of the 10-year period lapse. Stock appreciation rights may
only be exercised after a waiting period and then only within
four exercise periods each year. Upon expiry of a four-year
waiting period a maximum 60% of the stock appreciation
rights awarded for an allocation year may be exercised. The
waiting period for each additional 20% of the stock appreci-
ation rights awarded for this allocation year to a member of
Stock appreciation rights were first granted for the 2000 fi-
nancial year and were awarded separately for each subse-
quent financial year (allocation year) until cancellation of the
plan, provided the performance criteria defined in the Condi-
tions for the Granting of Stock Appreciation Rights were sat-
isfied.
The Conditions for the Granting of Stock Appreciation Rights
were cancelled for all eligible recipients. Awarded stock ap-
preciation rights continue to be exercisable until the end of
their period of validity.
With effect from 1 January 2000 the Executive Board of
Hannover Rück SE, with the consent of the Supervisory
Board, introduced a virtual stock option plan that provides
for the granting of stock appreciation rights to certain mana-
gerial staff. The content of the stock option plan is based sole-
ly on the Conditions for the Granting of Stock Appreciation
Rights. All the members of the Group's management are
eligible for the award of stock appreciation rights. Exercise of
the stock appreciation rights does not give rise to any entitle-
ment to the delivery of shares of Hannover Rück SE, but
merely to payment of a cash amount linked to the perfor‐
mance of the Hannover Rück SE share.
Stock Appreciation Rights Plan
• Share Award Plan (valid since 2011)
Stock Appreciation Rights Plan (in effect since 2000,
cancelled in stages from 2011 onwards and currently
being wound up)
•
In the year under review the following share-based payment
plans with cash settlement existed within the Hannover Re
Group:
8.3 Share-based payment
The members of the governing bodies did not receive any
advances or loans in the year under review. Nor were there
any other material reportable circumstances or contractual
relationships as defined by IAS 24 between companies of the
Hannover Re Group and the members of the governing bod-
ies or their related parties in the year under review. Further-
more, above and beyond the aforementioned remuneration as
supervisory board members at Group companies, the mem-
bers of the Supervisory Board were not granted any remuner-
ation or benefits for personally rendered services.
The exclusively short-term total remuneration of the Supervi-
sory Board of Hannover Re amounted to EUR 1.1 million
(EUR 0.9 million). Of this, EUR 0.8 million (EUR 0.3 million)
was fixed remuneration; a variable component no longer ex-
isted in 2021 (in 2020: EUR 0.3 million). In addition, remu-
neration of EUR 0.2 million (EUR 0.1 million) was paid for
committee work together with EUR 0.1 million (EUR 0.1 mil-
lion) in attendance allowances. A further EUR 0.1 million
(EUR 0.1 million) arose in connection with supervisory board
remuneration at Group companies. There are no pension
commitments for former members of the Supervisory Board
or their surviving dependants.
million was attributable in the previous year to payments due
to the termination of an employment relationship. Altogether,
a provision of EUR 31.2 million (EUR 34.5 million) has been
set aside for pension commitments.
The total remuneration of former members of the Executive
Board and their surviving dependants, for whom 16 (17) pen-
sion commitments existed, amounted to EUR 1.8 million
(EUR 3.7 million) in the year under review. Of this, EUR 1.9
The fixed remuneration is granted in three components,
namely fixed remuneration, fringe benefits and retirement
provision. The fixed remuneration is aligned with the scope of
duties and the professional experience of the individual mem-
ber of the Executive Board. In addition, each member of the
Executive Board receives certain, non-performance-based
fringe benefits in the customary scope, for example a compa-
ny car and insurance coverage. These amounted to EUR 0.1
million (EUR 0.1 million). The benefits after termination of
the employment relationship for the most part consist of a
defined contribution retirement plan, which only takes the
form of a final salary pension commitment for one member of
the Executive Board. Altogether, a pension expense for the
active members of the Executive Board amounting to EUR 1.3
million (EUR 1.0 million) was recognised for 2021.
ual premium or deduction are defined by the Supervisory
Board in advance for the coming financial year and communi-
cated to the members of the Executive Board. The STI for the
2021 financial year amounts to EUR 2.2 million. In the pre-
vious year the total amount was split into EUR 3.1 million
short-term, EUR 1.0 million medium-term and EUR 1.0 mil-
lion long-term variable remuneration.
Annual financial statements
255
Hannover Re | Annual Report 2021
mance share awards). For a detailed explanation of the long-
term incentive (LTI) we would refer to section 8.3 "Share-
based payment". The short-term incentive (STI) is geared to
Hannover Re's commercial success in the respective financial
year. The basis for payment under the STI is the contractually
defined STI target amount, which is based on overall target
attainment of 100%. The overall target attainment (including
the individual premium or deduction) can range from 0% to
200%. The amount paid out under the STI is thus limited to
200% of the target amount. In addition to the return on equi-
ty as a financial performance criterion, an individual premium
or deduction is also determinative for the STI. The latter en-
compasses both financial and non-financial performance cri-
teria, particularly including sustainability targets. The amount
of the premium or deduction, which can range from -25 per-
centage points to +25 percentage points, is determined by the
Supervisory Board at its reasonable discretion. The criteria
and key performance indicators used to establish the individ-
boards of the parent company
2,930,497
24,392
46,269
95,746
98
2,884,228
85,289
Accounts receivable
Deferred acquisition costs
Funds withheld
Assets
(65,277)
10,436
(75,713)
1,760,555
71,511
280,676
1,689,044
7,939
(13,626)
70,662
1,817,764
(46,776)
20,427
(62,496)
(9,417)
29,844
13,232
15,720
(58,625)
1,888,426
(5,687)
688,885
933,151
17,668
11,564
1,018,440
298,344
700,449
3,422,207
91,708
972,152
810,913
90,753
22,352
68,401
Reinsurance payable
810,913
Contract deposits
50,233
91,708
143
972,009
Unearned premium reserve
Benefit reserve
3,371,974
reserve
Loss and loss adjustment expense
Liabilities
536,376
14,566
521,810
267,121
21,942
245,179
836,089
784,123
51,966
828,114
Hannover Re enters into derivative transactions on the basis
of standardised master agreements that contain global net-
ting agreements. The netting agreements set out below nor-
The net changes in the fair value of these instruments re-
duced the result of the financial year by EUR 3.8 million (EUR
12.3 million).
(44,460)
2,035,162
No deferred taxes were established on liabilities-side taxable
temporary differences amounting to EUR 24.3 million
(EUR 50.4 million) in connection with interests in Group
companies because the Hannover Re Group can control their
reversal and will not reverse them in the foreseeable future.
Excess deferred tax assets are recognised with respect to
losses in the year under review or in the previous year only to
the extent that, based on strong evidence, it is likely that the
company concerned will generate sufficiently positive taxable
results in the future. This evidence was provided for deferred
tax assets of EUR 30.9 million (EUR 1.1 million).
der review (previous year: EUR 16.2 million). This is opposed
by deferred tax income of EUR 25.5 million (previous year:
none) from the reassessment of earlier write-downs.
largely by a significantly increased pre-tax profit and a slight-
ly higher effective tax rate than in the previous year of 21.3%
(18.2%).
The write-down of deferred tax assets recognised in previous
years did not result in a deferred tax expense in the year un-
In the year under review the actual taxes on income were
reduced by EUR 0.8 million (EUR 2.3 million) because loss
carry-forwards were used for which no deferred tax assets
were established.
The assets-side unadjusted deferred taxes on loss carry-
forwards amounting to EUR 349.8 million (EUR 329.7 mil-
lion) will probably be realised in an amount of EUR 34.1 mil-
lion (EUR 67.7 million) within one year and in an amount of
EUR 315.7 million (EUR 262.0 million) in the subsequent
years.
Availability of non-capitalised loss carry-forwards
Unused tax loss carry-forwards of EUR 1,875.6 million
(EUR 1,828.2 million) existed as at the balance sheet date.
Of existing tax loss carry-forwards, EUR 302.9 million
(EUR 385.6 million) was not capitalised in consideration of
local tax rates because their realisation is not sufficiently
certain.
The expense for income taxes in the financial year was EUR
146.5 million higher than in the previous year at EUR 351.6
million (EUR 205.1 million). This development was driven
205.086
Availability of loss carry-forwards that have not been capital-
ised:
999
(17.713)
(68,131)
Actual expense for income taxes
Other
Trade tax modifications
19.651
(22,719)
Value adjustments on deferred taxes/loss carry-forwards
(41.633)
(14,706)
8,204
351,569
Expiry of non-capitalised loss carry-forwards and temporary differences
in EUR thousand
Temporary differences
Hannover Re holds derivative financial instruments to hedge
interest rate risks from loans connected with the financing of
real estate; these gave rise to recognition of other liabilities in
an amount of EUR 1.8 million (EUR 4.2 million) and other fi-
nancial assets at fair value through profit or loss in an amount
of EUR 0.1 million (EUR 0.0 million).
The fair values of the derivative financial instruments were
determined on the basis of the market information available
at the balance sheet date. Please see section 3.1 “Summary of
major accounting policies” with regard to the measurement
models used.
Derivatives are financial instruments, the fair value of which
is derived from an underlying trading instrument such as eq-
uities, bonds, indices or currencies. We use derivative finan-
cial instruments in order to hedge parts of our portfolio
against interest rate and market price risks, optimise returns
or realise intentions to buy/sell. In this context we take spe-
cial care to limit the risks, select first-class counterparties and
adhere strictly to the standards defined by investment guide-
lines.
8.1 Derivative financial instruments and financial guarantees
8. Other notes
Annual financial statements
249
302,930
288,211
14,719
14,719
185,412
200,131
14,257
14,257
88,542
88,542
Total
Unlimited
More than
ten years
Six to
ten years
One to
five years
N 90
Hannover Re | Annual Report 2021
Total
Loss carry-forwards
Tax expense/income not attributable to the reporting period
Hannover Re's portfolio contained derivative financial instru-
ments as at the balance sheet date in the form of forward ex-
change transactions taken out to hedge currency risks. These
transactions gave rise to recognition of other liabilities in an
(61.789)
Tax-exempt income
676,344
2,836,374
2,160,030
2021
ther netting was made based on the timing of the reversal of
temporary differences and other offsetting possibilities, ulti-
mately resulting in the following disclosure of deferred tax
assets and deferred tax liabilities in the balance sheet:
Net deferred tax liabilities
Deferred tax liabilities
Deferred tax assets
in EUR thousand
Netting of deferred tax assests and deferred tax liabilities
The deferred tax assets and deferred tax liabilities are shown
according to their origin in the above table. Deferred taxes
resulting from a single transaction and with respect to which
the corresponding temporary valuation differences are simul-
taneously reversed were already netted on recognition. Fur-
1 Thereof on tax loss carry-forwards: EUR -72.871 thousand (EUR -79.543 thousand)
N 88
2,133,662
4,259,698
2,160,030
117,316
147,757
679,461
556,658
303,788
169,698
199,370
235,015
983
3,934,180
2020
597,986
2,731,648
2,133,662
In view of the unrealised components of profit and loss recog-
nised directly in equity in the financial year, actual and de-
ferred tax income including amounts attributable to
non-controlling interests – of EUR 178.5 million (tax expense
of EUR (192.0) million) was also recognised directly in equity.
The following table presents a reconciliation of the expected
expense for income taxes with the actual expense for income
taxes reported in the statement of income. The pre-tax result
is multiplied by the Group tax rate in order to calculate the
Group's expected expense for income taxes.
74.471
126,484
Non-deductible expenses
(145.007)
(157,250)
Differences in tax rates affecting subsidiaries
8.601
22,134
Change in tax rates
367.506
540,135
Expected expense for income taxes
32.7%
32.7%
Group tax rate
2020
1,123,871
1,651,790
Profit before taxes on income
2021
in EUR thousand
Reconciliation of the expected expense for income taxes with the actual expense
Hannover Re | Annual Report 2021
248
(82,582)
amount of EUR 50.3 million (EUR 46.5 million) and other fi-
nancial assets at fair value through profit or loss in an amount
of EUR 16.4 million (EUR 7.2 million).
The decrease in equity from hedging instruments recognised
directly in equity pursuant to IAS 39 in an amount of EUR 0.4
million (EUR 0.8 million) derived solely from the forward ex-
change transactions taken out to hedge currency risks from
long-term investments in foreign operations. These hedging
instruments resulted in the recognition of other liabilities of
EUR 0.3 million (EUR 1.0 million).
In order to hedge the risk of share price changes in connec-
tion with the stock appreciation rights granted under the
share award plan, Hannover Re has taken out hedges since
2014 in the form of so-called equity swaps. The fair value of
these instruments was recognised in an amount of EUR 2.0
million under other receivables (EUR 0.0 million recognised
under other liabilities) as at the balance sheet date. The
hedge gave rise to an increase in equity from hedging instru-
ments recognised directly in equity in an amount of EUR 0.7
million (decrease of EUR 10.0 million recognised directly in
equity).
3,854,356
(33,901)
(5,105)
46,141
(11,517)
401,221
(9,884)
412,140
(7,395)
2,994,854
27,064
2,012
641
(9)
N 92
641
27,064
2,012
3,720,541
46,141
401,221
311,335
2,961,844
(34,291)
(5,105)
(11,517)
(9)
2020
Less than
one year
One to
five years
(11)
22,943
(10,033)
173,105
(23,851)
694,609
(10,576)
1,167,448
(11)
22,943
1,913,156
173,105
598,729
1,141,322
(40,249)
(10,033)
(20,492)
(9,724)
99,063
95,880
3,183
(4,200)
(3,359)
(841)
ten years
31.12.2020
More than
Five to
ten years
(8,966)
(8,703)
106,110
(1,613)
Interest rate hedges
in EUR thousand
Maturity structure of derivative financial instruments
Notional values
Fair values
Total hedging instruments
Notional values
Fair values
Share price hedges
Notional values
Fair values
Inflation hedges
Notional values
Fair values
Currency hedges
Notional values
Fair values
Interest rate hedges
in EUR thousand
Maturity structure of derivative financial instruments
Hannover Re | Annual Report 2021
250
The maturities of the fair values and notional values of the
hedging instruments described above can be broken down as
follows:
Fair values
27,958
1,349,086
Notional values
Fair values
31.12.2021
More than
ten years
ten years
Five to
N 91
2021
100,164
5,946
(909)
(704)
five years
One to
Less than
one year
Notional values
Fair values
Total hedging instruments
Notional values
Fair values
Share price hedges
Notional values
Fair values
Inflation hedges
Notional values
Currency hedges
Netting agreements
30.6.
the managerial staff is one further year. Each exercise period
lasts for ten trading days, in each case commencing on the
sixth trading day after the date of publication of the quarterly
report of Hannover Rück SE.
2023
2024
2025
2026
Subsequent years
The rental payments receivable result from the long-term
renting out of properties by the Group's real estate compa-
nies. The leases in question are operating leases. The rental
income received in the financial year amounted to EUR 137.0
million (EUR 139.6 million).
Hannover Re | Annual Report 2021
N 104
Amounts receivable
100,487
97,533
2022
87,940
67,856
207,926
263
Annual financial statements
8.9 Fee paid to the auditor
At its meeting on 8 March 2018 the Supervisory Board of
Hannover Re appointed PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft (PwC GmbH) as the auditor
of the consolidated financial statement of Hannover Re as de-
Fee paid to the auditor
fined by § 318 German Commercial Code (HGB). The expense
recognised for the fees paid to PwC GmbH and worldwide
member firms of PwC International Limited (PwC) in the year
under review can be broken down as follows:
in EUR thousand
Services relating to auditing of the financial
statements
Other assurance services
Other services
Total
74,145
2021
(EUR 0.3 million). The total amounts payable for leases came
to EUR 14.5 million (EUR 12.2 million).
Future minimum lease payments receivable
1,456
82,841
The allocation to the right-of-use assets amounted to
EUR 35.7 million (EUR 9.2 million) in the financial year.
The increase can be attributed primarily to the long-term
leasing of new office space.
Amortisation of right-of-use assets in connection with leases
in EUR thousand
Investment property
Own-use real estate
Fixtures, fittings and equipment
Sundry assets
Total
The following amounts were recognised in the statement of
income in connection with leases.
N 103
in EUR thousand
2020
2021
413
11,728
51
891
10,966
13,083
80
893
12,368
The interest expenses for lease liabilities totalled EUR 3.7
million (EUR 3.6 million). Expenses in connection with short-
term leases were recognised in an amount of EUR 0.4 million
Rented properties
429
1,159
112,553
PwC worldwide
2020
D/K->
Henchoz
на рыму или
Jungsthöfel Miker
Althoff
Chèvre
Tickel S. Sel-
Sehm
Jungsthöfel
Dr. Miller
Dr. Pickel
까
Hannover Re | Annual Report 2021
Annual financial statements
Independent Auditor's Report
(Translation of the auditor's report issued in German language of the annual/consolidated financial statements prepared in
German language by the management of Hannover Rück SE)
To Hannover Rück SE, Hannover
Report on the audit of the consolidated financial statements
and of the group management report
Audit Opinions
We have audited the consolidated financial statements of
Hannover Rück SE, Hanover, and its subsidiaries (the Group),
which comprise the consolidated statement of financial posi-
tion as at December 31, 2021, and the consolidated statement
of comprehensive income, consolidated statement of profit or
loss, consolidated statement of changes in equity and con-
solidated statement of cash flows for the financial year from
January 1 to December 31, 2021, and notes to the consoli-
dated financial statements, including a summary of signifi-
cant accounting policies. In addition, we have audited the
group management report of Hannover Rück SE, which is
combined with the Company's management report - which
comprise the content included to comply with the German
legal requirements as well as remuneration report pursuant
to § [Article] 162 AktG [Aktiengesetz: German Stock Corpo-
ration Act], including the related disclosures, included in sec-
tion,,Remuneration report" of the group management report
for the financial year from January 1 to December 31, 2021.
In accordance with the German legal requirements, we have
not audited the content of those parts of the group manage-
ment report listed in the "Other Information" section of our
auditor's report.
In our opinion, on the basis of the knowledge obtained in the
audit,
•
•
the accompanying consolidated financial statements
comply, in all material respects, with the IFRSS as adopt-
ed by the EU, and the additional requirements of Ger-
man commercial law pursuant to § 315e Abs. [para-
graph] 1 HGB [Handelsgesetzbuch: German Commercial
Codel and, in compliance with these requirements, give
a true and fair view of the assets, liabilities, and financial
position of the Group as at December 31, 2021, and of
its financial performance for the financial year from
January 1, to December 31, 2021, and
265
N 105
Executive Board
A number of large loss events have already occurred in the
early weeks of 2022. They include severe winter storms that
swept across Central Europe with high wind speeds and a car
carrier adrift on fire southwest of the Azores in the Atlantic.
The amount of the insured losses and our participation in
them cannot yet be reliably estimated. Nevertheless, we do
not currently expect our pro rata large loss budget for the first
quarter to be exceeded as a consequence of this group of
claims.
thereof
PwC GmbH
PwC worldwide
thereof
PwC GmbH
9,474
3,067
9,029
225
135
186
2,469
104
301
10,000
Hannover, 4 March 2022
190
325
3,392
9,606
2,898
The fee for services relating to auditing of the financial state-
ments performed by PwC GmbH includes above all the fees
for the auditing of the consolidated financial statement in-
cluding legally required extensions of the mandate, the re-
view report on the interim report as well as audits of annual
financial statements and audits of the Solvency II balance
sheets of the subsidiaries included in the consolidated finan-
cial statement.
The fees for other assurance services relate to legally or con-
tractually required reviews. The fees for other services en-
compass, for example, consultancy services in connection
with the adoption of IFRS 17.
The auditor responsible for performance of the audit engage-
ment as defined by § 38 Para. 2 of the Professional Charter for
Accountants/Certified Auditors (Berufssatzung WP/vBP) as
amended on 21 June 2016 is Mr. Mathias Röcker. He first
served as the engagement partner responsible for the audit of
the annual and consolidated financial statements effective
31 December 2018.
264
Hannover Re | Annual Report 2021
8.10 Events after the balance sheet date
The impacts of the armed conflict that broke out in February
on the territory of Ukraine cannot be assessed at the present
point in time. Even though direct consequences of war are
normally excluded from reinsurance coverage, the possibility
cannot be ruled out that losses may occur in specialty lines
and that the sanctions threatened in this connection could
indirectly affect Hannover Re.
391
the accompanying group management report as a whole
provides an appropriate view of the Group's position. In
all material respects, this group management report is
consistent with the consolidated financial statements,
complies with German legal requirements and appro-
priately presents the opportunities and risks of future
development. Our audit opinion on the group manage-
ment report does not cover the content of those parts of
the group management report listed in the "Other Infor-
mation" section of our auditor's report.
54
42,821
25,144
23,152
bb) Expenditures for pension provision
29,028
28,851
bc) Expenditures for assistance
4,750
4,792
58,922
56,795
Total
b) Social security contributions and expenditure on provisions and assistance
ba) Social security contributions
361,516
8.5 Earnings per share and dividend proposal
Calculation of the earnings per share
Group net income in EUR thousand
Weighted average of issued shares
Basic earnings per share in EUR
Diluted earnings per share in EUR
260
N 101
2021
1,231,334
120,597,003
10.21
10.21
2020
883,073
120,596,996
7.32
7.32
341,906
Hannover Re | Annual Report 2021
285,111
285,111
30.9.
31.12.
Average
31.12.
Average
Number of employees
(excluding members of the
Executive Board)
3,286
3,308
3,333
302,594
3,346
3,218
3,132
Expenditures on personnel
The expenditures on insurance business, claims expenses
(claims settlement) and expenditures on the administration of
investments include the following personnel expenditures:
Personnel expenditures
N 100
in EUR thousand
2021
2020
a) Wages and salaries
302,594
3,298
140
The earnings per share is calculated by dividing the net in-
come attributable to the shareholders of Hannover Rück SE
by the weighted average number of shares outstanding with-
in the period under review.
Dividend per share
Outstanding capital commitments with respect to alternative
investments exist on the part of the Group in an amount of
EUR 1,588.2 million (EUR 1,275.6 million). These primarily
involve as yet unfulfilled payment obligations from invest-
ment commitments given to private equity funds and venture
capital firms.
Group companies are members of the association for the re-
insurance of pharmaceutical risks and several atomic and nu-
clear pools. The failure of one of the other pool members to
meet its liabilities would result in an additional call according
to the quota participation.
Hannover Rück SE has provided an open-ended guarantee
limited to EUR 11.9 million in favour of the pension fund "The
Congregational & General Insurance Plc Pension and Life As-
surance Scheme" at usual market conditions.
The application of tax regulations may not have been resolved
at the time when tax items are brought to account. The calcu-
lation of tax refund claims and tax liabilities is based on what
we consider to be the regulations most likely to be applied in
each case. The revenue authorities may, however, take a dif-
fering view, as a consequence of which additional tax liabili-
ties could arise in the future.
Hannover Re enters into contingent liabilities as part of its
normal business operations. A number of reinsurance treaties
concluded by Group companies with outside third parties in-
clude letters of comfort, guarantees or novation agreements
under which Hannover Rück SE guarantees the liabilities of
the subsidiary in question or enters into the rights and obliga-
tions of the subsidiary under the treaties if particular constel-
lations materialise.
262
Hannover Re | Annual Report 2021
8.8 Leases
Leased properties
Hannover Releases various office premises, technical faci-
lities, office equipment and vehicles. A long-term land
lease agreement also exists in connection with investment
property.
The following items were recognised in the balance sheet as
at 31 December 2021 in connection with leases.
As security for liabilities in connection with participating in-
terests in real estate companies and real estate transactions
the usual collateral under such transactions has been fur-
nished to various banks, the amount of which totalled EUR
922.4 million (EUR 662.3 million) as at the balance sheet
date.
Leases in the balance sheet
Investment property
Own-use property
Fixtures, fittings and equipment
Sundry assets
Lease liabilities
N 102
2021
2020
33,391
31,215
68,636
in EUR thousand
Neither in the year under review nor in the previous reporting
period were there any dilutive effects. The weighted average
of the issued shares was, as in the previous year, slightly low-
er than the value of the shares in circulation on the balance
sheet date. In the context of the employee share option plan
Hannover Re acquires treasury shares and sells them at a lat-
er date to eligible employees. The weighted average number
transactions. We received collateral with a fair value of EUR
14.4 million (EUR 2.8 million) for existing derivative transac-
tions.
A number of LoC facilities include standard market contractu-
al clauses that allow the banks rights of cancellation in the
event of material changes in our shareholding structure or
trigger a requirement on the part of Hannover Re to furnish
collateral upon materialisation of major events, for example if
our rating is significantly downgraded. Please see also our
explanatory remarks in the “Financial position and net as-
sets" subsection of the management report, page 63 et seq.,
on the information pursuant to § 315a Para. 1 German Com-
mercial Code (HGB).
A dividend of EUR 542.7 million (EUR 663.3 million) was paid
in the year under review for the 2020 financial year.
It will be proposed to the Annual General Meeting on 4 May
2022 that a dividend of EUR 4.50 as well as a special dividend
of shares does not include 15,766 (16,511) treasury shares
pro rata temporis for the duration of the holding period. For
further details please see our comments in section 6.13
"Shareholders' equity and treasury shares".
There were no other extraordinary components of income
which should have been recognised or disclosed separately in
the calculation of the earnings per share.
The earnings per share could potentially be diluted in future
through the issue of shares or subscription rights from the
authorised or conditional capital.
of EUR 1.25 per share should be paid for the 2021 financial
year. This corresponds to a total distribution of EUR 693.4
million. The dividend proposal does not form part of this con-
solidated financial statement.
8.6 Lawsuits
Member companies of the Hannover Re Group are involved in
judicial and supervisory procedures as well as in arbitration
proceedings as part of the conduct of insurance and reinsur-
ance business. Depending upon the subject matter of the pro-
cedure, the Hannover Re Group sets aside provisions for the
amount in dispute in such proceedings - for the most part in
the technical account and in exceptional cases as a charge to
other income/expenses - if and to the extent that the result-
ing commitments are likely to materialise and their amount
can be estimated with sufficient accuracy. The provision es-
tablished in each case covers the expense that can be expect-
ed in our assessment as at the balance sheet date.
Neither the outcome nor the duration of pending procedures
can be definitively foreseen at the time when provisions are
established. The final liabilities of Hannover Re may diverge
considerably from the constituted provisions because the as-
sessment of probability and the quantification of these uncer-
tain liabilities in large measure require estimates that may
prove not to be accurate as the proceedings in question con-
-
tinue to progress. This is also true of procedures for which no
provisions were established. Insofar as a commitment exists
under such procedures as at the balance sheet date that may
possibly but will probably not result in a loss, the Hannover
Re Group estimates this potential loss where practicable -
and reports a contingent liability. For estimation purposes
Hannover Re takes into account a number of factors. These
include, among others, the nature of the claim, the status of
the procedure concerned, decision of courts and arbitration
bodies, prior settlement discussions, experience from compa-
rable cases as well as expert opinions and the assessments of
legal advisers and other experts. If a provision has been es-
tablished for a particular procedure, a contingent liability is
not recognised.
We put up own investments with a book value of EUR 41.9
million (EUR 37.3 million) as collateral for existing derivative
The lawsuits pending in the year under review and as at the
balance sheet date were not material for the Hannover Re
Group either individually or combined. Furthermore, there
were no contingent liabilities from lawsuits to report as at the
balance sheet date.
Hannover Rück SE has secured by subordinated guarantee
the subordinated debt issued by Hannover Finance (Luxem-
bourg) S.A. in the 2012 financial year in an amount of EUR
500.0 million.
The guarantee given by Hannover Rück SE for the subordi-
nated debt attaches if the issuer fails to render payments due
under the bonds. The guarantee covers the nominal amount
as well as interest due until the repayment dates. Given the
fact that interest on the bond is partly dependent on the cap-
ital market rates applicable at the interest payment dates
(floating rates), the maximum undiscounted amounts that can
be called cannot be estimated with sufficient accuracy. Han-
nover Rück SE does not have any rights of recourse outside
the Group with respect to the guarantee payments.
Hannover Re | Annual Report 2021
261
Annual financial statements
As security for technical liabilities to our US clients, we have
established two trust accounts (master trust and supplemen-
tal trust) in the United States. They amounted to EUR 4,305.4
million (EUR 3,939.7 million) and EUR 295.9 million (EUR
208.6 million) respectively as at the balance sheet date. The
securities held in the trust accounts are shown as availa-
ble-for-sale investments. In addition, we furnished further
collateral to ceding companies in an amount of EUR 3,947.1
million (EUR 2,814.5 million) in the form of so-called "single
trust funds”. This amount includes a sum equivalent to EUR
3,131.8 million (EUR 2,464.4 million) which was furnished by
investors as security for potential reinsurance obligations
from ILS transactions.
As part of our business activities we hold collateral available
outside the United States in various blocked custody accounts
and trust accounts, the total amount of which in relation to
the Group's major companies was EUR 3,210.1 million (EUR
3,065.2 million) as at the balance sheet date.
The securities held in the blocked custody accounts and trust
accounts are recognised predominantly as available-for-sale
investments.
Letter of credit (LoC) facilities existed with a number of finan-
cial institutions as at the balance sheet date in a total volume
equivalent to EUR 2,646.8 million (EUR 2,816.2 million) and
with various terms maturing at the latest in 2026.
As security for our technical liabilities, various financial insti-
tutions have furnished sureties for our company in the form
of letters of credit. The total amount as at the balance sheet
date was EUR 1,264.2 million (EUR 1,448.4 million).
8.7 Contingent liabilities and commitments
Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare
that our audit has not led to any reservations relating to the
legal compliance of the consolidated financial statements and
of the group management report.
31.3.
We conducted our audit of the consolidated financial state-
ments and of the group management report in accordance
with § 317 HGB and the EU Audit Regulation (No. 537/2014,
referred to subsequently as “EU Audit Regulation") in com-
pliance with German Generally Accepted Standards for
Financial Statement Audits promulgated by the Institut der
Wirtschaftsprüfer [Institute of Public Auditors in Germany]
(IDW). We performed the audit of the consolidated financial
139.04
130.30
150.42
167.15
Executive Board
Senior Executives
30.12.2021 17.03.2021 30.12.2020 18.03.2020 30.12.2019 14.03.2019 28.12.2018 16.03.2018 29.12.2017
30.12.2021 24.03.2021 30.12.2020 25.03.2020 30.12.2019 21.03.2019 28.12.2018 23.03.2018 29.12.2017
Executive Board
Senior Executives
Valuation per share
award in EUR
2017
Final Anticipated
allocation allocation
2018 for
2017
172.30
N 97
2019
2020
2019 for
allocation
allocation
allocation allocation
2020 for
allocation allocation
2021 for
Final Anticipated
2018
2019
Allocation year
2018
Final Anticipated
129.60
111.65
Senior Executives
9,537
9,060
9,010
7,882
7,278
7,993
9,214
7,851
25,130
Executive Board
117.70
allocation year
Number of allocated
104.90
111.32
117.70
129.38
172.30
156.39
130.30
147.06
167.15
104.90
share awards in the
44,477
Anticipated
allocation
2021
143
40.87
4 years
10 years
2011
15.3.2012
Allocation year
N 96
Amounts paid out in the 2021 financial year (in EUR million)
Expense in the 2021 financial year (in EUR million)
Provisions at 31 December 2021 (in EUR million)
Number of rights existing at 31 December 2021
Weighted exercise price
263,515
Maximum value (in EUR)
Number of rights granted
Participants in year of issue
Basic price (in EUR)
Waiting period
Period
Award date
Stock appreciation rights of Hannover Rück
The allocation for the year 2011 gave rise to commitments in
the 2021 financial year shown in the following table. No fur-
ther commitments exist after the 2021 financial year.
The amount paid out is limited to a maximum calculated as a
quotient of the total volume of compensation to be granted in
the allocation year and the total number of stock appreciation
rights awarded in the year in question. In the event of cancel-
lation or termination of the employment relationship as a con-
sequence of a termination agreement or a set time limit, a
holder of stock appreciation rights is entitled to exercise all
such rights in the first exercise period thereafter. Stock ap-
preciation rights not exercised in this period and those in re-
spect of which the waiting period has not yet expired shall
lapse. Retirement, disability or death of the member of man-
agement shall not be deemed to be termination of the em-
ployment relationship for the purpose of exercising stock ap-
preciation rights.
Upon exercise of a stock appreciation right the amount paid
out to the entitled party is the difference between the basic
price and the current market price of the Hannover Rück SE
share at the time of exercise. In this context, the basic price
corresponds to the arithmetic mean of the closing prices of
the Hannover Rück SE share on all trading days of the first full
calendar month of the allocation year in question. The current
market price of the Hannover Rück SE share at the time when
stock appreciation rights are exercised is determined by the
arithmetic mean of the closing prices of the Hannover Rück
SE share on the last twenty trading days prior to the first day
of the relevant exercise period.
Basis for the Audit Opinions
Fair value at 31 December 2021 (in EUR)
2020
32.21
32.21
Valuation date
Share awards of Hannover Rück SE
Hannover Re | Annual Report 2021
258
The Share Award Plan of Hannover Rück SE gives rise to the
amounts shown in the following table.
Any entitlement to the granting of share awards after leaving
the company is excluded. This shall not apply with respect to
claims to variable remuneration acquired (pro rata) in the last
year of service of the eligible recipient in the event of exit
from the company on account of non-reappointment, occur-
rence of the pensionable event or death.
In the event that the Board mandate or service relationship
with the member of the Executive Board or the employment
relationship with the manager ends, the eligible recipient
shall retain his claims to payment of the value of already
granted share awards after expiry of the applicable vesting
period, unless such termination is based on resignation of of-
fice/voluntary termination on the part of the member of the
Executive Board or voluntary termination on the part of the
manager or dismissal by Hannover Re for a compelling rea-
son. In the event of death the claims arising out of the already
granted and/or still to be granted share awards pass to the
heirs.
In addition, upon payment of the value of the share awards, a
sum shall be paid out in the amount of the dividend insofar as
dividends were distributed to shareholders. The amount of
the dividend is the sum total of all dividends per share paid
out during the term of the share awards multiplied by the
number of share awards due for disbursement to the eligible
recipient at the disbursement date. In the event of early
disbursement of the share awards, the value of the divi-
dends shall only be paid out for the period until occurrence of
the event that triggers early disbursement. No pro rata
allowance shall be made for dividends that have not yet been
distributed.
The eligible recipient shall be paid an amount that corre-
sponds to the sum total of the values of the share awards cal-
culated at the disbursement date for which the vesting period
of four years has expired. The amount is to be paid in the
month after expiry of the determinative period for calculating
the value per share according to the preceding paragraphs.
of the Total Shareholder Return (TSR). The TSR captures the
share price performance as well as the dividends during the
vesting period. The TSR of Hannover Re is considered in re-
lation to the unweighted average TSR of a peer group, com-
prised of Munich Re, Swiss Re, Everest Re, RGA and SCOR,
and produces the relative TSR. The base amount paid out de-
rived from the share price and dividends is multiplied by this
TSR, producing the final amount paid out – which is at most
200% of the base amount paid out.
The share awards are granted automatically without any re-
quirement for a declaration. Following expiry of a vesting pe-
riod of four years the value of one Hannover Re share calcu-
lated at the disbursement date is paid out for each share
award. This value is calculated according to the provisions of
the preceding paragraph. The amount paid out for the perfor-
mance shares is additionally influenced by the development
32.21
The total number of share awards granted is based on the
value per share of Hannover Rück SE. The value per share is
established according to the unweighted arithmetic mean of
the Xetra closing prices of the Hannover Re share. In the con-
ditions applicable to members of the Executive Board a peri-
od of five trading days before to five trading days (from 2021
onwards in each case 15 trading days) after the meeting of
the Supervisory Board that approves the consolidated finan-
cial statement for the financial year just-ended is envisaged
for the calculation. For senior executives a period of 20 trad-
ing days before to ten trading days after the meeting of the
Supervisory Board that approves the consolidated financial
statement for the financial year just-ended has been agreed.
The prices calculated in this way also determine the payout
value of the share awards that have become payable. The to-
tal number of share awards granted is established by dividing
the amount available for the granting of share awards to the
respective eligible recipients by the value per share, rounded
up to the next full share. For members of the Executive Board
20% (from 2021 onwards 60%) and for senior executives
40% or 35% - according to management levels - of the de-
fined variable remuneration shall be granted in the form of
share awards. From the 2021 financial year onwards the cal-
culation of the share awards for the Executive Board is based
on the target amount, which - depending on the entrepre-
neurial and personal target achievement - produces an allo-
cation value that is at most 200% of the target amount.
The members of the Executive Board and management of
Hannover Re who are eligible recipients under the Share
Award Plan are those who have been allowed a contractual
claim to the granting of share awards and whose service/em-
ployment relationship exists at the time when the share
awards are granted and does not end through cancellation or
a termination agreement on an effective date prior to expiry
of the vesting period.
Annual financial statements
257
Hannover Re | Annual Report 2021
The Share Award Plan replaced the cancelled Stock Appreci-
ation Rights Plan. The share awards do not establish any
claim against Hannover Re to the delivery of stock, but mere-
ly to payment of a cash amount in accordance with the condi-
tions set out below.
for the Executive Board with effect from the 2021 financial
year ("performance shares").
exercised. The total amount paid out stood at EUR 0.13 mil-
lion.
With effect from the 2011 financial year the Supervisory
Board of Hannover Rück SE implemented a Share Award Plan
for the members of the Executive Board of Hannover Re; this
provides for the granting of stock participation rights in the
form of virtual shares (referred to as "share awards"). The
Executive Board of Hannover Re decided to adopt a Share
Award Plan for certain management levels at Hannover Re as
well with effect from the 2012 financial year. The Annual Gen-
eral Meeting 2021 modified and expanded the share awards
Share Award-Plan
In the 2021 financial year the waiting period expired for
100% of the stock appreciation rights awarded in 2011. 4,147
stock appreciation rights from the 2011 allocation year were
0.13
Share awards were granted separately for the first time for
the 2011 financial year and then for each financial year (allo-
cation year) thereafter. The first payout of share awards took
place in the 2016 financial year for those share awards that
had been allocated in the 2011 financial year to the eligible
members of the Executive Board. In the 2017 financial year
the first payout was also made to the participating senior ex-
ecutives.
45,349
Final Anticipated
45,426
statements in supplementary compliance with the Interna-
tional Standards on Auditing (ISAs). Our responsibilities un-
der those requirements, principles and standards are further
described in the “Auditor's Responsibilities for the Audit of
the Consolidated Financial Statements and of the Group Man-
agement Report" section of our auditor's report. We are inde-
pendent of the group entities in accordance with the require-
ments of European law and German commercial and
Provision at
1,973
608
710
655
Release 2021
13,322
15,511
1,227
13,322
Utilisation 2021
2,638
3,595
2,688
1,863
2,638
Allocation 2021
30,849
12,095
7,608
5,951
3,293
1,902
31 December 2020
3,500
Provision at
3,765
8,741
53,465
266
Hannover Re | Annual Report 2021
2020
2021
N 99
Personnel information
by the Hannover Re Group, with 1,477 (1,407) employed in
Germany and 1,869 (1,811) working for the consolidated
Group companies abroad.
The average number of staff at the companies included in the
consolidated financial statement of the Hannover Re Group
during the reporting period was 3,298 (3,132). As at the bal-
ance sheet date altogether 3,346 (3,218) staff were employed
Staff
8.4 Staff and expenditures on personnel
5,326
With regard to the effects of the equity swaps taken out to
hedge price risks, please see our explanatory remarks in sec-
tion 8.1 "Derivative financial instruments and financial guar-
antees".
Annual financial statements
259
Hannover Re | Annual Report 2021
EUR 15.5 million (EUR 4.9 million). This consists of the ex-
pense for share awards of the 2021 financial year as well as
the dividend claim and the additionally earned portion of the
share awards granted in earlier financial years. The value of
the share awards finally granted is also influenced by move-
ments in the share price. The sum total of the dividends in-
cluded in the expenditures on personnel for earlier financial
years amounted to EUR 1.0 million (EUR 1.4 million). The
distributed dividend is recognised, with no allowance made
for expected dividend payments. Dividend claims are recog-
nised in the discounted amounts.
The personnel expense for share awards in the case of mem-
bers of the Executive Board is spread on an accrual basis
across the relevant term of the share awards or the shorter
term of the service contracts; in the case of senior executives
the personnel expense is spread across the relevant term of
the share awards. The allocation of the financial year recog-
nised in the expenditures on personnel totalled altogether
-
non-technical provisions
recognised under the sundry
amounted to EUR 31.1 million
(EUR 30.9 million) as at the balance sheet date.
The aggregate provision
- - 31,065
10,595
In the year under review the 8,629 share awards of the Exec-
utive Board finally allocated in 2016 with a value of EUR
150.42 each plus the dividend entitlement of EUR 20.75 were
paid out to the eligible members of the Executive Board. The
69,744 share awards of the senior executives for the 2016 fi-
nancial year were paid out in 2021 with a value of EUR 147.06
each plus the dividend entitlement of EUR 20.75.
1,209
31 December 2021
14,747
944
Total
Allocation year
N 98
Development of the provision for share awards of Hannover Rück SE
This figure results from originally granted share awards that have since lapsed.
1
74,439
64,867
76,431
65,516
52,381
2021
53,419
53,200
69,607
Total
(1,835)
(837)
Other adjustments1
64,902
57,642
67,421
58,471
14,747
62,679
2020
45,103
2018
2019
105
90
70
Release 2020
Utilisation 2020
4,853
500
1,040
1,398
1,902
Allocation 2020
13
15,691
12,187
7,198
4,981
2017
1,895
31 December 2019
Provision at
in EUR thousand
2015
2016
41,952
Our auditor's report must always be read together with the
audited consolidated financial statements and the audited
group management report as well as the assured ESEF docu-
ments. The consolidated financial statements and the group
management report converted to the ESEF format - including
the versions to be published in the Federal Gazette - are
merely electronic renderings of the audited consolidated
financial statements and the audited group management
Reference to an Other Matter - use of the Auditor's Report
We declare that the audit opinions expressed in this auditor's
report are consistent with the additional report to the audit
committee pursuant to Article 11 of the EU Audit Regulation
(long-form audit report).
We were elected as group auditor by the supervisory board
on March 10, 2021. We were engaged by the supervisory
board on December 3, 2021. We have been the group auditor
of Hannover Rück SE, Hanover, without interruption since the
financial year 2018.
•
Evaluate whether the tagging of the ESEF documents
with Inline XBRL technology (iXBRL) in accordance
with the requirements of Articles 4 and 6 of the Dele-
gated Regulation (EU) 2019/815, in the version in force
at the date of the consolidated financial statements,
enables an appropriate and complete machine-readable
XBRL copy of the XHTML rendering.
Evaluate whether the ESEF documents provide an
XHTML rendering with content equivalent to the audit-
ed consolidated financial statements and to the audited
group management report.
Evaluate the technical validity of the ESEF documents,
i.e., whether the electronic file containing the ESEF doc-
uments meets the requirements of the Delegated Regu-
lation (EU) 2019/815 in the version in force at the date
of the consolidated financial statements on the technical
specification for this electronic file.
report and do not take their place. In particular, the "Report
on the Assurance on the Electronic Rendering of the Conso-
lidated Financial Statements and the Group Management
Report Prepared for Publication Purposes in Accordance with
§ 317 Abs. 3a HGB" and our assurance opinion contained
therein are to be used solely together with the assured ESEF
documents made available in electronic form.
Further Information pursuant to Article 10 of the EU Audit Regulation
German public auditor responsible for the engagement
(PricewaterhouseCoopers GmbH has performed a limited assurance engagement on the German version of the combined
non-financial statement and issued an independent practitioner's report in German language, which is authoritative. The
following text is a translation of the independent practitioner's report.)
is Mathias Röcker.
Hannover, 7 March 2022
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
sgd. Mathias Röcker
Wirtschaftsprüfer
(German Public Auditor)
sgd. Dennis Schnittger
Wirtschaftsprüfer
(German Public Auditor)
274
Hannover Re | Annual Report 2021
Independent Practitioner's Report on a Limited Assurance
Engagement on Non-financial Reporting
•
The German Public Auditor responsible for the engagement
•
Responsibilities of the Executive Directors and the Supervisory Board for the ESEF Documents
The executive directors of the Company are responsible for
the preparation of the ESEF documents including the elec-
tronic renderings of the consolidated financial statements
and the group management report in accordance with § 328
Abs. 1 Satz 4 Nr. [number] 1 HGB and for the tagging of the
consolidated financial statements in accordance with § 328
Abs. 1 Satz 4 Nr. 2 HGB.
Identify and assess the risks of material non-compliance
with the requirements of § 328 Abs. 1 HGB, whether due
to fraud or error, design and perform assurance proce-
dures responsive to those risks, and obtain assurance
evidence that is sufficient and appropriate to provide a
basis for our assurance opinion.
272
Hannover Re | Annual Report 2021
requirements, and communicate with them all relationships
and other matters that may reasonably be thought to bear on
our independence, and where applicable, the related safe-
guards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial state-
ments of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report
unless law or regulation precludes public disclosure about
the matter.
Other legal and regulatory requirements
Report on the Assurance on the Electronic Rendering of the
Consolidated Financial Statements and the Group Management Report Prepared for
Publication Purposes in Accordance with § 317 Abs. 3a HGB
Assurance Opinion
We have performed assurance work in accordance with § 317
Abs. 3a HGB to obtain reasonable assurance as to whether
the rendering of the consolidated financial statements and
the group management report (hereinafter the "ESEF docu-
ments") contained in the electronic file Hannover RueckSE_
KA_LB 2021-12-31-de.zip and prepared for publication pur-
poses complies in all material respects with the requirements
of § 328 Abs. 1 HGB for the electronic reporting format
("ESEF format"). In accordance with German legal require-
ments, this assurance work extends only to the conversion of
the information contained in the consolidated financial state-
ments and the group management report into the ESEF for-
mat and therefore relates neither to the information contained
within these renderings nor to any other information con-
tained in the electronic file identified above.
Basis for the Assurance Opinion
Obtain an understanding of internal control relevant to
the assurance work on the ESEF documents in order to
design assurance procedures that are appropriate in the
circumstances, but not for the purpose of expressing an
assurance opinion on the effectiveness of these controls.
We conducted our assurance work on the rendering of the
consolidated financial statements and the group management
report contained in the electronic file identified above in ac-
cordance with § 317 Abs. 3a HGB and the IDW Assurance
Standard: Assurance Work on the Electronic Rendering, of
Financial Statements and Management Reports, Prepared for
Publication Purposes in Accordance with § 317 Abs. 3a HGB
(IDW ASS 410 (10.2021)) and the International Standard on
Assurance Engagements 3000 (Revised). Our responsibility
in accordance therewith is further described in the "Group
Auditor's Responsibilities for the Assurance Work on the
ESEF Documents" section. Our audit firm applies the
IDW Standard on Quality Management 1: Requirements for
Quality Management in the Audit Firm (IDW QS 1).
necessary to enable the preparation of ESEF documents that
are free from material non-compliance with the requirements
of § 328 Abs. 1 HGB for the electronic reporting format,
whether due to fraud or error.
In addition, the executive directors of the Company are re-
sponsible for such internal control as they have considered
The supervisory board is responsible for overseeing the
process for preparing the ESEF documents as part of the
financial reporting process.
Hannover Re | Annual Report 2021
273
Independent Auditor's Report
Group Auditor's Responsibilities for the Assurance Work on the ESEF Documents
Our objective is to obtain reasonable assurance about wheth-
er the ESEF documents are free from material non-compli-
ance with the requirements of § 328 Abs. 1 HGB, whether due
to fraud or error. We exercise professional judgment and
maintain professional skepticism throughout the assurance
work. We also
•
•
In our opinion, the rendering of the consolidated financial
statements and the group management report contained in
the electronic file identified above and prepared for publica-
tion purposes com-plies in all material respects with the re-
quirements of § 328 Abs. 1 HGB for the electronic reporting
format. Beyond this assurance opinion and our audit opinion
on the accompanying consolidated financial statements and
the accompanying group management report for the financial
year from January 1 to December 31, 2021 contained in the
"Report on the Audit of the Consolidated Financial State-
ments and on the Group Management Report" above, we do
not express any assurance opinion on the information con-
tained within these renderings or on the other information
contained in the electronic file identified above.
To Hannover Rück SE, Hannover
Hannover Re | Annual Report 2021
Non-financial Statement") included in section “Combined
Non-financial Statement" of the combined management report.
process and about disclosures in the Combined
Non-financial Statement
Identification of likely risks of material misstatement in
the Combined Non-financial Statement
Analytical procedures on selected disclosures in the
Combined Non-financial Statement
Reconciliation of selected disclosures with the corre-
sponding data in the consolidated financial statements
and combined management report
Evaluation of the presentation of the Combined
Non-financial Statement
Evaluation of the process to identify taxonomy-eligible
economic activities and the corresponding disclosures
in the Combined Non-financial Statement
In determining the disclosures in accordance with Article 8
of the EU Taxonomy Regulation, the executive directors are
required to interpret undefined legal terms. Due to the imma-
nent risk that undefined legal terms may be interpreted
differently, the legal conformity of their interpretation and,
accordingly, our assurance engagement thereon are subject
to uncertainties.
Assurance Opinion
Inquiries of the executive directors and relevant
employees involved in the preparation of the Combined
Non-financial Statement about the preparation process,
about the internal control system relating to this
Based on the assurance procedures performed and evidence
obtained, nothing has come to our attention that causes us to
believe that the Combined Non-financial Statement of the Com-
pany for the period from 1 January to 31 December 2021 is not
prepared, in all material respects, in accordance with §§ 315c
in conjunction with 289c to 289e HGB and the EU Taxonomy
Regulation and the Delegated Acts issued thereunder as well as
We do not express an assurance opinion on the external
sources of documentation or expert opinions mentioned in the
Combined Non-financial Statement.
Restriction of Use
We draw attention to the fact that the assurance engagement
was conducted for the Company's purposes and that the
report is intended solely to inform the Company about the
result of the assurance engagement. Consequently, it may not
be suitable for any other purpose than the aforementioned.
Frankfurt am Main, 7 March 2022
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Accordingly, the report is not intended to be used by third
parties for making (financial) decisions based on it. Our
responsibility is to the Company. We do not accept any
responsibility to third parties. Our assurance opinion is not
modified in this respect.
Nicolette Behncke
Wirtschaftsprüferin
[German public auditor]
ppa. Christopher Hintze
Wirtschaftsprüfer
[German public auditor]
276
We also provide those charged with governance with a state-
ment that we have complied with the relevant independence
the interpretation by the executive directors disclosed in
section "Disclosures under Article 8 of the EU Taxonomy
Regulation" of the Combined Non-financial Statement.
•
•
•
Not subject to our assurance engagement are the external
sources of documentation or expert opinions mentioned in
the Combined Non-financial Statement.
Responsibility of the Executive Directors
The executive directors of the Company are responsible for
the preparation of the Combined Non-financial Statement in
accordance with §§ (Articles) 315c in conjunction with 289c
to 289e HGB ("Handelsgesetzbuch”: “German Commercial
Code") and Article 8 of REGULATION (EU) 2020/852 OF
THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of
18. June 2020 on establishing a framework to facilitate sus-
tainable investment and amending Regulation (EU) 2019/
2088 (hereinafter the “EU Taxonomy Regulation”) and the
Delegated Acts adopted thereunder, as well as for making
their own interpretation of the wording and terms contained
in the EU Taxonomy Regulation and the Delegated Acts
adopted thereunder, as set out in section "Disclosures under
Article 8 of the EU Taxonomy Regulation" of the Combined
Non-financial Statement.
This responsibility includes the selection and application of
appropriate non-financial reporting methods and making
assumptions and estimates about individual non-financial
disclosures of the Group that are reasonable in the circum-
stances. Furthermore, the executive directors are responsible
for such internal controls as the executive directors consider
necessary to enable the preparation of a Combined Non-
financial Statement that is free from material misstatement
whether due to fraud or error.
The EU Taxonomy Regulation and the Delegated Acts issued
thereunder contain wording and terms that are still subject to
considerable interpretation uncertainties and for which clari-
fications have not yet been published in every case. There-
fore, the executive directors have disclosed their interpreta-
tion of the EU Taxonomy Regulation and the Delegated Acts
adopted thereunder in section "Disclosures under Article 8 of
the EU Taxonomy Regulation" of the Combined Non-financial
Statement. They are responsible for the defensibility of this
interpretation. Due to the immanent risk that indeterminate
legal terms may be interpreted differently, the legal conform-
ity of the interpretation is subject to uncertainties.
Independence and Quality Control of the Audit Firm
We have complied with the German professional provisions
regarding independence as well as other ethical require-
ments.
-
Our audit firm applies the national legal requirements and
professional standards in particular the Professional Code
for German Public Auditors and German Chartered Auditors
("Berufssatzung für Wirtschaftsprüfer und vereidigte Buch-
prüfer": "BS WP/vBP") as well as the Standard on Quality
-
Control 1 published by the Institut der Wirtschaftsprüfer (In-
stitute of Public Auditors in Germany; IDW): Requirements to
quality control for audit firms (IDW Qualitätssicherungs-
standard 1: Anforderungen an die Qualitätssicherung in der
Wirtschaftsprüferpraxis – IDW QS 1) – and accordingly main-
tains a comprehensive system of quality control including
documented policies and procedures regarding compliance
with ethical requirements, professional standards and appli-
cable legal and regulatory requirements.
Responsibility of the Assurance Practitioner
Our responsibility is to express a conclusion with limited
assurance on the Combined Non-financial Statement based
on our assurance engagement.
Hannover Re | Annual Report 2021
We conducted our assurance engagement in accordance with
International Standard on Assurance Engagements (ISAE)
3000 (Revised): Assurance Engagements other than Audits or
275
Independent Auditor's Report
Reviews of Historical Financial Information, issued by the
IAASB. This Standard requires that we plan and perform the
assurance engagement to obtain limited assurance about
whether any matters have come to our attention that cause us
to believe that the Company's Combined Non-financial State-
ment, other than the external sources of documentation or
expert opinions mentioned in the Combined Non-financial
Statement, are not prepared, in all material respects, in ac-
cordance with §§ 315c in conjunction with 289c to 289e HGB
and the EU Taxonomy Regulation and the Delegated Acts is-
sued thereunder as well as the interpretation by the executive
directors disclosed in section "Disclosures under Article 8 of
the EU Taxonomy Regulation” of the Combined Non-financial
Statement.
In a limited assurance engagement the procedures performed
are less extensive than in a reasonable assurance engage-
ment, and accordingly a substantially lower level of assurance
is obtained. The selection of the assurance procedures is
subject to the professional judgement of the assurance
practitioner.
In the course of our assurance engagement, we have, amongst
other things, performed the following assurance procedures
and other activities:
•
•
•
We have performed a limited assurance engagement on the
combined non-financial statement of Hannover Rück SE,
Hannover, (hereinafter the "Company") for the period from
1 January to 31 December 2021 (hereinafter the "Combined
We communicate with those charged with governance re-
garding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify
during our audit.
The calculation of the claims provision required the use of
judgments, estimates and assumptions by the executive
directors. Minor changes to those assumptions or to the
methods used may have a material impact on the meas-
urement of this provision.
Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business ac-
tivities within the Group to express audit opinions on the
consolidated financial statements and on the group
management report. We are responsible for the direc-
tion, supervision and performance of the group audit.
We remain solely responsible for our audit opinions.
Evaluate the consistency of the group management re-
port with the consolidated financial statements, its con-
formity with German law, and the view of the Group's
position it provides.
(b) Given the significance of the claims provision, as part of
our audit we worked with our actuaries to assess the
methods used by the Company and the assumptions made
by the executive directors. The assessment was based on
Among other things, we assessed the appropriateness of
the design of the process for recognizing reserves and
carried out functional tests in order to assess the effec-
tiveness of the internal controls. We focused in particular
on controls designed to ensure that the data used are
appropriate and complete and that the calculation process
is subject to a sufficient form of quality assurance.
Based on the testing of controls, we carried out additional
analytical and substantive audit procedures relating to the
measurement of the claims provision. In light of the sig-
nificance of the claims provision for the overall business
of the Company, our internal valuation specialists as-
sessed the appropriateness of the methods used by the
Company. Furthermore, our internal valuation specialists
also assessed the models and assumptions used by the
executive directors based on industry expertise and expe-
rience with recognized actuarial practice, and assessed
the consistent application of the valuation methods. In
this context, we also assessed the executive directors'
estimate as to the impact of the coronavirus crisis on
the business as a whole.
Based on our audit procedures, we were able to satisfy
ourselves that the estimates and assumptions made by the
executive directors with respect to the claims provisions
are appropriate overall.
(c) The Company's disclosures on the property reinsurance
claims provisions are contained in the sections of the
notes to the consolidated financial statements entitled
"Accounting policies" and "Notes to the individual items
of the balance sheet", subsection "Technical provisions".
Disclosures on risks are contained in the Group manage-
ment report in the section entitled “Risk report", subsec-
tion "Technical risks of property reinsurance".
268
Hannover Re | Annual Report 2021
(3) Measurement of premium reserves
(a) Technical provisions amounting to EUR 7,541.9 million
(9.1% of total consolidated assets) are reported under the
"Premium reserves" balance sheet item in the consolidat-
ed financial statements. The premium reserves were rec-
ognized primarily for the reinsurance activities in the life
and health reinsurance segments.
The premium reserve is measured by using actuarial
methods to derive the present value of future benefits to
cedants, less the present value of premiums still to be
paid by cedants in future. The respective policies are ini-
tially recognized in accordance with recognized account-
ing bases. Depending on the structure of the relevant pol-
icy and the regular business, the calculation is based
either on a combination of previous cedant settlements,
where necessary adjusted to account for estimates of the
course of the policy for settlement periods not yet settled
or based on model-driven own calculations of the premi-
um reserve. In so doing, actuarial assumptions must be
made with respect to interest rates, investment yields,
mortality, invalidity, longevity, costs and future behavior
of policyholders.
Perform audit procedures on the prospective informa-
tion presented by the executive directors in the group
management report. On the basis of sufficient appropri-
ate audit evidence we evaluate, in particular, the signifi-
cant assumptions used by the executive directors as a
basis for the prospective information, and evaluate the
proper derivation of the prospective information from
these assumptions. We do not express a separate audit
opinion on the prospective information and on the as-
sumptions used as a basis. There is a substantial una-
voidable risk that future events will differ materially
from the prospective information.
Annual appropriateness tests are conducted to verify at
the level of portfolios subject to standardized manage-
ment whether the actuarial provisions calculated as of the
reporting date in accordance with the accounting bases
used upon initial recognition, and hence the premium re-
serve in particular, less existing deferred costs of conclud-
ing the policy, are sufficient to cover the present value of
future benefits as best estimated at the reporting date,
less the present value of premiums to be paid in connec-
tion with the portfolios subject to standardized manage-
ment. This also includes the expected impact of the ongo-
ing coronavirus crisis on the premium reserves.
(b) Given the significance of premium reserves, as part of our
audit we worked with our actuaries to assess the methods
used by the Company and the assumptions made by the
executive directors. The assessment was based on our in-
dustry expertise and experience, among other things.
For the purposes of the assessment, we also evaluated the
design and effectiveness of the controls established by the
Company for the purpose of calculating and recording the
premium reserves. We focused in particular on controls
designed to ensure that new products and policies are
correctly classified and that changes in assumptions are
correctly implemented in the systems.
Based on the testing of controls, we carried out additional
analytical and substantive audit procedures relating to the
measurement of the premium reserves.
With the help of our actuaries, we have compared the
respective actuarial methods applied and the material
assumptions with generally recognized actuarial practices
and industry standards and ascertained to what extent
these are appropriate for the valuation. In tests of details
we assessed the correct and proper use of the available
cedant settlements when calculating the premium
reserves.
We also assessed the appropriateness of the material
assumptions by analyzing how the actuarial methods
applied were derived.
Based on the tests of appropriateness conducted, we
formed an opinion as to whether the accounting bases
and methods were appropriately applied. Where market
rates of interest were used in the valuation, we verified
the appropriateness of the discount rates used by compar-
ing these with observable market parameters. Given the
significance of the business for the Group, we focused in
particular on the appropriateness test for the business of
covering mortality risks in the USA in the Mortality Solu-
tions division. Furthermore we analyzed the development
of premium reserves as compared to the previous year,
particularly in light of the fact that the assumptions con-
sistently correspond to the currently available cedant in-
formation, current business developments of the cedants
and our expectations based on market observations.
Hannover Re | Annual Report 2021
269
Independent Auditor's Report
In this context, we also assessed the executive directors'
estimate as to the impact of the coronavirus crisis.
The estimate of the sufficiency of the reported premium
reserves, the estimates made in the absence of cedant set-
tlements as well as model-driven calculations of the pre-
mium reserve is subject to considerable judgement to be
exercised by the executive directors and the associated
estimate uncertainties. Against this background and due
to the material significance of the amount of the premium
reserves for the assets liabilities and financial perfor-
mance of the Group and the complexity of the underlying
calculations, this matter was of particular significance in
the context of our audit.
professional law, and we have fulfilled our other German pro-
fessional responsibilities in accordance with these require-
ments. In addition, in accordance with Article 10 (2) point (f)
of the EU Audit Regulation, we declare that we have not pro-
vided non-audit services prohibited under Article 5 (1) of the
The executive directors calculate the amount of the
provision taking into account the results of the actuarial
methods and other factors in relation to calculation uncer-
tainty.
The claims provisions under property reinsurance are
estimated based on cedant information based on expe-
rience. The provision is measured based on actuarial
methods which require a sufficiently long data history and
stability of the observed data.
EU Audit Regulation. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis
for our audit opinions on the consolidated financial state-
ments and on the group management report.
Key Audit Matters in the Audit of the Consolidated Financial Statements
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the con-
solidated financial statements for the financial year from Jan-
uary 1 to December 31, 2021. These matters were addressed
in the context of our audit of the consolidated financial state-
ments as a whole, and in forming our audit opinion thereon;
we do not provide a separate audit opinion on these matters.
In our view, the matters of most significance in our audit were
as follows:
(1) Fair value measurement of certain financial instruments
(2) Measurement of provisions for unsettled claims in the
property reinsurance business segment
(3) Measurement of premium reserves
(4) Calculation of estimated gross premium
Our presentation of these key audit matters has been struc-
tured in each case as follows:
(a) Matter and issue
(b) Audit approach and findings
(c) Reference to further information
Hereinafter we present the key audit matters:
(1) Fair value measurement of certain financial instruments
(a) Financial instruments amounting to EUR 67,519.7 million
(81.4% of total assets) are reported in the Company's
consolidated financial statements.
The mathematical methods use assumptions concerning
premiums, ultimate loss ratios and run-off patterns, which
are based on an expert estimate derived from past experi-
ence. This also includes the expected impact of the ongo-
ing coronavirus crisis on the recognition of the claims
provision for the business as a whole.
Of these financial instruments, financial assets amounting
to EUR 49,666.9 million were measured at fair value. Of
those financial instruments in turn, the fair value of
EUR 45,614.2 million was calculated using valuation
models or based on third-party inputs. The measurement
of financial instruments whose fair value must be deter-
mined based on valuation models and third-party inputs
are subject to uncertainty including in light of the
impacts of the coronavirus crisis - because the most re-
cent market data or comparable figures are not always
available and therefore estimates must be used in lieu of
currently observable market parameters.
(b) In the course of our audit, we analyzed the financial in-
struments valued based on models and third-party inputs,
with the focus being placed on measurement uncertain-
ties. We assessed the appropriateness and effectiveness
of the relevant controls for the measurement of the finan-
cial instruments and the model validation. Therewith, we
assessed, among other things, the integrity of the under-
lying data and the process for arriving at the assumptions
and estimates used in the valuation.
With the help of our internal financial mathematics spe-
cialists, we also assessed the appropriateness of the
methods used by the executive directors to test the assets
for impairment and the inputs used for that purpose. In
this context, we also assessed the executive directors' es-
timate as to the impact of the coronavirus crisis on recov-
erability. We have compared the methods and assump-
tions used to calculate valuation adjustments in the
financial year with recognized practices and industry
standards and ascertained to what extent these are suita-
ble for determining an appropriate accounting treatment.
Based on our audit procedures, we were able to satisfy
ourselves that the methods and assumptions used by the
executive directors to measure certain financial instru-
ments (valued based on models and third-party inputs)
are suitable overall and that the notes and disclosures
contained in the notes to the consolidated financial state-
ments are appropriate.
Hannover Re | Annual Report 2021
267
Independent Auditor's Report
(c) The Company's disclosures on the measurement of the
financial instruments are contained in the sections of the
notes to the consolidated financial statements entitled
"Accounting policies" and "Notes to the individual items
of the balance sheet", subsection "Assets under own man-
agement".
our industry expertise and experience, among other
things.
(2) Measurement of provisions for unsettled claims in the property reinsurance business segment
(a) In the consolidated financial statements of the Company
technical provisions ("claims provisions") amounting to
EUR 40,777.7 million (49.2% of total assets) are reported
under the "Provisions for unsettled claims" consolidated
balance sheet item.
Of that amount, EUR 35,089.4 million was attributable to
the Property reinsurance segment.
In this context, financial instruments measured using
models are subject to an increased measurement risk due
to their lower objectivity and the underlying judgments,
estimates and assumptions of the executive directors, in-
cluding in light of the impacts of the coronavirus crisis.
Since the estimates and assumptions, in particular with
regard to interest rates and cash flows, and the valuation
methods applied could materially affect the measurement
of these financial instruments and the assets, liabilities
and financial performance of the Group and also signifi-
cant notes disclosures on measurement methods and
judgments are necessary, this matter was of particular
significance in the context of our audit.
Based on our audit procedures, we were able to satisfy
ourselves that the methods and assumptions used by the
executive directors to measure premium reserves are
appropriate overall.
Against this background and also due to the material sig-
nificance of the amount of these provisions for the assets
liabilities and financial performance of the Group, the
measurement of these provisions was of particular signif-
icance in the context of our audit.
(4) Calculation of estimated gross premium
(a) In its consolidated financial statements, the Company
reported gross premiums of EUR 27,762.3 million in the
income statement.
The executive directors and the supervisory board are further
responsible for the preparation of the remuneration report,
including the related disclosures, which is included in a sep-
arate section of the group management report and complies
with the requirements of § 162 AktG. They are also responsi-
ble for such internal control as they determine is necessary to
enable the preparation of a remuneration report, including
the related disclosures, that is free from material misstate-
ment, whether due to fraud or error.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and
of the Group Management Report
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or
error, and whether the group management report as a whole
provides an appropriate view of the Group's position and, in
all material respects, is consistent with the consolidated
financial statements and the knowledge obtained in the audit,
complies with the German legal requirements and appropri-
Hannover Re | Annual Report 2021
271
Independent Auditor's Report
ately presents the opportunities and risks of future develop-
ment, as well as to issue an auditor's report that includes our
audit opinions on the consolidated financial statements and
on the group management report.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with § 317
HGB and the EU Audit Regulation and in compliance with
German Generally Accepted Standards for Financial State-
ment Audits promulgated by the Institut der Wirtschafts-
prüfer (IDW) and supplementary compliance with the ISAs
will always detect a material misstatement. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of these consolidated financial statements and
this group management report.
We exercise professional judgment and maintain professional
skepticism throughout the audit. We also
•
The supervisory board is responsible for overseeing the
Group's financial reporting process for the preparation of the
consolidated financial statements and of the group manage-
ment report.
•
Identify and assess the risks of material misstatement of
the consolidated financial statements and of the group
management report, whether due to fraud or error, de-
sign and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and ap-
propriate to provide a basis for our audit opinions. The
risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omis-
sions, misrepresentations, or the override of internal
controls.
Obtain an understanding of internal control relevant to
the audit of the consolidated financial statements and of
arrangements and measures (systems) relevant to the
audit of the group management report in order to design
audit procedures that are appropriate in the circum-
stances, but not for the purpose of expressing an audit
opinion on the effectiveness of these systems.
Evaluate the appropriateness of accounting policies
used by the executive directors and the reasonableness
of estimates made by the executive directors and related
disclosures.
Conclude on the appropriateness of the executive direc-
tors' use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a mate-
rial uncertainty exists related to events or conditions
that may cast significant doubt on the Group's ability to
continue as a going concern. If we conclude that a mate-
rial uncertainty exists, we are required to draw attention
•
•
•
•
in the auditor's report to the related disclosures in the
consolidated financial statements and in the group man-
agement report or, if such disclosures are inadequate, to
modify our respective audit opinions. Our conclusions
are based on the audit evidence obtained up to the
date of our auditor's report. However, future events or
conditions may cause the Group to cease to be able to
continue as a going concern.
(c) The Company's disclosures on the premium reserve are
contained in the sections of the notes to the consolidated
financial statements entitled “Accounting policies" and
"Notes to the individual items of the balance sheet", sub-
section "Technical provisions”. Disclosures on risks are
contained in the Group management report in the section
entitled "Risk report", subsection "Technical risks of
personal reinsurance".
•
in all material respects, consistent with the consolidated
financial statements, complies with German legal require-
ments, and appropriately presents the opportunities and risks
of future development. In addition, the executive directors
are responsible for such arrangements and measures
(systems) as they have considered necessary to enable the
preparation of a group management report that is in accord-
ance with the applicable German legal requirements, and to
be able to provide sufficient appropriate evidence for the
assertions in the group management report.
Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements present the underlying transactions and
events in a manner that the consolidated financial state-
ments give a true and fair view of the assets, liabilities,
financial position and financial performance of the
Group in compliance with IFRSs as adopted by the EU
and the additional requirements of German commercial
law pursuant to § 315e Abs. 1 HGB.
Acquired reinsurance premiums are accounted for in
accordance with the terms and conditions of the reinsur-
ance policies. In the absence of invoices for cedants, the
Company made supplementary or complete estimates of
the premiums.
The estimates are based on assumptions and are there-
fore subject to considerable uncertainty and judgment,
including with respect to the impact of the coronavirus.
Due to the material significance of the estimated premi-
ums for the assets, liabilities and financial performance of
the Group as well as the considerable scope for judgment
on the part of the executive directors and the associated
uncertainties in the estimations made, this matter was of
particular significance in the context of our audit.
(b) For the purposes of auditing the estimated gross premi-
um, we first evaluated the design of the contribution and
estimation process. In that connection, we identified the
material key controls and analyzed their design. Based on
that analysis, we evaluated the operating effectiveness by
testing the effectiveness of the key controls implemented
in the process and to assess the appropriateness of the
material assumptions by verifying and analyzing the pro-
cedure for calculating and deriving the estimated gross
premium. In this context, we also assessed the executive
directors' estimate as to the impact of the coronavirus
crisis.
In tests of details, we critically reviewed the material
assumptions underlying an estimate and asked the Com-
pany to explain to us the grounds for such estimates.
Based on information on the premiums expected in the
previous year, we reconciled the expectations against the
actual events and thus were able to draw conclusions as to
the quality of the estimates.
Based on our audit procedures, we were able to satisfy
ourselves that the calculation procedures used by the
executive directors to derive the estimated gross pre-
mium are appropriate overall.
(c) The Company's disclosures on the recognized and esti-
mated gross premiums are contained in the sections of
the notes to the consolidated financial statements entitled
"Accounting policies" and "Notes to the individual items
of the income statement".
Furthermore, the executive directors are responsible for the
preparation of the group management report that, as a whole,
provides an appropriate view of the Group's position and is,
The executive directors are responsible for the other infor-
mation. The other information comprises the following
non-audited parts of the group management report:
•
the statement on corporate governance pursuant to
§ 289f HGB and § 315d HGB included in section,,Corpo-
rate governance" of the group management report
the non-financial statement pursuant to § 289b Abs. 1
HGB and § 315b Abs. 1 HGB included in section "Com-
bined non-financial statement" of the group manage-
ment report.
270
•
Other Information
Hannover Re | Annual Report 2021
The other information comprises further all remaining parts
of the annual report - excluding cross-references to external
information - with the exception of the audited consolidated
financial statements, the audited group management report
and our auditor's report.
Our audit opinions on the consolidated financial statements
and on the group management report do not cover the other
information mentioned above, and consequently we do not
express an audit opinion or any other form of assurance con-
clusion thereon.
In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the
other information
•
is materially inconsistent with the consolidated financial
statements, with the group management report disclo-
sures audited in terms of content or with our knowledge
obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in
this regard.
Responsibilities of the Executive Directors and the Supervisory Board for the
Consolidated Financial Statements and the Group Management Report
The executive directors are responsible for the preparation
of the consolidated financial statements that comply, in all
material respects, with IFRSS as adopted by the EU and the
additional requirements of German commercial law pursuant
to § 315e Abs. 1 HGB and that the consolidated financial
statements, in compliance with these requirements, give a
true and fair view of the assets, liabilities, financial position,
and financial performance of the Group. In addition the exec-
utive directors are responsible for such internal control as
they have determined necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the exec-
utive directors are responsible for assessing the Group's abil-
ity to continue as a going concern. They also have the respon-
sibility for disclosing, as applicable, matters related to going
concern. In addition, they are responsible for financial report-
ing based on the going concern basis of accounting unless
there is an intention to liquidate the Group or to cease opera-
tions, or there is no realistic alternative but to do so.
the disclosures on Solvency II reporting included in
the group management report that are marked as un-
audited.
3-10 Nibancho
Chiyoda-ku
Tokyo 102-0084
Tel. +81 3 5214-1101
Fax +81 3 5214-1105
General Manager:
Takayuki Ohtomo
220 Bay Street, Suite 400
Toronto, Ontario M5J 2W4
Tel. +1 416 867-9712
Fax +1 416 867-9728
Hannover Re (Ireland) DAC
Canadian Life Branch
220 Bay Street, Suite 400
Toronto, Ontario M5J 2W4
Tel. +1 416 607-7824
Fax +1 416 867-9728
General Manager:
Louis Kerba
Hannover Rück SE
Canadian Branch
Canada
Hannover Re Services Japan
Hakuyo Building, 7th Floor
Ireland
Fax +39 02 8068-1349
Head of Administration:
Giorgio Zandonella-Golin
Tel. +39 02 8068-1311
20123 Milan
Hannover Re Services Italy S.r.l.
Via Dogana, 1
Italy
Kathrin Scherff
CEO:
Fax +353 1 633-8806
Tel. +353 1 633-8800
Designated Activity Company
No. 4 Custom House Plaza, IFSC
Dublin 1
Hannover Re (Ireland)
General Manager:
Japan
Paul Carragher
92, Saemunan-ro, Jongno-gu
Laurel E. Grant
Hannover Re | Annual Report 2021
286
Av. Santa Fé No. 170
Col. Lomas de Santa Fé
C.P. 01219 México, D.F.
Tel. +52 55 9140-0800
Fax +52 55 9140-0815
General Manager:
Alejandra Bautista
Oficina 4-4-28
S.A. de C. V.
German Centre
Hannover Services (México)
Mexico
Managing Director:
Daniel Gunawan
59200 Kuala Lumpur
Tel. +60 3 2687-3600
Fax +60 3 2687-3760
Hannover Rueck SE
Malaysian Branch
Level 32, Mercu 2
No. 3, Jalan Bangsar
KL Eco City
Malaysia
Chief Agent:
Tel. +82 2 3700-0600
Fax +82 2 3700-0699
General Manager:
Simon Jun Chong
Gwanghwamun Officia Building
Room 414, 4th Floor
Hannover Rück SE
Korea Branch
Korea
Fax +57 1 642-0273
General Manager:
Miguel Guarín
Tel. +57 1 642-0066
Bogotá
Floor 5
Bogotá Oficina de Representación
Carrera 9 No. 77-67
Hannover Rück SE
Colombia
Seoul 03186
Fax +91 22 6138-0810
General Manager:
GLN Sarma
Member of various supervisory boards
Mumbai 400 099
informed the Supervisory Board of the outcome of its reviews.
The audit reports were distributed to all the members of the
Supervisory Board and explored in detail - with the participa-
tion of the auditors - at the Supervisory Board meeting held
to consider the annual results. The auditors will also be pres-
ent at the Annual General Meeting.
The accounting, annual financial statements, consolidated fi-
nancial statements and the combined management report
were audited by PricewaterhouseCoopers GmbH Wirtschafts-
prüfungsgesellschaft. The Supervisory Board chose the audi-
tor and the Chairman of the Supervisory Board awarded the
audit mandate. The auditor's independence declaration was
received. Along with the audit concentrations defined by the
European Securities and Markets Authority (ESMA), auditing
activities relating to the implementation of IFRS 17 were also
included in the scope of the audit. The mandate for the review
report by the independent auditors on the Half-yearly Finan-
cial Report and the Solvency II balance sheet was also award-
ed again. The special challenges associated with the interna-
tional aspects of the audits were met without reservation.
Since the audits did not give rise to any objections, Pricewa-
terhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft is-
sued unqualified audit certificates. It was also determined
that the annual financial statement contains the information
pursuant to § 289f German Commercial Code (HGB). The Fi-
nance and Audit Committee discussed the financial state-
ments and the combined management report with the partic-
ipation of the auditors and in light of the audit reports, and it
Audit of the annual financial statements and
consolidated financial statements
As in the previous years, among other things, the Standing
Committee reviewed the adequacy of the remuneration
scheme for the members of the Executive Board, determined
the variable remuneration of the members of the Executive
Board for the 2020 financial year based on the findings per-
taining to attainment of their respective targets and examined
the remuneration for the Board members who were due for
review. We exchanged views with the Chairman of the Exec-
utive Board regarding the aforementioned change to the
schedule of responsibilities in the area of property and
casualty reinsurance. With regard to all these matters the
Committee drew up corresponding recommendations for the
full Supervisory Board. In the context of the extensions of the
terms of office for individual members of the Executive Board
that were up for discussion in 2021, we engaged in an ongo-
ing dialogue on medium- and long-term succession arrange-
ments. Furthermore, the individual targets of the members of
the Executive Board for 2022 were defined on the basis of the
new remuneration scheme and prepared for adoption of a
resolution by the full Supervisory Board.
Manager and the Executive Board, we examined in detail the
process for compiling the non-financial information state-
ment with an eye to existing and new regulatory require-
ments. The implementation of the new financial reporting
standard (IFRS 17) was another point of emphasis in the
Committee's deliberations in the 2021 financial year.
Hannover Re | Annual Report 2021
280
The Finance and Audit Committee considered inter alia the
consolidated financial statement and the quarterly reports
drawn up in accordance with IFRS and the individual finan-
cial statement of Hannover Rück SE drawn up in accordance
with the German Commercial Code (HGB), and it discussed
with the independent auditors their reports on these financial
statements. As in the previous years, an expert opinion on the
adequacy of the loss reserves in property and casualty rein-
surance was noted, the retrocession structure of the Han-
nover Re Group as well as reports of the key functions were
received and considered. In addition, the Committee exam-
ined the investment structure and investment income - in-
cluding the stress tests with regard to the investments and
their implications for net income and the equity base. The
audit concentrations of the independent auditors for the 2021
financial year were defined. The review of the quality of the
auditing was carried out using the system defined in the pre-
vious year. The Committee continued to be provided with on-
going detailed reports on the recognition and measurement
of the risk-oriented book of US life reinsurance business ac-
quired in 2009 from Scottish Re as well as on the rate increas-
es that had been initiated and/or implemented. In one meet-
ing we focused on the capital market risks in life and health
reinsurance, while in another we concentrated specifically on
the mapping of currencies in the IFRS consolidated financial
statement. The increasingly significant issue of sustainabili-
ty/ESG was also discussed by the Committee on multiple oc-
casions. In cooperation with the Corporate Sustainability
Of the committees formed by the Supervisory Board within
the meaning of § 107 Para. 3 Stock Corporation Act (AktG),
the Finance and Audit Committee and the Standing Commit-
tee each met on four occasions in 2021. The committee chairs
updated the full Supervisory Board on the major deliberations
of the committee meetings at its next meeting and provided
an opportunity for further questions.
Committees of the Supervisory Board
As in every year, we were regularly briefed on the work of the
Supervisory Board committees.
Supervisory Board. It was again the case this year that the
individual members of the Supervisory Board attended nu-
merous advanced training measures in relation to various
core topics; the costs incurred in this connection were paid
by the company. Topics covered in 2021 included, among
others, Solvency II, financial reporting, sustainability/ESG,
cyber and recent market developments relating to the pan-
demic. We also discussed and approved the individual targets
for members of the Executive Board for 2022. The focus here
was on the findings of the Organisational Health Check, sus-
tainability and the strategic objectives.
At the last meeting of the year held on 3 November 2021, we
deliberated at length on the key preliminary results in the
business performance together with the outlook for the cur-
rent financial year. The large losses in property and casualty
reinsurance, which confronted the entire industry with ex-
ceptional challenges in the year under review, were our pri-
mary focus. The Executive Board also presented to us the
operational planning for 2022; we considered this in detail
and subsequently approved the annual and results planning
submitted to us. We discussed the latest insights from the risk
report and were informed of the status of major pending legal
proceedings. The Executive Board provided routine reporting
on employee capacities and the elaboration of the remunera-
tion system for senior executives pursuant to § 3 Para. 5 of
the Regulation on the Supervisory Law Requirements for Re-
muneration Schemes in the Insurance Sector (VersVergV).
The resolutions to be adopted by us on internal restructuring
measures within the Group were a point of emphasis in the
meeting. After in-depth discussion of the proposed transac-
tion, we approved the strategic sale of the shares in HDI Glob-
al Specialty SE. Following on from the training activities at
the August meeting, we received an update on the progress of
implementation of IFRS 17 in the internal accounting process
as well as a report on the prospects for dealing with relevant
new framework conditions in tax law. In addition, we were
provided with pertinent information on the sustainability
strategy in the current strategy cycle and the latest status of
implementation. For this purpose we were able to engage di-
rectly with the newly instituted function of Corporate Sustain-
ability Manager. We also devoted a significant part of our
discussions in the meeting to corporate governance issues
and hence approved the modified Declaration of Conformity
(for further details see the Declaration on Corporate Govern-
ance on page 118 et seq. of the combined management re-
port). Based on the findings of the "Fit and Proper" self-as-
sessment that had been conducted among the Supervisory
Board members, the Supervisory Board engaged in an exten-
sive exchange of views on a development plan for the entire
Stock Corporation Act (AktG)). Within the subject area of cor-
porate governance we also explored the efficiency of the Su-
pervisory Board's working procedure. The German Corporate
Governance Code (DCGK) requires a self-assessment to be
conducted regularly in this respect. For this purpose, our in-
dividual assessments were surveyed in advance. The consoli-
dated anonymised evaluation of this survey then formed the
basis for exploring the findings at the meeting. Similarly
building on our further training in the previous year, we again
had the opportunity to learn about the latest developments in
the area of (group) tax law in reinsurance and their relevance
to the company from the responsible expert present at the
meeting.
The report on the company's relations with affiliated com-
panies drawn up by the Executive Board has likewise been
examined by PricewaterhouseCoopers GmbH Wirtschafts-
prüfungsgesellschaft and given the following unqualified
audit certificate:
Supervisory Board
Hannover Re | Annual Report 2021
On 3 August 2021, in a meeting that lasted the entire day, the
Executive Board reported on the first half of 2021, describing
as usual key performance indicators from the underwriting
and non-underwriting side and outlining the progress made
in attaining the strategic targets. We discussed the major in-
sights from the risk report and the Chief Risk Officer present-
ed the final conclusions of the expert opinion submitted to us
on the adequacy of the loss reserves in property and casualty
reinsurance. We also received the audit report on the Solven-
cy II balance sheet. Another key topic at the August meeting
was the internal approach to dealing with cyber risks. The
Supervisory Board was able to obtain a solid picture of the
risk management processes. Based on a separate item of the
reporting, we also looked at the metrics used to steer the life
and health reinsurance business. We received a detailed re-
port on the status of implementation of the new financial re-
porting standard (IFRS 17) within the company. In this con-
text, more extensive content-related information was provided
about the new standard - building on the training in which
the Supervisory Board had participated in the previous year.
Furthermore, following the necessary process changes com-
pleted in the previous year, an account of related party trans-
actions was provided. It was concluded that there were no
transactions in the reporting period that fall under the legal
requirements governing mandatory approval (§ 111b Stock
Corporation Act (AktG)) or compulsory disclosure (§ 111c
sociated with the pandemic. We explored the overall results
of the previous year in greater depth, with the underlying ef-
fects on intrinsic value creation (IVC) considered in detail. We
also received a report on the return on investment in a peer
comparison. In addition to the outlook for the current finan-
cial year -
which was similarly shaped by the uncertainties
around the Covid-19 crisis -, the examination of the Own Risk
and Solvency Assessment (ORSA) and the capitalisation un-
der Solvency II constituted further key points of deliberation.
Following up on this, the structure of the Regular Supervisory
Report (RSR) and its differences and overlaps relative to the
ORSA were explained. Another focus of the meeting was the
discussion of the IT strategy. In light of the increasing impor-
tance of digitalisation and innovation and the attention paid
to them in all areas of the company, we shall continue to ap-
proach this topic more intensively going forward. We also
used the meeting to review the Corporate Governance Princi-
ples with an eye to their up-to-dateness and the conformity of
their language with the other documents describing corpo-
rate governance. The version approved by us was published
on the company's website following the meeting
(https://www.hannover-re.com/50889/corporate-govern-
ance-principles.pdf). With regard to the self-assessment of
the Supervisory Board's areas of expertise that had once
more been carried out, the Supervisory Board decided that
the present extensive list of topics which goes beyond the
regulatory requirements will be used again in 2022.
At the meeting held on 4 May 2021 the Executive Board re-
ported on the first quarter of 2021, in which regard we also
considered at length the objectives of the current strategy cy-
cle (2021-2023) against the backdrop of the uncertainties as-
-
the current 2021 financial year. The insights gained from the
important renewals in property and casualty reinsurance as at
1 January 2021 were described, providing us with a good im-
pression of the development of market conditions and Han-
nover Re's positioning. We discussed the major findings from
the compliance, audit and risk reports. The respective func-
tion holders of the key functions were available to answer
questions for this purpose. We adopted a resolution on the
annual revision of the investment guidelines, in which regard
no significant change to the general investment strategy was
proposed. At the recommendation of the Finance and Audit
Committee, PricewaterhouseCoopers GmbH Wirtschaftsprü-
fungsgesellschaft – following its initial appointment for the
audit of the 2018 financial year - was again awarded the man-
date to audit the annual financial statements. In preparation
for the Annual General Meeting on 5 May 2021, the agenda
was discussed and approved; in view of the ongoing pandem-
ic situation, we opted to hold the General Meeting in a virtual
format without physical attendance. In terms of content, we
had already explored at length in the previous year the remu-
neration system for the Executive Board to be presented to
the General Meeting for approval and decided on its contrac-
tual implementation at the turn of the year. The remuneration
of the Supervisory Board, which had also already been a topic
of consideration in 2020, was prepared for adoption of a res-
olution by the General Meeting. Details of the systems can be
found in the Declaration on Corporate Governance on page
118 et seq. as well as in the remuneration report for 2021 on
page 124 et seq. In addition, we deliberated on the issuance
of a subordinated bond and approved - following a further
recommendation of the Finance and Audit Committee the
proposed near-term issuance of regulatory subordinated cap-
ital. Placement was consequently completed successfully on
22 March 2021 in the planned volume and with an attractive
coupon of 1.375% (https://www.hannover-re.com/1673190/
bonds). Furthermore, after in-depth consideration we ap-
proved the modification of the schedule of responsibilities
for the Executive Board, according to which the global mar-
kets in P&C were strategically regrouped under Mr. Althoff
and Dr. Pickel. Additionally, the variable remuneration of the
members of the Executive Board was defined on the basis of
the findings with respect to attainment of the respective indi-
vidual targets for the 2020 financial year. In this context, as
usual, we factored the findings of external remuneration
surveys into our deliberations for the purpose of making a
market comparison. Dr. Schipporeit was unable to attend one
meeting and cast his votes on the relevant resolutions in
writing pursuant to § 12 (2) of the Articles of Association of
Hannover Rück SE.
-
Hannover Re | Annual Report 2021
278
At its meeting on 10 March 2021 the Supervisory Board dis-
cussed in detail the audited annual and consolidated financial
statements as well as the Executive Board's proposal for the
appropriation of the disposable profit for the 2020 financial
year. In this regard, as in the previous year, the Executive
Board described all material indicators from the technical and
non-technical accounts as well as key data on the investment
side. The independent auditors presented the results of the
audit and elaborated on the audit procedure. The assurance
report on the non-financial information statement was also
discussed. The Executive Board outlined the prospects for
Key points of deliberation in the full meetings of
the Supervisory Board
100
100
100
279
"Having audited the report in accordance with our profes-
sional duties, we confirm that
1. the factual details of the report are correct,
2. in the case of the transactions detailed in the report,
the expenditure of the company was not unreasonably
high."
Dr. Schipporeit
Dr. Pollak
Dr. Ollmann
Dr. Lipowsky
Олипи
hipousy
Hundeshagen
Heitmüller
Bani Ardalan
Natalie Bani Ardalan F. Heitmüller Ilka thundestagen
Haas
M. Mam
Leue
Нилии
The Supervisory Board
Hannover, 8 March 2022
The Supervisory Board would like to express its recognition
and special appreciation to the Executive Board and above all
to the employees for their efforts.
We have examined
a. the annual financial statements of the company, the
financial statements of the Hannover Re Group and the
combined management report prepared by the
Executive Board for the company and the Group, and
b. the report of the Executive Board pursuant to § 312
Stock Corporation Act (AktG) (Report on relations with
affiliated companies)
- in each case drawn up as at 31 December 2021 - and have
no objections in this regard; nor do we have any objections to
the statement made by the Executive Board at the end of the
report on relations with affiliated companies.
The Supervisory Board concurred with the opinions of the
auditors and approved the annual financial statements and
the consolidated financial statements; the annual financial
statements are thereby adopted. Our proposal regarding the
appropriation of the disposable profit for 2021 is in accord-
ance with that of the Executive Board.
We considered the report by the Executive Board on
non-financial matters (cf. page 70 et seq. of the combined
management report in the present Annual Report) and exam-
ined it. PricewaterhouseCoopers GmbH Wirtschaftsprüfungs-
gesellschaft also reviewed the information statement with
limited assurance in accordance with the audit standard ISAE
3000 (Revised) (see here the Independent Auditor's Report
on page 275 et seq.).
Hannover Re | Annual Report 2021
4/4
281
Changes on the Supervisory Board and the
Executive Board
There were no changes in the composition of the Supervisory
Board or its committees in the year under review. The term of
office of the company's Supervisory Board ends pursuant to
§ 10 (3) of the Articles of Association of Hannover Rück SE
at the end of the General Meeting that ratifies the acts of
management for the 2023 financial year.
Nor were any changes made to the composition of the Exec-
utive Board in the year under review.
Word of thanks to the Executive Board and
members of staff
Thanks to the extraordinary performance and prudent
management of the Executive Board in this and past years
and even though the 2021 financial year once again pre-
sented enormous challenges, Hannover Rück SE generated a
good result. A great debt of gratitude is owed here in parti-
cular to the employees of the company and the Group for
their dedication and their considerable flexibility.
Supervisory Board
в. Али белая
Dr. Erhard Schipporeit
Herbert K. Haas
100
Participation rate
Number of
in %
meetings
Dr. Ursula Lipowsky
Dr. Michael Ollmann
Ilka Hundeshagen
Frauke Heitmüller
Natalie Bani Ardalan
Herbert K. Haas
Torsten Leue
Participation in full meetings of the
Supervisory Board
In our function as the Supervisory Board we considered at
length during the 2021 financial year the position and devel-
opment of the company and its major subsidiaries. The impli-
cations of the Covid-19 crisis remained a focus of our deliber-
ations. We advised the Executive Board on the direction of
the company and monitored the management of business on
the basis of written and verbal reports. The Supervisory Board
of Hannover Rück SE held four regular meetings in order to
adopt the necessary resolutions after appropriate discussion.
In conformity with the applicable safeguards to reduce the
risk of infection with Covid-19 the meetings were held in a
hybrid format, i.e. with partially physical and partially virtual
attendance. With the exception of the meeting in March, in
which Dr. Schipporeit was unable to participate, all the Su-
pervisory Board members took part in the Supervisory Board
meetings held in 2021. The meetings of the committees were
duly attended in all cases by all the members of the respective
bodies. In addition, two representatives of the Federal Finan-
cial Supervisory Authority attended one meeting of the Su-
pervisory Board on a virtual basis. The individual participa-
tion in the meetings is shown in the following table:
of Hannover Rück SE
Report by the Supervisory Board
Supervisory Board
Miscellaneous
We were informed by the Executive Board in writing and orally
on the basis of the quarterly statements about the course of
business as well as the position of the company and the Group.
With regard to reports on topics that fall under the responsibil-
ity of key functions, we had an opportunity to engage directly
in a dialogue with the respective function holders. The quarter-
ly reports with the components of the financial statements and
the key figures for the Hannover Re Group constituted an im-
portant source of information for the Supervisory Board. We
also held discussions without the presence of the Executive
Board, inter alia regarding personnel matters on the level of
the Executive Board and regularly in relation to matters of the
Supervisory Board's internal organisation.
277
Sehm
Dr. Pickel
Dr. Miller
Jungsthöfel
Jungsthöfel Miker Tickel S. Sel-
Chèvre
Althoff
Henchoz
까
MIK> for folkhalf Chin
opment and performance of the business and the position of
the Group, together with a description of the principal oppor-
tunities and risks associated with the expected development
of the Group.
Executive Board
Hannover, 4 March 2022
To the best of our knowledge, and in accordance with the
applicable reporting principles, the consolidated financial
statements give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group, and the
Group management report includes a fair review of the devel-
Hannover Re | Annual Report 2021
We received an analysis of the 2020 results in property &
casualty and life & health reinsurance as well as a presentation
from the Executive Board covering the profit expectations for
the 2021 financial year and the operational planning for the
2022 financial year. In addition, the Chairman of the Supervi-
sory Board was constantly kept informed by the Chairman of
the Executive Board of major developments and impending
decisions as well as of the company's risk situation. All in all,
we were involved in decisions taken by the Executive Board
and assured ourselves of the lawfulness, regularity and
efficiency of the company's management as required by our
statutory responsibilities and those placed upon us by the
company's Articles of Association.
No audit measures pursuant to § 111 Para. 2 Sentence 1 Stock
Corporation Act (AktG) were required in the 2021 financial
4/4
100
4/4
Torsten Leue
Participation in meetings of the Standing Committee
4/4
Dr. Ursula Lipowsky
100
4/4
Herbert K. Haas
100
4/4
Torsten Leue
75
3/4
Dr. Erhard Schipporeit
100
4/4
4/4
100
4/4
100
4/4
100
4/4
year.
100
4/4
100
4/4
100
Dr. Andrea Pollak
4/4
J.
282
Hannover Re | Annual Report 2021
30 Harbour Road
2008 Sun Hung Kai Centre
20th Floor
Hannover Rück SE
Hong Kong Branch
China
Representative:
Joao Caproni
Fax +55 21 2217-9500
Tel. +55 21 2217-9500
Rio de Janeiro
CEP 22250-145
Praia de Botafogo, n°. 228
15° Floor, wing B, Botafogo
no Brasil Ltda.
Escritório de Representação
Hannover Rück SE
Brazil
Wanchai, Hong Kong
Tel. +852 2519-3208
Fax +852 2588-1136
General Manager:
Marian Leung
Chantal Cardinez
Tel. +1 441 294-3110
Hannover Re (Bermuda) Ltd.
Victoria Place, 2nd Floor,
31 Victoria Street
Hamilton, HM 10
President & CEO:
Peter R. Schaefer
Tel. +1441 294-3240
29 Victoria Street
Hamilton, HM 10
of America (Bermuda) Ltd.
Purvis House, First Floor
Hannover Life Reassurance Company
Bermuda
Tel. +973 1757-4766
Fax +973 1757-4667
Managing Director:
Adham El-Muezzin
Hannover Rueck SE
Bahrain Branch
17th Floor Zamil Tower
Government Avenue
Manama Center 305
Manama
Tel. +973 1757-4766
Fax +973 1757-4667
Managing Director:
Adham El-Muezzin
Manama
Manama Center 305
Government Avenue
Fax +1 441 296-7568
CEO:
Hannover Rück SE
Shanghai Branch
6th Floor, KAISA Finance Center
1188 Minsheng Road, Pudong New
Area
Andheri (East)
Sahar Road
Unit 604, 6th Floor B Wing, Fulcrum
Hannover Rück SE - India Branch
India
Fax +44 20 7015-4001
Managing Director:
Debbie O'Hare
Tel. +44 20 7015-4290
10 Fenchurch Street
London EC3M 3BE
Hannover Services (UK) Limited
Further information
285
Hannover Re | Annual Report 2021
Fax +44 20 3206-1701
Managing Director:
Debbie O'Hare
Tel. +44 20 3206-1700
London EC3M 3BE
Hannover Re UK Life Branch
10 Fenchurch Street
Andrew J. Annandale
200135 Shanghai
Tel. +86 21 2035-8999
Fax +86 21 5820-9396
Director:
Fook-Kong Lye
France
Hannover Rück SE
Succursale Française
33 Avenue de Wagram
75017 Paris
Tel. Life & Health
+33 1 4561-7300
17th Floor Zamil Tower
Tel. Property & Casualty
Fax +33 1 4006-0225
General Manager:
Raphaël Rimelin
United Kingdom
Argenta Holdings Limited
5th Floor
70 Gracechurch Street
London EC3V OXL
Tel. +44 20 7825-7200
Fax +44 20 7825-7212
CEO:
+33 1 4561-7340
Hannover ReTakaful B.S.C. (c)
Bahrain
100 Barangaroo Avenue
Sydney NSW 2000
Tel. +61 2 8373-7580
Fax +61 2 9274-3033
Managing Director:
Michael Eberhardt
(since 3 May 2007) 5
Dr. Erhard Schipporeit¹
Hannover
Independent management consultant
(since 3 May 2011) 5
Dr. Andrea Pollak 3
Vienna, Austria
(since 8 May 2019) 5
Dr. Michael Ollmann
Hamburg
Member of various supervisory boards
(since 7 May 2018) 5
Dr. Ursula Lipowsky 2
Munich
(since 8 May 2019) 5
Employee
Ilka Hundeshagen 4
Hannover
(since 3 May 2012) 5
Employee
Frauke Heitmüller 4
Hannover
Employee
(since 8 May 2019) 5
Springe
Supervisory Board of Hannover Rück SE
Torsten Leue 1, 2, 3
Hannover
(since 7 May 2018) 5
Chairman
Chief Executive Officer of HDI Haftpflichtverband der
Deutschen Industrie V.a.G., Hannover
Independent management consultant
Chief Executive Officer of Talanx AG, Hannover
Burgwedel
(since 24 May 2002) 5
Deputy Chairman
Former Chief Executive Officer of Talanx AG and
HDI Haftpflichtverband der Deutschen Industrie V.a.G.,
Hannover
Natalie Bani Ardalan 4
Herbert K. Haas 1, 2, 3
Tel. +91 22 6138-0808
1 Member of the Standing Committee
3 Member of the Nomination Committee
Australian Branch
Tower 1, Level 33
Hannover Rueck SE
Gerd Obertopp
Fax +61 2 9251-6862
CEO:
Tel. +61 2 9251-6911
100 Barangaroo Avenue
Sydney NSW 2000
Tower 1, Level 33
Hannover Life Re of
Australasia Ltd
Australia
Branch offices and subsidiaries of the
Hannover Re Group abroad
300
Imprint
299
Financial calendar
298
Contact information
294
4 Staff representative
5
Date when member was first appointed/elected to the company's
Supervisory Board. Current term of office for the entire Supervisory
Board commenced at the end of the Annual General Meeting on
8 May 2019.
Details of memberships of legally required supervisory boards
and comparable control boards at other domestic and foreign
business enterprises are contained in the Annual Report of
Hannover Rück SE.
Hannover Re | Annual Report 2021
283
2 Member of the Finance and Audit Committee
Supervisory Board
Branch offices and subsidiaries of the
Hannover Re Group abroad
285
Glossary
288
List of graphs, tables and charts
Further information
Participation in meetings of the Finance and Audit Committee
Responsibility statement
80
151.00
140
137.20
144.40
142.90
140.00
150.65
139.90
130
128.00
128.90
120
110
100
137.85
144.00
154.65
153.25
180
167.95
170
165.10
161.35
160
€ 157.20
157.85
158.30
157.15
155.20
157.50
147.30
147.40
150
Jan
190
Feb
Apr
100
3.75 +1.50³
80
60
40
2019
120
2020
Hannover Re share (including dividend)
■ DAX
MDAX
Munich Re
Swiss Re
■ SCOR
2021
140
160
180
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Monthly average
Highs and lows (closing prices)
20
20
Hannover Re | Annual Report 2021
Relative performance of the Hannover Re share (including reinvested dividends)
in %
200
Mar
Performance of benchmark indices
200
On 17 November 2021 the DAX charted a new all-time high of
16,251 points, before the spread of the Omicron variant of the
coronavirus unsettled markets and prompted another sharp
price decline on the DAX. Despite all the risks associated with
the Covid-19 pandemic, supply chain shortages and rising in-
flation, the stock market year ended on a positive note for the
DAX as well as for the US benchmark indices and MSCI World
index.
• Structured Reinsurance and
•
Insurance-Linked Securities
Retrocessions
Regional responsibility:
•
Sven Althoff
Catastrophe XL (Cat XL)
Coordination of Property &
Worldwide responsibility:
Continental Europe and
Africa
•
• Aviation and Marine
•
Credit, Surety and
Casualty Reinsurance Business
Group
•
Worldwide responsibility:
Reinsurance
40.97
Cash flow per share
3.50 +1.50³
Hannover Re | Annual Report 2021
17
For our investors
Executive Board
of Hannover Rück SE
As of 31 December 2021
Dr. Michael Pickel
Property & Casualty Reinsur-
ance; Group Legal Services
Worldwide responsibility:
• Run-Off Solutions
Agricultural Risks
Regional responsibility:
Asia, Australia and
Middle East
Germany, Switzerland,
Austria and Italy
• Latin America,
Iberian Peninsula
Silke Sehm
Property & Casualty
Political Risks
109
.
Regional responsibility:
Life & Health Reinsurance
Regional responsibility:
North America,
United Kingdom, Ireland,
Northern, Eastern and
Central Europe
Hannover Re | Annual Report 2021
19
For our investors
The Hannover Re share
•
Dr. Klaus Miller
Share price clearly outperforms the MDAX in 2021 with a gain of 32.1%
Dynamic equity markets
Essentially, 2021 proved to be a satisfactory year for global
equity markets, even though initial hopes that the corona-
virus pandemic would soon be contained as vaccines became
available failed to materialise. The expectation of a compre-
hensive fiscal package from newly elected US President Joe
Biden helped to drive markets higher as the year got under-
way. While the economic upswing continued throughout the
year, global economic growth was nevertheless curtailed by
moderating effects. A wide range of different factors made
themselves felt here. A scarcity of raw materials and prob-
lems in the global supply chain, for example, led to a chip
shortage that affected the automobile industry and many oth-
er sectors. Furthermore, the rapid rise in inflation from the
summer months onwards stoked fears that central banks
would move sooner than previously anticipated to end their
ultra-accommodative monetary policy, one of the major
drivers of equity markets in recent years. Fresh uncertainty
was triggered in the second half of the year by the spread of
the Delta and subsequently Omicron variants of the corona-
virus, which brought rising case numbers and accompanying
fears of renewed lockdowns. Ultimately, a wide range of re-
lated adverse factors prompted a new wave of uncertainty
and an economic slowdown that was reflected on capital
markets in indices tending to move sideways. On top of this,
the softening economic trend - especially in China owing to
tighter regulation and turmoil in the real estate sector – put
markets under pressure.
The German DAX index had entered the year at 13,719 points.
Although the first half of the 2021 stock market year - in com-
Highs and lows of the Hannover Re share
in EUR
mon with the world economy - was shaped by the effects of
the global coronavirus pandemic, improvements in the real
economy compared to the previous year were particularly
conducive to a favourable performance overall on equity mar-
kets. On 30 March 2021 the DAX broke through 15,000 points
for the first time to close the day at 15,009 - a gain of a good
9% altogether since the beginning of the year. Particularly
key drivers of this trend were the hope of a global economic
upswing as well as the containment of the pandemic.
In the months that followed the German equity market was
unable to make further pricing advances. As part of the index
reform undertaken by Deutsche Börse AG in September 2021,
the DAX was expanded through the addition of ten MDAX-
listed companies, as a consequence of which the MDAX was
reduced to 50 members and hence lost a good 40% of its
market capitalisation. Yet the combination of uncertainty
around monetary policy and economic concerns cast a
shadow over the new enlarged DAX 40. At the end of Sep-
tember 2021 the DAX was hovering slightly below the level of
the previous quarter at 15,261 points. The parliamentary
elections on 26 September 2021 had at least put an end to the
considerable political uncertainty in Germany.
Dividend proposal: Ordinary dividend of EUR 4.50 and special dividend of EUR 1.25
Europe
Latin America, Middle East,
Western and Southern
Africa, Asia, Australia,
• North America
• United Kingdom, Ireland and
London Market
Jean-Jacques Henchoz
Chairman
Compliance
Controlling
Innovation Management
Human Resources
Management
Internal Auditing
Risk Management
Corporate Development
Corporate Communications
18
Hannover Re | Annual Report 2021
Clemens Jungsthöfel
Finance and Accounting
Information Technology
Investment and
Collateral Management
Facility Management
Claude Chèvre
Life & Health Reinsurance
Worldwide responsibility:
Longevity Solutions
•
Regional responsibility:
Facultative Reinsurance
Quotations
| 11
Change
Opening
2018
2017
120.6
120.6
120.6
120.6
2019
120.6
107.50
116.40
104.70
95.95
Annual high1
167.95
128.00
2020
2021
I 15
840 221
DE 000 840 221 5
HNR1 (Bloomberg), HNRGn (Reuters), HVRRY (ADR)
Xetra, Frankfurt, Munich, Stuttgart, Hamburg, Berlin, Düsseldorf, Hannover
(official trading: Xetra, Frankfurt and Hannover)
American Depositary Receipts (Level 1 ADR program; 2 ADR = 1 share)
Prime Standard
MDAX
30 November 1994
120,597,134
EUR 120,597,134.00
No-par-value registered shares
| 14
Key figures
in EUR
Number of shares in million
Annual low¹
192.40
Share class
175.20
115.65
Hannover Rück SE in EUR million
11,885.0
10,995.0
10,528.0
8,776.8
8,528.5
Equity attributable to shareholders of
Book value per share
Earnings per share (basic and diluted)
10.21
Dividend per share
4.50 +1.25 2,3
91.17
7.32
4.503
87.30
10.65
4.00 +1.50³
98.55
12,650.6
14,194.3
20,778.9
Year-opening price 1
130.30
172.30
117.70
104.90
102.80
Year-ending price¹
167.15
130.30
172.30
117.70
104.90
Market capitalisation at year-end in EUR million
20,157.8
15,713.8
125.30
Common shares
(as at 31 December 2021)
Number of issued shares
21
I 10
For our investors
Dividend proposal envisages a
higher distribution
The Executive Board and the Supervisory Board intend to
propose to the Annual General Meeting on 4 May 2022 that a
dividend of EUR 5.75 per share should be distributed. Against
the backdrop of a comfortable level of capitalisation and
achievement of the profit guidance, the ordinary dividend of
EUR 4.50 will be supplemented by a special dividend of
EUR 1.25. This would put the ordinary dividend on the level
of the previous year and is thus in line with the company's
goal of pursuing a consistent dividend policy. Based on the
year-end closing price, this produces a dividend yield of
3.4%.
Attendance at the Annual General
Meeting again around 76%
By year-end 2021 22 analysts had handed down opinions on
our company: twelve analysts recommended the Hannover Re
share as "buy" or "overweight". Altogether six opinions were
a "hold". "Underweight" or "sell" recommendations were is-
sued by only four analysts.
The Annual General Meeting 2021 of Hannover Rück SE was
held on 5 May 2021 for the second consecutive time without
the physical presence of shareholders or their authorised
proxies. In view of the ongoing Covid-19 pandemic, the com-
pany had again decided on a virtual format to reduce risks to
the health of all participants. Altogether, around 76% of the
share capital was represented, a similar figure to the previous
year.
All items on the agenda were adopted by a majority of more
than 85% of the represented voting rights. The results of the
votes and the attendance were published on the company's
website following the Annual General Meeting.
Dialogue with the capital market
considered a high priority
Even with the ongoing Covid-19 pandemic throughout the
2021 financial year, an active and open dialogue with the cap-
ital market retained the highest priority. With travel restric-
tions still in place worldwide, investor conferences and road-
shows have been held almost exclusively in a virtual format as
audio or video broadcasts. The Executive Board and repre-
sentatives of the Investor Relations department were thereby
once again able to maintain the dialogue with institutional
investors, analysts and private investors and share extensive
insights into Hannover Re's strategy and business operations.
In regional terms, the focus of our efforts remained on the fi-
nancial centres of Europe and North America. While the num-
ber of participations in capital market conferences rose to 18
(previous year: 13), the roadshow days were virtually un-
changed at 13 (12).
Direct contact with the Investor Relations department contin-
ued to play a major role in communication activities. Ques-
tions about the impacts of the Covid-19 pandemic on
Hannover Re were again a central theme in these discussions
in 2021. Rising inflation and concerns about the influence of
climate change on losses from natural catastrophes also took
on added significance as the year progressed.
Growth opportunities in property & casualty reinsurance and
life & health reinsurance as well as the current development
of business in line with the Group strategy were major themes
of Hannover Re's 24th Investors' Day, which was broadcast
on 14 October 2021 as a webcast from Hannover. A modest
adjustment to the dividend policy was also announced and
the continuity of the dividend payment was emphasised. Go-
ing forward, it is envisaged that the regular distribution of an
ordinary dividend should at least remain stable. A payout ra-
tio will no longer be set as a target. Payment of a special div-
idend will remain a capital management tool to be considered
if the capitalisation exceeds the capital required for future
growth and the earnings guidance is achieved. In general
terms, a growing tendency to align investments with sustain-
ability criteria can be observed among investors, as a conse-
quence of which questions relating to Hannover Re's sustain-
ability efforts as well as ESG (environmental, social and
governance) issues also continued to be asked more widely.
The shareholders approved the proposal made by the Execu-
tive Board and Supervisory Board to pay an ordinary dividend
of EUR 4.50 per share for the 2020 financial year - an in-
crease of EUR 0.50 - and to omit payment of a special divi-
dend. In his address to the meeting Chief Executive Officer
Jean-Jacques Henchoz looked back on a 2020 financial year
shaped by the Covid-19 pandemic, in which Hannover Re
generated Group net income of EUR 883.1 million despite the
challenging circumstances. At the same time, Jean-Jacques
Henchoz highlighted the growing importance of sustainabili-
ty for the Group's strategy.
Based on the year-end closing price, Hannover Re's market
capitalisation totalled EUR 20.2 billion at the end of the finan-
cial year. According to the MDAX rankings drawn up by
Deutsche Börse AG, the company placed first at the end of
December in terms of its free float market capitalisation. With
a book value per share of EUR 98.55, the Hannover Re share
showed a price-to-book ratio of 1.70 at the end of the year
under review; it was thus below the average MDAX price-to-
book ratio of 2.14 at year-end. Compared to the average
price-to-book ratio for its peer group, the Hannover Re share
continues to be significantly better valued.
The performance including reinvested dividends amounted to
+32.1%. From an annual perspective, the Hannover Re share
thus fared significantly better than the domestic benchmark
DAX (+15.8%) and MDAX (+14.1%) indices. In a three-year
comparison, the Hannover Re share delivered a performance
(including reinvested dividends) of 58.2%. It therefore per-
formed on a similar level to the benchmark DAX and MDAX
indices.
The capital market nevertheless responded robustly and the
Hannover Re share also rose steadily from the end of Novem-
ber onwards, reaching its highest point at year-end. The
Hannover Re share thus closed out the 2021 financial year
with a gain of 28.3% at EUR 167.15 and outperformed its
main peers Munich Re (+7.3%), Swiss Re (+8.3%) and Scor
(+3.8%).
price
in EUR
2021
Closing
price
2021
DAX
13,718.78
15,884.61
MDAX
S&P 500
Dow Jones Industrial
MSCI World
31,013.05 35,123.25
3,764.61 4,766.18
30,627.47 36,338.30
2,690.04 3,231.73
15.8%
14.1%
26.9%
18.7%
20.1%
The Hannover Re share performed well
The performance of the Hannover Re share was similarly less
volatile in 2021 than in 2020, even though the Covid-19 pan-
demic continued to impact the (re)insurance industry.
The share stood at EUR 131.40 going into January and had
already touched its low for the year of EUR 128.00 by the end
of the month. Buoyed by a positive outlook coming out of the
treaty renewals, the share price then rose appreciably before
reaching its highest point of the year so far of EUR 157.20 on
30 March 2021. Worries about the repercussions of rising in-
flation on the (re)insurance industry and the forecast of an
unusually active hurricane season then caused the price to
slump abruptly to EUR 137.85 on 19 July 2021. The price
subsequently showed indications of a rally that did not gather
significant momentum until the end of July - further bolstered
by the publication of highly satisfactory half-year results in
August. In the second half of the year the Hannover Re share
was adversely affected by the heavy loss expenditures antici-
pated from Storm Bernd and Hurricane Ida as well as by the
spread of the Omicron variant and the associated uncertainty.
Hannover Re | Annual Report 2021
22
22
Hannover Re | Annual Report 2021
Sustainability ratings improved
Number of shareholders
continues to grow
Our share register showed some 70,560 shareholders at the
end of the year, another increase in the number of sharehold-
ers year-on-year (64,200). The largest shareholders at year-
end were Talanx AG with 50.2% as well as BlackRock, Inc.
with a reported 3.0%, Deutsche Asset Management Invest-
ment GmbH with a reported 3.0% and FMR LLC with a re-
ported 3.0% of the voting rights. Within the free float, insti-
tutional investors accounted for 37.7% (38.1%) of the total
shares outstanding, while private investors held 12.1%
(11.7%). Our shareholders include investors who pay par-
ticularly close attention to sustainability criteria.
Hannover Re | Annual Report 2021
23
For our investors
Basic information
Securities identification number
International Securities Identification Number (ISIN)
Ticker symbols
Exchange listings
Germany
United States
Market segment
Index membership
First listed
27.9% Germany
26.79
28.6% United States
1.2% Rest of Europe
Along with traditional financial considerations, non-financial
key performance indicators are coming to play an increasing-
ly important role in the evaluation of companies on the capital
market. In the financial year just ended, therefore, Hannover
Re again reported extensively on sustainability and ESG top-
ics. The disclosures took the form of a combined non-finan-
cial information statement as an integral component of the
Group management report. In this connection we also report
for the first time how and to what extent our activities fall
within the frame of reference of the EU taxonomy for sustain-
able economic activities. In addition, we publish annual sus-
tainability reports compiled in accordance with the interna-
tionally recognised reporting standards of the Global
Reporting Initiative (GRI). In 2021, as in prior years, we culti-
vated a regular dialogue with a number of different stake-
holders on sustainability issues. Particularly among investors
and analysts, a marked increase in discussions of specific
ESG topics can be observed. In addition, Hannover Re partic-
ipates in the feedback processes of various ESG rating agen-
cies. The company has ratings from, among others, CDP, ISS
ESG, MSCI, Sustainalytics and VigeoEiris and is listed in the
FTSE4Good, the Global Challenges Index and the sustainabil-
ity index of Deutsche Börse AG (DAX50 ESG). Hannover Re
also became a signatory to the UN Principles for Sustainable
Insurance (UN PSI) and joined the Net-Zero Insurance Alli-
ance (NZIA) in the year under review.
Shareholder structure as at 31 December 2021
12.1% Private investors
37.7%
Institutional investors
0
I 12
50.2% Talanx AG
Geographical breakdown of the shares held by
institutional investors
I 13
1.7% Scandinavia
3.4% Asia
3.7% Switzerland
5.1% Benelux
5.1% Canada
7.8% France
15.3%
United Kingdom
0.2% Rest of world
20.81
18.45
Return on equity (after tax) 4
Opportunity and risk report
Risk report
70
information statement
Combined non-financial
65
57
55
35
72.78
8.79
Hannover Re | Annual Report 2021
38
86
37
GGGGWww w w
31
Information on Hannover Rück SE
Financial position and net assets
Investments
51
Life & Health reinsurance
Property & Casualty reinsurance
Results of operations
Overall assessment of the business position
Business development
37
86
Opportunity report
115
26
26
In the Life & Health reinsurance business group we are recog-
nised as customer surveys confirm - as one of the top play-
ers for traditional covers and a leading provider of structured
solutions. We achieve this standing by opening up new mar-
kets for our company and by identifying trends in order to
anticipate the future needs of our customers.
In the Property & Casualty reinsurance business group we
consider ourselves to be a reliable, flexible and innovative
market player that ranks among the best in any given market.
Cost leadership, effective cycle management and superlative
risk management are the key elements of our competitive po-
sitioning.
Our subsidiary E+S Rückversicherung AG (E+S Rück), as the
"Reinsurer for Germany", offers a range of products and ser-
vices tailored to the specific features of the German market.
Of special importance here are the mutual insurers with
whom we maintain a strategic partnership that is underscored
through their participation in E+S Rück.
Guided by a clearly defined risk appetite, the Executive Board
steers the company using risk management techniques so as
to be able to act on business opportunities while securing our
financial strength on a lasting basis.
Furthermore, we strive for the broadest possible diversifica-
tion and hence an efficient risk balance. This is achieved by
accepting reinsurance risks with mostly little or no correla-
tion across all lines and regions of property & casualty and
life & health reinsurance. In conjunction with efficient capital
management, this is the key to our comparatively low cost of
capital.
We also generate competitive advantages to the benefit of our
clients and shareholders by conducting our reinsurance busi-
ness with lower administrative expenses than our rivals. In
this way we deliver above-average profitability while at the
same time being able to offer our customers reinsurance pro-
tection on competitive terms.
The strategy pursued in both property & casualty and
life & health reinsurance supports our Group's paramount
mission, namely: "Striving for sustainable outperformance".
Our entire business operations are geared to our goal of be-
ing the preferred business partner for our clients. It is for this
reason that our clients and their concerns form the focus of
our activities.
With a gross premium volume of more than EUR 24 billion,
the Hannover Re Group is the third-largest reinsurer in the
world. Hannover Rück SE is a European Company, Societas
Europaea (SE), based in Hannover, Germany. We transact re-
insurance in our Property & Casualty and Life & Health busi-
ness groups.
Competitive advantages due to our low cost of capital and administrative expense ratio
Financial strength secured through sophisticated risk management
Worldwide reinsurance, transacting all lines of property & casualty and life & health reinsurance
with the goal of achieving the broadest and most balanced possible regional and line-based
diversification
Business model
Foundations of the Group
Combined management report
153
153
Forecast
Outlook
124
Remuneration report
118
Declaration on Corporate Governance
118
Enterprise management
industry-specific environment
Macroeconomic climate and
70.72
7.95
Report on economic position
2.0
1.6
1.5
Price/earnings (P/E) ratio?
16.9
17.8
16.2
13.4
13.2
Price-to-cash flow (P/CF) ratio 8
4.1
1.4
4.9
6.4
1
Xetra daily closing prices from Bloomberg
2
Proposed dividend
3
Dividend of EUR 4.50 plus special dividend of EUR 1.25 for 2021, dividend of EUR 4.50 for 2020, dividend of EUR 4.00 plus special dividend of EUR 1.50
for 2019, dividend of EUR 3.75 plus special dividend of EUR 1.50 for 2018 and dividend of EUR 3.50 plus special dividend of EUR 1.50 for 2017
4
31
Earnings per share/average of book value per share at start and end of year
5 Dividend per share/year-end closing price
8.3
1.7
7.5
4.8%
30
Research and development
Price-to-book (P/B) ratio6
Management system
26
Business model
26
Foundations of the Group
Combined management report
Hannover Re | Annual Report 2021
24
8 Year-end closing price/cash flow (from operating activities) per share
27
7
3.5%
3.2%
Year-end closing price/earnings per share
Dividend yield 5
14.05
10.9%
3.1%
6 Year-end closing price/book value per share
13.3%
8.2%
4.5%
10.8%
12.2%
M71
76
M70 Opportunity management process
116
78
Changes in the remuneration system of the
125
80
Executive Board
Environmental matters: Selected goals
M44 Respect for human rights: Selected goals
81
M45 Fighting corruption and bribery: Selected goals
M46 Risk management through multiple levels
of limits
Social matters: Selected goals
M43
72
M41
82
66
66
M15 Property & Casualty reinsurance: Gross premium
in Asia-Pacific by lines of business
M38 Hannover Rück SE: Breakdown of
47
M16 Property & Casualty reinsurance: Gross premium
in Structured Reinsurance and Insurance-Linked
Securities by lines of business
M39
M40
48
gross premium by individual lines of business
Balance sheet structure of Hannover Rück SE
Allocation of the non-financial aspects to
the material topics
67
68
294
Hannover Re | Annual Report 2021
M42 Employee matters: Selected goals
M72 Guiding principles for the Executive Board
remuneration of Hannover Re
(economic capital/shareholders' equity)
M73
Reconciliation
corporate strategy/development
131
Condensed profit and loss account of
Hannover Rück SE
96
M77
Calculation of the short-term incentive (STI)
132
M51 Required risk capital at the confidence level
of 99.5%
M78
Target attainment Group RoE in the
97
47
2021 financial year
133
M50
remuneration and their relevance to the
94
Performance criteria for the variable
M47
Own funds and required risk capital
M 48
M49
Central functions of risk monitoring and steering 92
Risk landscape of Hannover Re
༄྾ཨྰཿ
86
126
M74
127
128
90
M75
Remuneration components and their target
130
M76
Structure of the target direct remuneration
Target remuneration
45
22222222640
M14 Property & Casualty reinsurance: Gross premium
in the Americas by lines of business
M17 Property & Casualty reinsurance: Gross premium
in Facultative Reinsurance by lines of business
Breakdown of gross premium by markets
Value of New Business (VNB) growth
48
51
51
M04 Business development and guidance in
M20
Breakdown of gross written premium
the year under review
36
36
by reporting categories
M19
51
M21
EBIT performance
reinsurance
38
88
M22
Key figures for Life & Health reinsurance
M06 Geographical breakdown of gross premium
in 2021
M23
Investment income
38
M05 Gross premium in Property & Casualty
M24
36
M 03
107
The Group worldwide
inside front cover 4
114
Basic information
108
Strategic business groups
inside front cover 4
115
Key figures
23
Gross premium by business group
24
109
Highs and lows of the Hannover Re share
20
M
Management Report
M01 Target attainment
27
M02
Intrinsic Value Creation and excess return
on capital allocated
28
M18
24
M37
Development of investment income
Gross premium by lines of business in 2021
Major loss trend
42
M31
Amortised cost of our bonds
M12 Property & Casualty reinsurance: Key figures for
individual markets and lines in 2021
M32
Consolidated cash flow statement
42
M33
Cash flow from operating activities
M13 Property & Casualty reinsurance: Gross premium
in Europe, the Middle East and Africa
(including CIS countries) by lines of business
M30 Development of Group shareholders' equity
M34
Financial strength ratings of Hannover Rück SE
Financial strength ratings of subsidiaries
45
M36
Issue ratings of notes payable
58
59
59
61
63
63
63
M35
M 07
Development of policyholders' surplus
41
38
M25
Investment portfolio
SSSSS
51
52
55
56
57
M08 Breakdown of proportional and
M26
M29
Breakdown of investments under
39
own management
M 09
Breakdown into business written through
brokers and direct business
M27
Rating of fixed-income securities
M28
Capital structure as at 31 December 2021
M10
M11
Key figures for Property & Casualty reinsurance
Property & Casualty reinsurance:
non-proportional treaties by volume
39
210
held by institutional investors
Capital asset pricing model (CAPM): model used to explain
the materialisation of prices/returns on the capital market
based on investor expectations regarding the future probabi-
lity distribution of returns. Under this method, the opportuni-
ty cost rate for the shareholders' equity consists of three com-
ponents - a risk-averse interest rate, a market-specific risk
loading and an enterprise-specific risk assessment, the beta
coefficient. The cost of shareholders' equity is therefore de-
fined as follows: risk-averse interest rate + beta * enterpri-
se-specific risk assessment.
Capital allocation: risk-appropriate allocation of the econo-
mic capital to the business segments of property & casualty
reinsurance and life & health reinsurance as well as the inves-
tments on the basis of the respective economic risk content.
Our internal capital model supplies key parameters such as
the volatility of the covered business/investments and the
contribution to diversification.
Capital adequacy ratio: the adequacy ratio is derived from
the ratio of the available capital (or own funds) to the required
capital - the solvency capital requirement (SCR).
proces-
Business continuity management: integrated set of
ses to maintain business operations
Book value per share: shareholders' equity divided by the
number of shares outstanding
Benefit reserves: value arrived at using mathematical me-
thods for future liabilities (usually prospectively as present
value of future liabilities minus present value of future inco-
ming premiums), primarily in life and health insurance (that
is transacted in a similar way to life insurance).
BaFin: Federal Financial Supervisory Authority (Bundesan-
stalt für Finanzdienstleistungsaufsicht)
Asset/liability management: matching of the invested assets
with the liabilities arising out of the reinsurance business.
American Depositary Receipt (ADR): share certificates writ-
ten by US banks on foreign shares deposited there. The ADRs
are traded instead of the foreign shares. In the United States
Hannover Re has enabled trading on the OTC (over-the-coun-
ter) market through an ADR Level 1 program. New capital
cannot be raised and the ADR is not listed on a US exchange
under a Level 1 program. The main advantage of an ADR Le-
vel 1 program compared to higher-level programs is that the-
re is no requirement for accounting or financial reporting in
accordance with US GAAP.
Alternative risk financing: use of the capacity available on
the capital markets to cover insurance risks, e. g. through the
securitisation of natural catastrophe risks.
Allocated capital: cf. → capital allocation
Aggregate excess of loss treaty: the reinsurance treaty atta-
ches if a ceding insurer incurs losses on a particular line of
business during a specific period (usually twelve months) in
excess of a stated amount.
Acquisition cost, deferred (DAC): cost of an insurance com-
pany that arises from the acquisition or the renewal of an in-
surance contract (e.g. commission for the closing, costs of
proposal assessment and underwriting etc.). Capitalisation
results in a distribution of the cost over the duration of the
contract.
Accumulation loss: sum of several individual losses incurred
by various policyholders as a result of the same loss event
(e.g. windstorm, earthquake). This may lead to a higher loss
for the direct insurer or reinsurer if several affected policyhol-
ders are insured by the said company.
Glossary
Further information
287
Eric Arnst
General Manager:
Fax +1 630 250-5527
Tel. +1 630 250-5529
Itasca, Illinois 60143
500 Park Blvd., Suite 805
Hannover Re Services USA, Inc.
Peter R. Schaefer
Tel. +1 516 593-9733
Fax +1 516 596-0303
President & CEO:
East Rockaway, New York 11518
112 Main Street
Cash flow statement: statement on the origin and utilisation
of cash and cash equivalents during the accounting period. It
shows the changes in liquid funds separated into cash flows
from operating, investing and financing activities.
Cat. bonds: securitised (re)insurance risks in respect of which
the payment of interest and/or repayment of capital is depen-
dent on the occurrence and severity of a predefined insured
event. Purchasers of a catastrophe bond assume the risk car-
ried by the (re)insurer upon occurrence of the catastrophic
event. Catastrophe bonds are part of the insurance-linked se-
curities market. Cf. securitisation instruments
Cedant: direct insurer or reinsurer which passes on (also: ce-
des) shares of its insured or reinsured risks to a reinsurer in
exchange for premium.
Cession: transfer of a risk from the direct insurer to the rein-
289
Hannover Re | Annual Report 2021
Exposure: level of danger inherent in a risk or portfolio of
risks; this constitutes the basis for premium calculations in
reinsurance.
Expense ratio: administrative expenses (gross or net) in rela-
tion to the (gross or net) premium earned.
Excess return on capital allocated (xRoCA): indicator which
describes the IVC in relation to the allocated capital and
shows the relative excess return generated above and beyond
the weighted cost of capital.
Excess of loss treaty: cf. → non-proportional reinsurance
Excess capital: the amount of available capital in excess of
the required capital
ESG (Environmental, Social, Governance): sustainability
risks are all risks involving environmental, social and gover-
nance (ESG) issues. It has become common practice to distin-
guish the risks a company faces (outside-in view) caused by
ESG issues and the impacts a company has on people and the
environment (inside-out view).
Economic capital model: cf. → internal model
Earnings retention: non-distribution of a company's profits
leading to a different treatment for tax purposes than if profits
were distributed.
Earnings per share, diluted: ratio calculated by dividing the
consolidated net income (loss) by the weighted average num-
ber of shares outstanding. The calculation of the diluted ear-
nings per share is based on the number of shares including
subscription rights already exercised or those that can still be
exercised.
Dynamic volatility adjustment: long-term insurance guaran-
tees can be dynamically adjusted due to potentially increased
volatility in valuations on capital markets
Diversification: orientation of business policy towards vari-
ous revenue streams in order to mitigate the effects of e.g.
economic fluctuations or natural catastrophes and thereby
minimise the volatility of results. Diversification is an instru-
ment of growth policy and risk policy for a company.
Discounting of loss reserves: determination of the present
value of future profits through multiplication by the corres-
ponding discount factor. In the case of the loss reserves this
is necessary because of the profit calculation methods for tax
purposes applicable to German joint-stock corporations.
Office New York
Direct (also: primary) insurer: company which accepts risks
in exchange for payment of an insurance premium and pays
indemnification for the insured loss in the event of a claim. A
direct insurer has a direct contractual relationship with the
policyholder (private individual, company, organisation).
Deposits with ceding companies/deposits received from
retrocessionaires (also: funds held by ceding compa-
nies/funds held under reinsurance treaties): collateral pro-
vided to cover insurance liabilities that a (re-)insurer retains
from the liquid funds which it is to pay to a reinsurer under a
reinsurance treaty. In this case, the retaining company shows
a deposit received, while the company furnishing the collate-
ral shows a deposit with a ceding company.
Deposit accounting: an accounting method originating in
US GAAP for the recognition of short-term and multi-year in-
surance and reinsurance contracts with no significant under-
writing risk transfer. The standard includes inter alia provisi-
ons relating to the classification of corresponding contract
types as well as the recognition and measurement of a depo-
sit asset or liability upon inception of such contracts.
Critical illness cover: personal rider on the basis of which
typically a lump-sum cash payment is made in the event of
previously defined severe illnesses
Credit spread: Mark-up between a risky and a risk-free inte-
rest-bearing security with the same maturity, as a risk premi-
um for the credit risk entered into by the investor.
Corporate Social Responsibility: the voluntary contribution
made by a company to sustainable development
Corporate Governance: serves to ensure responsible ma-
nagement and supervision of enterprises and is intended to
foster the trust of investors, clients, employees and the gene-
ral public in companies.
Confidence (also: probability) level: the confidence level de-
fines the probability with which the defined amount of risk
will not be exceeded.
ments.
Compliance: compliance by an enterprise with legal require-
Hannover Re | Annual Report 2021
288
Coinsurance Funds Withheld (CFW) Treaty: reinsurance
treaty under which the ceding company retains a portion of
the original premium at least equal to the ceded reserves.
Combined ratio: sum of the loss ratio and expense ratio.
Claims and claims expenses: sum total of paid claims and
provisions for loss events that occurred in the business year;
this item also includes the result of the run-off of the provisi-
ons for loss events from previous years, in each case after the
deduction of own reinsurance cessions.
surer.
Derivatives, derivative financial instruments: financial pro-
ducts derived from underlying primary instruments such as
equities, fixed-income securities and foreign exchange inst-
ruments, the price of which is determined on the basis of an
underlying security or other reference asset. Notable types of
derivatives include swaps, options and futures.
Further information
Hannover Re | Annual Report 2021
Tel. +1 303 860-6011
15 Biermann Ave
Office Level 3
Rosebank Towers
Hannover Re South Africa Limited
Managing Director:
Ismail E. Ismail
Tel. +27 11 745-8333
Fax +27 11 745-8444
www.compass.co.za
P.O. Box 37226
Birnam Park 2015
Johannesburg 2196
Sandton
5th floor, 90 Rivonia Rd.
Compass Insurance Company Limited
South Africa
General Manager:
Eduardo Molinari
Fax +34 91 319-9378
Tel. +34 91 319-0049
28010 Madrid
Paseo del General Martínez
Campos 46
Correduría de Reaseguros, S. A.
HR Hannover Re,
Spain
Thomas Barenthein
Fax Property & Casualty
+46 8 617-5593
Managing Director:
+46 8 617-5597
Fax Life & Health
Tel. +46 8 617-5400
P.O. Box 22085
10422 Stockholm
Hantverkargatan 25
Hannover Rück SE,
Tyskland Filial
Sweden
Rosebank, Johannesburg 2196
P.O. Box 85321
Emmarentia 2029
Tel. +27 11 481-6500
Fax +27 11 484-3330/32
CEO:
Achim Klennert
Glendale, Colorado 80246
4500 Cherry Creek Drive South,
Suite 1100
Office Denver
Peter R. Schaefer
Fax +1 704 542-2757
President & CEO:
Tel. +1 704 731-6300
Charlotte, North Carolina 28277
15720 Brixham Hill Avenue
Suite 300
Office Charlotte
Fax +1 407 649-8322
President & CEO:
Peter R. Schaefer
Orlando, Florida 32801
Tel. +1 407 649-8411
Hannover Life Reassurance
Company of America
200 South Orange Avenue
Suite 1900
President:
Patrick Fee
Orlando, Florida 32801
Tel. +1 800 214-2424
Fax +1 630 735-2341
Fax +1 303 860-6032
President & CEO:
Peter R. Schaefer
Glencar Insurance Company
200 South Orange Avenue
Suite 1900
Tel. +886 2 8770-7792
Fax +886 2 8770-7735
Representative:
Ryan Chou
Taipei
Taipei Representative Office
Rm. 902, 9F, No. 129, Sec. 3
Minsheng E. Road
Hannover Rück SE
Taiwan
Achim Klennert
Fax +27 11 484-3330/32
CEO:
Tel. +27 11 481-6500
P.O. Box 85321
Emmarentia 2029
Rosebank, Johannesburg 2196
15 Biermann Ave
Hannover Reinsurance
Group Africa (Pty) Ltd.
Rosebank Towers
Office Level 3
Managing Director P&C:
Randolph Moses
Managing Director L&H:
Wesley Clay
USA
M52 Required risk capital for underwriting risks
in property and casualty reinsurance
M53 Required risk capital for the five largest
natural hazards scenarios
Facultative reinsurance: participation on the part of the
reinsurer in a particular individual risk assumed by the
direct insurer. This is in contrast to obligatory (also: treaty)
reinsurance.
Financial Solutions: reinsurance transactions which - in ad-
dition to the transfer of biometric risks - also include finan-
cing components such as financing arrangements for new
and existing business, reserve relief, smoothing of volatility in
results, optimisation of the solvency position.
List of graphs, tables and charts
Further information
293
Hannover Re | Annual Report 2021
xROCA: cf. Excess Return on Capital Allocated
Volatility adjustment: addition to the risk-free curve used
under Solvency II to calculate technical provisions. Its use
must be approved by the responsible supervisory authority
and is intended to smooth volatility in the measurement of
bonds due to changes in credit spreads.
tion
Value-at-Risk: the measure of risk for a company's risk posi-
provision for unearned
Unearned premium reserve: cf. →
premiums
Underwriting: process of examining, accepting or rejecting
(re-)insurance risks and classifying those selected in order to
charge the proper premium for each. The purpose of under-
writing is to spread the risk among a pool of (re-)insureds in
a manner that is equitable for the (re-)insureds and profitable
for the (re-)insurer.
Treaty reinsurance: cf. → obligatory reinsurance
Technical result: balance of income and expenditure alloca-
ted to the insurance business and shown in the technical sta-
tement of income.
Target solvency capital: regulatory solvency capital require-
ment in accordance with Solvency II standards. At Hannover
Re this is calculated using an internal model.
Survival ratio: ratio of loss reserves to paid losses under a
specific contract or several contracts in a balance sheet year.
ceding company's retention (surpluses) are borne by the rein-
surer. The reinsurer's lines thus vary according to the level of
the retention and the sum insured of the reinsured contract.
The reinsurer's liability is generally limited to a multiple of
the ceding company's retention.
Surplus reinsurance: form of proportional reinsurance under
which the risk is not spread between the insurer and reinsu-
rer on the basis of a previously agreed, set quota share. Ins-
tead, the insurer determines a maximum sum insured per risk
up to which it is prepared to be liable. Risks that exceed the
Structured reinsurance: reinsurance with limited potential
for profits and losses. In most cases customers strive for risk
equalisation over time or solvency relief, both of which have
a stabilising effect on the ceding company's balance sheet.
Structured entity: entity with specific characteristics not
bound to a particular legal form that is used to conduct clo-
sely defined activities or to hold assets and for which the tra-
ditional concept of consolidation - based on voting rights - is
often inadequate for determining who exercises control over
the entity.
Spread loss treaty: treaty between an insurer and a reinsurer
that covers risks of a defined portfolio over a multi-year
period.
Solvency capital ratio (SCR): percentage coverage of the su-
pervisory capital requirement (target solvency capital) under
Solvency II by eligible own funds.
Solvency II: European directive for the insurance industry.
The new European regulatory regime for (re)insurers that en-
tered into force on 1 January 2016 on the basis of the Solven-
cy II Directive (Directive 2009/138/EC) is comprised of
risk-based capital requirements and imposes quantitative,
qualitative and reporting-related requirements in three main
areas known as pillars.
Silent cyber: unintended coverage of cyber-related losses in
traditional reinsurance treaties
Segment reporting: presentation of items in the balance
sheet and income statement split according to functional cri-
teria such as business sectors and regions.
Hannover Re | Annual Report 2021
292
Securitisation instruments: instruments for transferring
reinsurance business to the capital markets with the goal of
refinancing or placing insurance risks.
Risk capital: the capital at risk notionally allocated to a risk
category
Risk, insured: risk that can lead to the occurrence of a loss.
The insured risk is the subject of the insurance contract.
|
Introductory Sections
M
Management Report
inside front cover 3
Key figures
106
21
21
222
Shareholding structure as at 31 December 2021 23
Geographical breakdown of the shares
113
inside front cover 2
Dividend
105
112
inside front cover 2
Book value per share
Retrocession (also: Retro): ceding of risks or shares in risks
which have been reinsured. Retrocessions are ceded to other
risk carriers (retrocessionaires) in exchange for a pro-rata or
separately calculated premium (→ Gross/Retro/Net).
104
I11
Relative performance of the Hannover Re share
(including reinvested dividends)
110
inside front cover 2
inside front cover 2
inside front cover 2
Policyholders' surplus
103
Group net income
102
Gross premium
Introductory Sections
101
|
Notes
N
Performance of benchmark indices
Fair value: price at which a financial instrument is freely tra-
ded between two parties.
Retention: the part of the accepted risks which an insurer/
reinsurer does not reinsure, i. e. shows as net (retention ratio:
percentage share of the retention relative to the gross written
premiums).
Reserve ratio: ratio of (gross or net) technical provisions to
the (gross or net) premiums.
Major loss budget: annual budget for major losses deter-
mined from the modelled loss expectancy for business with
natural perils exposure as well as for man-made net losses
larger than EUR 10 million.
Major loss: loss which has special significance for the direct
insurer or reinsurer due to the amount involved; it is defined
as a major loss in accordance with a fixed loss amount or
other criteria (in the case of Hannover Re more than EUR 10
million gross).
Loss ratio: proportion of loss expenditure in the retention re-
lative to the (gross or net) premium earned.
Loss, insured: the insured loss reflects the total amount of
losses covered by the insurance industry (insurers and rein-
surers).
Loss, economic: total loss incurred by the affected economy
as a whole following the occurrence of a loss. The economic
loss must be distinguished from the insured loss.
Longevity risk: in general terms, the actuarial risk that a per-
son receiving regular living benefits such as annuities or
pensions - lives longer than expected.
-
Life and health (re-)insurance: collective term for the lines of
business concerned with the insurance of persons, i.e. life,
pension, health and personal accident insurance, insofar as
the latter is written by life insurers.
Letter of credit (LOC): bank guarantee under which, at the
request of the guaranteed party, the bank undertakes to ren-
der payment to the said party up to the amount specified in
the LOC. This method of providing collateral in reinsurance
business is typically found in the USA.
Leader: if several (re-)insurers participate in a contract, one
company assumes the role of leader. The policyholder deals
exclusively with this lead company. The lead (re-)insurer nor-
mally carries a higher percentage of the risk for own account.
Hannover Re | Annual Report 2021
290
Issuer: private enterprise or public entity that issues secu-
rities, e.g. the federal government in the case of German
Treasury Bonds and a joint-stock corporation in the case of
shares.
IVC: cf. Intrinsic value creation
Investment grade: investment grade ratings are awarded to
companies and assigned to securities that have a low risk pro-
file. They contrast with non-investment-grade ratings, which
by definition include speculative elements and therefore
entail a significantly higher risk.
Intrinsic value creation (IVC): the IVC is calculated accor-
ding to the following formula: real operating value creation =
adjusted operating profit (EBIT) – (capital allocated x weigh-
ted cost of capital). IVC is a tool of value-based enterprise
management used to measure the accomplishment of long-
term targets on the level of the Group, the individual business
groups and the operating units (profit centres).
International Securities Identification Number (ISIN):
ten-character universal code used to identify securities inter-
nationally. It is prefixed by a country code that specifies the
country where the issuer entity is legally registered or in
which it has legal domicile, e. g. DE = Germany.
Internal model: economic capital model verified and appro-
ved by the Federal Financial Supervisory Authority that better
reflects the company's risk profile than the standard formula
under Solvency II.
Insurtech: term referring to new business models/compa-
nies in the insurance industry that focus primarily on the use
of new technologies.
Insurance pool: a risk-sharing partnership under civil law
formed by legally and economically independent insurers and
reinsurers in order to create a broader underwriting base for
particularly large or unbalanced risks. The members underta-
ke to write certain risks only within the scope of the insurance
pool. They include such risks - while maintaining their com-
mercial independence - in the insurance pool against a com-
mission fee. Each insurer participates in the profit or loss of
the insurance pool according to its proportionate interest.
Reinsurance is often ceded or accepted in order to further
diversify the risk. Pools can be divided into two types: coin-
surance pools, in which all members take the role of primary
insurers according to their interests, and reinsurance pools,
in which a primary insurer writes the risks and then spreads
them among the participating insurers by way of reinsurance.
Insurance-linked securities (ILS): securitised insurance ris-
ks, such as catastrophe bonds, derivatives or collateralised
reinsurance.
Impairment: extraordinary amortisation taken when the pre-
sent value of the estimated future cash flow of an asset is less
than its book value.
IBNR (Incurred but not reported) reserve: provision for
claims which have already occurred but which have not yet
been reported.
Hybrid capital: debt structure which because of its subordi-
nation bears the character of both debt and equity.
Group net income: Group net income under IFRS corres-
ponds to the profit for the year available to the shareholders
of Hannover Re.
Gross/Retro/Net: gross items constitute the relevant sum
total deriving from the acceptance of direct insurance policies
or reinsurance treaties; retro items constitute the relevant
sum total deriving from own reinsurance cessions. The diffe-
rence is the corresponding net item (gross - retro = net, also:
for own account).
Goodwill: the excess of the cost of an acquired entity over the
net of the amounts assigned to assets acquired and liabilities
assumed.
Funds held by ceding companies/funds held under rein-
surance treaties: cf. deposits with ceding companies/depo-
sits received from retrocessionaires
Frequency losses: losses that occur frequently in a foresee-
able amount, i. e. where the underlying risks are associated
with relatively high probabilities of occurrence and usually
low loss amounts.
Mark-to-market valuation: the evaluation of financial instru-
ments to reflect current market value or fair value.
Matching currency cover: coverage of technical liabilities in
foreign currencies by means of corresponding investments in
the same currency in order to avoid exchange-rate risks.
Modified Coinsurance (ModCo) treaty: type of reinsurance
treaty where the ceding company retains the assets with res-
pect to all the policies reinsured and also establishes and re-
tains the total reserves on the policies, thereby creating an
obligation to render payments to the reinsurer at a later date.
Such payments include a proportional share of the gross pre-
mium plus a return on the assets.
Reinsurer: company which accepts risks or portfolio seg-
ments from a direct insurer or another reinsurer in exchange
for an agreed premium.
Reinsurance: passing on of a primary insurer's or reinsurer's
risks to a reinsurer.
Rate: percentage rate (usually of the premium income) of the
reinsured portfolio which is to be paid to the reinsurer as
reinsurance premium under a non-proportional reinsurance
treaty.
Quota share reinsurance: form of proportional reinsurance
under which the reinsurer assumes a contractually set percen-
tage share of the written risk. Since the insurer is responsible
for acquisition, pricing, policy administration and claims
handling, the administrative expenditure for the reinsurer is
very low. The latter therefore participates in the aforementi-
oned expenses mostly through payment of a reinsurance
commission.
case of wasting assets less scheduled and/or special amorti-
sation.
Purchase cost, amortised: the cost of acquiring an asset item
including all ancillary and incidental purchasing costs; in the
Provision for unearned premiums (also: unearned premi-
um reserve): premiums written in a financial year which are
to be allocated to the following period on an accrual basis.
This item is used to defer written premiums.
Provision: liability item as at the balance sheet date to
discharge obligations which exist but whose extent and/or
due date is/are not known. Technical provisions, for example,
are for claims which have already occurred but which have
not yet been settled, or have only been partially settled (=
provision for outstanding claims, abbreviated to: claims pro-
vision).
Protection cover: protection of segments of an insurer's
portfolio against major losses (per risk/per event), primarily
on a non-proportional basis.
Proportional reinsurance: reinsurance treaties on the basis
of which shares in a risk or portfolio are reinsured under the
relevant direct insurer's conditions. Premiums and losses are
shared proportionately on a pro-rata basis. This is in contrast
to non-proportional reinsurance.
Property and casualty (re-)insurance: collective term for the
lines of business concerned with the insurance of property,
including for example liability, fire, hail or marine insurance.
Probability level: cf. → confidence level
Priority: direct insurer's loss amount stipulated under
non-proportional reinsurance treaties; if this amount is excee-
ded, the reinsurer becomes liable to pay. The priority may
refer to an individual loss, an accumulation loss or the total of
all annual losses.
Primary insurer: cf. direct insurer
Retakaful: reinsurance in accordance with Islamic law (Sha-
ria-compliant). The business model is similar in form to that
of mutual insurance and addresses, among other things, the
prohibition of interest in Islam.
Price/earnings ratio (PER): a valuation ratio of a company's
share price compared to its per-share earnings.
Premium: remuneration for the risks accepted from an in-
surance company. Unlike the earned premiums, the written
premiums are not deferred.
Further information
291
Hannover Re | Annual Report 2021
Portfolio: a) all risks assumed by an insurer or reinsurer in a
defined sub-segment (e.g. line of business, country) or in
their entirety; b) group of investments defined according to
specific criteria.
Parametric cover: index-based type of insurance, e.g. to pro-
tect against weather risks
Other securities, trading: securities or financial instruments
that are held solely for short-term trading purposes. They are
measured at their fair value at the balance sheet date.
Other securities, held-to-maturity: securities or financial in-
struments that can and are intended to be held until maturity.
They are measured at amortised cost.
Other securities, available-for-sale: securities or financial
instruments that cannot be clearly allocated to the "trading"
or "held-to-maturity” portfolios; these securities can be dis-
posed of at any time and are reported at their fair value at the
balance sheet date. Changes in fair value are not recognised
in the statement of income.
Obligatory (also: treaty) reinsurance: reinsurance treaty un-
der which the reinsurer participates in a cedant's total, preci-
sely defined insurance portfolio. This is in contrast to faculta-
tive reinsurance.
Non-proportional reinsurance: reinsurance treaty under
which the reinsurer assumes the loss expenditure in excess of
a particular amount (priority) (e.g. under an excess of loss
treaty). This is in contrast to proportional reinsurance.
Net: cf. Gross/Retro/Net
Mortality risk: in general terms, the actuarial risk that a per-
son upon whose death a benefit is payable lives shorter than
expected. From a (re)insurer's perspective, this is the risk
that the observed mortality experience in an underlying port-
folio deviates from what had previously been calculated on
the basis of actuarial assumptions.
Morbidity risk: in general terms, the actuarial risk that the
state of health of a person is adversely impacted by illness,
malfunctioning of organs or other body parts (functional disa-
bility), injury or frailty and that higher costs are triggered by
medical treatment, long-term care or protracted periods of
disability.
Present value of future profits (PVFP): intangible asset pri-
marily arising from the purchase of life and health insurance
companies or portfolios. The present value of expected future
profits from the portfolio assumed is capitalised and amorti-
sed according to schedule.
98
N 40
134
209
N 62
Provisions for pensions
233
N26 Rating structure of fixed-income securities 2021 209
N 63
N25 Carrying amounts before impairment
Effect on the defined benefit obligation
296
Hannover Re | Annual Report 2021
level 3 financial assets and liabilities 2020
Fair value hierarchy of financial assets and
liabilities measured at amortised cost 2021
Fair value hierarchy of financial assets and
liabilities measured at amortised cost 2020
205
variable-yield securities
Maturities of the fixed-income and
233
N 17
232
208
228
208
N58
Development of the benefit reserve
229
N24
defined benefit pension plans
Fair value of financial assets at fair value
through profit or loss before and after accrued
interest as well as accrued interest on such
financial assets
Development of the unearned premium reserve 229
N 60
Measurement assumptions
231
N61
Movements in net liability from
N59
Maturities of the technical reserves 2020
204
N16
N12
Movements in level 3 financial assets and
N 36
190
List of shareholdings
N11
N13
215
214
Fair value hierarchy of financial assets and
liabilities recognised at fair value 2021
Fair value hierarchy of financial assets and
liabilities recognised at fair value 2020
Movements in level 3 financial assets and
liabilities 2021
189
N 10 Scope of consolidation
N 35
185
215
Investments
Material branches within the Group
Book values from business relations with
liabilities 2020
N39
200
Consolidated segment report
N 15
197
unconsolidated structured entities 2020
193
216
N 38
196
N14
Income and expenses from
N 37
216
level 3 financial assets and liabilities 2021
Income and expenses from
Key exchange rates
N 57
Maturities of the technical reserves 2021
N 46
Rating structure of financial assets that give rise
to solely payments of principal and interest
Development of deferred acquisition costs
Age structure of overdue accounts receivable
Value adjustments on accounts receivable
219
220
220
221
N 45
as well as their fair value 2020
N47
Development of goodwill
221
N20
Amortised cost, unrealised gains and losses
and accrued interest on loans and
N 48
206
Capitalisation rates
N44
N 19
217
217
218
N 18
Amortised cost, unrealised gains and losses
N41
Amortised cost, unrealised gains and losses
and accrued interest on the portfolio of
investments classified as held to maturity
and accrued interest on the portfolio of
N 42
N 43
Fair value disclosures for financial assets 2021
Fair value disclosures for financial assets 2020
218
219
as well as their fair value 2021
206
investments classified as held to maturity
228
222
Other assets
N 53
Technical provisions
225
N 54
Loss and loss adjustment expense reserve
226
225
207
Net loss reserve and its run-off in the property
N23
Amortised cost, unrealised gains and losses
and accrued interest on the portfolio of
investments classified as available for sale
as well as their fair value 2020
and casualty reinsurance segment
227
N 56
N 55
N49
Development of other intangible assets
224
222
N21
N22
receivables as well as their fair value 2021
Amortised cost, unrealised gains and losses
and accrued interest on loans and
receivables as well as their fair value 2020
Amortised cost, unrealised gains and losses
and accrued interest on the portfolio of
investments classified as available for sale
as well as their fair value 2021
206
N 50
N52
M79 Individual targets and target attainment of the
member of the Executive Board
future profits (PVFP) on acquired life
reinsurance portfolios
223
207
N51
Fixtures, fittings and equipment
Development of the present value of
N09
unconsolidated structured entities 2021
Book values from business relations with
Valuation models
104
M61 Required risk capital for market risks
M 62 Utilisation of the trigger system
144
the 2021 financial year
179
Remuneration granted and owing in
M91
M90
Pension commitments
M 89
M60 Sensitivities of the underwriting risks
(impact corridors in % of the available
economic capital)
141
Bonus bank 2017
M 88
142
102
Former members of the Executive Board
remuneration granted and owing
M65 Rating structure of our fixed-income securities
Group of participants and total number of
M94
106
material asset classes
150
105
Comparative presentation
M64 Scenarios for changes in the fair value of
148
M92 Individual remuneration of the members of
the Supervisory Board
106
M 63 Value at Risk for the investment portfolio
of the Hannover Re Group
146
M93
141
HR Share Awards (HR SA) 2016
M87
retrocessions
137
Calculation of the long-term incentive (LTI)
allocation value
M55 Stress tests for natural catastrophes after
M 82
99
99
66
Multi-year variable remuneration components
M81
M54 Survival ratio in years and reserves for
asbestos-related claims and pollution damage
136
M80 Overall target attainment and amount paid out
under STI 2021
98
137
M83
LTI 2021 allocation
138
M59 Required risk capital for underwriting risks
in life and health reinsurance
140
Target attainment curve relative TSR
M86
101
M58 Combined and catastrophe loss ratio
139
Calculation of the LTI amount paid out
M 85
101
138
Calculation of the LTI base payment amount
M84
100
M56 Catastrophe losses and major claims in 2021
M57 Ensuring the quality of our portfolios
108
eligible participants in variable remuneration
102
systems - valid: 31 December 2021
Investments in associated companies
N31
Consolidated statement of changes in
N 04
212
Financial information on investments in
associated companies
212
167
N 30
Consolidated statement of comprehensive
N 03
211
Breakdown of investments by currencies 2020
N 29
income 2021
166
shareholders' equity2021
N32
N 08
N34
178
Restatements pursuant to IAS 8
N07
177
168
Further IFRS Amendments and Interpretations
N 33
M66 Required risk capital for the
Consolidated cash flow statement 2021
N 05
213
Development of investment property
N06
Consolidated statement of income 2021
170
Breakdown of investments by currencies 2021
156
Property & Casualty reinsurance:
Forecast development for 2022
Reinsurance recoverables as at the
M 68
M96
109
balance sheet date
Gross written premium retained
Growth in gross domestic product (GDP)
M95
108
counterparty default risk
151
N 02
M 67
109
153
M69 Required risk capital for operational risks
Rating structure of fixed-income securities 2020 210
M97 Life & Health reinsurance:
N 27
N 28
164
Consolidated balance sheet as at
N01
Notes
31 December 2021
Further information
110
295
Hannover Re | Annual Report 2021
159
N
Forecast development for 2022
6 October 2022
25th International Investors' Day
3 November 2021
Quarterly Statement as at 30 September 2022
Results of treaty renewals as at 1 January
9 March 2023
Half-yearly Financial Report 2022
Analysts' Meeting
Publication of the annual financial statements 2022
Annual Results Press Conference
8 February 2023
4 August 2022
Publication of the annual financial statements 2021
4 May 2022
Quarterly Statement as at 31 March 2022
4 May 2022
Analysts' Meeting
Annual Results Press Conference
10 March 2022
Financial calendar 2022/2023
Hannover Re | Annual Report 2021
3 May 2023
298
Annual General Meeting
Annual General Meeting
Savo Ilic/Adobe Stock, sima/Adobe Stock
Hannover Re | Annual Report 2021
axel.bock@hannover-re.com
300
page 11
Dragonlmages/Adobe Stock
Artem Varnitsin/Adobe Stock
page 10
xy/Adobe Stock, skarie/Adobe Stock
page 9
page 7
onephoto/Adobe Stock
page 6
page 5
fizkes/Adobe Stock
page 2, 18/19
Werner Bartsch
Credits
Fax +49 511 5604-1188
Tel. +49 511 5604-0
30625 Hannover, Germany
Karl-Wiechert-Allee 50
Hannover Rück SE
Published by
Imprint
Further information
299
www.hannover-re.com
Tel. +49 511 5604-1736
Fax +49 511 5604-1648
N74
Investor Relations
Reconciliation of financing liabilities 2020
N73
251
instruments 2020
238
Reconciliation of financing liabilities 2021
N 72
Maturity structure of derivative financial
N 92
238
Maturities of financial liabilities 2020
N71
251
instruments 2021
237
238
Maturities of financial liabilities 2021
N 93
252
242
Investment income
N76
254
and abroad
241
Gross written premium
N 75
Business assumed and ceded in Germany
N 95
240
252
Netting agreements 2020
N 94
Subsidiaries with material non-controlling
interests
Netting agreements 2021
N 96
N 70
N 91
248
deferred tax liabilities
Maturities of the sundry non-technical
provisions
N 66
Netting of deferred tax assests and
N 88
234
248
of all Group companies
Development of sundry non-technical
provisions
N 65
Deferred tax assets and deferred tax liabilities
N 87
234
N 64 Other liabilites
234
Maturity structure of derivative financial
N 89
N 67
237
notes payable
249
and temporary differences
Net gains and losses from long-term debt and
N 69
Expiry of non-capitalised loss carry-forwards
N 90
237
Long-term debt and notes payable 2020
N68
249
income taxes with the actual expense
236
Long-term debt and notes payable 2021
Reconciliation of the expected expense for
Axel Bock
Stock appreciation rights of Hannover Rück
N77
264
263
N 104 Future minimum lease payments receivable
N 105 Fee paid to the auditor
Domestic/foreign breakdown of
N 86
247
Income tax
N 85
263
connection with leases
246
Revenue categories
N 84
N 103 Amortisation of right-of-use assets in
245
recognised tax expenditure/income
Other income/expenses
247
297
The Annual Report of Hannover Rück SE is also available
here in English and German.
This is a translation of the original German text; the German
version shall be authoritative in case of any discrepancies in
the translation.
oliver.suess@hannover-re.com
Tel. +49 511 5604-1502
Fax +49 511 5604-1648
Oliver Süß
Media Relations
www.hannover-re.com
For reasons of sustainability Hannover Re does not print or
mail out the annual and interim reports. The present Group
Annual Report of Hannover Re can be accessed online in
English and German as an HTML version and downloaded in
PDF format:
karl.steinle@hannover-re.com
Fax +49 511 5604-1648
Tel. +49 511 5604-1500
Karl Steinle
Corporate Communications
Contact information
Further information
Hannover Re | Annual Report 2021
257
N 83
N 102 Leases in the balance sheet
259
of Hannover Rück SE
243
Net gains and losses on investments 2020
N79
Development of the provision for share awards
N 98
243
Net gains and losses on investments 2021
N78
259
Share awards of Hannover Rück SE
N 97
242
Interest income on investments
N 80
263
Reinsurance result
N 99
245
deferred acquisition costs
260
Calculation of the earnings per share
N 101
Commission and brokerage, change in
N 82
260
Personnel expenditures
N 100
244
Other technical income
N 81
260
Personnel information
244
Hannover Re | Annual Report 2021
www.hannover-re.com
In keeping with its strict zero Covid policy, China took
far-reaching containment measures in some instances which
had appreciable impacts at times on international supply
chains. Problems affecting the energy supply and the real es-
tate crisis were two other sensitive factors hampering growth
in the country. In the third quarter the pace of economic
growth in China almost came to a standstill at just 0.2%.
Viewed over the year as a whole, the Chinese economy
achieved a gain of 7.8% (2.3%).
Hannover Re | Annual Report 2021
27
Excess return (one-year economic profit in excess of the cost of capital) on allocated economic capital
Based on Solvency II principles; pre-tax reporting
8
7 Average annual growth
Average annual growth at constant exchange rates
6
According to our internal capital model and Solvency II requirements
After tax; risk-free: five-year average return of ten-year German government bonds
5
This information has not been audited by the independent auditor
4
Combined management report
3
2
Restated pursuant to IAS 8
1
6.5%
11.8%
17.6%
-11.3%
≥ 2%
XROCA 4,8
EUR 589
million
EUR 663
million
million
Annual average growth/weighted averages
EUR 778
Capital allocation
IVC - the strategic management ratio
reinsurance
Property and casualty
xRoCA
IVC
xRoCA
IVC
xRoCA
IVC
2019
2020
2021
in EUR million
The basis of value-based management is the risk-appropriate
allocation of capital to the individual business activities. This
enables us to evaluate the acceptance of underwriting risks
and investment risks both in light of individual risk/return
aspects and against the backdrop of our overall risk appetite.
Our internal capital model supplies the key parameters for
this purpose. Starting out from the Group's overall risk situa-
tion, capital is first allocated to the functional areas of under-
writing and investments. We then further divide the capital
within the underwriting sector, first between the business
segments of property & casualty reinsurance and life & health
reinsurance and then between the various reinsurance prod-
ucts according to risk categories/treaty types and lines. In
this way, we ensure consistent adherence to our profit targets
- allowing for risk, cost and return considerations - in the
evaluation and pricing of our various reinsurance products.
M 02
The adjusted economic profit is comprised of two factors: the
IFRS Group net income recognised after tax and the change
in the balancing items for differences between economic val-
uations and amounts stated in the IFRS balance sheet. By way
of the latter we make allowance in the value determination for
changes in the fair values of assets not recognised in income
under IFRS as well as for the change in economic effects in
the technical Solvency II balance sheet items that are not rec-
ognised in the IFRS balance sheet. In addition, interest on
hybrid capital already recognised in the IFRS Group net in-
come and the non-controlling interest in profit and loss are
included back in the calculation.
The IVC (Intrinsic Value Creation) is calculated according to
the following formula: adjusted economic profit - (capital
allocated x weighted cost of capital) = IVC.
measure strategy contributions with an eye to our
demanding profit and growth targets.
optimise the allocation of capital and resources,
identify opportunities and risks and
•
•
•
In this way, we can
With the aid of the IVC ratio it is possible to compare the val-
ue contributions of the Group as a whole, its two business
groups and the individual operational units. This enables us
to reliably identify value creators and value destroyers.
business activities - is referred to as Intrinsic Value Creation
(IVC).
In order to manage the portfolios and individual treaties we
apply underwriting-year-oriented measurement principles
based on expected cash flows that appropriately accommo-
date the specific characteristics of property & casualty and
life & health reinsurance. The attainment of targets in a par-
ticular financial year is also of interest – especially from the
standpoint of shareholders. Based on our economic measure-
ment according to Solvency II principles and our internal cap-
ital model, the foundation of our enterprise management, we
strive to generate a profit in excess of the cost of capital. This
return which is the decisive ratio for the management of our
-
Intrinsic Value Creation and excess return on capital allocated¹
-6.8%
106.6%
-31.0%
In the advanced economies the upswing lost appreciable mo-
mentum in the second half of the year. The same was true of
emerging economies, although the picture here was a more
nuanced one. In Latin America, for example, the economy
picked up markedly in the Andean states of Chile, Peru and
Colombia, whereas output in the large economies of Brazil,
Mexico and Argentina declined. Growth here was in part de-
pressed by drought-related crop failures and rising prices.
The geopolitical landscape remained tense in 2021. A hard-
ening of relations between the United States and China
loomed large under the new Biden administration. In Eastern
Europe the conflict between NATO and Russia intensified.
United States
The US economy rallied after the previous year's downturn.
Gross domestic product increased by 5.6% (previous year:
-3.4%). Private consumption surged by a vigorous 8%
(-3.8%). Exports grew by 4.0% (-13.9%), while imports
soared by 13.2% (-8.9%). Investments in equipment also
shot up by 13.3% (-8.3%). The jobless rate retreated to 5.4%
(8.1%). Fiscal policy remained expansionary, although Con-
gress tended to scale back its stimulus spending compared
with the programmes of the two previous years. Higher ener-
gy prices saw inflation rise to 4.7% (1.2%), a level in excess
of the target set by the US Federal Reserve.
Europe
In the Eurozone, the recovery from the pandemic-induced de-
cline in output continued virtually undiminished. After mod-
est contractions over the winter months, overall economic
output picked up sharply in the second and third quarters.
The first faint sights of a fresh slowdown could be discerned
towards year-end, however, as containment measures were
put in place again to curb the pandemic. Looked at over the
year as a whole, economic output rose by 5.0% (-6.5%). The
national picture varied widely in some instances. Ireland was
a major growth engine with a gain of 14.9%. The growth
rates in France, Italy and Spain stood at 6.6%, 6.2% and
4.2% respectively. Consumption in the Eurozone was up by
3.3% (-8.0%). Consumer prices climbed by 2.5% (0.3%)
against the backdrop of soaring energy costs. Unemployment
fell slightly to 7.6% (7.8%).
Gross domestic product in the United Kingdom expanded by
6.9% (-9.8%). This growth was heavily propped up by the
government, which boosted its spending by 16%. Along with
the effects of Covid-19, Brexit impacts were a considerable
drag on the economy: supply chain bottlenecks, labour short-
ages and the logistical reorientation clearly emerged as re-
strictive factors. Foreign trade was soft: exports fell by 2.2%,
while imports were up by a modest 1.6%.
Hannover Re | Annual Report 2021
31
Germany
Gross domestic product grew by 2.6% year-on-year in Ger-
many (-4.6%). Softness over the winter months was followed
by a robust upswing in the summer. Restrictions began to
make themselves felt again towards year-end. As the year
progressed, private consumer spending bounced back sharp-
ly to almost pre-crisis levels. Looked at over the year as
whole, private consumption nudged modestly higher by
0.3% (-5.9%). Corporate spending rose by 2.1% (-5.5%),
with supply chain bottlenecks and materials shortages
which became even more acute in the summer - putting the
brakes on any further increase. Construction investments
were accompanied by record price increases, the pace of
which slowed in 2021 to 1.6% (2.5%).
Boosted by exports of services, which include the resurgence
in the travel sector, exports rose by 7.5% in 2021 (-9.3%).
Imports were up by 7.8% (-8.6%). Import prices, in particu-
lar, increased appreciably on account of rising costs for raw
materials and intermediate goods.
Despite the economic recovery, the Covid-19 pandemic con-
tinued to have a significant effect on economic activity. Coun-
tries with higher vaccination rates were also increasingly able
to tolerate higher case numbers without having to implement
containment measures. In the summer the rising numbers of
infections led to economic reverses, especially in Asia. The
repercussions were milder in the United States and Europe.
By year-end the economy faced new risks with the emergence
of the new virus variant Omicron and rising inflationary pres-
sures. Supply chain shortages continued.
The jobless rate fell by 0.2 percentage points year-on-year to
5.7%. The increase in consumer prices was 3.1% (0.5%) av-
eraged over the year as a whole, driven primarily by higher
commodity and wholesale prices.
Emerging markets in Asia maintained the vigorous pace of
growth seen in the second half of 2020. From an annual per-
spective, gross domestic product grew by 6.9% (-1.1%).
24,770
After suffering a renewed pandemic-induced downturn in the
spring, the Indian economy rallied over the remainder of the
year and posted an increase in economic output of 7.6%
(-7.0%) for 2021.
Gross domestic product in Japan rose by 1.5% (-4.7%). Ex-
ports were a key growth driver with a gain of 11.2% (-11.8%).
Compared to many other countries, however, the recovery in
the overall economy was softer. The Olympic Games held in
the summer failed to give the economy any appreciable boost.
Given the low vaccination rate - it was still around 40% in
August - case numbers began to rise again in late summer,
prompting the reimposition of restrictions and causing con-
sumers to rein in their spending.
Capital markets
After the turmoil of the previous year the investment climate
- which in recent years had repeatedly proven challenging.
was considerably more stable in 2021, while also showing the
effects of the coronavirus pandemic and other geopolitical
and economic challenges. Global supply chains, which had
already been under strain from the pandemic, were disrupted
further by the incident involving the "Ever Given" in the Suez
Canal in March. Markets nevertheless remained largely sta-
ble, thanks to the supportive policy of central banks, fiscal
measures and a slow easing of the backlog in consumption.
The generally positive trend was sustained even after brief
setbacks due to the emergence of new coronavirus variants
and despite upheavals on Chinese real estate markets.
Interest rates with minimal risk on the important fixed-in-
come markets for our company recorded in some cases very
sharp increases, especially for USD- and sterling-denominat-
ed bonds. This was also true, albeit to a lesser extent, of the
euro area. All in all, we benefited from the higher interest rate
level in our reinvesting activities. Credit spreads on corporate
bonds remained on a low pre-crisis level throughout virtually
the entire period under review after the very marked increas-
es and volatility seen in the previous year.
On equity markets the picture was largely favourable. Gener-
ally speaking, broader-based demand re-emerged after the
temporary emphasis on tech stocks. The markets in estab-
lished economic regions closed the year with robust gains,
while those in developing economic areas were affected so
significantly by the upheavals on the Chinese market that
losses were posted here overall from an annual perspective.
Alternative investments held up exceptionally well in the
course of 2021. Most notably, valuations of investments in
private equity and in the real estate sector trended higher,
reflecting not only what were certainly more cautious valua-
tions at the end of the previous year but also brisk risk-taking
during the year.
The massive monetary and fiscal programmes undertaken by
individual governments, which especially in some European
countries and in Japan took on considerable dimensions rela-
tive to the respective gross domestic product, made them-
selves felt as in the previous year. Given that such supportive
actions make it easier for bubbles to form, it will be important
to keep a close eye on the timing and steps taken as these
supports are withdrawn. We expect to see elevated volatility
again on capital markets in this context.
The development of the global economy was also reflected in
rising raw materials and transport costs. These, in turn, have
been passed on in the form of a general rise in prices. It is
currently too soon to draw any definitive conclusions as to
whether we will have to live with higher inflation as a struc-
tural and more protracted phenomenon. As growth normalis-
32
Asia
The world economy bounced back in 2021 from the previous
year's pandemic-induced slump. The Kiel Institute for the
World Economy (IfW) estimates that global output surged by
5.7% after a contraction of 3.1% in the previous year. The
economy showed particularly marked improvement in the
early months of the year despite repeated pandemic-driven
setbacks. The effects of the pandemic remained largely re-
stricted to the service sector. Industrial output and global
trade expanded vigorously up until the spring. In the second
half of the year the pace of the economic turnaround slowed
in most regions.
Macroeconomic climate
Market environment for insurers shaped by low interest rates, inflation and catastrophe losses
5.6%
6.7%
4.7%
5.5%
-43.2%
EUR 326
million
million
> EUR 250
Value of New Business
(VNB)4,9
Combined management report
35
Hannover Re | Annual Report 2021
The investment income generated by Hannover Re per-
formed significantly better than expected with income
from assets under own management rising by 14.4% to
EUR 1,674.8 million (EUR 1,463.7 million) – and thus played
an important part in the overall result for the year under re-
view. Earnings benefited from, among other things, strong
income from our portfolio of inflation-linked bonds and from
alternative investments such as private equity funds. The re-
turn on investment stood at 3.2% and thus very clearly beat
our target of more than 2.4%, which we had revised upwards.
The Group gross premium booked by Hannover Re increased
by 12.1% as at 31 December 2021 to EUR 27.8 billion
(EUR 24.8 billion). At constant exchange rates growth would
have reached 12.8%. We thus beat our guidance, which we
had revised upwards to growth in the upper single-digit
percentages. The level of retained premium was virtually
unchanged at 89.5% (90.1%). Net premium earned rose by
13.0% to EUR 24.1 billion (EUR 21.4 billion). The increase
would have been 13.7% at unchanged exchange rates.
In our Life & Health reinsurance business group we were
able to grow the gross premiums considerably more strongly
than our anticipated guidance of at least 3% with an increase
of 5.5% adjusted for exchange-rate effects. The result was,
however, impacted by the effects of the pandemic in the fi-
nancial year just ended. Altogether, the expenditures in-
curred here amounted to EUR 582.0 million. The bulk of them
stemmed from illnesses and deaths in the United States, our
largest single market, and South Africa. The pandemic-relat-
ed losses were opposed by positive one-time income of
EUR 131.7 from a restructuring measure in the US mortality
book as well as a positive special effect of EUR 121.9 million
in business with longevity covers. The pandemic-related
strains for the entire insurance industry further boosted what
had already been generally strong demand for reinsurance
covers - including for example in financial solutions busi-
ness, where we offer our customers individual reinsurance
solutions designed to improve their solvency, liquidity and
capital position.
surers in the world, we enjoy sustained very good access to
profitable business.
Gross premium in the Property & Casualty reinsurance busi-
ness group grew by 16.3% at constant exchange rates, com-
fortably beating our guidance of around 5%. The main fac-
tors here were the favourable market climate and improved
prices. On the other hand, no pandemic-related losses were
recorded for our account overall beyond the reserves set
aside in 2020. Nevertheless, the burden of large losses sur-
passed our budgeted expectation of EUR 1.1 billion. This was
due primarily to substantial losses from natural catastrophes
in the third quarter. The combined ratio in property and
casualty reinsurance improved in the financial year just end-
ed to 97.7% (previous year: 101.6%). Due to the considera-
ble major loss expenditure and on account of the protracted
low interest rate environment, the sustained improvement in
prices and conditions for reinsurance protection in property
and casualty business continued, although at the same time
retrocession covers saw a moderate price increase as the year
progressed. Thanks to its comparatively low administrative
expenses and cost of capital as well as its above-average
financial strength, Hannover Re has been and remains able to
successfully assert itself in the market. Based on our position-
ing as one of the largest and most robustly capitalised rein-
In the 2021 financial year we had to deal with, among other
things, pandemic-related expenditures in life and health rein-
surance and catastrophe losses in property and casualty rein-
surance. Once again, we demonstrated our robust risk-carry-
ing capacity and profitability. All in all, the business
development was pleasing.
For a number of years now the global reinsurance markets
have been fiercely competitive and overshadowed by rising
costs from natural catastrophes. Above and beyond this, the
low interest rate environment, higher inflation and the
Covid-19 pandemic present further challenges for the
industry.
As the third-largest reinsurer in the world, Hannover Re has a
far-reaching international network and extensive underwrit-
ing expertise. On this basis, we are able to offer our custom-
ers traditional, tailor-made and innovative reinsurance solu-
tions and we work with them to open up new business
opportunities.
Shareholders' equity rises to EUR 11.9 billion; return on equity reaches 10.8%
Group net income of EUR 1.23 billion at the upper end of expectations
Return on investment significantly higher than target at 3.2%
Life and health reinsurance delivers good underlying result, albeit with high pandemic-related
losses of EUR 582.0 million
Property and casualty reinsurance posts double-digit growth on the back of improved prices and
conditions; large loss expenditure higher than expected
•
.
≥ 5%7
Significant stabilisation in movements on capital markets
717.0
2
11.9%
0.9%
Life & Health reinsurance1
Return on investment
Group net income
1 At constant exchange rates
2
Organic growth only
3
Guidance 2021
gross premium growth of around 5%
or in the upper single-digit percentage range 4
growth of around 5%
growth of at least 3%²
around 2.4% or more than 2.4% 5
between EUR 1.15 and 1.25 million 3
Assuming stable capital markets and/or major loss expenditure in 2021 that does not exceed EUR 1.1 billion.
Gross premium growth for
4
5 The expected return on investment was revised with the publication of the Q3 statement.
Target attainment 2021
+12.8%
+16.3%
+5.5%
3,2%
EUR 1.23 billion
36
Hannover Re | Annual Report 2021
Business development and guidance in the year under review
The total policyholders' surplus, consisting of shareholders'
equity, non-controlling interests and hybrid capital, increased
measured in terms of the
capital adequacy ratio which is still comfortably in excess of
threshold levels - remains very robust. The equity attributa-
ble to shareholders of Hannover Re rose to EUR 11.9 billion
(EUR 11.0 billion) as at 31 December 2021. The return on
equity increased to 10.8% (8.2%). The book value per share
reached EUR 98.55 (EUR 91.17). We were able to achieve all
- and in some cases even substantially outperform - the fore-
casts shown in the table “Business development and guid-
ance in the year under review", some of which we had revised
higher in the course of the financial year.
-
The expected gross premium growth was revised with the publication of the Q1 statement.
Hannover Re's equity position
Gross premium growth for
Property & Casualty reinsurance¹
M 04
25,000
22,597
8,538
8,026
20,000
19,176
17,791
15,000
7,816
7,200
7,080
19,224
Gross premium growth (Group) 1
10,000
14,781
11,976
10,711
5,000
0
2017
2018
2019
20201
2021
Property & Casualty reinsurance
1 Restated pursuant to IAS 8
Life & Health reinsurance
16,744
M 03
30,000
Gross premium by business group
in EUR million
28
2
1 This information has not been audited by the independent auditor
Income above risk-free interest rate after deduction of risk-appropriate cost of capital
6.2%
910.2
6.0%
952.6
6.5%
996.4
Group
8.4%
483.4
Hannover Re | Annual Report 2021
4.1%
11.0%
663.5
Investments 2
11.8%
421.8
17.6%
653.5
-11.3%
(384.0)
Life and health reinsurance
0.1%
5.2
245.4
The allocated capital consists of the economic equity pursu-
ant to Solvency II including non-controlling interests and the
hybrid capital. Capital is allocated to the profit centres as de-
scribed above according to the risk content of the business in
question. A systematic distinction is made here between the
assumption of underwriting risks, on the one hand, and in-
vestment risks, on the other. Under the IVC calculation, there-
fore, only risk-free interest income on the generated cash
flows is allocated to the business segments of proper-
ty & casualty and life & health reinsurance. The investment in-
come above and beyond risk-free is allocated in its entirety to
the functional area of investments and included in the IVC
after deduction of the risk-appropriate cost of capital and the
administrative expenses.
In calculating the cost of capital, our assumption - based on a
Capital Asset Pricing Model (CAPM) approach - is that the
investor's opportunity costs are 625 basis points above the
risk-free interest rate, meaning that economic value is creat-
ed above this threshold. Our strategic return on equity target
of 900 basis points above risk-free thus already contains a
substantial target value creation. We allocate equity sparingly
and use equity substitutes to optimise our average cost of
capital, which amounted to (unaudited by the independent
auditor) 4.6% in 2021 (previous year: 4.1%).
Since comparison of absolute amounts is not always mean-
ingful, we have introduced the xRoCA (excess return on cap-
ital allocated) in addition to the IVC. This describes the IVC in
relation to the allocated capital and shows us the relative ex-
cess return generated above and beyond the weighted cost of
capital.
―
A detailed overview of the development of our two business
groups Property & Casualty reinsurance and Life & Health
reinsurance and the performance of our investments is pro-
vided on pages 37 et seq.
to EUR 15.7 billion (EUR 14.1 billion) as at 31 December
2021, in part due to the issuance of a subordinated bond.
The operating profit (EBIT) improved sharply by 42.9% to
EUR 1,734.8 million (EUR 1,214.1 million). Group net income
was up by 39.4% at EUR 1,231.3 million (EUR 883.1 million).
We thus achieved our Group earnings guidance of EUR 1.15
billion to EUR 1.25 billion. Earnings per share stood at
EUR 10.21 (EUR 7.32).
Other income contracted by 38.6% to EUR 271.2 million
(EUR 441.4 million). This was due to a decline in the ba-
lance of exchange gains and losses to EUR -77.5 million
(EUR 149.1 million). This effect was, however, partially
opposed by stronger income of EUR 386.7 million
(EUR 342.4 million) from treaties recognised according to the
deposit accounting method.
Slowdown in most regions in the second half of the year
Global economy recovers after pandemic-induced slump in the previous year
•
Macroeconomic climate and industry-specific environment
Report on economic position
Combined management report
Hannover Re | Annual Report 2021
30
In organisational terms, the exploration of market trends and
development of innovative products at Hannover Re are tasks
assigned to the individual market units. In addition, business
opportunities and innovations that cut across markets and
segments are coordinated by the "Group Performance & Strat-
egy Development" team and pursued by means of inter-
disciplinary projects in which various market and service
units participate.
Reinsurance business is founded on the comprehensive un-
derstanding and active management of risks. Our specialists
therefore continuously analyse known risks with an eye to
changes in their structure and probability of occurrence,
while at the same time focusing on the early detection of new-
ly emerging risks and working to provide our clients with ap-
propriate solutions tailored to their needs. This has signifi-
cantly supported growth over the past five years, especially in
structured reinsurance. Above and beyond this, Hannover Re
makes systematic efforts to identify new business opportuni-
ties in order to achieve sustainable growth and strengthen the
profitable development of the company.
Not only that, through our active involvement and the provi-
sion of financial assistance we support scientific initiatives
geared to developing products, solutions or markets that will
be crucial success factors going forward in the viability of any
reinsurance undertaking. In recent years, for example, we
have launched and held two ideas competitions in which we
opened up new business opportunities on both the primary
and reinsurance side. In addition, we work for and with our
customers to develop fresh business approaches and sales
channels and we make our proprietary IT applications availa-
ble for risk assessment in the underwriting process. Another
example of Hannover Re's development activities is our own
internal model for risk management under Solvency II that
caters to the requirements of various stakeholders (regula-
tors, rating agencies, capital providers) and was one of the
first in Europe to be approved by the national financial regu-
lator (Federal Financial Supervisory Authority = BaFin).
By way of example, our move to give capital market players
direct access to insurance risks as far back as the mid-1990s
through our "K" transactions puts us among the industry pio-
neers. The intervening years have seen the subsequent evolu-
tion of a market for so-called insurance-linked securities,
which is one of the fastest growing markets in the insurance
sector.
In the context of our innovation activities we continuously de-
velop products and solutions that deliver value added both for
Hannover Re and for our clients. Our innovation and digitali-
sation initiatives are enshrined in our Group strategy.
Research and development
Combined management report
Hannover Re | Annual Report 2021
29
The key indicators from the target matrix are integrated
into the individual agreements on objectives with managers.
When it comes to the definition of objectives, the participants
take into account not only standardised financial indicators
but also non-financial variables derived from the strategic
parameters.
Management by Objectives
A number of IFRS-based financial performance indicators are
also embedded in our strategic system of targets and coordi-
nated with our parameters for value creation derived from the
internal capital model. We use these indicators for operation-
al management within the year, in part because they are
available promptly and also because they already provide ini-
tial pointers as to whether we are likely to achieve our high-
er-order strategic objectives. These are for both business
groups the growth in gross premium, for property and
casualty reinsurance the combined ratio, for life and health
reinsurance the EBIT growth and for the Group as a whole the
return on investment. Non-financial performance indicators,
on the other hand, are not used for operational management
within the year.
Operational management system
The close interlinking of our internal capital model with the
capital allocation and value-based management helps us to
fulfil the requirements of the Solvency II use test.
53.9
Hannover Re | Annual Report 2021
27,762
es and the kinks in the supply chain are ironed out again, it is
conceivable that inflation may fade and secondary effects
such as wage pressures can be curbed. Even after some
potential easing, we nevertheless anticipate a slightly higher
level of inflation overall compared to the past decade.
83.7%
≥ 5%7
EBIT growth
reinsurance
17.5%
20.4%
15.8%
16.3%
≥ 5% 6
Gross premium growth
Property & Casualty
10.7%
242.8%
13.3%
250.7%
235.2%
243.1%
-36.0%
≥ 200%
-2.8%
Combined ratio
Combined management report
EBIT growth
≥ 3% 6
Gross premium growth
4.4%
0.1%
0.9%
11.9%
≥ 2%
XROCA 4,8
99.1%
98.2%
101.6%
97.7%
≤ 96%
4.6%
Solvency ratio 4,5
Life & Health
reinsurance
10.8%
•
Business development
Hannover Re | Annual Report 2021
34
The issue of digitalisation was once again of special signifi-
cance to the (re)insurance industry in the year under review.
The pandemic has sharply accelerated the pace of the digital
transformation, particularly due to the deep inroads made
into public life around the world as part of efforts to slow the
spread of the virus and the associated shift towards more
widespread working from home. This will have an enduring
effect on the industry, including through the growing adop-
tion of hybrid forms of work and communication, in the de-
sign of digital insurance solutions and in increasing cross-sec-
tor partnerships. Technological progress is now so advanced
that computer systems are able to analyse enormous quanti-
ties of data and provide ever more useful support in many
areas of work and life. At the same time, the risks posed by
cybercrime must not be underestimated.
closure standards for reporting on sustainability matters.
All in all, the issue of sustainability has increasingly moved
front and centre for political institutions and corporations in
recent years. The topic attracted greater attention in Europe
with the unveiling of the Green Deal by the European Com-
mission in December 2019. The primary objective of the
Green Deal is to establish Europe as the world's first cli-
mate-neutral continent by 2050. This will involve a complete
transformation of the energy sector, industry, transportation
and agriculture in a shift away from fossil-based energy to-
wards sustainability and climate protection. Against this
backdrop, there were a number of regulatory developments
relating to sustainability in the year under review. Many of
them tie in with the European Commission's Green Deal, in-
cluding for example the aforementioned revision of the Sol-
vency II regime. The IFRS Foundation also announced the
creation of its International Sustainability Standards Board
(ISSB) in November at the UN Climate Change Conference in
Glasgow. It is intended that this will develop international dis-
33
Hannover Re | Annual Report 2021
In Europe the Solvency II prudential regime is currently un-
dergoing a multi-step review process. In September 2021 the
European Commission submitted extensive proposals for an
overhaul of EU insurance rules, which will now be considered
by the European Parliament and the European Council. The
main aim of the review is to enable insurance undertakings to
step up their long-term investment in the European Union's
recovery from the Covid-19 pandemic. The European Com-
mission would also like to make the (re)insurance industry
more resilient so that it is even better equipped to weather
future crises and hence better protect policyholders. As a fur-
ther step, it is envisaged that simplified and more proportion-
ate rules will be adopted for certain smaller insurance compa-
nies. At the same time, the commitment of insurers to greater
sustainability will be strengthened. Insurers are to be incenti-
vised to scale up long-term capital investment in the economy
and hence contribute to the Green Deal and the Capital Mar-
kets Union in their dual role as protector and investor.
The planned adoption of the new international accounting
standard IFRS 17 by the International Accounting Standards
Board (IASB) continued to be an important concern in the
year under review. With effect from 1 January 2023 IFRS 17
will replace the interim standard IFRS 4, which has been in
force since 2005, and is intended to make it easier to compare
insurers through a consistent basis for the recognition of in-
surance contracts. Application of the standard is mandatory
for the consolidated financial statements of capital-mar-
ket-oriented insurance companies. At the same time, the ap-
plication of the financial instruments standard IFRS 9 was
deferred, with the result that all affected insurers will be able
to apply IFRS 9 and IFRS 17 simultaneously from 2023 on-
wards.
Industry-specific environment
The euro largely gave back the previous year's gains against
the US dollar over the course of the year. It retreated from
USD 1.23 to USD 1.13. The euro similarly lost ground against
the British pound, falling from GBP 0.90 to GBP 0.84, and
also softened against the Australian dollar (from AUD 1.60
to AUD 1.56) and the Canadian dollar (from CAD 1.57 to
CAD 1.45).
The economy continued to enjoy strong support from central
banks in our main currency areas, which largely pressed
ahead with their expansionary interest rate policy adopted in
the prior year. Both the US Federal Reserve and the European
Central Bank left their key rates on the previous year's low
level. The Bank of England, on the other hand, was the first
major central bank to modestly increase its key lending rate
in December - primarily in response to inflationary tenden-
cies. The ECB - in common with the Fed and the Bank of
England continued its extensive asset purchase programme
for bonds issued by governments and corporate entities in
order to support them in this time of crisis. Overall, then, the
policies pursued by central banks in our main currency areas
were essentially consistent, supplemented by significant fis-
cal interventions. We view these worldwide interventions by
governments and central banks with their enormous money
supply as a not inconsiderable challenge because in some
ways they divorce the financial world from the natural, recip-
rocal control mechanisms of the financial markets and it is
unclear to what extent the current or future valuation levels
are supported by fundamentals.
8.2%
Group gross premium grows by 12.1%
.
For the international (re)insurance industry, 2021 turned out
to be another challenging year. The Covid-19 pandemic fea-
tured particularly prominently for the second year in succes-
sion. Once again, business operations were extensively con-
ducted through home-based working as a means to contain
the pandemic. Only limited business travel was possible. In
addition, low interest rates, sharply higher inflation in some
cases and significant losses from natural disasters - such as
the severe floods in Europe and Hurricane Ida in the United
States took a toll on the results posted by insurers and rein-
surers. While the investment climate remained challenging, it
was nevertheless considerably more stable compared to the
turmoil of 2020.
Management system
9
900 bps above
Return on equity 3
02019-20212
2019
Target attainment
20201
2021
Group
Key data
Value-based management
Our integrated system of enterprise management constitutes
the basis for attainment of our strategic objectives. Located at
its core are, first and foremost, our profit and growth targets,
which are summarised for the Group and its business groups
in the so-called target matrix. In addition to traditional perfor-
mance indicators geared to the IFRS balance sheet, our sys-
tem of strategic targets also includes economic targets de-
Targets for 2021
Target attainment
risk-free
rived from our internal capital model approved by the
regulator and from the economic equity pursuant to Solvency
II reporting. The targets are regularly analysed and adjusted
in the context of the strategy review conducted at periodic
intervals. Given that reinsurance business is subject to cycli-
cal fluctuations, our primary focus is on medium- and long-
term attainment of the strategic targets across the cycle.
M 01
Business group
3,604
746
12,000
11,976
3,543
577
394
791
Gross premium by lines of business in 2021
4,544
651
14.5% Asia
17.1% Rest of Europe
M 07
9,000
355
482
896
667
346
527
2,926
823
2,607
6,000
802
726
673
3,728
10,711
559
18,000
United Kingdom
3,078
Overall assessment of the business position
The development of Hannover Re's business in 2021 was af-
fected by considerable losses from natural catastrophes and
the pandemic. Covid-19 continues to have substantial adverse
impacts on life in society and on the world economy. Corona-
virus infections are still claiming lives. We make the agreed
payments to our clients for deaths and illnesses. As a result,
we faced further significant strains from the pandemic in life
and health reinsurance in the financial year just ended, espe-
cially for deaths in the United States and South Africa.
In our Property & Casualty reinsurance business group, on the
other hand, we did not record any pandemic-related losses in
the 2021 financial year over and above the reserves estab-
lished in 2020. However, expenditures incurred here from
natural catastrophes and other large losses exceeded our ex-
pectations for the fifth year in a row. At the same time, inter-
est rates remained on a low level, while inflation rose - appre-
ciably in some cases. In response to these challenges, the
sustained improvement in prices and conditions seen in many
lines on both the insurance and reinsurance side continued.
The investment income generated by Hannover Re improved
sharply on the previous year. This was primarily due to earn-
ings booked from inflation-linked bonds and from alternative
investments, such as in the private equity segment.
Despite the protracted global crisis and the substantial pay-
ments made to our customers, we were able to deliver a
Group profit in line with our expectations.
The shareholders' equity of Hannover Re continued to grow
and constitutes the foundation for our superb positioning as
one of the largest and most financially robust reinsurers in
the world.
At the time of preparing the management report, it remains
the case that both the business position of the Group and its
financial strength can be assessed as very good. Within the
framework of our Group strategy we determine our necessary
equity resources according to the requirements of our inter-
nal capital model, solvency regulations, the expectations of
rating agencies for our target rating and the expectations of
our clients and shareholders.
Results of operations
In the following sections we discuss the development of the
financial year in our two strategic business groups, namely
Property & Casualty reinsurance and Life & Health reinsur-
ance, as well as the performance of our investments and the
financial position and assets of our Group.
Hannover Re | Annual Report 2021
37
Combined management report
Property & Casualty reinsurance at a glance
Gross premium in Property & Casualty reinsurance
in EUR million
21,000
15,000
39.4% North America
10.8%
19,224
1.7% Africa
9.2% Germany
3.7% Australia
843
3.6% Latin America
Geographical breakdown of gross premium in 2021
M 05
653
832
16,744
14,781
M 06
2,749
2,421
1,281
Interest in extended warranties and similar covers for end
consumers continued to grow in 2021. With this in mind, we
offer innovative reinsurance solutions to our cedants in auto-
mated form so as to tap into the available attractive margins.
Demand for catastrophe covers remained high and continued
to trend upwards on account of various losses in the region.
Movements in original rates again resulted in appreciably
more attractive margins in Chile and Brazil.
insurers and reinsurers alike made considerable adjust-
ments - especially in the assessment of political risks and
pricing for corresponding covers.
Combined management report
45
49
Hannover Re | Annual Report 2021
The Latin American region was again shaken by unrest in
multiple countries in 2021. In view of this elevated exposure,
In Latin America, too, Covid-19 heavily impacted the local
economies. It will take some time before the growth in gross
domestic product returns to pre-pandemic levels. At the same
time, the state of the economy also has direct implications for
the underlying growth in insured values. Nevertheless, posi-
tive tendencies can already be discerned in some countries
that point to concrete and profitable business opportunities.
8,100
(68%)
7,133
(67%)
6,000
(66%)
10,887
(65%)
6,000
12,683
13,486
(70%)
11,773
(70%)
10,472
(71%)
9,000
9,000
4,898
(33%)
5,857
(35%)
6,541
(34%)
14,781
16,744
M 09
In collaboration with the United Nations Development Pro-
gramme (UNDP), Global Parametrics and other market play-
ers, Hannover Re is working on concepts for the coverage of
natural catastrophe risks in Argentina and Colombia and has
positioned itself as a long-term term reinsurance partner for
public-private partnerships.
19,224
The premium volume in our Americas reporting category
again surged sharply in the year under review by 17.8% to
EUR 4,374.3 million (EUR 3,713.1 million). The combined ra-
tio of 107.3% was higher than in the previous year (107.8%),
principally due to losses from natural catastrophes. The
operating profit (EBIT) increased to EUR 161.9 million
(EUR 97.3 million).
The Asia-Pacific was the region with the strongest economic
growth in the world despite Covid-19 and is developing into
one of the largest insurance markets globally. This growth
opens up business opportunities, not least because the insur-
ance density is still lower than in more mature markets.
2018
2017
2021
2020
2019
2018
2017
0
0
3,000
3,000
(70%)
9,883
(67%)
8,214
(69%)
47.5% Property
7,481
Hannover Re | Annual Report 2021
46
46
Responsibility for Australia and New Zealand rests with our
branch in Sydney. A high frequency of catastrophe events to-
gether with considerable uncertainty around the pandemic
had led to substantial losses in the previous year, prompting
significant rate improvements on both the original and the
reinsurance market. The resulting growth impetus was sus-
tained in 2021 and we were able to expand our portfolio.
Large losses were on the low side in 2021, as reflected in a
pleasing underwriting result.
The situation facing our branch in India remains highly com-
petitive. We were nevertheless able to keep on growing in the
property insurance lines. The burden of losses and hence also
the result were, however, in line with our expectations.
The 2021 financial year in Southeast Asia was notable for vig-
orous growth and increased loss expenditure compared to
the previous year. Among other things, we incurred losses
in Thailand from business with a bearing on the pandemic.
Given the price adjustments and general improvements in
conditions anticipated for 2022, we consider ourselves well
placed to share further in the growth of the Southeast Asian
region moving forward.
In Korea we delivered on our customer-centric concept and
extended our position as a major market player. At the same
time, we have achieved broad portfolio diversification. Busi-
ness in Korea developed favourably.
Our branch in Malaysia is responsible for Japan, Korea and
Southeast Asia. We continued to grow our footprint in the
region during the year under review, including in Japan. Spe-
cial emphasis is put on customer-centric concepts as well as
on risk-oriented covers to support the expansion of the local
infrastructure. In Japan the expenditures on fire losses and
natural catastrophes remained within reasonable bounds in
the year under review, compared to the previous years which
in some instances had been very costly.
Thanks to rigorous controls, the Covid-19 pandemic affected
Greater China to only a very limited extent in the financial
year just ended. The insurance industry faced challenges,
however, due to regulatory changes as well as the establish-
ment of a new state-backed reinsurance company for agricul-
tural business. Aside from serious flooding in Henan Province
in July, no other appreciable insured catastrophe losses oc-
curred in China. All in all, the business developed profitably.
Our local branch positioned itself through (product) partner-
ships and expanded its portfolio.
Back in 2019 Hannover Re had already launched an Asia-Pa-
cific strategic initiative so as to leverage the region's growth
potential even more heavily. We attach special importance to
innovative and customer-centric concepts and to the expan-
sion of efficient local decision channels, prompting us for ex-
ample to relocate our Asian business in property and casualty
reinsurance previously written out of Hannover to Asia.
Hannover Re continued to expand its APAC footprint in 2021.
We assist our clients in this growth region with their develop-
ment as they face up to the challenges of the coming years
through concepts designed to reinforce their capital resourc-
es or, for example, by optimising the distribution and design
of their products.
Asia-Pacific
3,762
(31%)
3,230
(30%)
10,711
38
Aviation and Marine
Structured Reinsurance and
Insurance-Linked Securities
■ Facultative Reinsurance
Worldwide Markets
EMEA (including CIS)
APAC
■ Americas
Regional Markets
2021
2020
2019
2018
2017
0
2,174
2,381
3,168
3,713
4,374
4,746
1,064
12.0% Other
2,104
4,352
1,696
840
Agricultural Risks
Credit, Surety and
Political Risks
17.7% Liability
22.4% Motor
12,000
11,976
4,309
(29%)
(30%)
4,971
15,000
14,781
5,738
(30%)
16,744
18,000
19,224
21,000
in % and in EUR million
3,000
and direct business
M 08
3,876
(32%)
3,578
(33%)
10,711
12,000
11,976
15,000
18,000
21,000
treaties by volume
in % and in EUR million
Breakdown of proportional and non-proportional
Hannover Re | Annual Report 2021
47.9% Property
Breakdown into business written through brokers
The gross premium volume in our reporting category Europe,
Middle East and Africa rose by 9.1% to EUR 4,746.2 million
(EUR 4,352.2 million). The combined ratio improved slightly
to 101.3% (103.5%). The operating result (EBIT) amounted
to EUR 222.4 million (EUR 140.2 million).
23.6% Liability
54.1% Property
| Net Net expectation for major losses 1
875
2,649
M 11
1,250
956
1,100
975
2015
2016
2017
2018
2019
2020
2021
Natural catastrophes and other major losses in excess of EUR 10 million gross
5.10
Gross Change in
premium
2014
Gross EBIT 2021
2013
2012
559
714
724
573
825
825
825
662
578
478
670
690
627
625
560
426
500
1
0
Gross
gross
premium
2021 in
94.8%
299.6
91.6%
97.0%
97.3
163.5
107.8%
98.7%
Europe, Middle East and
Africa (including CIS countries)
4,746.2
+9.1%
4,352.2
222.4
101.3%
95.4%
140.2
103.5%
Worldwide Markets
Facultative Reinsurance
1,064.4
107.3%
161.9
3,713.1
2,104.3
+15.0%
premium
2020 in
in EUR
million
Combined
ratio 2021
Target
combined
EBIT 2020
EUR
million
relative
to
EUR
million
846
ratio
2021
previous
year
Regional Markets
M 12
Combined
ratio 2020
Americas
4,374.3 +17.8%
Asia-Pacific
2,420.7
in EUR
million
+18.8%
1,000
1,127
Net investment income
15.5
372.8
235.4
(223.5)
383.5
Net underwriting result²
9,158.7
10,804.2
12,797.6
14,205.4
+17.0%
16,623.9
Net premium earned
10,710.9
11,796.0
14,781.3
16,744.1
+14.8%
1,343.1
19,224.2
+36.0%
1,069.4
+76.1%
8.98
Earnings per share in EUR
837.3
929.1
871.7
614.8
+76.1%
1,082.4
Group net income
1,120.2
1,322.6
1,285.8
823.0
+83.7%
1,512.3
Operating result (EBIT)
1,209.3
1,035.1
987.5
Gross written premium
year
in EUR million
2
Including interest on funds withheld and contract deposits
3
Operating result (EBIT)/net premium earned
Hannover Re | Annual Report 2021
41
11
Combined management report
Property & Casualty reinsurance: Major loss trend¹
in EUR million
3,000
2,500
2,000
1,500
2,127
1,790
1,722
1,595
1,497
1 Restated pursuant to IAS 8
99.8%
96.5%
98.2%
2017
2018
7.70
6.94
35.7% Liability
EBIT margin³
9.1%
5.8%
10.0%
850
12.2%
Retention
90.1%
90.3%
90.3%
90.7%
89.7%
Combined ratio 2
97.7%
101.6%
12.2%
896.2
Property & Casualty reinsurance: Key figures for individual markets and lines in 2021
92.3%
largely met their budgets. The loss ratios were exceptionally
pleasing. Compass Insure, the primary insurer belonging to
our subsidiary in South Africa, posted a gross loss ratio of
52%.
With effect from 1 January 2021 we have operated in South
Africa under the name Hannover Re South Africa as well as
with two subsidiaries Compass Insure and the investment
company Lireas
that hold our shares in MGAs and in-
surtechs.
-
-
Property & Casualty reinsurance:
Gross premium in Europe, the Middle East and Africa
(including CIS countries) by lines of business in %
9.8% Other
M 13
Inflation surged sharply higher in 2021 in North America, as
in other regions. This added to the pricing pressure in both
the property and liability lines.
The financial year was also impacted by various large losses.
Particularly costly events were winter storm Uri, which
caused considerable losses on the insurance and reinsurance
side, and hurricane Ida, which took a toll through wind and
flood damage on the East Coast and especially in the region
around New York City. Further windstorm events were also
recorded. While the wildfires in the western states of the US
began very early in 2021, they did not ultimately lead to any
significant insured losses. Taken together, these various loss
events meant that we were unable to achieve our targeted
combined ratio of around 95% for the North American
market.
19.0% Motor
20201
+/-
previous
2021
144.0
M 10
Key figures for Property & Casualty reinsurance
Hannover Re | Annual Report 2021
40
Hannover Re | Annual Report 2021
44
We generate a large part of our property and casualty reinsur-
ance business in South Africa through managing general
agents (MGAs) in which we hold shares. These agencies
adapted very well to the difficult conditions in 2021 and
The economy in South Africa unfortunately continues to
suffer under the effects of Covid-19. Even though some sec-
tors - most notably commodities - developed favourably, un-
employment kept on rising. The insurance industry is still
busy dealing with the settlement of Covid-19-related business
interruption claims from the tourism sector. Now that the le-
gal position has been clarified in favour of the insureds, the
insurers are making efforts to settle – but loss adjustment bot-
tlenecks and the sluggish delivery of information by insureds
is making the settlement process difficult. The loss reserves
that we had set aside in the previous year are currently prov-
ing to be adequate, and we therefore did not face any finan-
cial impacts from the business interruption losses in the year
under review.
On the whole, we were again satisfied with the development
of premiums and rates in Continental European markets in
2021. Demand for high-quality reinsurance capacity was par-
ticularly evident this year, enabling us to further expand our
position in the market.
Responsibility for the German market within the Hannover
Re Group is assigned to our subsidiary E+S Rückversicherung
AG. As the dedicated "reinsurer for Germany", E+S Rück is a
sought-after partner thanks to its very good rating and the
continuity of its business relationships, and it is one of the
market leaders in property and casualty reinsurance with a
share of around 17% in its domestic market.
Business in Germany was heavily shaped by natural catastro-
phe losses in 2021. The disastrous flooding in July caused by
low-pressure area Bernd alone resulted in considerable in-
sured losses. Further hail and heavy rainfall events came on
top of this, leading overall to an extreme loss burden from
natural catastrophes in Germany.
The continuing pandemic situation in 2021 and the steps tak-
en to contain it left a mark on the insurance industry in com-
mon with many other sectors. Supply chain disruptions, for
example, impacted the industrial segment and indirectly also
motor insurance business owing to a decline in new vehicle
registrations. Rising inflation, especially as it affects con-
struction costs, also led to an increase in claims expenditures.
Pandemic-related losses in business closure insurance, on
the other hand, were barely a factor in 2021 compared to the
previous year.
-
-
Premium growth in the German primary insurance market
was around 2.2% in 2021 compared to the previous year. The
motor line saw only minimal growth, in part against the back-
drop of the reduced traffic volume overall. On the other hand,
the high-volume property insurance lines namely home-
owners' insurance and industrial lines - continued to deliver
above-average premium growth – albeit short of the previous
year's level. As a result, the combined ratio on the market is
expected to be around 102% for 2021. This is influenced pri-
marily by the exceptionally high combined ratio in the prop-
erty line of roughly 130%, which was heavily impacted not
only by the catastrophe losses but also by an elevated fre-
quency of large fire losses in the industrial segment.
In motor insurance, the claims side was still heavily influ-
enced by reduced mobility. The number of accident claims
was thus well below the level of 2019 and even slightly lower
than in 2020. At the same time, the costs of spare parts and
repairs continued to rise. Bearing in mind the hail and flood
events, the results generated in the motor line in the year
under review therefore took a significant turn for the worse
compared to the previous year. All in all, though, E+S Rück
was still able to benefit from the comparatively moderate
claims situation on the motor insurance market.
Hannover Re | Annual Report 2021
40
43
In the cyber line, progressive digitalisation and sustained
growth combined with increasing cyber attacks are leading to
greater risk awareness and adjustments in conditions. Silent
cyber risks, i. e. cyber exposures from insurance contracts
that do not primarily cover this risk, were more heavily re-
stricted market-wide with an eye to potential accumulation
scenarios and in many instances they were excluded.
Insurers in the United Kingdom, Ireland and the London
Market secured further rate increases in the year under re-
view. Although these were less marked than in the previous
year, sometimes appreciable increases were pushed through
in specific lines. Cyber covers, in particular, as well as some
liability lines benefited from the state of the market as a con-
sequence of adverse claims trends in past years. In property
insurance, on the other hand, only moderate rate gains were
recorded. Our customers with international portfolios were
particularly hard hit by large loss events such as the frost
damage in Texas, hurricane Ida and the floods in Europe.
With this in mind, further price increases in property insur-
ance are to be anticipated.
Compared to the previous year, however, belated notifica-
tions of Covid-19-related claims were few and far between.
Motor business in the UK benefited from a reduced volume of
traffic during the strict lockdowns. In view of the sharply low-
er number of claims, our customers passed on price reduc-
tions to their insureds.
Lloyd's pressed ahead with the initiative to improve market
rates and conditions in 2021, causing capacity shortages on
the market to continue. At the same time, the number of new
syndicates permitted by Lloyd's to commence business activ-
ities increased significantly. These new market players will
seek to benefit from the sizeable price increases in specific
lines and grow their business. It remains to be seen whether
this will put the brakes on rate growth in the market.
Substantial rate increases were recorded on the reinsurance
side in liability business and for business interruption covers.
Price gains driven by worldwide losses from natural perils in
past years were given added momentum by the latest major
loss events. As a further factor, there were indications of a
contraction in the risk appetite on the market and among in-
vestors in insurance-linked securities. In cyber reinsurance,
which for the most part we write on a proportional basis, we
benefited from the appreciable price increases booked by our
customers.
In the year under review, we were able to support our clients
across all lines with a consistent risk appetite. Our portfolio
continued to grow in 2021 on the back of rate increases in the
original market, which make themselves felt in our propor-
tional business, and price rises in the non-proportional book.
In the Middle East we conduct both traditional reinsurance
and business in accordance with Islamic law, known as re-
takaful. The latter is written not only in the Middle East and
North Africa but also in Southeast Asia, thereby supporting
the strategic growth initiative launched by Hannover Re in
Asia. In the financial year just ended a modest recovery from
the impacts of the pandemic and a partial return to normal
could be observed on Middle Eastern markets. After the price
increases and improvements in conditions seen in the previ-
ous year, prices on the reinsurance market tended to remain
stable.
In the 2021 financial year coming on top of Covid-19 -
South Africa suffered unrest in July. The imprisonment of
ex-president Jacob Zuma triggered a wave of violence, de-
struction and looting in the province of KwaZulu-Natal which
spread as far as Gauteng province, the economic heart of
South Africa. The resulting losses are mostly covered by the
state-owned monopoly insurer Sasria, in whose reinsurance
we have participated for many years.
Natural perils covers are still insufficiently widespread in
some regions, and this issue took on added urgency in con-
nection with the major flash flooding in July. This prompted
the German Insurance Association (GDV) to put forward a
proposal for improving insurance density, which E+S Rück
supports.
In Northern Europe we further improved the quality of our
portfolio and were able to increase the rates under loss-af-
fected programmes. Hannover Re particularly benefits here
from its local presence in the market.
On the following pages we report in detail on developments
in our Property & Casualty reinsurance business group. This is
split into a number of reporting categories, sorted according
to regional markets and worldwide markets.
The underwriting result including interest and expenses on
funds withheld and contract deposits stood at EUR 383.5 mil-
lion (EUR -223.5 million). The combined ratio improved to
97.7% (101.6%).
Property & Casualty reinsurance
direct business
business written through brokers
non-proportional
proportional
2021
2020
2019
The treaty renewals for 2021 got off to a thoroughly satisfac-
tory start for Hannover Re. We were able to secure improve-
ments in prices and conditions in all lines. This trend contin-
ued over the course of the financial year, even though it
tended to soften slightly. Exceptions here were the profes-
sional indemnity lines and cyber covers, where we booked
consistent price increases and improvements in conditions
throughout the year.
Property & Casualty reinsurance:
Gross premium in the Americas by lines of business
in %
9.0% Motor
M 14
1.2% Other
Americas
We combine our business in North and Latin America in the
Americas reporting category.
North America is the largest insurance market in the world.
Our business here is written largely through brokers.
The economic landscape in North America was once again
dominated by Covid-19 in 2021. The legal disputes surround-
ing business interruption losses connected with the pandem-
ic were mostly decided by the courts in favour of the insurers.
The US economy proved to be rather resilient on the whole
despite Covid-19. The premium volume in primary insurance
therefore increased and hence the basis for reinsurance also
expanded somewhat. Furthermore, insurers were able to
push through additional rate increases, which reflected a cer-
tain degree of uncertainty in the markets.
•
Gross premium grows by 14.8%
•
Continued improvement in prices and conditions
The largest individual losses for net account were hurricane
Ida at EUR 304.9 million, the storm damage connected with
low-pressure area Bernd in an amount of EUR 208.4 million,
the extreme cold snap in the US in February at a net cost of
EUR 156.0 million and unrest in South Africa to the tune of
EUR 100.1 million. We generally consider events for which
we expect gross loss payments of more than EUR 10 million
to be major losses.
Major losses in the 2021 financial year exceeded our ex-
pectations for the fifth consecutive year. In terms of large
loss expenditure, heavy strains were incurred primarily
in the third quarter from flood damage in Europe, storm
damage in the United States and unrest in South Africa. Our
net burden of major losses added up to EUR 1,250.2 million
(EUR 1,594.9 million). This was higher than our budgeted ex-
pectation of EUR 1,100 million.
adjusted for exchange rate effects, growth would have
amounted to 18.4%.
earned grew by 17.0% to EUR 16.6 billion (EUR 14.2 billion);
Gross written premium in the Property & Casualty reinsurance
business group rose by 14.8% to EUR 19.2 billion (previous
year: EUR 16.7 billion). At constant exchange rates the in-
crease would have been 16.3%. The level of retained premi-
um edged slightly lower to 90.1% (90.3%). Net premium
ance.
In natural catastrophe business we continued to pursue our
profit-oriented underwriting policy. Our risk appetite for the
coverage of natural catastrophes grew at a slower pace rela-
tive to the overall growth in property and casualty reinsur-
This positive trend continued in the 1 June and 1 July rounds
of renewals, when parts of the North American portfolio, nat-
ural catastrophe risks and some risks in credit and surety re-
insurance were renewed. The main renewal season in Aus-
tralia and New Zealand also took place at this time. We
boosted the premium volume by 14.7%, while the average
price increase came to 3.2%. In general terms, it was particu-
larly loss-affected programmes or regions that saw some-
times very appreciable premium increases.
In the 1 April treaty renewals we traditionally renegotiate our
business in Japan and – albeit on a smaller scale - in Austral-
ia, New Zealand, the other Asian markets and North America.
We were able to grow the premium volume here by 7.4% and
increase prices by 5.0%.
The investment income booked for the Property & Casualty
reinsurance business group surged by 36.0% to EUR 1,343.1
million (EUR 987.5 million). The operating profit (EBIT)
soared by 83.7% to EUR 1,512.3 million (EUR 823.0 million).
The contribution made by property and casualty reinsurance
to Group net income improved by 76.1% to EUR 1,082.4 mil-
lion (EUR 614.8 million).
In the main property and casualty reinsurance renewals as at
1 January 2021 we saw a continuation of the previous year's
pricing momentum and further pleasing growth in our re-
newed business at significantly improved prices and condi-
tions. On 1 January 2021 67% of our portfolio in traditional
property and casualty reinsurance (excluding facultative
business, ILS business and structured reinsurance) was up
for renewal. We boosted the premium volume here by 8.5%.
The average price increase was 5.5%.
39
Hannover Re | Annual Report 2021
The various rounds of treaty renewals in property and casualty
reinsurance during the year consequently passed off favoura-
bly for Hannover Re.
The profitability of the underwriting results therefore re-
mained our highest priority. The improvement in prices and
conditions in many regions and lines on both the primary and
reinsurance side continued. Further adjustments were need-
ed to secure the industry's risk-carrying ability for the long
term. In addition, insurers are increasingly looking for
high-quality reinsurance protection and tailored solutions de-
signed to deliver solvency relief.
inflation rates also rose - sharply in some areas - over the
course of the year.
Global markets for property and casualty reinsurance faced a
range of challenges in the financial year just ended. The pan-
demic continued to impact life in society and the economic
landscape. Overall, however, in the 2021 financial year we did
not incur any further pandemic-related strains for our ac-
count in our Property & Casualty reinsurance business group
beyond the losses reported in 2020. On the other hand, large
loss expenditure clearly showed the effects of natural disas-
ters, most notably flood damage in Europe and storm damage
in the United States. This was especially true of the third
quarter. While the low interest rate environment persisted,
Accounting for 69% of the Group's gross premium, Pro-
perty & Casualty reinsurance is Hannover Re's largest busi-
ness group.
• Stable net reserves overall for the Covid-19 pandemic
Combined ratio improves to 97.7%
Operating profit up by 83.7%
Large loss expenditure higher than budgeted after catastrophic flooding in Europe and
hurricane Ida
Combined management report
Economic growth in the markets of Central and Eastern Eu-
rope was slowed by the pandemic. Our premiums held stable
while at the same time the premium quality improved. In this
region we incurred numerous frequency losses in natural ca-
tastrophe and fire business. Prices consequently rose on the
reinsurance side. Even more appreciable increases are need-
ed, however. Premiums also have to be adjusted to better re-
flect the risks as part of the ongoing need for remediation in
industrial business.
7.23
In Italy, numerous bad weather events such as severe rainfall
in Sicily caused considerable damage in the year under re-
view and became a dominant issue in the renewal negotia-
tions as at 1 January 2022. In both the motor own damage
and fire lines this led to a need for adjustments on the insur-
ance and reinsurance side.
96.7%
98.7%
124.2
98.5%
Aviation and Marine
672.5
2019
+3.3%
651.0
239.3
157.9
95.0%
62.0%
Agricultural Risks
559.0
-14.3%
652.5
59.5
95.0%
92.9%
(17.0)
In Spain, natural catastrophes brought about a hardening of
reinsurance conditions over the year under review, although
the bulk of the losses were absorbed by the local state-owned
pool Consorcio.
235.7
3,542.8
69.8%
4,543.7
Although Western Europe, and here especially France, had
been hard hit by the pandemic in the previous year, the re-
serves set aside for losses were sufficient overall. In the 2021
financial year this region suffered an above-average number
of catastrophe losses, particularly effecting the agricultural
sector. In addition, the low-pressure area Bernd resulted in
considerable losses in the Netherlands and Belgium.
+28.3%
Europe, Middle East and Africa (including CIS countries)
In Continental Europe the situation in primary and reinsur-
ance business remained uneven overall. Surging inflation, a
persistent low interest rate level, claims from Covid-19 that
had still to be fully settled and an elevated loss frequency
from natural catastrophes led to further price improvements
for Hannover Re. This also had positive implications for the
quality of the treaties.
Regional markets
Combined management report
Hannover Re | Annual Report 2021
42
(103.0)
94.5%
79.9%
227.7
119.8%
Structured Reinsurance and
+1.4%
843.3
Political Risks
Credit, Surety and
106.3%
96.5%
182.1
88.2%
832.0
Insurance-Linked Securities
1,650
1,712
1,673
1,192
290
4,000
364
400
326
692
1,374
705
375
763
849
840
600
1,132
6,000
883
354
963
196
1,465
1,043
1,483
Whereas 2020 had been shaped primarily by pandemic-relat-
ed losses, natural catastrophe and human-caused losses were
increasingly evident again in 2021. Sizeable losses that im-
pacted the result in facultative reinsurance included those
resulting from winter storm Uri, the severe flooding in Europe
caused by low-pressure area Bernd and hurricane Ida. On the
other hand, no significant additional strains from the pan-
demic were observed in 2021, and hence there was no need
to further strengthen the reserves established in the previous
year.
1,657
Property & Casualty reinsurance:
Hannover Re has enshrined sustainability goals as part of its
Group strategy and implements appropriate measures. In re-
cent years, for example, we have taken a very conservative
approach to the coverage of thermal coal and oilsands risks
and from 2020 onwards we have no longer written any new
business in these areas. Not only that, we included the sus-
tainability issues of human rights and biodiversity in our re-
view processes. If we identify violations of internationally
recognised conventions, we decline the business in question.
Despite the increased number of loss events, facultative rein-
surance can look back on a successful 2021 financial year.
The market environment again opened up attractive business
and growth opportunities that we acted on in keeping with
our technical underwriting approach and risk appetite. The
greater decentralisation of our underwriting activities has
strengthened our customer relationships. Hannover Re is in-
creasingly and actively sought after as a reinsurance partner.
663
Demand for facultative reinsurance solutions stabilised on a
high level in the year under review. Customers continued to
attach importance to obtaining coverage for their facultative
reinsurance needs from financially robust reinsurers. This de-
velopment could be observed globally and enabled us to gen-
erate further substantial growth on the back of 2019 and
2020.
The tendencies towards market hardening that began in 2019
were sustained in the 2021 financial year. We saw capacity
reductions on the primary insurance side and improvements
in rates and conditions across virtually all lines and regions.
In contrast to obligatory reinsurance, we write primarily indi-
vidual risks in facultative reinsurance. The general frame-
work conditions for both types of reinsurance in the various
markets are extensively correlated.
Facultative Reinsurance
The gross premium volume in the Structured Reinsurance
and ILS reporting category increased by 28.3% to
EUR 4,543.7 million (EUR 3,542.8 million). The combined
ratio was 96.7% (98.5%). The operating profit (EBIT) climbed
to EUR 157.9 million (EUR 124.2 million).
4.2% Liability
45.1% Property
1.8% Other
1,489
M 16
Gross premium in Structured Reinsurance and
Insurance-Linked Securities by lines of business in %
Property & Casualty reinsurance:
The important role played by the capital market in our pur-
chasing of retrocession protection was unchanged. For exam-
ple, we have placed a protection cover for Hannover Re
known as the "K quota share” – a modelled quota share ces-
sion consisting of non-proportional reinsurance treaties in
the property, catastrophe, aviation and marine (including off-
shore) lines inter alia on the ILS market since as long ago as
1994. In addition to the K quota share, we made use of the ILS
market for other protection covers as well and were able over-
all to purchase the desired risk capacity despite the challeng-
ing environment.
47
Hannover Re | Annual Report 2021
Collateralised reinsurance, which remains by far our largest
segment in the ILS sector, showed pleasing growth in the
year under review.
0
≥ 250
200
2,000
≥ 220
1,518
48.9% Motor
198
245
457
M 17
1.5% Other
18.5% Liability
68.7% Property
The gross premium volume in our reporting category Facul-
tative Reinsurance grew by 18.8% to EUR 1,064.4 million
(EUR 896.2 million). The combined ratio stood at 92.3%
(88.2%). The operating profit (EBIT) amounted to EUR 144.0
million (EUR 182.1 million).
48
Hannover Re | Annual Report 2021
Credit, Surety and Political Risks
11.3% Motor
Loss ratios were lower in credit and surety insurance as well
as in the political risks segment despite the global economic
challenges. This reflects wide-ranging government support
programmes on the fiscal and monetary side, which were
launched in 2020 and continued in 2021. The state guarantee
schemes also rolled out in 2020 in favour of mostly European
credit insurance business expired at the end of June 2021,
although the loss-mitigating effects of the guarantees contin-
ued to be felt for a few months. The elimination of premium
cessions to the government in connection with the furnished
guarantees at the end of June - combined with a general eco-
nomic revival – led to a visible rise in premium volumes. This
trend was supported by rising demand in view of the contin-
ued uncertainties in the economic landscape. The increased
price level on the insurance and reinsurance side was for the
most part maintained.
-
The gross premium for the Credit, Surety and Political Risks
reporting category increased in the financial year by 1.4% to
EUR 843.3 million (EUR 832.0 million). Given that the loss
experience trended lower in the reporting period, this
prompted us to release reserves in some cases that had been
set aside in the previous year. The combined ratio amounted
to 79.9% (119.8%). The operating profit (EBIT) came in at
EUR 227.7 million (EUR -103.0 million).
Aviation and Marine
The positive rate movements on the primary market for avia-
tion covers continued in 2021, albeit on a significantly lower
level. We expect to see a stabilisation in rates for the airline
segment, which in large part is renewed in December. This is
due to the recent resurgence in the risk appetite on the mar-
ket as well as appreciably reduced exposures compared to
the state of the market before the pandemic. In the general
aviation segment, on the other hand, we still recorded rate
increases. These were, however, smaller than in the previous
year.
The picture was similar in product liability business, although
developments in this part of the market were generally some-
what less volatile. In the space segment we observed further
rate increases for both launch and in-orbit policies. Overall,
though, 2021 saw a comparatively low number of launches,
with corresponding implications for the absolute market pre-
mium.
The trend reversal that had already set in over the past two
years on the reinsurance side was sustained in 2021. The
pace slowed over the year, however, owing to renewed growth
in the risk appetite and new capacities. At the beginning of
the year, for example, we were still able to push through sig-
nificant price increases for non-proportional business, where-
as the risk-adjusted rate increases of late only barely reached
the double-digit percentages. In the proportional segment,
we were able to renew a large part of our portfolio based on
the improvements in conditions obtained in prior years.
The upward trajectory in the marine market that has been
clearly evident since 2020 was initially sustained in the year
under review, only to stabilise in the second half of the year.
This was especially true of cargo insurance but also applied
to marine hull and specie insurance. Heavy competition and
excess capacities to some extent put the brakes on ongoing
remediation efforts by insurers. In all the various rounds of
treaty renewals we were nevertheless able to secure modest
improvements, both in terms of pricing and treaty conditions.
Special mention should be made of the marked price increas-
es in longer-tail liability lines such as protection & indemnity
(PGI) insurance.
In 2021 the volume of new exposures that we transferred to
the capital market in the form of catastrophe bonds was in the
region of USD 2.7 billion split into eleven transactions. This
substantially exceeded past numbers both in terms of the vol-
ume and number of transactions. The largest transactions
were catastrophe bonds with volumes of USD 575 million for
the Federal Emergency Management Agency to protect
against flooding in the US and USD 500 million for the Texas
Windstorm Insurance Association as coverage against risks
from named storms and tornados.
Gross premium in Facultative Reinsurance by lines
of business in %
Hannover Re leverages the entire spectrum of opportunities
offered by the ILS market. On the one hand, we take out rein-
surance with ILS investors, while at the same time we transfer
our customers' risks to the capital market as a service. This is
done in the form of catastrophe bonds or through collateral-
ised reinsurance, under which our partners on the investment
side are primarily specialised ILS funds. We also invest our-
selves in catastrophe bonds.
-
Combined management report
Property & Casualty reinsurance:
Gross premium in Asia-Pacific by lines of business
in %
12.7% Other
27.8% Motor
12.6% Liability
M 15
46.9% Property
The gross premium volume in the Asia-Pacific region grew
by 15.0% to EUR 2,420.7 million (EUR 2,104.3 million).
The combined ratio improved to 91.6% (98.7%). The
operating profit (EBIT) climbed to EUR 299.6 million
(EUR 163.5 million).
Worldwide markets
Structured Reinsurance and Insurance-Linked Securities
In the Structured Reinsurance and Insurance-Linked Secu-
rities reporting category we combine our business involving
tailor-made property and casualty reinsurance solutions and
insurance-linked securities (ILS).
In structured reinsurance we rank as one of the largest pro-
viders in the world. With our Advanced Solutions we offer our
clients support for their capital management as well as inno-
vative and bespoke reinsurance concepts. These provide sol-
vency relief and thus have a positive effect on the client's rat-
ing or protect against the strain of frequency losses.
Structured concepts also offer an alternative in cases where
traditional reinsurance capacity cannot be accessed to the full
extent.
Overall, structured reinsurance fared better than expected in
the 2021 financial year and the premium volume increased
appreciably. We were again able to grow our customer base
and also substantially increased the number of treaties. In to-
tal, more than half of our premium income derived from the
United States and roughly a third from Europe.
The purchasing habits of many customers have continued to
shift towards holistic reinsurance solutions. This trend
showed no signs of easing and resulted in more and more
clients seeking complex structured contractual arrange-
ments. Given that this business is to some extent based on
large-volume transactions, premium income in structured re-
insurance can generally fluctuate sharply.
The market for insurance-linked securities (ILS) was rough-
ly stable on the level of the previous year in 2021 with a ca-
pacity of around USD 95 billion. The further hardening of the
rate level as well as the prospect of additional price increases
led to cash inflows, while loss payments and dissatisfaction
with the general loss situation prompted outflows. A volume
of some USD 15 billion to USD 20 billion in trapped collateral
for claims that have still to be settled further reduced the
funds available for reinvestment. In addition, investors fo-
cused more heavily on natural catastrophe reinsurance on an
excess-of-loss basis and paid less attention to quota share
and aggregate covers than in previous years.
The worldwide volume of newly issued catastrophe bonds in-
creased again. At almost USD 14 billion, it was higher than
the level in the previous record year of 2020.
According to our estimates, roughly two-thirds of the ILS
market can be attributed to collateralised reinsurance, under
which insurers and investors conclude private risk transfer
agreements which are secured by collateral held in trust ac-
counts. We support these transactions as a so-called fronting
company.
Catastrophe bonds have been less impacted by losses in re-
cent years than collateralised reinsurance. For this reason,
catastrophe bonds looked somewhat more attractive than col-
lateralised reinsurance with an eye to risk considerations
although the relative proportions did not change.
After a significant but short slump in global trade due to pan-
demic restrictions, commercial shipping and the transport of
goods picked up sharply in 2021 while the cruise ship indus-
try continued to work towards a fresh start. The year under
review provided confirmation that insurers and reinsurers in
the marine market were less affected by direct pandemic loss-
es than other insurance lines.
997
In offshore energy business both the insurance and reinsur-
ance markets were stable with slightly higher prices. Losses
were once again moderate. Oil and gas prices surged appre-
ciably around the world in the year under review. Efforts to
explore and develop these resources were therefore stepped
up after years of stagnation, hence also giving rise to in-
creased insurance volumes and an easing in the pressure on
costs. Looking to the future, a significant shift in existing cus-
tomer portfolios towards alternative energies and away from
the traditional offshore industry is to be anticipated against
the backdrop of sustainability issues and climate protection
concerns. As one of the leading reinsurers in this line, we
44
1,000
8,538
8,000
7,815
8,026
295
238
778
in EUR million
800
7,200
244
442
202
203
424
241
236
7,081
Value of New Business (VNB) growth 1,2
M 18
10,000
49
Combined management report
shall continue to move forward together with our customers
along the path mapped out in 2021.
Aside from catastrophe losses caused by the low-pressure
area Bernd in Germany and hurricane Ida in the United
States, the losses incurred in the year under review were at-
tributable primarily to individual risks. They include a sunken
drilling rig in the waters off Malaysia, a container vessel
stranded in the Suez Canal and a cargo ship going down off
the coast of Sri Lanka. Among other events, mention should
be made of the unrest in South Africa and an oil spill off the
coast of California. As had already been the case in the previ-
ous year, we were again compelled to post additional reserves
for the P&I liability loss associated with a car carrier that
sized in 2019 off the coast of the US state of Georgia.
сар-
Based on our strong international positioning as one of the
leading reinsurers in the marine and offshore energy seg-
ment, we were able to cement and further expand existing
customer relationships. As in previous years, we systemati-
cally restructured or relinquished inadequate business and
wrote promising new business.
The premium volume for our Aviation and Marine reporting
category rose by 3.3% to EUR 672.5 million (EUR 651.0 mil-
lion). The combined ratio was 69.8% (62.0%). The operating
profit (EBIT) came in at EUR 239.3 million (EUR 235.7 mil-
lion).
Agricultural risks
In the year under review we continued to grow our position in
some markets for agricultural risks. Particularly in emerging
and developing countries, the growing need for agricultural
commodities and foodstuffs combined with the accumulation
of extreme weather events led to stronger demand for insur-
ance and reinsurance solutions. In this area Hannover Re of-
fers its customers both comprehensive traditional reinsur-
ance concepts and parametric covers that optimally
complement existing insurance solutions.
The increasing number of public-private partnerships, not
only in emerging and developing countries but also in more
advanced economies, presents new opportunities for our
company to write profitable agricultural business in markets
that have still to mature. Acceptance of drought insurance
products has continued to grow in recent years, not least due
to the increase in extremely dry years. Given that comprehen-
sive agricultural insurance is too expensive for many farmers,
parametric covers have become established as a prob-
lem-solving approach.
-
In addition, the increasingly widespread availability of new
technologies such as remote sensing by satellites - facili-
tates further expansion of the segment with innovative and
efficient insurance products. Our team specialising in in-
dex-based and parametric covers supports our customers
around the world not only with reinsurance but also in the
development and implementation of parametric coverage
concepts. Along with our technical know-how, we draw on
our growing network of insurtechs and partners and we offer
solution options that also extend beyond the bounds of tradi-
tional agricultural business.
In general terms, movements in rates and conditions in agri-
cultural business on both the primary and reinsurance side
were commensurate with the risk. Rates for catastrophe cov-
ers, such as for forest insurance, remained on a high level.
Altogether, the gross premium volume in the Agricultural
Risks reporting category fell by an appreciable 14.3% to EUR
559.0 million (EUR 652.5 million). One reason here was
the establishment of a new state-backed reinsurance firm
in China. The combined ratio was 95.0% (106.3%). The
operating profit (EBIT) increased to EUR 59.5 million
(EUR 17.0 million).
50
Hannover Re | Annual Report 2021
Life & Health reinsurance at a glance
Breakdown of gross premium by markets
in EUR million
Hannover Re | Annual Report 2021
The wave of insolvencies anticipated at year-end 2020 has so
far failed to materialise on any appreciable scale, enabling us
to reduce the corresponding reserve in the area of credit,
surety and political risks at the end of 2021 and reallocate
them to other segments – although we still have adequate
provision for catch-up effects on the insolvency front.
1,988
2,093
in EUR million
2021
M 23
Investment income
Impairments and depreciation totalling EUR 88.8 million
(EUR 129.4 million) were taken. Of this, an amount of EUR
24.9 million (EUR 32.3 million) was attributable to private eq-
uity. An impairment loss of EUR 24.8 million (EUR 19.0 mil-
lion) had to be recognised in our portfolio of real estate and
real estate funds. On the whole, the sectors hardest hit by the
pandemic did not play a significant role in our investment
portfolio. Write-downs of EUR 0.2 million (EUR 11.8 million)
were taken on other fixed-income securities. Depreciation on
directly held real estate was slightly higher at EUR 38.4 mil-
lion (EUR 36.6 million) due to the growth of the portfolio.
The income recognised from measurement at equity declined
to EUR 35.7 million (EUR 88.1 million), primarily reflecting
special income booked in the previous year associated with
measurement of one of our participating interests. Interest on
funds withheld and contract deposits increased to EUR 268.3
million (EUR 221.8 million).
Our real estate and real estate funds similarly contributed to
our result with slightly higher earnings.
Income from fixed-income securities reflected above all
sharply higher inflation expectations, leading to increased
amortisation amounts in our portfolio of inflation-linked
bonds. We also booked substantially higher distributions
from our investments in private equity.
Against the backdrop of the continued challenging state of
global financial markets, we are highly satisfied with the per-
formance of our investments. The ordinary investment in-
come excluding interest on funds withheld and contract de-
posits amounting to EUR 1,555.6 million as at 31 December
2021 came in significantly higher than in the previous year
(previous year: EUR 1,240.4 million) and was thus even
slightly ahead of our expectations.
Volume of assets under own management grows by 15% to EUR 56.2 billion
Return on investment surpasses target of more than 2.4% to reach 3.2%
Higher income from inflation-linked bonds and private equity
Very pleasing investment performance despite continued challenging market environment
•
Investments
Hannover Re | Annual Report 2021
54
In general terms, our customers continue to take a keen inter-
est in issues of digitalisation and innovation. Furthermore, we
are engaged in an intensive exchange with numerous start-
ups and primary insurers with an eye to the development of
innovative, digital coverage concepts. Our innovation plat-
form "hr equarium" enables our customers, on the one hand,
to access a wide range of insurance-specific products and
solutions. At the same time, it opens up access for insurtechs
and other start-ups to our global client network.
Under the heading of Underwriting Services we report on
the activities and services that we provide for our customers
above and beyond pure risk transfer. Our automated under-
writing systems under the "hr| ReFlex" and "hr Quirc"
brands and the associated process automation for our cus-
tomers are a major feature in this regard.
Ordinary investment income²
Underwriting Services
1,555.6
2019
273.7
329.6
-14.7%
281.0
Realised gains/losses
16.0
5.0
26.4
88.1
-59.4%
35.7
associated companies
Result from participations in
1,289.0
1,321.7
1,380.8
1,240.4
2017
2018
+/−
previous
year
+25.4%
127.7
The gross premium for our total mortality and morbidity port-
folio increased by 5.4% to EUR 5,715.4 million (EUR 5,421.2
million). The operating result (EBIT) for the Mortality and
Morbidity Solutions reporting category totalled EUR -376.2
million (EUR -108.6 million).
Pandemic-related losses were also reported in health busi-
ness, albeit on an appreciably lesser scale than under mortal-
ity covers. The underlying business developed in line with
expectations.
The operating result (EBIT) contracted by 43.2% to EUR
223.3 million (EUR 393.0 million). The contribution made by
life and health reinsurance to Group net income declined by
40.2% to EUR 196.6 million (EUR 328.9 million).
The investment income for the Life & Health reinsurance busi-
ness group fell by 13.9% to EUR 598.8 million (EUR 695.3
million). In the year under review we recognised positive in-
come of EUR 43.9 million from our extreme mortality cover,
tranches of which we have brought to the capital market reg-
ularly since 2013; this was recognised under the assets meas-
ured at fair value through profit or loss in the investments on
the life and health reinsurance side.
The result in life and health reinsurance was clearly impacted
by the aforementioned pandemic-related expenditures. The
underwriting result including interest and expenses on funds
withheld and contract deposits therefore declined to EUR
-594.5 million (EUR -467.2 million). Not included here are
large parts of the result in Financial Solutions business that
we disclose according to the deposit accounting method in
other income/expenses on account of the minimal risk trans-
fer. Consequently, no gross premium is booked for this busi-
ness either.
Gross written premium in the Life & Health reinsurance busi-
ness group climbed by 6.4% to EUR 8.5 billion (previous
year: EUR 8.0 billion); at constant exchange rates the increase
would have been 5.5%. The level of retained premium stood
at 88.2% (89.8%). Net premium earned increased by 5.1%
to EUR 7.5 billion (EUR 7.2 billion), corresponding to growth
of 4.4% adjusted for exchange rate effects.
Digital insurance solutions and automation are playing an in-
creasingly important role in virtually all market segments.
This is true not only of cooperation with start-ups but also of
joint projects conducted with primary insurers and other
cedants.
When it comes to solutions for the coverage of longevity risks,
stronger demand was again observed in other countries be-
yond the traditionally important UK market. The exacting
capital requirements placed on primary insurers and pension
funds in connection with such business are one of the driving
factors here.
Combined management report
Hannover Re | Annual Report 2021
662
52
2 Operating result (EBIT)/net premium earned
1 Restated pursuant to IAS 8
3.8%
4.3%
8.2%
5.5%
3.0%
EBIT margin²
1.43
91.7%
-
The gross premium for morbidity business grew by 4.7% to
EUR 2,497.2 million (EUR 2,385.5 million).
We provide below a more detailed discussion of develop-
ments in the individual reporting categories – Financial Solu-
tions, Longevity Solutions and Mortality and Morbidity Solu-
tions as well as an overview of the extensive support that we
provide as part of our Underwriting Services.
In the Financial Solutions reporting category, we offer our
customers bespoke reinsurance solutions designed to opti-
mise their solvency, liquidity and capital position. The gener-
ally good level of demand here is supported by the persistent
low interest rate environment. Our reinsurance solutions in
this segment are always tailored to the customer's specific
needs and hence highly diverse and individually structured.
Given that the customer's primary motivation here is not ex-
clusively to secure coverage for biometric risks, a hallmark of
such solutions is that they also seek to deliver financial and
regulatory benefits.
Within the Morbidity Solutions reporting category, we cover
business centred around the risk of deterioration in a per-
son's state of health due to disease, injury or infirmity. A hall-
mark of this business is the wide range of possible combina-
tions of different covered risks, including for example strict
(any occupation) disability, occupational disability and long-
term care insurance.
Morbidity Solutions
The gross premium in the Mortality Solutions reporting
category rose by 6.0% to EUR 3,218.2 million (EUR 3,035.7
million).
With regard to the management actions initiated some years
ago to improve the profitability of a large portfolio within our
book of legacy US mortality business, we were able to settle
one additional legal action through arbitration proceedings.
The Covid-19 pandemic and the large number of resulting
deaths continued to negatively affect results. Mortality covers
accounted for the bulk of pandemic losses in life and health
reinsurance. Along with the United States, Hannover Re's
largest single market, considerable losses were also incurred
in South Africa.
Mortality Solutions generate the lion's share of premium in-
come in our Life & Health reinsurance business group. We
provide reinsurance protection here for our customers against
the risk that their insureds do not live as long as anticipated
and hence the actual mortality negatively diverges from the
originally expected mortality.
Mortality Solutions
In the global (re)insurance industry it is standard practice for
mortality and morbidity risks to form a common element of
one and the same business relationship, and in some cases
both risks are even covered under one reinsurance treaty. In
our reporting we therefore consolidate the profit contribu-
tions of these two reporting categories, but nevertheless pro-
vide below a separate overview of significant developments in
the financial year just ended.
Mortality and Morbidity Solutions
The gross premium for the Longevity Solutions reporting cat-
egory rose by 11.9% to EUR 1,493.3 million (EUR 1,334.6
million). The operating result (EBIT) increased to EUR 183.5
million (EUR 77.2 million).
Overall, the market environment for longevity solutions con-
tinued to be intensely competitive. The volume of disposals
for sizeable blocks of pension obligations was smaller than in
the previous year. In a reflection of this, we saw an increased
number of smaller and mid-sized transactions as well as a
larger share of deferred annuities.
53
Hannover Re | Annual Report 2021
The United Kingdom remains the largest market for coverage
of longevity risks. In addition, growing demand continues to
be evident in other countries, such as Germany and the Neth-
erlands. The exacting capital requirements faced by primary
insurers and pension funds in connection with such business
are a driving force here.
-
In the Longevity Solutions reporting category, we group to-
gether all reinsurance business under which the primary risk
covered for our customers is the longevity risk. We develop
innovative annuity products, for example, that are tailored to
the individual needs of policyholders in various life situations.
The bulk of our longevity solutions consists of traditional an-
nuity policies, pensions blocks taken out for new business
and enhanced annuities under which pensioners with a
pre-existing condition are guaranteed a higher annuity pay-
ment for their remaining shortened life expectancy.
Longevity Solutions
Gross premium income in the Financial Solutions reporting
category climbed by 4.7% to EUR 1,329.5 million (EUR
1,270.4 million). The operating result (EBIT) fell by 2.0% to
EUR 416.0 million (EUR 424.5 million). This includes an EBIT
contribution of EUR 356.2 million (EUR 329.5 million) from
business with a reduced risk transfer, which we recognise in
other income/expenses owing to the reduced risk transfer
and for which no gross premium is booked.
The United States has traditionally been an exceptionally im-
portant insurance market for our financial solutions business
and in 2021 again played a considerable part in the total re-
sult. As in previous years, new business in Asia - and espe-
cially China - continued to develop favourably.
Financial Solutions
377.1
Appreciation
1.1
206
235
1,686
1,757
1,774
1,500
1
2,000
Development of investment income
in EUR million
on our inflation-linked bonds. Secondly, we received larger
distributions from our private equity investments and, fur-
thermore, net realised gains proved to be appreciably higher
than had been assumed at the beginning of the reporting
period on account of the aforementioned effects.
The investment income of EUR 1,943.0 million (EUR 1,685.5
million) was 15.3% higher than in the comparable period.
Income from assets under own management accounted for
EUR 1,674.8 million (EUR 1,463.7 million), producing an an-
nualised average return (including effects from ModCo) of
3.2%. The pleasing clear outperformance of our guidance of
more than 2.4% can be attributed, in the first place, to infla-
tion expectations, which turned out to be higher than antici-
pated. Consequently, we booked higher amortisation amounts
Altogether, the unrealised gains in our assets recognised at
fair value through profit or loss amounted to EUR 36.1 million
(EUR 64.0 million). Our extreme mortality cover, tranches of
which we have brought to the capital market regularly since
2013, is recognised under this item in a positive amount of
EUR 43.9 million (EUR 3.7 million).
Net realised gains on disposals totalled EUR 281.0 million
(EUR 329.6 million). The high level of hidden reserves due to
low interest rates made itself felt in our portfolio of fixed-in-
come securities, again benefiting the net realised gains. In
addition, we generated pleasing realised gains in connection
with the reorganisation of our high-yield portfolio. In the
United States and East Asia we also very successfully made
the most of conditions on real estate markets to dispose of
two large properties. The sale of some of our equity funds as
part of portfolio restructuring measures at the beginning of
the year was also a highly positive factor in our net realised
gains.
Combined management report
55
Hannover Re | Annual Report 2021
Portfolio measured at fair value through profit or loss and held for trading
4
3 Including depreciation/impairments on real estate
1,530
Excluding interest on funds withheld and contract deposits
208
M 24
Hannover Re | Annual Report 2021
56
| Other income from funds withheld and contract deposits
Restated pursuant to IAS 8
Investment income from assets under own management
2021
20201
2019
2018
2017
0
500
1,322
1,464
1,551
1,539
1,675
1,000
268
1,943
222
2
Restated pursuant to IAS 8
1
146.0
Investment expenses
38.6
31.2
72.9
64.0
-43.5%
36.1
financial instruments 4
Change in fair value of
71.9
52.7
80.6
129.4
-31.4%
88.8
Depreciation, amortisation, impairments 3
0.9
3.6
+13.2%
129.0
122.5
114.3
234.9
1,773.9
208.0
1,530.0
206.4
1,757.1
221.8
1,685.5
+15.3%
1,943.0
Total investment income
+21.0%
268.3
90.7%
funds withheld
1,539.0
1,322.0
1,550.6
1,463.7
+14.4%
1,674.8
under own management
Net investment income from assets
110.8
Net investment income from
1.54
3.91
89.5%
89.8%
895
1,330
1,270
1,274
1,276
1,257
100
1,335
2,000
1,493
200
3,260
3,040
3,200
4,000
3,036
245
3,218
276
928
300
981
2017
20201
2019
2018
223
393
570
Hannover Re | Annual Report 2021
Restated pursuant to IAS 8
1
1 Restated pursuant to IAS 8
2017
0
Morbidity
Mortality
Financial Solutions Longevity
2021
20201
2019
2018
0
1,956
400
2,301
2020
2019
2018
Africa
Rest of Europe
Asia
2021
20201
2019
1 Restated pursuant to IAS 8
Latin America Germany
Australia/New Zealand
North America United Kingdom
2017
2018
0
2,106
1,920
2,125
2021
Value of New Business (VNB) - Target 2016-2020
- Target since 2021
1 Based on Solvency II principles and pre-tax reporting
2,386
2,497
7,200
7,816
500
8,026
8,538
600
1,728
2021
6,000
8,000
10,000
in EUR million
in EUR million
by reporting categories
EBIT performance
M 20
Breakdown of gross written premium
2 This information has not been audited by the independent auditor
7,080
2017
M 19
51
336.3
+30.5%
438.7
Other income/expenses
210.7
216.9
255.7
254.1
+4.4%
265.2
Own administrative expenses
1,081.8
0.6
5,666.8
560.6
491.8
5,341.6
(50.8)
1,263.6
7,079.6
6,472.8
7,200.4
6,484.8
7,816.4
6,931.9
684.5
5,817.5
(10.8)
1,254.8
289.0
1,204.8
172.1
Operating result (EBIT)
88.2%
Retention
2.73
-40.2%
1.63
Earnings per share in EUR
172.6
185.9
471.6
328.9
-40.2%
196.6
Net income after tax
245.2
275.9
569.9
393.0
-43.2%
223.3
170.6
+4.9%
1,263.8
Commissions
20201
+/-
previous
2021
M 22
In general terms, global life and health reinsurance markets
remained intensely competitive in the 2021 financial year and
were shaped by a persistent low interest rate environment in
many regions. This had negative implications for the invest-
ment income generated by insurers and reinsurers. At the
same time, though, it opened up additional opportunities for
financially robust reinsurers such as Hannover Re - for exam-
ple in the area of financial solutions.
Leaving aside the losses due to the pandemic and the positive
one-off effects, the business developed in line with our expec-
tations.
A further positive special effect of EUR 121.9 million was re-
corded in business with longevity covers from the revaluation
of portfolios.
management.
funds withheld transferred to our investments under own
Key figures for Life & Health reinsurance
The pandemic-related expenditures were opposed by positive
one-time income from a restructuring measure in US mortal-
ity business amounting to EUR 131.7 million. In this context
collateral structures were partially liquidated and assets-side
Covid-19 remained a dominant issue in the market for life and
health reinsurance. The pandemic sadly continues to take a
heavy toll on human life and remains a challenge for medical
experts and society alike as new virus variants emerge and
spread. We make the agreed payments to our cedants for
deaths and illnesses, especially in the area of mortality covers.
Altogether, we faced pandemic-related strains of EUR 582.0
million in the 2021 financial year (previous year: EUR 261.1
million). The bulk of these were attributable to the United
States and South Africa.
Life & Health reinsurance is Hannover Re's second major
business group. It contributed a 31% share of our Group
gross premium in the year under review.
Positive one-time effects in the US mortality portfolio and in longevity business
Operating result down by 43.2%
Sustained customer interest particularly in financial solutions and longevity covers
Strains from the pandemic amount to EUR 582.0 million
Gross premium up by 6.4%
•
Life & Health reinsurance
Combined management report
2019
2018
2017
in EUR million
103.5
+188.6%
298.6
Change in benefit reserve
695.3
6,438.3
+10.3%
7,103.4
Claims and claims expenses
-13.9%
M 21
598.8
7,155.2
+5.1%
7,519.5
Net premium earned
8,026.3
+6.4%
8,538.1
Gross written premium
year
Investment income
20201
generation of stable and risk-commensurate returns
while at the same time maintaining the high quality
standard of the portfolio
subordinated bond,
1.125
4/18/2018
EUR 750 million; 2018/2028
senior bond,
496.8
497.5
3.375
9/15/2014
498.9
744.9
499.2
11/20/2012
2020
2021
Coupon in %
Issue date
M 31
Hannover Rück SE,
EUR 500 million; 2014/undated
Hannover Rück SE,
5.00
744.1
Hannover Rück SE,
subordinated bond,
2,975.7
3,722.3
743.3
1.375
3/22/2021
Total
EUR 750 million; 2021/2042
subordinated bond,
Hannover Rück SE,
494.9
495.4
1.75
7/8/2020
EUR 500 million; 2020/2040
subordinated bond,
Hannover Rück SE,
741.0
742.0
1.125
10/9/2019
EUR 750 million; 2019/2039
EUR 500 million; 2012/2043
subordinated bond,
Hannover Finance (Luxembourg) S.A.,
in EUR million
Compared to the position as at 31 December 2020, Group
shareholders' equity increased in the year under review by
EUR 916.8 million, equivalent to 7.7%, to EUR 12,756.2 mil-
lion. After adjustment for non-controlling interests, it rose by
EUR 890.0 million to EUR 11,885.0 million. The book value
per share increased accordingly by 8.1% to EUR 98.55. The
changes in the shareholders' equity were shaped chiefly by
the following developments:
6,793
7,414
7,754
4,000
6,026
6,381
6,000
Group shareholders' equity
8,000
-959
1,059
758
765
1,284
9,542
9,287
10,000
883
826
1,231
2,000
Several Group companies have also taken up long-term debt
- principally in the form of mortgage loans – amounting to
EUR 535.4 million (EUR 372.7 million).
2,054
1,853
Amortised cost of our bonds
The following table presents an overview of the amortised
cost of the issued bonds.
Our bonds supplement our equity resources with the aim of
reducing the cost of capital and also help to ensure liquidity
at all times. As at the balance sheet date altogether six bonds
had been placed on the European capital market through
Hannover Rück SE and Hannover Finance (Luxembourg) S. A.
In addition to the financing effect of the changes in share-
holders' equity described above, debt financing on the capital
market is a significant component of Hannover Re's financ-
ing. It is essentially composed of bonds issued to ensure last-
ing protection of our capital base - in part also in observance
of rating requirements. The total volume of long-term debt
and notes payable stood at EUR 4,257.7 million (EUR 3,348.4
million) as at the balance sheet date.
Financing and Group debt
Hannover Re | Annual Report 2021
60
2021
2020
Common shares and additional paid-in capital
Cumulative other comprehensive income
Retained earnings excluding Group net income
Group net income Non-controlling interests
845
2019
2018
2017
0
845
845
845
845
492
699
1,606
-
For further explanatory information please see our remarks in
the notes to this report, section 6.12 “Financing liabilities",
page 236 et seq., and section 6.13 "Shareholders' equity and
treasury shares", page 238 et seq.
Various financial institutions have provided us with letters of
credit for the collateralisation of technical liabilities. We re-
port in detail on existing contingent liabilities in the notes,
section 8.7 "Contingent liabilities and commitments”, page
261 et seq.
As part of the process of rating Hannover Re, the rating agen-
cies also assess the debt issued by the Hannover Re Group.
Issue ratings of notes payable
Financial strength ratings of
A.M. Best and Standard & Poor's, the rating agencies of par-
ticular relevance to the insurance industry, assess the finan-
cial strength of Hannover Rück SE on the basis of an interac-
tive rating process and have awarded it very good ratings.
The rating agencies highlight in particular the profitability,
strong competitive position, capitalisation and risk manage-
ment of Hannover Rück SE.
Financial strength ratings
Hannover Re | Annual Report 2021
62
For further information on our liquidity management please
see page 86 et seq. of the "Opportunity and risk report".
Overall, the cash and cash equivalents therefore increased
year-on-year by EUR 77.0 million to EUR 1,355.1 million.
The cash inflow from financing activities amounted on bal-
ance to EUR 277.5 million (EUR -726.0 million) in the year
under review. This item includes primarily the dividends paid
out in the financial year by Hannover Rück SE, E+S Rückver-
sicherung AG and other Group companies to parties outside
the Group totalling EUR 588.5 million (EUR 708.8 million) as
well as the balance from the issuance and repayment of long-
term debt, especially bonds, in an amount of EUR 865.5 mil-
lion (EUR -17.7 million).
Cash flow from financing activities
The balance of cash inflows and outflows from operating ac-
tivities and financing activities in an amount of EUR -5,261.1
million (EUR -2,031.8 million) was invested in accordance
with the company's investment policy, giving particular con-
sideration to the matching of currencies and maturities on the
liabilities side of the technical account. Regarding the devel-
opment of the investment portfolio, please see also our re-
marks at the beginning of this subsection.
The cash flow from operating activities, which also includes
inflows from interest received and dividend receipts, amount-
ed to EUR 4,940.5 million in the year under review as op-
posed to EUR 3,018.2 million in the previous year. The in-
crease of altogether EUR 1,922.3 million was due to the
positive development of operational business.
Cash flow from operating activities
1 Restated pursuant to IAS 8
1.278,1
1.355,1
at the end of the period
Cash and cash equivalents
187,2
77,0
Issue ratings of notes payable
statement
Hannover Rück SE
subordinated bond,
EUR 750 million;
2021/2042
Standard &
Poor's
M 35
Financial strength ratings of
subsidiaries
senior bond, EUR 750 million;
Hannover Rück SE
A
2019/2039
EUR 750 million;
Hannover Rück SE
subordinated bond,
A+ (Superior)
stable
A
EUR 500 million:
2020/2040
A.M. Best
Standard &
Poor's
AA-
Outlook
Rating
Hannover Rück SE
subordinated bond,
Hannover Rück SE
A
M 34
Combined management report
A.M. Best
M 36
844
equivalents according to cash flow
1.090,9
Cash flow from investing activities
4,941
1,694
2,000
2,225
2,509
3,018
1,000
3,000
4,000
5,000
Hannover Re does not conduct any automated internal cash
pooling within the Group. Liquidity surpluses are managed
and created by the Group companies. Various loan relation-
ships exist within the Hannover Re Group for the optimal
structuring and flexible management of the short- or long-
term allocation of liquidity and capital.
We generate liquidity from our operational reinsurance busi-
ness, investing activities and financing measures. Through
regular liquidity planning and by managing the fungibility of
our investments, we ensure that Hannover Re is able to make
the necessary payments at all times. Hannover Re's cash flow
is shown in the consolidated cash flow statement on page 170
et seq.
Liquidity
cash flow statement
Analysis of the consolidated
M 33
Cash flow from operating activities
in EUR million
Combined management report
61
Hannover Re | Annual Report 2021
0
Change in cash and cash
2017
2019
1.278,1
beginning of the period
Cash and cash equivalents at the
187,2
77,0
equivalents
Change in cash and cash
20201
3.018,2
(2.031,8)
(726,0)
(73,2)
120,1
Exchange rate differences on cash
277,5
Cash flow from financing activities
(5.261,1)
2021
4.940,5
Cash flow from operating activities
Cash flow from investing activities
in EUR million
1 Restated pursuant to IAS 8
M 32
Consolidated cash flow statement
2021
20201
2018
11,354
871
11,839
17
40
32
30
29
31
6
50
60
70
80
7
4
3
2
3
00
90
5
5
6
30
3
20
0
cation of technical holdings to the investments under own
management as part of a restructuring move in US mortality
business favourably affected the portfolio. The unrealised
gains and losses on our fixed-income securities contracted
sharply overall to EUR 1,446.7 million (EUR 2,558.4 million),
primarily against the backdrop of rising interest rates across
our main currencies.
34
14
32
6
Corporate bonds
2021
20201
Semi-government bonds
2019
Government bonds
2018
2017
30
34
35
35
15
15
16
16
10
We adjusted the allocation of our investments to the individu-
al classes of securities in that we acted on market opportuni-
ties in the first quarter and sold parts of our equity holdings.
As far as our fixed-income securities were concerned, when it
came to reinvesting or making new investments we increas-
ingly focused throughout the year on instruments that - - giv-
ing due consideration to their risk profiles - offer higher re-
turns than government bonds. We expanded our holding of
inflation-linked bonds so as to adjust it to requirements from
the underwriting side as part of regular portfolio mainte-
nance. Similarly, we further expanded our exposure to the
areas of infrastructure and private equity. We substantially
enlarged our real estate portfolio in Asia, making the most of
attractive acquisition opportunities in Singapore and Japan,
as well as in Germany and Poland. In the United States and
South Korea we very successfully acted on the state of the
real estate market to dispose of two large properties. Overall,
we thus slightly increased our real estate allocation to 5.5%
(5.1%). In the high-yield bond sector we progressively rea-
ligned our portfolios away from fund structures towards di-
rect investments. We kept the modified duration of our
fixed-income portfolio stable compared to the end of the pre-
vious year at 5.8 (5.8). In all other asset classes we made only
minimal changes in the context of regular portfolio mainte-
3
4
Funds withheld
2019
2020
2021
in EUR million
M 25
By adjusting the maturity pattern of our fixed-income securi-
ties to the expected payment patterns of our liabilities we re-
duce the economic exposure to the interest rate risk. In the
current reporting period this gave rise to a broadly neutral
modified duration of our bond portfolio, which stood at 5.8
(previous year: 5.8) as at 31 December 2021. Through active
and regular management of the currency spread in our
fixed-income portfolio we also aim for extensive matching of
currencies on the assets and liabilities sides of the balance
sheet, as a consequence of which fluctuations in exchange
rates have only a limited effect on our result. As at year-end
2021 we held 29.1% (31.2%) of our investments in euros,
44.2% (41.2%) in US dollars, 6.5% (7.6%) in pound sterling
and 6.5% (6.9%) in Australian dollars.
the foundation for the asset allocation of the entire Hannover
Re Group and the individual portfolios. Our ability to meet our
payment obligations at all times is also ensured in this way.
Within the scope of our asset/liability management (ALM)
the allocation of investments by currencies and maturities is
determined by the technical liabilities. The modified duration
of our bond portfolio is geared largely to the technical liabili-
ties.
Investment portfolio
With these goals in mind, we engage in active risk manage-
ment based on balanced risk/return analyses. To this end we
adhere to centrally implemented investment guidelines and
incorporate insights gained from dynamic financial analysis.
They form the basis for investment ranges which are speci-
fied in light of the prevailing state of the market and the re-
quirements on the liabilities side and within which operation-
al management of the portfolio takes place. These measures
are intended to safeguard the generation of an appropriate
level of return. In so doing, we pay strict attention to compli-
ance with our clearly defined risk appetite, which is reflected
in the risk capital allocated to the investments and constitutes
limitation of currency exposure and maturity risks
through matching currencies and maturities
high diversification of risks
ensuring liquidity and solvency at all times
.
•
Hannover Re's investment policy continues to be guided by
the following core principles:
Investment policy
Highly diversified investment portfolio
Equity base remains robust
Risk-commensurate investment policy
•
Financial position and net assets
11,306.5
M 26
9,958.2
2018
10,864.6
3
3
100
in %
Breakdown of investments under own management
Combined management report
57
57
Hannover Re | Annual Report 2021
50,960.4
53,061.9
58,903.2
58,959.8
67,519.7
Total
2017
10,902.9
40,057.5
42,197.3
47,629.4
49,001.6
56,213.2
Investments under own management
11,273.8
2018/2028
nance.
Private Equity
10,528
10,995
6,000
758
-765-
9,000
495
496
997
997
497
844
496
826
11,035
10,779
498
871
12,000
1,739
1,735
13,589
14,071
2,480
8,529
15,734
8,777
0
12,756
M 30
12,000
14,000
in EUR million
Development of Group shareholders' equity
The Group net income for 2021 attributable to the sharehold-
ers of Hannover Rück SE amounted to EUR 1,231.3 million
(EUR 883.1 million). The non-controlling interest in the profit
generated in the year under review totalled EUR 68.9 million
(EUR 35.7 million).
Non-controlling interests in shareholders' equity increased
by EUR 26.8 million to EUR 871.2 million as at 31 December
2021. The bulk of this - in an amount of EUR 740.1 million -
is attributable to the non-controlling interests in E+S Rückver-
sicherung AG.
Net unrealised gains on investments stood at EUR 1,768.3
million, a decrease of EUR 507.6 million compared to the be-
ginning of the year under review. This reflects the general
rise in interest rates observed in our main currency areas in
the course of the year under review.
Cumulative foreign currency gains amounting to EUR 366.2
million were recorded as at the balance sheet date as a con-
sequence of exchange rate movements of foreign currencies
against the euro. Compared to the cumulative foreign curren-
cy losses of EUR 330.7 million in the previous year, this con-
stitutes an increase of EUR 696.9 million in the foreign cur-
rency gains and losses recognised directly in equity. This
increase in the currency translation reserve from the transla-
tion of the shareholders' equity of foreign subsidiaries result-
ed principally from the devaluation of the euro against almost
all relevant currencies, especially the US dollar.
In its capital management Hannover Re is guided by the re-
quirements and expectations of the rating agencies with an
eye to its targeted rating. Furthermore, while making appro-
priate allowance for business policy considerations and fac-
tors that influence market presence, the allocation of capital
to the Group's operational companies is based upon the eco-
nomic risk content of the business group in question. The
Group companies are also subject to national capital and sol-
vency requirements. All Group companies met the applicable
local minimum capital requirements in the year under review.
Adherence to these capital requirements is continuously
monitored by the responsible organisational units on the ba‍
sis of the latest actual figures as well as the corresponding
planned and forecast figures. From the Group perspective we
manage Hannover Re's solvency extensively using our inter-
nal capital model (cf. "Opportunity and risk report", page 86
et seq.).
11,885
| Hybrid capital, limited maturity
Non-controlling interests
Hybrid capital, no maturity
Shareholders' equity
2021
2020
2019
2018
2017
3,000
Covered Bonds, ABS
M 29
18,000
The technical provisions and liabilities are of course by far
the most significant item in our balance sheet. Further ele-
ments are equity and equity substitutes, which help to sub-
stantially strengthen our financial base and optimise our cost
of capital. The following chart shows our capital structure as
at 31 December 2021, broken down into percentages of the
balance sheet total.
Analysis of the capital structure
At the end of the year under review we held a total amount of
EUR 1.8 billion (EUR 1.6 billion) in short-term investments
and cash. Funds withheld amounted to EUR 11.3 billion
(EUR 10.0 billion).
Holdings of alternative investment funds increased overall in
the reporting period. As at 31 December 2021 an amount of
EUR 1,747.2 million (EUR 1,300.7 million) was invested in
private equity funds; a further EUR 556.5 million (EUR 635.6
million) was attributable predominantly to investments in
high-yield bonds and in the credit sector – with the decrease
here reflecting the aforementioned regrouping of this asset
class away from funds towards direct investments. In addi-
tion, altogether EUR 805.9 million (EUR 582.3 million) was
invested in structured real estate investments. The uncalled
capital with respect to the aforementioned alternative invest-
ments totalled EUR 1,435.3 million (EUR 1,275.6 million).
12.7% AA
18.6% A
The technical provisions and liabilities shown above, which
include funds withheld/contract deposits and reinsurance
payable, make up 74.7% (73.5%) of the balance sheet total
and are more than covered by our investments, (assets-side)
funds withheld/contract deposits, accounts receivable and re-
insurance recoverables.
43.4% AAA
M 27
18.6% BBB
6.8% <BBB
Rating of fixed-income securities
Hannover Re | Annual Report 2021
58
The portfolio of fixed-income securities excluding short-term
assets rose to EUR 48.0 billion (EUR 41.5 billion). As already
outlined with respect to the investment portfolio as a whole,
this reflects, on the one hand, interest rate increases that re-
duced fair values, while on the other hand currency effects
and cash inflows as well as a reallocation of technical hold-
ings to the investments led to rising total portfolios. The net
hidden reserves for available-for-sale fixed-income securi-
ties, which are included in shareholders' equity, totalled EUR
1,299.1 million (EUR 2,347.4 million). This reduction can be
attributed primarily to the interest rate increases seen on gov-
ernment bonds in the course of the reporting period. As to the
quality of the bonds measured in terms of rating categories,
the proportion of securities rated “A” or better remained on a
consistently high level and stood at 74.6% (76.7%) as at
year-end.
Our portfolio of assets under own management amounted to
EUR 56.2 billion, a considerably higher level than in the pre-
vious year (31 December 2020: EUR 49.0 billion). With credit
spreads narrowing only slightly overall, higher interest rates
I gave rise to declines in the fair values of our fixed-income
securities. These were clearly more than offset by positive
effects from currency translation - especially in connection
with the US dollar and pound sterling. As additional factors,
cash inflows from issuance of a bond and the one-time reallo-
Investments
Short-term investments and cash
1 Restated pursuant to IAS 8
Other
Real estate
Capital structure as at 31 December 2021
15,000
4.6% Other liabilities
0
in EUR million
Development of policyholders' surplus
Combined management report
59
Hannover Re | Annual Report 2021
Hannover Re uses "Intrinsic Value Creation" (IVC) as its cen-
tral value-based management tool. As part of this methodolo-
gy, we apply the principles of economic allocation of equity
and efficient use of debt as an equity substitute in order to
achieve an attractive weighted cost of capital. This concept as
well as the objectives and principles in accordance with
which we conduct our enterprise management and capital
management are described in greater detail in our remarks
on value-based management on page 27 et seq. of this report.
The policyholders' surplus totalled EUR 15,733.6 million
(EUR 14,071.0 million) as at the balance sheet date, an in-
crease of 11.8%. Retained earnings rose by EUR 688.7 mil-
lion to EUR 8,985.8 million (EUR 8,297.1million) on the back
of the good Group net income booked in the year under re-
view. In addition, the foreign currency gains and losses and
the net gains on investments recognised in equity were high-
er by altogether EUR 189.3 million. In the year under review
a subordinated bond in a nominal amount of EUR 750.0 mil-
lion was issued.
hybrid capital used as an equity substitute, which takes
the form of subordinated bonds.
non-controlling interests and
interests, composed of the common shares, additional
paid-in capital, other comprehensive income and
retained earnings,
shareholders' equity excluding non-controlling
•
A key strategic objective of Hannover Re is long-term capital
preservation. We have issued hybrid capital as an equity sub-
stitute in order to keep the cost of capital on a low level. The
policyholders' surplus is an important management ratio in
the context of Hannover Re's comprehensive capital manage-
ment. The total policyholders' surplus is defined as follows:
Management of policyholders' surplus
We ensure that our business is sufficiently capitalised at all
times through continuous monitoring and by taking appropri-
ate steering actions as necessary.
The equity including non-controlling interests at 15.4%
(16.6%) of the balance sheet total as well as the long-term
debt and especially notes payable at altogether 5.3%
(4.8%) of the balance sheet total represent our most impor-
tant sources of funds.
-
-
74.7% Technical
provisions and liabilities
5.3% Long-term debt
and notes payable
M 28
15.4% Equity
AA-
(Very Strong)
stable
Standard &
Operating expenses, net of retrocession
Other technical charges, net of retrocession
3,632,733
3,296,559
262
374
Subtotal
(126,866)
(209,120)
Change in the equalisation reserve and similar provisions
(545,672)
(694,004)
Net technical result
(672,538)
(903,124)
17
Investment income
5
(101,263)
2021
2020
Earned premiums, net of retrocession
14,768,338
12,923,326
Allocated investment return transferred from the non-technical account, net of retrocession
187,951
189,357
Other technical income, net of retrocession
0
Claims incurred, net of retrocession
11,346,793
9,923,590
Changes in other technical provisions, net of retrocession
(103,362)
Bonuses and rebates, net of retrocession
1,913,417
1,803,280
Investment charges
Profit brought forward from previous year
Allocations to other retained earnings
Disposable profit
557,313
713,716
522
529
1,100,000
The underwriting result (before changes in the equalisation
reserve) came in at EUR -126.9 million (EUR -209.1 million).
An amount of EUR 545.7 million (EUR 694.0 million) was al-
located to the equalisation reserve and similar provisions in
the year under review.
Large losses again exceeded our expectations in the 2021 fi-
nancial year. Particularly notable major losses were incurred
from disastrous flooding in Europe, hurricanes and other
weather phenomena in the United States as well as losses
from unrest in South Africa. The total net expenditure on ma-
jor losses for Hannover Rück SE amounted to EUR 598.4 mil-
lion (EUR 1,186.4 million).
Ordinary investment income including deposit interest came
in below the previous year's level at EUR 1,505.7 million
(EUR 1,600.6 million), primarily due to a one-time effect from
our investment holding companies in the previous year. Ordi-
nary income from fixed-income securities totalled EUR 478.5
million (EUR 485.0 million). Net gains of EUR 280.4 million
(EUR 166.2 million) were realised on disposals. The increase
resulted principally from the release of substantial hidden re-
serves in connection with the regrouping of our equity hold-
ings and the portfolio of high-yield bonds. Write-downs of
EUR 31.6 million (EUR 34.3 million) were taken on invest-
ments, for the most part on bearer debt securities held as
current assets, in the area of alternative investments and on
deposits with ceding companies. The write-downs contrasted
with write-ups of EUR 6.0 million (EUR 1.5 million) that were
made on assets written down in previous periods in order to
reflect increased fair values. All in all, the net investment re-
sult increased slightly to EUR 1,687.4 million (EUR 1,673.3
million).
The profit on ordinary activities rose to EUR 776.0 million
(EUR 393.8 million). The year under review closed with a
profit for the year of EUR 701.2 million (EUR 386.8 million).
66
66
Hannover Re | Annual Report 2021
Hannover Rück SE
386,813
701,209
Profit for the financial year
6,956
226,000
129,998
Allocated investment return transferred to the technical account
(197,485)
(196,977)
Other income
315,449
in EUR thousand
186,711
356,833
366,123
Profit or loss on ordinary activities before tax
776,010
393,769
Taxes on profit and income and other taxes
74,801
Other charges
M 37
1,258,000
Combined management report
Company of America (Bermuda)
2012/2043
Condensed profit and loss account of Hannover Rück SE
aa-
Ltd.
AA-
A+
Hannover Life Re of
Australasia Ltd.
AA-
Hannover Reinsurance
South Africa Ltd. 1
AA-
Hannover Re (Ireland)
Designated Activity Company
EUR 500 million;
AA-
Hannover Life Reassurance
A+
A.M. Best
subordinated bond,
Poor's
EUR 500 million;
2014/undated
A
a+
E+S Rückversicherung AG
AA-
A+
Hannover Finance
Hannover Life Reassurance
Company of America
(Luxembourg) S.A.
AA-
subordinated bond,
A+
A
AA-
Hannover Re | Annual Report 2021
Hannover Re | Annual Report 2021
Information on
Hannover Rück SE
(condensed version in accordance with the German Commer-
cial Code (HGB))
Hannover Re exercises the option to present a combined
management report pursuant to § 315 Para. 5 of the German
Commercial Code (HGB) in conjunction with § 298 Para. 2 of
the German Commercial Code (HGB). Supplementary to the
reporting on the Hannover Re Group, we discuss below the
development of Hannover Rück SE.
The annual financial statement of Hannover Rück SE is drawn
up in accordance with German accounting principles (HGB).
The consolidated financial statement, on the other hand, con-
forms to International Financial Reporting Standards (IFRS).
This gives rise to numerous divergences in accounting poli-
cies affecting, above all, intangible assets, investments, tech-
nical assets and liabilities, financial instruments and deferred
taxes.
The annual financial statement of Hannover Rück SE - from
which the balance sheet and profit and loss account in par-
ticular are reproduced here in condensed form - is submitted
to the operator of the electronic Federal Gazette and can be
accessed via the website of the Companies Register. This an-
nual financial statement can also be accessed on the compa-
ny's website (www.hannover-re.com).
Hannover Re (Bermuda) Ltd.
Since 1 January 1997 Hannover Rück SE has written active
reinsurance for the Group - with few exceptions - solely in
foreign markets. Responsibility within the Hannover Re
Group for German business rests with the subsidiary E+S
Rückversicherung AG.
Results of operations
Hannover Rück SE recorded a pleasing business develop-
ment in the 2021 financial year. The gross premium in total
business grew by 14.2% to EUR 21.9 billion (previous year:
EUR 19.2 billion). The level of retained premium increased to
69.0% (68.3%). Net premium earned climbed by 14.3% to
EUR 14.8 billion (EUR 12.9 billion).
65
65
64
The company has not concluded any compensation agree-
ments with the members of the Executive Board or with em-
ployees in the event of a takeover bid being made.
Hannover Rück SE transacts reinsurance business in the
business groups of Property & Casualty and Life & Health rein-
surance. Through its global presence and activities in all lines
of reinsurance, the company achieves extensive risk diversifi-
cation.
We describe below major agreements concluded by the com-
pany that are subject to reservation in the event of a change
of control, inter alia following a takeover bid, as well as the
resulting effects. Some letter of credit lines extended to Han-
nover Rück SE contain standard market change-of-control
clauses that entitle the banks to early termination of a credit
facility if Talanx AG loses its majority interest or drops below
the threshold of a 25% participation or if a third party ac-
quires the majority interest in Hannover Rück SE.
In addition, retrocession covers in property & casualty and
life & health business contain standard market change-of-
control clauses which in each case grant the other contract-
ing party a right of termination if a significant change occurs
in the ownership structure and participation ratios of the af-
fected contracting party.
A+
Hannover ReTakaful B.S.C.(c)
A+
Glencar Insurance Company
1 Hannover Re South Africa Ltd. (HRe SA) benefits from parental
guarantees issued by Hannover Rück SE (the "Guarantor"). The
guarantees cover all of the payment obligations of HRE SA in respect of
insurance and reinsurance contracts issued by them. The guarantees are
unconditional and continuing and shall be binding upon the Guarantor.
The owners of the insurance and reinsurance contracts issued by these
subsidiaries are third party beneficiaries of these guarantees.
Information pursuant to § 315a Para. 1
German Commercial Code (HGB)
The common shares (share capital) of Hannover Rück SE
amount to EUR 120,597,134.00. They are divided into
120,597,134 registered no-par shares.
The Executive Board of the company is not aware of any re-
strictions relating to voting rights or the transfer of shares,
including cases where these may arise out of agreements be-
tween shareholders.
A+
The appointment and recall of members of the Executive
Board are determined by §§ 84 et seq. Stock Corporation Act
(AktG). Amendment of the Articles of Association is governed
by §§ 179 et seq. Stock Corporation Act (AktG) in conjunction
with § 18 (2) of the Articles of Association of Hannover Rück
SE.
Hannover Re | Annual Report 2021
63
63
There are no shares with special rights granting their holders
powers of control, nor is there any specially structured voting
control for employees who have capital participations and do
not directly exercise their rights of control.
The following companies hold direct or indirect capital par-
ticipations that exceed 10% of the voting rights: Talanx AG,
Hannover, directly holds 50.2% (rounded) of the company's
voting rights. This participation is indirectly allocable to
HDI Haftpflichtverband der Deutschen Industrie Versiche-
rungsverein auf Gegenseitigkeit, Hannover, which holds the
majority stake in Talanx AG.
The powers of the Executive Board with respect to the issue
and repurchase of shares are defined in the Articles of Asso-
ciation of Hannover Rück SE (§ 6 "Contingent capital" and
§ 7 "Authorised capital") as well as in §§ 71 et seq. Stock Cor-
poration Act (AktG). In this connection the Annual General
Meeting authorised the Executive Board on 6 May 2020 pur-
suant to § 71 Para. 1 Number 8 Stock Corporation Act (AktG)
to acquire treasury shares on certain conditions for a period
of five years, ending on 5 May 2025.
Risk management system
In the course of its operations as a reinsurance company Han-
nover Re knowingly enters into many different risks. It is
equipped with an adequate and effective risk management
system for ongoing monitoring of these and other risks.
In the context of its risk management system Hannover Re
also considers risks that arise in connection with environ-
mental concerns, social issues or corporate governance - so-
called sustainability or ESG risks. These may be associated
with negative implications for the net assets, financial posi-
tion and results of operations (outside-in) as well as negative
implications for the ESG landscape (inside-out). Both risks
can affect, among other things, the company's reputation.
Sustainability risks do not constitute a risk category of their
own, but can instead have implications for all risk categories.
In the year under review the meta-risk of sustainability and
reputational risks was added to “Other risks" in the risk reg-
ister.
The Executive Board approved a framework for the manage-
ment of sustainability and reputational risks with Group-wide
validity in the year under review in order to underscore the
importance of the topic.
Combined management report
72
Hannover Re | Annual Report 2021
Risk management
Compliance
Good governance
M 40
Compliance management system
For further information we would refer to the "Opportunity
and risk report" in the combined Group management report.
ESG in insurance business
ESG in asset management
Sustainable protection
ESG in asset management
Sustainable protection
Dialogue
Covid-19
Health and wellness of employees
Diversity and equal opportunities
Attractiveness as an employer
Learning and development
ESG in insurance business
ESG in asset management
Climate change
Material topic
Fighting corruption and bribery
Respect for human rights
Social matters
Employee matters
Environmental matters
Human rights
Compliance encompasses not only compliance with statutory
and regulatory requirements (legal compliance) but also ful-
filment of external standards such as corporate governance
principles as well as internal guidelines. At Hannover Re,
compliance topics are addressed in a compliance manage-
ment system. This is geared to international standards and
ensures that the core tasks of a compliance function are per-
formed:
waters below 5,000 feet. The facultative underwriters at all
locations were already provided with training in ESG topics
and the ESG manual in 2020.
•
In the year under review Hannover Re became a signatory to
the UN Principles for Sustainable Insurance (UN PSI).
In obligatory reinsurance, large-volume portfolios with some-
times heterogenous contents are accepted. We are engaged
in talks with our customers in order to obtain an overview of
the CO2 intensity of the business ceded to us. In 2021
Hannover Re joined the Net-Zero Insurance Alliance (NZIA)
so as to work with other participants on the development of
metrics and targets. On this basis we shall identify measures
for the progressive reduction of our carbon footprint.
Non-financial aspect
Combined management report
Hannover Re | Annual Report 2021
74
Reinsurance covers for individual risks are written in faculta-
tive reinsurance, i.e. the treaties can be allocated to specific
projects or policyholders. In this segment, reinsurance has no
longer been provided for planned new coal-fired plants or
thermal coal mines since April 2019. Moreover, from Febru-
ary 2020 onwards our facultative division has excluded any
new business connected with thermal coal or the associated
infrastructure. Thermal coal infrastructure encompasses
mines, coal-fired power plants and facilities as well as port
and rail operations allocable exclusively to the coal industry.
In the case of mixed groups, companies are excluded that
generate more than 30% of their revenues from activities in
thermal coal. In addition, since 2020 the facultative division
has no longer accepted any new individual risks for compa-
nies that hold 20% or more of their oil reserves in oil sands
and it excludes oil sands extraction and processing opera-
tions. Oil sands extraction and processing encompass the
extraction of bituminous sand (both in surface mining and in
the form of in-situ extraction) from bitumen, refinement into
synthetic crude oil, further processing of this synthetic crude
into petroleum products and the associated transportation by
pipeline or rail. The exclusions for oil and gas were expanded
in the year under review. From mid-2022 onwards the facul-
tative division will no longer take on any new covers for pro-
ject policies associated with the exploration and/or develop-
ment of new oil and gas reserves (upstream) or for project
policies that exclusively support the transportation and stor-
age (midstream) of new oil and gas reserves. Complementary
to this, the facultative division adopted an ESG manual in the
year under review that addresses other environmental con-
cerns. Transactions are to be declined if they may entail dam-
age to protected areas classified as IUCN category 1a/b, wet-
lands protected under the Ramsar Convention or world
cultural heritage sites. Furthermore, the facultative division
no longer accepts any new risks connected with projects for
the extraction of oil and gas in Arctic regions. These are de-
fined as the zone around the Arctic Circle which runs in a
circle of latitude 66.34° north of the Equator. This includes
the Arctic National Wildlife Refuge (ANWR) in the United
States. In addition, no risks are written that are connected
with the development of new oil and gas deposits in deep
tion from power plant and thermal coal by the year 2038 in
the entire portfolio of property and casualty reinsurance busi-
ness. Work began in the year under review on the elaboration
of our internal positioning for the property and casualty rein-
surance sector. This will flesh out the approach in greater de-
tail and address further issues (such as oil and gas). The po-
sition paper is applicable to both facultative and obligatory
business.
At the same time, Hannover Re is consistently seeking to re-
duce its exposure to fossil fuels. The goal is to no longer cov-
er any risks connected with the mining of and power genera-
Fossil fuels are considered to be one of the major drivers of
climate change. With a view to countering this and facilitating
the transformation to a lower carbon economy, Hannover Re
encourages the expansion of renewable energy sources in
property and casualty reinsurance that range from wind ener-
gy (both onshore and offshore) through photovoltaic energy
and hydroelectric power to geothermal energy.
Impacts of our operations
Insurance business
In support of the goals of the Paris Agreement on climate
change, Hannover Re also adopted concrete targets in the
year under review for the achievement of net zero emissions:
net zero in reinsurance business by 2050, net zero in invest-
ments by 2050 and net zero in our own business operations
by 2030. These targets are associated with a range of impacts
on our operations.
The risks posed by climate change can affect numerous risk
categories of the risk register and are extensively monitored
through the risk management system. ESG topics are also ad-
dressed as part of the management of sustainability and rep-
utational risks. For information on the corresponding con-
cepts and implemented stress test mechanisms the reader is
referred to the "Opportunity and risk report" in the combined
Group management report. When it comes to evaluating im-
pacts and risks, one advantage is that business in property
and casualty reinsurance is normally renewed annually. This
means that it is possible to adjust the premiums or risk appe-
tite each year according to the conducted risk assessment
and hence manage the exposure on a risk-oriented basis. For
information on the industry-specific environment and the re-
sults of operations in property and casualty reinsurance,
please see the section "Report on economic position".
Climate change goes hand-in-hand with a range of impacts
on Hannover Re's operations, e.g. due to an increase in the
frequency and/or severity of losses (physical risks) or chang-
ing framework conditions with implications for reinsurance
business and investments (transitory risks). Furthermore, on
the societal level an increase in environment-related lawsuits
against businesses and public institutions can be observed
(litigation risks) that may adversely affect the insurance in-
dustry.
Impacts on operations
73
Hannover Re | Annual Report 2021
Examining and evaluating changes in the legal/
regulatory environment and determining measures
(monitoring function)
Advising the Executive Board and the employees on
compliance with laws (advisory function)
Identifying and evaluating specific current and
emerging compliance risks (identification function)
• Identifying and assessing material compliance risks
(risk function)
The Executive Board is responsible for and tasked with ensur-
ing adequate and effective compliance structures. Execution
falls to the Chief Compliance Officer (CCO), who reports in a
direct line to the Executive Board on material compliance is-
sues and developments. The annual compliance report is also
submitted to the Supervisory Board and its Finance and Audit
Committee. The CCO is supported in his work by the Compli-
ance department, specially designated officers and a world-
wide network of local compliance officers. Monitoring proce-
dures are conducted for the management of compliance risks.
Checks can also take place on an ad hoc basis where there are
grounds for suspicion. The underlying compliance risk analy-
sis is updated annually.
•
The CCO works closely with Risk Management to ensure a
consistent approach to operational risks, which include com-
pliance risks. Several compliance committees also exist, com-
prised of members from the operational business groups as
well as from the areas of Group Legal, Finance, Accounting
and Investments. Among other things, the compliance com-
mittees examine reinsurance treaties with a special eye to
compliance with supervisory requirements and accounting
standards and they take fundamental decisions on dealing
with sanctions.
compliance-related issues. On joining the Group, all new
members of staff take compliance training. In addition, fo-
cused training activities are held on various compliance top-
ics throughout the year for specific target groups. This is sup-
plemented by dedicated compliance pages in the intranet
containing more extensive information. In 2020 Hannover Re
also launched a 12-month compliance campaign to raise
awareness among the workforce. This was concluded in the
year under review.
Should members of staff or indeed persons outside the com-
pany become aware of compliance violations, harmful behav-
iour or risks, such suspicions can be reported to the CCO or
the Compliance department or, if so desired, anonymously
through an online speak-up system.
For further information we would refer to the "Opportunity
and risk report" in the combined Group management report.
Environmental matters
In connection with environmental matters, special impor-
tance attaches to the active exploration of the causes and
consequences of progressive climate change. The impacts
can be felt ever more clearly. Extreme weather events and
natural disasters such as heatwaves and droughts, severe
precipitation events and storms, as well as continuous pro-
cesses such as glacier melting and rising sea levels, have
far-reaching implications for society and the economy and
lead to considerable economic and insured losses. What is
more, further environmental concerns, such as the proper
functioning of ecosystems or the water resources of ground
and surface waters, are directly affected by climate change. If
the earth's temperature were to continue rising unchecked,
this would increase the scale of such phenomena and risks.
Yet the sought-after transition to a climate-friendly, re-
source-saving economy is also associated with a number of
social and economic impacts.
In view of these comprehensive environmental, economic and
social impacts, climate change is at the heart of numerous
national and international regulatory initiatives and meas-
ures. The goals of the Paris Agreement on climate change,
under which the international community committed in 2015
to limit the rise in the global average temperature to well be-
low 2°C, preferably to 1.5°C, compared to pre-industrial lev-
els, are considered a key driving force here. In the closing
statement of the UN Climate Change Conference 2021 in
Glasgow, known as COP26, the participating countries recon-
firmed the 1.5 °C target.
Attentive and trained employees are a crucial component of a
functioning compliance management system - both in order
to avoid unconscious violations and to recognise and prevent
deliberate violations and associated risks. Hannover Re uses
various training activities in order to sensitise employees to
Allocation of the non-financial aspects to the material topics
Outlook
71
5,000
An ordinary dividend of EUR 4.50 per share, equivalent to
EUR 542.7 million (EUR 633.3 million), was paid out in the
year under review for the 2020 financial year.
Hannover Re | Annual Report 2021
68
Our capital and reserves - excluding the disposable profit
stood at EUR 1,631.7 million (EUR 1,631.7 million). The total
capital, reserves and technical provisions - comprised of the
capital and reserves excluding disposable profit, the subordi-
nated liabilities, the equalisation reserve and similar provi-
sions as well as the net technical provisions – increased dur-
ing the year under review to EUR 44,182.2 million (EUR
37,586.4 million). Among other things, the issuance of a sub-
ordinated bond had a positive effect here. The balance sheet
total of Hannover Rück SE grew to EUR 52.7 billion (EUR 44.9
billion).
Deposits with ceding companies, which are shown under the
investments, increased to EUR 8.7 billion (EUR 7.6 billion).
Our portfolio of assets under own management increased to
EUR 36.9 billion (EUR 31.4 billion). The balance of unrealised
gains on fixed-income securities and bond funds declined to
EUR 1,078.2 million (EUR 1,578.6 million). Along with the
moderate realisation of reserves, this was primarily a reflec-
tion of decreases in valuations due to higher interest rates,
which were not offset by very largely stable risk premiums on
corporate bonds.
44,864,195
52,685,867
4,237
4,758
5,026
5,679
225
It will be proposed to the Annual General Meeting on 4 May
2022 that a dividend of EUR 4.50 per share plus a special
dividend of EUR 1.25 per share should be paid for the 2021
financial year. This corresponds to a total distribution of EUR
693.4 million. The dividend proposal does not form part of
this consolidated financial statement.
1,861
258
2,452
460
336
10,000
322
391
1,584
2,945
2,735
1,590
1,963
Investments
442
454
Combined management report
In view of the interrelations between the parent company and
the Group companies and the former's large share of busi-
ness within the Group, we would refer here to our remarks
contained in the section entitled "Outlook for 2022" on page
147 et seq., which also reflect the expectations for Hannover
Rück SE. We expect the profit reported for the 2022 financial
year under the German Commercial Code (HGB) to improve
significantly on the previous year.
The business development of Hannover Rück SE is essentially
subject to the same risks and opportunities as that of the Han-
nover Re Group. As a general principle, Hannover Rück SE
shares in the risks of participating interests and subsidiaries
according to the amount of its respective holding; these risks
are described in the risk report. The relations with participat-
ing interests of Hannover Rück SE may give rise to losses
from legal or contractual contingent liabilities (particularly
novation clauses and guarantees). Please see our explanatory
remarks in the notes to this report.
Hannover Re | Annual Report 2021
Hannover Re regularly conducts materiality analyses in order
to identify material ESG (environmental, social and govern-
ance) issues, most recently in the spring of 2020 in the form
of interviews/workshops with internal and external experts.
The basis consisted of a list of possible topics derived from
the materiality analysis conducted in 2018, dialogues with
stakeholders and non-governmental organisations, media re-
ports and the GRI Framework. All experts were encouraged to
indicate other topics.
Materiality analysis and material topics
In view of its considerable significance, the topic of Covid-19
had already been picked up on last year as an additional topic
in the non-financial reporting. In the year under review the
Executive Board validated the materiality analysis and includ-
ed Covid-19 as a supplementary material topic.
The analysis looked at two dimensions (so-called double ma-
teriality): positive/negative impacts of Hannover Re's opera-
tions on the respective topic (inside-out perspective) and pos-
itive/negative impacts of the respective topic on Hannover
Re's operations (outside-in perspective). Each topic was
scored on a scale of 1 to 5 in this regard. Extensive interviews
were conducted with the external experts (stakeholder group:
asset managers, ESG analysts, representatives of non-govern-
mental organisations, representatives of the trade press as
well as representatives of foundations and associations). All
topics that received an average score of at least 3.75 were
marked as material. Four workshops were held with the inter-
nal experts (stakeholder group: employees) from various
market and service units to score the topics on the list. In this
case, too, the materiality threshold was set at 3.75. Some top-
ics were clustered at the workshops. The topics were trans-
ferred to a materiality matrix as averaged values from the in-
ternal and external scores. In this context, those topics that
fell below the threshold after averaging also continued to be
material. As a result, 13 material topics were identified.
We have also defined financial targets for the strategy cycle
2021-2023. We report on these targets and target attainment
on page 27 et seq. of the section "Management system" in
this combined management report.
Our system of strategic targets encompasses qualitative and
quantitative goals. Along with traditional, balance sheet-ori-
ented IFRS indicators we have defined economic targets that
are derived from our certified internal capital model and the
Solvency II reporting.
The strategic programme is supported and monitored by the
division Group Performance & Strategy Development and pro-
gress reports are provided to the Executive Board quarterly
(reporting on strategic initiatives) and half-yearly (manage-
ment reporting).
Altogether, our strategic programme encompasses 25
cross-functional strategy contributions that support the
Group strategy. “Corporate Social Responsibility" is one of
these subject areas that we shall refine in the strategy cycle
2021-2023 and in which we pursue non-financial goals,
among others. Associated topics are specified more closely in
our Sustainability Strategy 2021-2023. This is comprised of
the four action fields Transparency, Employees, Core Busi-
ness and Commitment as well as underlying measures and
goals. The sustainability strategy is publicly available on our
website.
forming the industry average in terms of the return on equity.
We have launched four strategic initiatives - Customer Excel-
lence, the Innovation and Digital Strategy, the Asia-Pacific
Growth Initiative and Talent Management – that we consider
especially crucial and we intend to work on them intensively
throughout the entire strategy cycle.
Hannover Re | Annual Report 2021
70
-
In our "Striving for sustainable outperformance" strong gov-
ernance, risk management, integrated compliance and corpo-
rate social responsibility constitute the foundations for our
growth as a reliable global reinsurance partner. Three perfor-
mance drivers – preferred business partner, innovation cata-
lyst, earnings growth are based on proven strengths and
address the global trends affecting the insurance and reinsur-
ance industry. Three performance enablers empowered
people, a lean operating model and effective capital manage-
ment have proven essential over the last decade for outper-
Risks and opportunities
The Group strategy of Hannover Re was revised most recent-
ly in 2020. It is valid for the 2021 - 2023 strategy cycle.
The combined non-financial information statement encom-
passes unless presented separately - the disclosures for the
Group and the parent company Hannover Rück SE. It con-
tains the legally required information relating to material en-
vironmental matters, employee matters, social matters, re-
spect for human rights and fighting corruption and bribery.
Within the individual aspects, the underlying concepts and
internal due diligence processes are discussed and available
findings are reported. The identified material issues were al-
located to the aspects (see section "Materiality analysis"). In
addition, the combined non-financial information statement
is to be used to report on material risks pursuant to § 289c
A detailed description of Hannover Re's sustainability efforts,
which go above and beyond the legal requirements of the
combined non-financial information statement, is provided in
a separate sustainability report compiled annually in accord-
ance with the GRI Standards.
The present combined non-financial information statement
was drawn up in accordance with §§ 315c in conjunction with
289c to 289e German Commercial Code (HGB) as well as Ar-
ticle 8 of Regulation (EU) 2020/852 of the European Parlia-
ment and of the Council of 18 June 2020 on the establishment
of a framework to facilitate sustainable investment, and
amending Regulation (EU) 2019/2088 (hereinafter EU Taxon-
omy Regulation). The identification of material contents re-
flected the materiality definitions of the Global Reporting Ini-
tiative (GRI) and the German Commercial Code (HGB). The
description of concepts is guided by the structure of the GRI
Standards, Standard GRI 103-1 to GRI 103-3 (Management Strategic orientation
Approach).
Pursuant to § 315b (1) Sentence 3 German Commercial Code
(HGB), reference is also made to non-financial disclosures
provided elsewhere in the combined management report with
respect to certain aspects. References to information outside
the combined management report and the consolidated and
annual financial statement do not form part of the combined
non-financial information statement.
Para. 3 No. 3 and 4 German Commercial Code (HGB) to the
extent necessary for an understanding of the business devel-
opment, business result, position of Hannover Rück SE and
the Group as well as of the implications for non-financial mat-
ters. Information pursuant to requirements of Article 8 of the
EU Taxonomy Regulation has been integrated for the first
time.
Introduction
The combined non-financial information statement is a
section of the report that the legislator has expressly
exempted from the audit of the financial statements
(§ 317 [2] Sentence 6 and Sentence 4 German Com-
mercial Code [HGB]). The combined non-financial in-
formation statement presented here has, however,
been reviewed with limited assurance by the auditing
firm of PricewaterhouseCoopers in accordance with
the audit standard ISAE 3000 (Revised) (see here the
Independent Auditor's Report on page 275 et seq.).
Combined non-financial
information statement
Combined management report
69
Hannover Re | Annual Report 2021
Hannover Rück SE maintains branches in Australia, Bahrain,
Canada, China, France, Hong Kong, India, Korea, Malaysia,
Sweden and the United Kingdom.
We received an adequate consideration for all transactions
with affiliated companies according to the circumstances of
which we were aware at the time when the transactions were
effected. We incurred no disadvantages as defined by § 311
Stock Corporation Act (AktG).
Other information
For a description of the business model the reader is referred
to the subsection "Business model" under "Foundations of
the Group".
ESG criteria are similarly applied on the asset management
side. These have been defined in writing in an internal Re-
sponsible Investment Policy, application of which is ensured
by an ESG officer on the investment team.
Other liabilities
Within the portfolio of assets under own management,
fixed-income securities (government and semi-government
bonds, corporate bonds and covered bonds [with the excep-
tion of collateralised debt obligations – CDOs]) and listed eq‐
uities have been subject to half-yearly negative screening
since 2012. Only a few niche funds or asset classes, such as
real estate, private equity or structured investments, cannot
be analysed using this system. Similarly, before any new in-
vestments are made corresponding screening is carried out
with an eye to existing ESG criteria. Issuers who do not satis-
fy our criteria are actively scaled back.
67
Combined management report
Other lines
The lines of health insurance, credit and surety, other indem-
nity insurance and other property insurance are reported
together under other lines. Other property insurance consists
of the extended coverage, comprehensive householder's
(contents), comprehensive householder's (buildings), burg-
lary and robbery, water damage, plate glass, engineering,
loss of profits, hail, livestock and windstorm lines. Other in-
demnity insurance encompasses legal protection, fidelity as
well as other pure financial losses and property damage.
Gross premium income in the other lines grew by 8.5% to
EUR 4,819.5 million (EUR 4,441.3 million). The net loss ratio
retreated to 69.7% (85.6%). The underwriting result closed
at EUR -51.7 million (EUR -462.4 million). After a withdrawal
of EUR 42.0 million in the previous year, an allocation of EUR
158.4 million was made to the equalisation reserve and simi-
lar provisions.
Assets and financial position
Balance sheet structure of Hannover Rück SE
in EUR thousand
Assets
Intangible assets
Investments
Receivables
Other assets
Prepayments and accrued income
52
Total assets
Subscribed capital
Capital reserve
Retained earnings
Disposable profit
Capital and reserves
Subordinated liabilities
Technical provisions
Provisions for other risks and charges
Deposits received from retrocessionaires
Accruals and deferred income
Total liabilities
2021
M 39
2020
61,356
45,535,383
Liabilities
61,439
38,944,054
Hannover Re | Annual Report 2021
Life
3,197
4,105
3,962
4,820
4,441
3,203
2,862
0
2017
2018
2019
2020
2021
Other lines Life
The gross premium in the life line grew by 13.0% to EUR
5,678.9 million (EUR 5,026.2 million). Life and health reinsur-
ance business has a clear international focus. We write our
business on all continents and in many instances we are di-
rectly available as a local point of contact thanks to our exten-
sive network. In addition to traditional life reinsurance, we
write financial solutions business as well as health and lon-
gevity risks on a worldwide basis. The financial year just end-
ed was crucially shaped by the Covid-19 pandemic. This is
clearly reflected in the result, which was reduced by an in-
creased burden of losses - thereby overshadowing a number
of positive developments in our strategic business segments.
The underwriting result in life business amounted to alto-
gether EUR -64.8 million (EUR -42.1 million).
Marine
Motor
Fire
Accident Casualty Fire
Gross premium income for the fire line climbed by 21.2% to
EUR 4,015.5 million (EUR 3,312.7 million). The net loss ratio
increased to 65.0% (63.9%). The underwriting result closed
at EUR 152.9 million (EUR 114.2 million). An amount of EUR
85.6 million (EUR 128.7 million) was allocated to the equali-
sation reserve and similar provisions.
Liability
Gross premium in liability business rose by 24.1% to EUR
2,991.9 million (EUR 2,410.2 million). The loss ratio increased
to 78.8% (71.4%). The underwriting result closed at EUR
-171.4 million (EUR 4.5 million). An amount of EUR 217.1
million (EUR 311.9 million) was allocated to the equalisation
reserve and similar provisions.
Accident
Gross premium income for the accident line contracted by
25.6% to EUR 379.1 million (EUR 509.7 million). The net loss
ratio rose to 68.6% (42.2%). The underwriting result came in
at EUR 10.3 million (EUR 48.1 million). An amount of EUR
19.4 million was withdrawn from the equalisation reserve and
similar provisions, after an allocation of EUR 22.8 million in
the previous year.
Motor
Gross premium for the motor line grew by 16.9% to EUR
3,197.2 million (EUR 2,734.7 million). The loss ratio climbed
to 75.4% (66.5%). The underwriting result closed at EUR
-75.9 million (EUR 31.3 million). An amount of EUR 46.3 mil-
lion (EUR 209.1 million) was allocated to the equalisation re-
serve and similar provisions.
Aviation
Gross premium income fell by 2.1% to EUR 315.5 million
(EUR 322.4 million). The loss ratio climbed to 55.8% (46.3%).
The underwriting result closed at EUR 43.4 million (EUR 65.4
million). An allocation of EUR 16.1 million (EUR 38.0 million)
was made to the equalisation reserve and similar provisions.
Marine
The gross premium volume for the marine line grew by
18.2% to EUR 543.8 million (EUR 459.9 million). The net loss
ratio increased to 62.9% (55.9%). The underwriting result
stood at EUR 30.3 million (EUR 31.9 million). An amount of
EUR 41.6 million (EUR 25.5 million) was allocated to the
equalisation reserve and similar provisions.
Aviation
-
6,227,938
622,690
Development of an internal
position paper and inclusion of
further ESG criteria, on target
Exclusions further tightened,
overachieved
Expansion of data recording for relevant environ-
mental aspects to at least 75% of the global
workforce. The assessed locations are to become
100% climate-neutral
Reduction of greenhouse gas emissions at the
Hannover location by 25% per employee (base year
2019)
Goal tightened: reduction of the carbon footprint
(corporate bonds, covered bonds, equities) by 30%
by 2025 (base year 2019)
No underwriting of facultative new business in
coal-fired power plants or mines for thermal coal
Phased withdrawal according to step-by-step plan
- completion of the evaluation phase and beginning
of the implementation phase; complete withdrawal
by 2038
Increase of 60% in the facultative premium volume Increase on the planned scale
for renewable energies
not achieved, under observa-
tion
Ongoing, on target
Cross-cutting goal, ongoing
Status 31.12.2021
Increasing transparency around greenhouse gas
emissions at the worldwide locations
Reducing greenhouse gas emissions at the Han-
nover location
Asset management: reducing the CO2 load in the
asset portfolio
No new business in the insurance of individual risks
in coal-fired power plants or mines for thermal coal
Reducing the CO2 load in connection with coal-fired
power plants or mines for thermal coal in obligatory
insurance portfolios
Annual reduction on target
Advancing a global energy transition through the
reinsurance of renewable energy sources
Definition of measures to reduce emissions,
enhance transparency, increase adaptability and
mitigate the impacts of climate change in the action
fields
Target indicator by 2023
Supporting the goals of the Paris Agreement on
climate change
Goal
M 41
Environmental matters: Selected goals
75
Hannover Re | Annual Report 2021
Changing general framework conditions, increasing values
and hence a greater need for protection, combined with the
transition to a net zero greenhouse gas economy - inter alia
in connection with the EU Action Plan for Financing Sustain-
able Growth and the European Green Deal -, will bring new
business opportunities. Such opportunities will open up, for
example, through an expansion of parametric covers, growth
in natural catastrophe business and further solutions for mit-
igation of/adaptation to climate-related risks or increased
premiums in the renewable energy sector.
Opportunities
Since 2020 Hannover Re has been a signatory to the UN Prin-
ciples for Responsible Investment (UN PRI).
Not only that, the implementation of the best-in-class invest-
ment approach that was completed in 2019 makes possible
ongoing monitoring of the existing portfolio's sustainability
quality.
In addition to our negative screening, we are increasingly
adding to our portfolio sustainable investments that support
the transformation towards a resource-efficient economy.
These include, for example, infrastructure assets such as re-
newable energies or clean transportation as well as dedicated
impact funds. Our goal is to increase the volume by at least
10% by the end of 2023 compared to the end of 2020.
In its investments, too, Hannover Re is aiming to consistently
reduce its carbon footprint. We use concrete, climate-related
exclusions for this purpose and exclude from our investing
activities, for example, companies that generate more than
25% of their revenues from the mining of or power genera-
tion from thermal coal or extract oil through the exploitation
of oil sands. In the year under review we adopted interim
goals for our net zero emissions target by the year 2050. The
focus is on progressive decarbonisation of the asset portfolio.
We shall do this, in the first place, by reducing the carbon
footprint (Scope 1 and 2) of our assets under own manage-
ment from the areas of corporate bonds, covered bonds and
equities by 30% by the year 2025, compared with the base
year of 2019. Our decarbonisation efforts are guided by an
external "carbon risk rating" that gives us an extensive over-
view of our investment portfolio's carbon footprint.
Promoting the development of actuarial methods for Active involvement in and financial sponsorship of
the assessment of risks from natural perils and
various market initiatives and events
climate change
4,996,983
Valid evaluation of the figures
not possible due to the
ongoing pandemic
Concept approved by the
Executive Board, on target
Qualified and motivated people are at the heart of a compa-
ny's business activities. Growing importance is attached to
sustainability-related aspects in all phases of their employ-
ment. Most notably, the demographic shift in industrial coun-
tries is leading to intensified competition for well-qualified
junior staff. It is evident that members of Generations X, Y
and Z are especially likely to consider not only monetary as-
pects when it comes to choosing their employer. Other as-
pects move front and centre, such as adherence to principles
of responsible corporate governance, measures to realise
sustainable development in the core business, a company's
reputation, culture and work atmosphere, compatibility of
work and family life, the availability of development and ca-
reer opportunities and other additional benefits - summed up
as the "total reward". On top of this, the Covid-19 pandemic
continued to present companies around the world with spe-
cial challenges. At the same time, existing trends such as mo-
bile working and virtual/hybrid meetings gained added im-
petus.
672,932
238,500
188,787
52,685,867
44,864,195
120,597
120,597
880,608
880,608
630,511
630,511
1,258,000
1,100,000
2,889,716
Employee matters
2,731,716
2,250,000
39,550,449
33,704,668
326,864
346,509
3,714,568
3,204,212
3,332,731
2,498,571
Hannover Re | Annual Report 2021
76
As a service provider in the insurance industry, Hannover Re
operates in a highly specialised environment and at the same
time finds itself faced with the framework conditions de-
scribed above. A risk could arise if vacancies cannot be filled
quickly enough or candidates of the necessary quality cannot
Impacts on our operations and
impacts of our operations
The Covid-19 pandemic, the direct and indirect effects of
which affected Hannover Re and its employees, among oth-
ers, was a crucial factor as in the previous year. For informa-
tion about the impacts on the business development please
see the section of the same name. For information about the
impacts on the risk management systems please see the "Op-
portunity and risk report” in the combined Group manage-
ment report.
Employees are part of a company and part of social structures
outside that company. All measures taken strengthen
Hannover Re's position on the labour market while at the
same time having external implications. For this reason, we
have chosen not to consider the impacts separately below.
3,000,000
510
0
2,317
2,213
58
Development of the individual lines of
business
The following section describes the development of the vari-
ous lines of business. The cooperation and exchange of busi-
ness between Hannover Rück SE and E+S Rückversicherung
AG was reorganised with effect from the beginning of the
2014 financial year and slightly adjusted in the 2019 financial
year. Since 2014 a quota share retrocession from Hannover
Rück SE to E+S Rückversicherung AG has been maintained in
property and casualty reinsurance.
Hannover Rück SE: Breakdown of gross premium
by individual lines of business
25,000
20,000
14,640.
19,217
18,073
in EUR million
2,937
M 38
21,941
4,015
2,992
315
544
15,000
2,410
379
3,313
13,292
M 43
Social matters: Selected goals
79
Hannover Re | Annual Report 2021
We see opportunities in particular in the context of the con-
tinued protection gap existing between economic and in-
sured values and on the basis of changing requirements in
the life sector. Examples in property and casualty reinsurance
include greater penetration of emerging markets, new/addi-
tional solutions to protect against or mitigate the impacts of
natural disasters or extreme weather events, crop insurance
products, parametric covers or protecting the transportation
of medicines/vaccines. In life and health reinsurance, exam-
ples similarly include the cultivation of new markets as well
as innovative insurance solutions connected with changing
demographics, special insurance solutions for new forms of
community, service offerings for seniors, digitalisation and
fitness trackers.
In our insurance business we encourage the expansion of
products in response to climate change, such as weather and
energy efficiency insurances, and we also contribute to soci-
etal development in structurally deprived regions by deliver-
ing insurance solutions in areas such as microinsurance and
agricultural risks. In this way, we enable people with scant
financial means to protect themselves against fundamental
risks such as natural disasters or crop failures. Furthermore,
we are taking an active part in the development of index-based
disaster finance concepts that guarantee rapid financial assis-
tance for countries in Africa, Asia and South America in the
event of natural disasters.
A budget for investments in dedicated impact funds was set
up back in 2019. The primary objective here is to achieve
appreciable improvements through the broadest possible
coverage of the United Nations Social Development Goals
(SDGs), inter alia in the fields of food security and nutrition,
education, health and well-being, ending poverty, climate ac-
tion etc. We held 15 of these specially focused funds with a
volume of EUR 33.5 million in our portfolio as at 31 Decem-
ber 2021. In addition, we invest in renewables both through
funds and direct infrastructure investments as well as in sus-
tainable forest and agriculture funds.
Investments
In life and health reinsurance we assist primary insurance
partners around the world with our expertise and power of
innovation in the development, launch and delivery of rein-
surance solutions. These include life and annuity insurance
products, solutions for critical illness, disability and long-
term care as well as in some instances insurance products
containing wellness and/or lifestyle components. Many of
these solutions address special needs of end consumers or
target groups that have hitherto not been adequately met by
existing standardised products on account of specific re-
quirements or challenges.
Insurance business
Goal
Opportunities
Further expanding insurance protection for
emerging and developing countries in relation to
extreme weather events and natural disasters in
property and casualty reinsurance
Measurable expansion in
progress, on target
Expanding insurance protection for previously
inadequately insured population groups in life and
health reinsurance
Supporting our primary insurance partners with the
(further) development of sustainable insurance
solutions in life and health reinsurance
Target indicator by 2023
Expansion of NatCat aggregates in emerging and
developing countries to close the protection gap
Discussion and review of at least five programmes
and initiatives
Premium growth in developing and emerging
countries
Status 31.12.2021
KPI under development, initial
application based on 2022
data
Achieved
The trust of stakeholders is a vital prerequisite for entrepre-
neurial success. With this in mind, we cultivate an active on-
going dialogue and report regularly on ESG-related topics.
This is done, inter alia, through the present combined non-fi-
nancial information statement as well as an annual sustaina-
bility report, into which we have integrated the United Na-
tions Global Compact (UNGC) Progress Report since 2020.
Expanded reinsurance of longevity risks, especially Measurable expansion in
outside the United Kingdom
Integrating ESG criteria into the underwriting policy Approval and adoption of an internal framework
for the facultative reinsurance department
Asset management: excluding issuers that violate
ESG principles
Expanding sustainable insurance solutions to
mitigate the impacts of climate disasters and natural
catastrophes
Impacts of our operations
Dialogue
Selection process for manag-
ers overhauled, on target
Combined management report
certain developments in the world of work that had already
begun in prior years. These include, for example, greater
combination of an office workspace with remote working as
well as working time models tailored to the employee's indi-
vidual situation. These changes are increasingly becoming an
integral component of a state-of-the-art, agile working envi-
ronment and enhance the company's attractiveness on the
labour market as well as the satisfaction, loyalty and perfor-
mance readiness of the workforce. We launched a project ex-
ploring the topic of new worlds of work in the year under re-
view to address this development.
Opportunities
We link all measures to the possibility of recruiting, retaining
and optimally fostering the best employees on the market.
Target indicator by 2023
Conceptual design and further refinement of
powerful branding and recruitment systems
Adoption of a Global Mobility Guideline
Alignment of our (ongoing) training activities with
the values and core competencies of Hannover Re
and expanded reporting on the worldwide pro-
gramme of continuing training
Optimisation of Group-wide talent reviews with a
focus on development planning
Promoting the health and performance of employees Expansion of programmes to promote health and
around the world
Increasing diversity on all managerial levels,
especially in relation to women
wellness by at least 10%
Gender-neutral new appointments/replacements
(50/50) for all vacant leadership positions on all
managerial levels worldwide
Enhancing equal opportunities through measures to Worldwide programme of mobile working
support the compatibility of career and family
Status 31.12.2021
M 42
Roadmap for employer
positioning under develop-
ment, on target
Achieved
Implementation of a new
global learning management
system initiated, on target
Implementation of a global
leadership development
programme and roll-out under-
way, on target
Concept under development
Asset management: expanding investments that
support the sustainable transformation
Achieved
Social matters
Access to insurance enables people to protect themselves
against fundamental personal risks and against adverse
changes in their environment. Such protection against threats
to their livelihood is especially important in countries where
social security systems are weak or not present at all. Yet it is
here, in particular, that the comparatively high vulnerability
of the population contrasts with what is still overall a minimal
supply of insurance solutions tailored to the relevant finan-
cial, social and cultural requirements.
In addition to protecting against personal life risks, insurance
solutions also offer protection for economic activities. Conse-
quently, they form a vital basis not only for the economic de-
velopment of national economies but also for a transition
from an informal economy – in which the vast majority of em-
ployees and their families enjoy scarcely any social protection
- to a formal economy.
Impacts on our operations
A latent reputational risk exists in connection with the mate-
rial topic of "Dialogue" as a result of potentially unclear ex-
ternal communication. The material topic of "Sustainable
78
Hannover Re | Annual Report 2021
protection" brings together various activities that support the
transformation to a sustainable world (e.g. expansion of sus-
tainable insurance services or the general provision of solu-
tions for previously inadequately insured risks). The associat-
ed underwriting risks are to be considered in the risk
assessment; reference is made to the "Opportunity and risk
report" in the combined Group management report. Risks
above and beyond this are not anticipated. We would similar-
ly refer to the "Opportunity and risk report” regarding im-
pacts connected with Covid-19.
Signing the Principles for Responsible Investment
Expanding corporate citizenship
As long as 20 years ago, human rights were one of the four
subject areas defined in the United Nations Global Compact
in which companies commit to behave in a responsible man-
ner. The requirements placed on companies in relation to hu-
man rights were fleshed out in greater detail in 2011 through
the endorsement of the UN Guiding Principles on Business
and Human Rights by the UN Human Rights Council. Compa-
nies are urged to implement adequate safeguards in order to
avoid human rights risks within their entrepreneurial scope of
influence. Hannover Re issued a corresponding policy state-
ment in the year under review.
Measurable expansion by 2023
With regard to our activities in insurance business, we would
refer the reader to the remarks made in connection with the
aspect "Environmental matters". Based on our risk analysis,
we identified the greatest risk of potentially detrimental im-
pacts on human rights in the following, particularly exposed
areas: large construction projects (incl. dams, oil and gas pro-
jects, mines and pipelines), mining operations as well as com-
panies connected with internationally banned weapons. The
facultative division's ESG manual, in which the facultative
underwriters around the world receive training, provides for
a screening process in order to identify and decline transac-
tions that entail an inherent risk of severe breaches of funda-
mental human rights.
Investments
With regard to our activities in asset management, we would
refer the reader to the remarks made in connection with the
aspect "Environmental matters" and the negative screening
process described there. This is based on the Ten Principles
of the United Nations Global Compact (UNGC); six of these
Principles explicitly address the issues of human rights and
labour standards. Our investment guidelines also exclude is-
suers involved in the development and proliferation of inter-
nationally banned weapons.
Opportunities
We do not see any particular opportunities in connection with
this non-financial aspect.
Definition of measures in conformity with the United
Nations Guiding Principles on Business and Human Rights
M 44
Status 31.12.2021
Cross-cutting goal, ongoing
Fighting corruption and bribery
Corruption, as the abuse of entrusted power for personal
gain, has numerous negative repercussions. On the political
and administrative level, corruption influences decision-mak-
ing and the execution of approved measures in favour of indi-
viduals or parts of the population. This erodes trust in the
state and can become a threat to state legitimacy as well as to
democratic institutions. On the economic level, corruption
distorts competition and causes business transactions to be-
come more expensive while preventing the efficient use of
resources. The fight against corruption and bribery forms
part of our compliance management.
Hannover Re | Annual Report 2021
81
Impacts on our operations
Compliance risks may become relevant in connection with
the non-financial aspect "Fighting corruption and bribery".
At the same time, integrity and lawful conduct are directly
correlated with a company's reputation and establish the ba-
sis for the trust placed in such company by business partners,
investors, shareholders and the broader public and hence
also the foundation for its success and competitiveness over
the long term. In view of the business operations and imple-
mented structures, no direct and/or severe risks were identi-
fied. For further information the reader is referred to the "Op-
portunity and risk report" in the combined Group management
report.
Impacts of our operations
Governance and compliance
Any form of unlawful or corrupt behaviour inflicts considera-
ble harm on society and impedes free and fair competition.
Companies in the financial sector have an important role to
play when it comes to prevention and execution. Hannover
Re has an extensive Governance and Compliance Manage-
ment System and adopts the "three lines of defence" ap-
proach. For details of the implemented structures please see
Fighting corruption and bribery: Selected goals
Goal
Ensuring that the organisation is compliant
the "Opportunity and risk report" in the combined Group
management report.
Code of Conduct
Hannover Re has adopted a company-wide Code of Conduct
that is publicly accessible on its website. The Code of Con-
duct makes it clear that active and passive corruption will not
be tolerated. Additionally, it explicitly references the prohibi-
tion of money laundering and other criminal activities and
contains specific instructions on appropriate behaviour for
the avoidance and disclosure of conflicts of interest, for the
granting and acceptance of benefits, gifts and invitations, for
the arrangement of donations and sponsorships as well as
with respect to sideline activities and involvement in other
companies and business transactions. As a listed company,
we make our employees aware at the start of their employ-
ment of the need to observe rules on insider trading and, as
warranted, to respect blocking periods for share trading.
Opportunities
No particular opportunities are identified in connection with
this non-financial aspect.
M 45
Insurance business
of 31 December 2021 100% of core IT suppliers have com-
mitted to comply with the Code of Conduct for Suppliers or
equivalent rules.
Target indicator by 2023
Living up to duties of care in matters of
human rights
Signing
Increase of 20% in the existing budget by 2023
progress, on target
Revising and integrating
further exclusions, overa-
chieved
Ongoing before inclusion in
the portfolio and half-yearly
Conceptual preparation
completed, on target
Achieved
Concept approved by the
Executive Board, on target
Respect for human rights
Identifying and fostering high-potentials and
assuring successors for key positions
Impacts on our operations
Reputational and compliance risks could materialise in con-
nection with the non-financial aspect. In view of our business
operations, no direct and/or severe risks were identified.
Please see the "Opportunity and risk report” in the combined
Group management report for further information.
The UN Guiding Principles on Business and Human Rights
and the National Action Plan of the German Federal Govern-
ment also have a bearing on Hannover Re. In the year under
review, under the leadership of the sustainability officers and
with the involvement of Risk Management and Compliance
(second line of defence) as well as participants from the first
line of defence, an analysis was conducted with an eye to the
risks for rightsholders; particularly exposed business areas
were identified and prioritised. Consideration also began to
be given in the year under review to requirements connected
with the Supply Chain Due Diligence Act (LkSG), which en-
ters into force in 2023.
Screening of the defined portfolio, regularly
As a signatory to the United Nations Global Compact (UNGC),
we release an annual progress report on the Ten Principles. In
addition, we publish statements regarding the Modern Slav-
ery Act 2015 (United Kingdom) and the Modern Slavery Act
2018 (Australia) on our website.
As an internationally operating reinsurer, we consider im-
pacts in relation to potential human rights violations from the
perspective of the rightsholders.
Employees
In view of the fact that our employees are highly skilled work-
ers and we attach the utmost priority to compliance with ap-
80
Hannover Re | Annual Report 2021
Combined management report
plicable national, collective bargaining and company regula-
tions, we do not see any risk of serious violations of human
rights. That said, issues such as discrimination, equal oppor-
tunities and oppression require constant attention and moni-
toring. We manage these issues in the context of our human
resources management structure. For further information the
reader is referred to the remarks in connection with the as-
pect "Employee matters". We protect employee data through
rigorous compliance with statutory data protection require-
ments.
Suppliers
Hannover Re does not have a traditional upstream or down-
stream supply chain of raw and auxiliary materials or pro-
duced goods as is the case with, for example, manufacturing
companies. Nevertheless, we too source a broad range of
goods and services. Hannover Re has adopted its own Code
of Conduct for Suppliers. This encompasses compliance with
legal and ethical provisions, respect for human rights includ-
ing observance of the core labour standards of the Interna-
tional Labour Organization (ILO) and adherence to all appli-
cable requirements in the areas of health, safety and
environmental protection.
As far as human rights due diligence is concerned, we see the
greatest risk in connection with the procurement of IT hard-
ware. For this reason, we have adopted an IT Procurement
Guideline that is valid Group-wide and contains consistent
rules governing the purchasing of IT products throughout the
organisation. It provides for all bottleneck, leverage and stra-
tegic suppliers to be subject to monitoring. Recognition of
the Code of Conduct for Suppliers or submission of the sup-
plier's own more extensive code of conduct is mandatory. As
Respect for human rights: Selected goals
Goal
Impacts of our operations
Cultivating and developing global mobility
Supporting the lifelong learning of employees
around the world
The issue of Covid-19 is inextricably linked to the topic of
employee health. Hannover Re's interdisciplinary crisis man-
agement team swung into action once the first cases were
reported in Europe and has since initiated a range of meas-
ures in close consultation with the Executive Board. These
are communicated on a Group-wide basis. In order to avoid
infections and help slow the spread of the virus, the technical
capabilities and necessary capacities were put in place within
a very short space of time to enable the global workforce to
work from home. At the Hannover location, since the onset of
the pandemic Hannover Re has voluntarily topped up in full
missing hours for employees with children under 12 or spe-
cial needs children to the individual working time, even if
work was not possible or only partially possible as a conse-
quence of the crisis situation. As a further step, even greater
flexibility was introduced for daily working hours so as to op-
timally support the members of staff.
Goal
86
98
Combined management report
85
Hannover Re | Annual Report 2021
The Taxonomy-non-eligible investments are
according to the following formula: (non-Taxonomy-eligible
investments/(investments under own management - govern-
ment bonds)) x 100
calculated
Taxonomy-non-eligible investments = 18.12%
The Taxonomy-eligible investments are calculated according
to the following formula: (Taxonomy-eligible investments/
(investments under own management - government bonds))
x 100
Taxonomy-eligible investments = 7.55%
-
The proportion of undertakings not subject to mandatory re-
porting under the NFRD is calculated according to the follow-
ing formula: (investments in undertakings not subject to man-
datory reporting under the NFRD/(investments under own
management government bonds)) x 100
Proportion of undertakings not subject to mandatory
reporting under the NFRD = 73.63%
-
The proportion of derivatives is calculated according to the
following formula: (total derivatives/(investments under own
management government bonds)) x 100
Proportion of derivatives = 0.70%
The proportion of government bonds is calculated according
to the following formula: (government bonds/investments
under own management) x 100
Proportion of government bonds = 35.09%
It is our assumption that with increasing data availability our
KPIs will change in the coming reporting periods and we
would again point to the considerable lack of reliable data.
This initially creates a picture of the actual Taxonomy-eligibil-
ity of our investments which is heavily restricted in its infor-
mation value.
Results for the 2021 financial year
As far as all other asset classes are concerned, we do not yet
see any possibility to disclose investments as Taxonomy-eligi-
ble within the scope of the regulatory framework for the first
reporting year. All investments in respect of which the issuing
country is outside the EU or for which we have received reli-
able information from our data provider to the effect that they
are not subject to mandatory reporting under the NFRD are
definitively not in the scope of the KPIs for Taxonomy-eligibil-
ity. In the absence of concrete data on conducted economic
activities and the obligation to report under the NFRD, we
disclose all other investments as Taxonomy-non-eligible in
the first reporting year if they are within the EU.
Hannover Re | Annual Report 2021
+
84
We consider all investments connected with the purchase and
ownership of real estate to be definitively Taxonomy-eligible.
We include here investment property, real estate funds and
mortgage loans for private households. In addition, sustaina-
ble bonds or debentures that finance a specific, Taxonomy-
eligible activity (e.g. the construction of infrastructure pro-
jects such as wind farms) are included in the numerator as
Taxonomy-eligible, even if the issuers are not subject to
mandatory reporting under the NFRD.
The European Commission has made it clear that only con-
crete information published by undertakings and investment
funds in the context of non-financial reporting may be used to
screen Taxonomy-eligibility. Given that this has to be dis-
closed for the first time in the current reporting period, data
availability is heavily restricted. In the absence of these data,
only a minimal part of our investment portfolio can therefore
be considered as Taxonomy-eligible for the 2021 financial
year.
These items are therefore out of scope for the calculation of
the numerators (as well as the denominators in the case of
government bonds) for the KPIs, but they are disclosed indi-
vidually for classification of the results.
Opportunity and risk report
• All derivatives are to be excluded from the numerator.
All exposures to undertakings not subject to mandatory
EU non-financial reporting under the NFRD are to be
excluded from the numerator.
Risk report
Hannover Re has capital resources in excess of the defined strategic threshold. The capital
position is reviewed on an ongoing basis against the backdrop of possible changes in the risk
profile and the impacts of the Covid-19 pandemic.
Average compliance score corresponding at a
minimum to the targeted maturity level
Hannover Re | Annual Report 2021
Limits per transaction
Limits for catastrophe risks
Limit per risk category
Strategic risk limits
M 46
Investment and Underwriting Guidelines
Exposure Management Guideline
Management Guideline
Risk and Capital
Risk Strategy
Corporate
Strategy
Risk management through multiple levels of limits
We manage our total enterprise risk such that we can expect
to generate positive IFRS Group net income with a probability
of at least 90% p.a. Our solvency ratio must amount to at
least 180%, although 200% is already considered to be a
The risk strategy, risk register and central system of limits
and thresholds - as integral components of our Risk and
Capital Management Guideline - are reviewed at least once a
year. In this way we ensure that our risk management system
is kept up-to-date.
8. We ensure the independence of the risk management
function
7. We make balanced use of both quantitative and
qualitative methods.
5. We fulfil the requirements of rating agencies.
6. We act in light of materiality and proportionality
considerations.
4. We fulfil regulatory requirements.
3. We promote an open risk culture and the transparency
of our risk management system.
2. We integrate risk management into value-based
management.
1. We monitor adherence to the risk appetite set by the
Executive Board.
The risk strategy is the core element in our handling of oppor-
tunities and risks. It specifies more closely the goals of risk
management and documents our understanding of risk. We
have defined eight overriding principles within the risk
strategy:
In the year under review Hannover Re's Group strategy
"Striving for sustainable outperformance" was adopted for
the 2021-2023 strategy cycle. Our strategy is based on the
interplay between solid fundamentals, performance drivers
and performance enablers. Robust governance and strong
risk management, integrated compliance and corporate so-
cial responsibility establish the foundation for our business
operations.
Strategy implementation
Our risk management system constantly monitors newly added and changing risks and is able
to respond flexibly to changes in internal and external factors.
•
All government bonds are to be excluded from the
calculation of the numerator and denominator.
•
•
The Delegated Act supplementing Art. 8 of the EU Taxonomy
Regulation ([EU] 2021/2139) currently focuses exclusively
on activities that contribute to mitigating or adapting to cli-
mate change. In this context, both the investments of the
Hannover Re Group and our reinsurance solutions in property
and casualty business fall within the scope of consideration.
Article 8 of the EU Taxonomy Regulation ([EU] 2020/852)
requires reporting entities pursuant to §289 of the German
Commercial Code (HGB) to publish information on how and
to what extent their activities are consistent with economic
activities that qualify as environmentally sustainable under
the EU Taxonomy. The Taxonomy is a central element of the
EU Action Plan for Financing Sustainable Growth and is in-
tended - as a unified classification system - to foster trans-
parency on sustainability in the financial market.
Disclosures under Article 8 of the EU Taxonomy Regulation
Combined management report
Hannover Re | Annual Report 2021
82
Status 31.12.2021
Ongoing
Combined management report
be appointed. At the same time, companies benefit directly
from motivated and high-performing employees.
A Talent Management initiative sponsored by the Chief Exec-
utive Officer was launched in 2020. The goal is to attract tal-
ented new people and retain them at the company, to opti-
mally deploy, foster and develop them at all locations and to
create a work environment that makes Hannover Re the em-
ployer of choice. In addition, the initiative envisages meas-
ures to promote global mobility, the optimisation of relevant
support processes and systems as well as a greater interlink-
ing of worldwide human resources activities.
For information on operational risks that can arise in connec-
tion with or independently of the activities of the workforce,
the reader is referred to the "Opportunity and risk report" in
the combined Group management report. This includes busi-
ness interruption risks and the risk of cyber attacks in con-
nection with Covid-19 as well as countermeasures.
For information about the requirements placed on the spe-
cialist qualifications and personal reliability (fit & proper crite-
ria) of persons in key positions, we would refer to the Solven-
cy and Financial Condition Report of Hannover Rück SE 2020
from page 33 onwards.
Hannover Re employed 3,346 members of staff (previous
year: 3,218) Group-wide at the reference date of 31 Decem-
ber 2021.
Development opportunities
Hannover Re operates in a knowledge-intensive industry with
a high level of specialisation. Continuous and appropriate
(further) training of employees serves to assure the high qual-
ity standard of services and a positive perception of the com-
pany. At the same time, the programme of further training
enables employees to continue their personal growth and it
promotes life-long learning. In support of our approach to
talent management, our goal is to align ongoing training
activities more closely with the values, competencies and
leadership fundamentals and to extend reporting to addition-
al locations. A global leadership development programme
"LEAD" was designed in the year under review and work on
its implementation began. Furthermore, a global assignment
policy was approved and we set about expanding the internal
job market to all locations around the world.
The Covid-19 pandemic did not significantly restrict the avail-
able training opportunities because they were converted to
virtual solutions at short notice.
Health and wellness
The performance capability and health of our employees are
essential prerequisites for sustainable development of our
business. Given that they work for a service provider, our staff
members do not engage in activities that expose them to par-
ticularly high risk. Nevertheless, the transformation in the
world of work, the need for efficiently structured work pro-
cesses and a constant pressure for change can lead to re-
duced productivity and physical and/or psychological disor-
ders and hence to direct economic impacts on the company
as well as social implications for the employees concerned,
their private sphere, their colleagues and the social welfare
systems.
With a view to protecting the health of the workforce, the ap-
plicable employment protection legislation as well as require-
ments relating to ergonomic workplace design are systemati-
cally observed and reviewed worldwide. Instruction in health
and safety at the workplace is provided regularly. In addition,
wellness among staff is actively encouraged through health
promotion measures; these are in place worldwide, but are
tailored to local needs in each case.
Diversity and equal opportunities
Supporting fair working conditions as well as a healthy and
non-discriminatory working environment is part of Hannover
Re's corporate culture. The Executive Board recognised the
Core Labour Standards of the Initial Labour Organization
(ILO) for 100% of the workforce in the year under review.
Hannover Re does not tolerate discrimination or bullying in
any form whatsoever and has enshrined this in a compa-
ny-wide Code of Conduct. Furthermore, the right to form em-
ployee representative bodies and to engage in collective bar-
Hannover Re | Annual Report 2021
77
gaining negotiations over working conditions is recognised;
employees are neither advantaged not disadvantaged on ac-
count of their membership of a trade union or employee rep-
resentative body.
Hannover Re and its Executive Board are committed to equal
opportunities in relation to diversity criteria and on all hierar-
chical levels. A current focus of the measures is on support-
ing women in leadership positions. Of the 157 senior execu-
tives around the world, 32 are women; this is equivalent to a
proportion of 20.4%. Our goal is to increase diversity on all
levels of management.
Compatibility of the professional and private sphere is closely
correlated with issues of diversity and equal opportunities. In
the year under review the Covid-19 pandemic accelerated
Employee matters: Selected goals
Reinsurance solutions can serve the purpose of climate
change adaption if they protect against climate-related natu-
ral perils such as flood or storm damage. Such protections
have always been a central theme in our business activities.
The worldwide reinsurance industry increases the resilience
of its customers in the face of natural catastrophes by com-
pensating those affected. It facilitates recovery after the oc-
currence of damage and helps to safeguard the livelihood of
people and businesses. It also ensures the continuation of
major projects and the development of new technologies,
thereby sustainably fostering economic growth. In this sense
comprehensive reinsurance solutions support adaptation to
the risks associated with climate change. In addition, our
long-standing experience in risk assessment and risk man-
agement facilitates the early detection of new and emerging
risks and the development of appropriate risk transfer solu-
tions. Our investments can similarly fall under the Taxonomy
if they serve the financing of Taxonomy-aligned sustainable
economic activities and hence support them. As a prudent
investor with a long-term horizon, we are committed to the
responsible management of our investments inasmuch as we
have deliberately incorporated ESG criteria into our invest-
ment policy since 2012.
In the context of our sustainability strategy we pursue various
goals with a view to fostering sustainability in both our under-
writing business and our investment portfolio. For more de-
tailed information on climate-related goals and measures we
would refer to the section "Environmental matters". We also
provide our stakeholders with information about the latest
developments through our website and our annually pub-
lished sustainability report.
Taxonomy key performance indicators
(KPIs)
For the financial years 2021 and 2022 reinsurance undertak-
ings are required by the Delegated Act ([EU] 2021/2139) to
disclose the following KPIs.
Our investments under own management similarly serve as
the point of departure for determining Taxonomy-eligibility.
The Delegated Act ([EU] 2021/2139) defines under Art. 7 (1)
to (3) the following exclusions when calculating the KPIs.
We define as Taxonomy-eligible investments that are used to
finance economic activities described in the Taxonomy or
linked to them. We compare them with our investments under
own management for the purpose of our KPIs. The invest-
ments under own management are arrived at by deducting
from our total investments the cash and cash equivalents and
any funds withheld/contract deposits. The latter refers to
cash or securities deposits in connection with technical provi-
sions to which we do not have any direct access. The data
used to establish the KPIs are derived from our asset manag-
er's internal accounting systems. External data from a service
provider are only used to determine the proportion of under-
takings that are not subject to mandatory reporting under the
NFRD, although they account for only a small part of our liq-
uid investment portfolio.
Investments
The Taxonomy-non-eligible premiums are calculated accord-
ing to the following formula: (sum of not described and Tax-
onomy-non-eligible lines of business in GWP/Total GWP in
property and casualty reinsurance) x 100
Taxonomy-non-eligible premiums = 37.49%
The Taxonomy-eligible premiums are calculated according to
the following formula: (sum of Taxonomy-eligible lines of
business in GWP (gross written premiums)/Total GWP in
property and casualty reinsurance) x 100
Taxonomy-eligible premiums = 62.51%
Given that life and health reinsurance is explicitly excluded
from consideration, our disclosures encompass only activities
in the entire book of property and casualty reinsurance. In
this context our KPIs cover roughly 98% of our premiums
(excluding Inter Hannover [No. 1] Ltd. and Argenta Holdings
Ltd.).
Results for the 2021 financial year
Taxonomy-eligibility enables us to identify those lines of busi-
ness to which the technical screening criteria must be applied
from the 2023 financial year onwards in order to determine
sustainability within the meaning of the Taxonomy. Overall,
we expect the alignment percentage of our premiums to be
significantly lower than the eligibility percentage because the
latter only defines the closer scope of consideration.
As part of our natural catastrophe (NatCat) monitoring, all
treaties with relevant covers are flagged in our internal sys-
tems. With the exception of earthquake, we consider all natu-
ral perils covered by us to be climate-related (in particular
including weather-related and bush fire damage, for exam-
ple). A NatCat-relevant treaty that covers other natural perils
beyond earthquake thus signals the existence of a climate-rel-
evant premium in the respective line of business. In order to
verify this finding we have also qualitatively established a
specific treaty with climate-relevant covers for each identified
line of business. Subject to further specifications by the legis-
lator, we classify all other lines of business that do not include
direct climate-relevant covers or are not described in the Del-
egated Act ([EU] 2021/2139) as Taxonomy-non-eligible.
In reinsurance business we consider all premiums in one of
the lines of business under Solvency II described in the Dele-
gated Act ([EU] 2021/2139) to be Taxonomy-eligible if direct
covers of climate-related natural perils can be established.
Reinsurance business
Recruiting, identifying, developing and retaining
performance-driven employees according to
requirements
83
Taxonomy eligibility defines the proportion of our economic
activities that is described in the Taxonomy and for which
technical screening criteria have been developed. These cri-
teria determine the substantial contribution to the set envi-
ronmental objectives, prevent harm to other environmental
objectives and are intended to ensure adherence to social
minimum standards. The proportions of the economic activi-
ties established using the screening criteria are aligned with
the Taxonomy and must be reported for the first time for the
2023 financial year. Currently, we take the view that the infor-
mation value of the KPIs is still too slight to incorporate them
as an effective steering tool into our business decisions and
product development processes.
Bearing in mind the FAQ published by the EU on 20 Decem-
ber 2021 and with an eye to consistent and comparable re-
porting, we are already using for this year the definition of the
denominator that is to apply to financial years from 2023 on-
wards. Therefore, we are comparing the stated figures with
the sum total of our investments under own management.
The proportion of derivatives in the total investments
The proportion of undertakings not subject to mandato-
ry reporting under the Directive 2014/95/EU (Non-Fi-
nancial Reporting Directive - NFRD) in the total
investments
The proportion of government bonds in the total
investments
The proportion of Taxonomy-eligible and Taxonomy-
non-eligible investments in the total investments
•
•
•
Investments
The proportion of Taxonomy-eligible and Taxonomy-
non-eligible premiums in the entire book of property
and casualty reinsurance
•
Reinsurance business
Hannover Re | Annual Report 2021
Target indicator by 2023