Allocation to the equalisation reserve and similar provisions (8.7) -106.4% 136.1 277.6 267.7 340.7
Boards and officers Executive Board Ulrich Wallin Chairman of the Executive Board Hannover Rück SE, Hannover, Germany Chairman of the Executive Board E+S Rückversicherung AG, Hannover, Germany Member of the Board of Management Talanx AG, Hannover, Germany Chairman of the Board of Directors Hannover Life Reassurance Company of America, Orlando, USA Chairman of the Board of Directors Hannover Re (Bermuda) Ltd., Hamilton, Bermuda Chairman of the Board of Directors Hannover Re (Ireland) Designated Activity Company, Dublin, Ireland Chairman of the Supervisory Board International Insurance Company of Hannover SE, Hannover, Germany 1
Sven Althoff Member of the Executive Board Hannover Rück SE, Hannover, Germany Member of the Board of Directors Apollo Syndicate Management Limited, London, United Kingdom Member of the Board of Directors Energi, Inc., Peabody, USA Member of the Board of Directors Integra Insurance Solutions Limited, Bradford, United Kingdom Member of the Supervisory Board International Insurance Company of Hannover SE, Hannover, Germany 1
Jürgen Gräber Member of the Executive Board Hannover Rück SE, Hannover, Germany Chairman of the Board of Directors Hannover Reinsurance Africa Limited, Johannesburg, South Africa Chairman of the Board of Directors Hannover Reinsurance Group Africa (Pty) Ltd., Johannesburg, South Africa Chairman of the Board of Directors Hannover ReTakaful B.S.C. (c), Manama, Bahrain Deputy Chairman of the Board of Directors Hannover Re (Bermuda) Ltd., Hamilton, Bermuda Member of the Board of Directors Hannover Re (Ireland) Designated Activity Company, Dublin, Ireland Member of the Board of Directors Hannover Re Services Japan, Tokyo, Japan Member of the Supervisory Board Talanx International AG, Hannover, Germany 1
Deputy Chairman of the Supervisory Board Talanx Asset Management GmbH, Cologne, Germany 1
Member of the Advisory Board Commerzbank AG, Frankfurt am Main, Germany Member of the Advisory Board Hannover Finanz GmbH, Hannover , Germany Member of the Advisory Board WeHaCo Unternehmensbeteiligungs-GmbH, Hannover, Germany 1 Details of supervisory board memberships within the meaning of § 125 (1) Sentence 5, first half-sentence of the Stock Corporation Act (AktG).
Vienna, Austria Independent Management Consultant Chairwoman of the Supervisory Board Kuchen-Peter Backwaren GmbH, Hagenbrunn, Austria 5
Chairman of the Administrative Board Talanx Finanz (Luxembourg) S.A., Luxembourg 5
Deputy Chairman of the Supervisory Board AmpegaGerling Investment GmbH, Cologne, Germany 5
Deputy Chairman of the Supervisory Board Talanx Reinsurance Broker GmbH, Hannover , Germany 5
Member of the Stock Exchange Council Frankfurter Wertpapierbörse (Deutsche Börse AG), Frankfurt am Main , Germany 5
Member of the Board of Directors Talanx Re (Ireland) Limited, Dublin, Ireland 5
I. Purchased franchises, trademarks, patents, licences and similar rights and assets 66,914 67,745
IV. Provision for bonuses and rebates 2. Less: reinsurance ceded 544 479
II. Current accounts with banks, cheques and cash in hand 352,354 277,499
I. Accounts payable arising out of reinsurance operations 1,037,084 1,200,571 to affiliated companies: II. Miscellaneous liabilities 122,032 395,642 from taxes: for social security: to affiliated companies: G. Accruals and deferred income 4 8
d) Change in the provisions for unearned premiums, retrocessionaires’ share (23,147) 138,492 2. Allocated investment return transferred from the non-technical account, net of retrocession 237,271 328,840 3. Other technical income, net of retrocession – 15 4. Claims incurred, net of retrocession a) Claims paid aa) Gross 8,481,897 10,565,168 bb) Retrocessionaires’ share 2,459,556 4,070,416 b) Change in provisions for outstanding claims aa) Gross (1,074,527) (1,108,181)
bb) Retrocessionaires’ share 190,962 380,917 5. Changes in other technical provisions, net of retrocession a) Net life assurance provision 334,497 (1,017,833)
6. Profit or loss on ordinary activities before tax 1,241,772 1,063,973 7. Taxes on profit and income 288,027 155,681 9. Profit for the financial year 949,232 905,801 10. Profit brought forward from previous year 85,163 2,462 11. Allocations to other retained earnings 395 250,263
Valuation of assets Valuation is carried out in accordance with the provisions of §§ 341 et seq. of the Commercial Code (HGB).
Other intangible assets and goodwill acquired for a consideration are valued at acquisition cost less scheduled amortisation in accordance with the normal operational useful life.
Loans to affiliated companies and loans to enterprises in which the company has a participating interest are valued at the lower of amortised cost or fair value.
Other investments are allocated to fixed assets or current assets and valued at purchase cost less write-downs to the lower fair value in accordance with the requirements of § 341 b of the Commercial Code (HGB). Valuation is made according to the strict or modified lower-of-cost-or-market principle depending on the intended use. Deposits and cash at banks in current accounts, cash in hand, other assets, deposits and accounts receivable arising out of reinsurance operations and other receivables are valued at the nominal amounts. Valuation adjustments are set up for default risks.
From 2010 onwards the run-off result of the previous year’s provision for outstanding claims is calculated by Hannover Re on an accident-year basis and hence appropriately allocated.
The shares of retrocessionaires in the technical reserves are determined on the basis of the reinsurance contracts. Provision is made for bad debts.
The equalisation reserve is set up in accordance with the notes to § 29 of the Regulation on the Presentation of Insurance Company Accounts (RechVersV); the similar provisions are constituted in accordance with § 30 of the Regulation on the Presentation of Insurance Company Accounts (RechVersV). With respect to insurance lines 28 Other property insurance and 29 Other indemnity insurance, separate profit and loss accounts are drawn up only for the fidelity line.
The provision for nuclear plants is calculated in accordance with § 30 (2) of the Regulation on the Presentation of Insurance Company Accounts (RechVersV).
The catastrophe risk provision for pharmaceutical product liability is calculated in accordance with § 30 (1) of the Regulation on the Presentation of Insurance Company Accounts (RechVersV).
The catastrophe risk provision for terrorism is calculated in accordance with § 30 (2a) of the Regulation on the Presentation of Insurance Company Accounts (RechVersV).
The pension commitments are carried in the settlement amount required according to reasonable and prudent business judgement. They are discounted at 4.00% using the average interest rate for the last ten years published by the German Bundesbank pursuant to the Regulation on the Discounting of Provisions (RückAbzinsVO) with an assumed maturity of 15 years. The provision for pensions is calculated according to the projected unit credit method. A rate of compensation increase of 2.50% and pension indexation of 1.86% are assumed. Fluctuation probabilities are determined separately according to age and gender. The benefit adjustment based on surplus participations from insured pension commitments is recognised in an amount of 0.00%. The 2005G standard tables of Dr. Klaus Heubeck are used as a basis for the calculations. With respect to employee -funded pension commitments, the amount of which is determined solely according to the fair value of a claim under a pension insurance policy, valuation is carried out in accordance with § 253 (1) Sentence 3 of the Commercial Code (HGB). For these commitments the settlement amount corresponds to the fair value of the actuarial reserve plus surplus participation.
A provision is constituted for virtual stock options in accordance with actuarial principles on the basis of a recognised financial option pricing model (Black-Scholes Model with the aid of a trinomial tree method). Discounting is carried out pursuant to § 253 (2) of the Commercial Code (HGB) not using risk-free interest rates but with the average interest rates for the last seven years published by the German Bundesbank.
Further accounting policies Transactions booked in foreign currencies are converted to the reporting currency at the applicable monthly exchange rate at the date of entry in the accounts. Assets and liabilities entered in the balance sheet are converted to euros at the average exchange rates on the balance sheet date.
In order to reduce currency risks as far as possible, matching cover is extensively established for liability elements by setting up corresponding asset elements in the different currencies. In relation to specific currencies, foreign currency liabilities are combined with matching foreign currency assets into valuation units on the basis of offsetting opposing changes in value pursuant to § 254 of the Commercial Code (HGB) (portfolio hedges) and the result of currency conversion of these foreign currency items is recognised without regard to the purchase cost method or the imparity principle.
A. Intangible assets 1. Purchased franchises, trademarks, patents, licences and similar rights and assets 67,745 6,820 7,633 1 – 15,059 (224) 66,914
B. III. Other financial investments 1. Shares, units or shares in investment funds and other variable-yield securities 2,087,133 820,778 – 791,907 251 4,033 311 2,112,533 2. Bearer debt securities and other fixed-income securities 15,310,969 6,603,998 – 5,120,972 25,264 29,651 119,277 16,908,885 3. Other loans
Our major shares in affiliated companies and participations are listed below.
We have omitted companies of subordinate economic importance with no material influence on the net assets, financial position or results of operations.
Hannover Rück Beteiligung Verwaltungs-GmbH, Hannover / Germany 100.00 EUR 2,341,925 –
holds 100.00% of the shares in: Hannover Re (Bermuda) Ltd., Hamilton / Bermuda USD 1,237,845 201,363 holds 95.00% of the shares in: Hannover ReTakaful B.S.C. (c), Manama / Bahrain BHD 65,810 4,080
holds 100.00% of the shares in: Hannover Re (Ireland) Designated Activity Company, Dublin / Ireland USD 1,709,897 105,225 holds 100.00% of the shares in: Hannover Life Reassurance Company of America, Orlando / USA USD 333,442 25,033 holds 100.00% of the shares in: Hannover Life Reassurance Bermuda Ltd., Hamilton / Bermuda USD 391,271 34,588 holds 100.00% of the shares in: Hannover Life Re of Australasia Ltd., Sydney / Australia AUD 480,863 2,466
Hannover Euro Private Equity Partners III GmbH & Co. KG, Cologne / Germany 40.98 EUR 633 11,738 holds 100.00% of the shares in: HEPEP III Holding GmbH, Cologne / Germany EUR 2,627 1,618
FUNIS GmbH & Co. KG, Hannover / Germany 100.00 EUR 75,123 3,875 holds 100.00% of the shares in: Glencar Underwriting Managers, Inc. 1, Chicago / USA USD 5,985 757 holds 100.00% of the shares in: Integra Insurance Solutions Limited 1, Bradford / United Kingdom GBP 2,789 2,748 holds 55.00% of the shares in: HMIA Pty Ltd 1, Sydney / Australia AUD (313) (185)
Leine Investment General Partner S.à.r.l., Luxembourg / Luxembourg 100.00 EUR 550 509 holds 100.00% of the shares in: LI RE, Hamilton / Bermuda USD – –
Hannover Re Global Alternatives GmbH & Co KG, Hannover / Germany 85.00 EUR 41,628 2,852
Hannover Re Euro RE Holdings GmbH, Hannover / Germany 65.00 EUR 886,721 21,602 holds 99.99% of the shares in: HR GLL Central Europe GmbH & Co. KG, Munich / Germany EUR 326,930 4,334
HAPEP II Komplementär GmbH, Hannover / Germany 50.00 EUR 39 3
holds 100.00% of the shares in: Hannover Services (UK) Limited, London / United Kingdom GBP 794 (66)
U FOR LIFE SDN.BHD. 1, Petaling Jaya / Malaysia 60.00 MYR (6,177) (5,487)
As at 31 December 2016 the company held shares in affiliated companies with a book value of EUR 6,014,234 thousand (EUR 6,237,511 thousand). Write-downs of EUR 55 thousand (EUR 2,779 thousand) were not taken on shares in affiliated companies with a book value of EUR 1,390 thousand (EUR 60,164 thousand) because the impairments in question are purely temporary. Based on the assumption that impairments on loans to affiliated companies will not be permanent and are attributable to the underlying measurement parameters, write-downs of EUR 2,470 thousand (EUR 36,261 thousand ) were not taken on a portfolio with a book value of EUR 63,489 thousand (EUR 373,411 thousand).
Of the securities totalling EUR 2,112,533 thousand (EUR 2,087,133 thousand) shown under the “Other financial investments” in the item “Shares, units or shares in investment funds and other variable-yield securities”, an amount of EUR 2,045,308 thousand (EUR 1,629,761 thousand) was allocated to fixed assets. The fair value of these holdings amounted to EUR 2,477,842 thousand (EUR 1,958,039 thousand). Based on the assumption that the impairments will not be permanent, write-downs of EUR 9,341 thousand (EUR 10,935 thousand ) were not taken on a portfolio with a book value of EUR 220,180 thousand (EUR 177,262 thousand). In the case of shares and investment fund certificates, a separate and standardised method is used to check the permanence of the impairment. For bond funds the permanence of the impairment is checked on the basis of the difference between the cost price and fair value. The permanence of the impairment for high-yield and emerging market funds is established on the basis of the difference between the cost price and fair value and depending on the ratings of the assets held within the funds.
Based on determination of the fair value as at 31 December 2016, no need for write-downs on registered debt securities (EUR 32,582 thousand) was identified, as a consequence of which – unlike in the previous year (EUR 2,571 thousand) – no hidden charges were recognised.
Assets with a balance sheet value of EUR 6,594,756 thousand (EUR 6,058,369 thousand) were blocked as security for ceding companies. Securities deposits were sometimes made available to banks for securities loan transactions in favour of third parties.
The fair values of land and buildings are determined annually using the gross rental method in accordance with the Decree on the Principles for Determining the Market Value of Property (ImmoWertV) and the supplementary valuation guidelines. Income values or net asset values are determined for shares in affiliated companies and participating interests. In individual cases the amortised cost is taken as the fair value.
B. I. Land and buildings, rights to land and buildings, leasehold 32,910 51,099 18,189
The sundry assets relate to tax refund claims in an amount of EUR 16,473 thousand (EUR 34,425 thousand).
Contingent capital of EUR 60,299 thousand is available. It can be used to grant shares to holders of convertible bonds and bonds with warrants as well as to convert participating bonds or profit-sharing rights. This contingent capital has a term until 9 May 2021.
By a resolution of the Annual General Meeting of Hannover Rück SE adopted on 6 May 2015, the company was authorised until 5 May 2020 to acquire treasury shares of up to 10% of the capital stock existing on the date of the resolution.
The company did not hold fully paid, no-par-value treasury shares as at 31 December 2016. Within the financial year just ended the company acquired shares for employees, which it subsequently sold to them.
Amount of capital stock attributable to the shares (EUR) 16,413.00 16,413.00
The company’s capital reserve remained unchanged as at 31 December 2016 in the amount of EUR 880,608 thousand. The capital reserve refers solely to the amount generated upon the issue of shares in excess of the par value of the subscribed capital.
The disposable profit for the financial year includes a profit carried forward from the previous year of EUR 85,164 thousand.
On 15 September 2014 Hannover Rück SE placed another subordinated bond with a volume of EUR 500,000 thousand on the capital market at a coupon of 3.375% and with a perpetual maturity as well as a first scheduled call option as at 26 June 2025.
Provisions for interest pursuant to § 233 a AO (Fiscal Code) 38,812 42,499
The plan assets for partial retirement were measured on the basis of fair values pursuant to § 253 (1) Sentence 3 of the Commercial Code (HGB). The acquisition cost of the plan assets amounted to EUR 1,861 thousand (EUR 1,572 thousand).
Shares in affiliated companies and participations as well as loans to affiliated companies and enterprises in which the company has a participating interest 231 561
Interest pursuant to § 233 a AO (Fiscal Code) 57 11,250
Expenses for personnel in EUR thousand 2016 2015 1. Wages and salaries 127,165 122,575 2. Social security payments and expenses for welfare 18,844 18,122 3. Expenses for old-age pension scheme 1,442 9,094
The Executive Board and Supervisory Board intend to propose to the Annual General Meeting that the disposable profit should be distributed as follows: Proposal for the distribution of profits in EUR 2016
Payment of a special dividend of EUR 1.50 on each eligible no-par value share 180,895,701.00
Hannover Re has placed two subordinated debts on the European capital market through its subsidiary Hannover Finance (Luxembourg) S.A. Hannover Re has secured by subordinated guarantee the debts issued in 2010 and 2012, each of which has a volume of EUR 500.0 million. In addition, Hannover Re has placed subordinated debt of EUR 500.0 million on the European capital market.
As security for technical liabilities, various financial institutions have furnished sureties for our company in the form of letters of credit. The total amount of the letters of credit, which also provide security for subsidiaries, was EUR 2,301.8 million (EUR 3,027.0 million) as at the balance sheet date.
There are no other obligations with a remaining maturity of more than five years.
No significant court cases were pending during the year under review or as at the balance sheet date – with the exception of proceedings within the scope of ordinary insurance and reinsurance business activities.
The list of shareholdings is provided on pages 18 to 20.
Talanx AG, Hannover, and HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover, include our financial statements in their consolidated financial statements, which are published in the electronic federal gazette.
No events of special significance occurred after the balance sheet date that had a material impact on the results of operations, financial position or net assets of Hannover Re.
Report of the Supervisory Board of Hannover Rück SE In our function as the Supervisory Board we considered at length during the 2016 financial year the position and development of the company and its major subsidiaries. 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 from the Executive Board. The Supervisory Board of Hannover Rück SE held four regular meetings in order to adopt the necessary resolutions after appropriate discussion. With the exception of two meetings that one member of the Supervisory Board did not attend, all nine Supervisory Board members took part in each of the Supervisory Board meetings held in 2016. Two representatives of the Federal Financial Supervisory Authority participated in one meeting on a routine basis. In addition, we were informed by the Executive Board in writing and orally about the course of business and the position of the company and the Group on the basis of the quarterly financial statements. The quarterly reports with the components of the financial statements and key figures for the Hannover Re Group constituted an important source of information for the Supervisory Board.
No audit measures pursuant to § 111 Para. 2 Sentence 1 German Stock Corporation Act were required in the 2016 financial year.
As in every year, we were regularly updated on the work of the Supervisory Board committees and given a description of the major pending legal proceedings. In addition, we received a report on the status of the Market Consistent Embedded Value in life and health reinsurance. A further key point of deliberation was the examination of the various reports in accordance with Solvency II (including ORSA, Day 1 Report). The Information Policy for the Supervisory Board was also revised against this backdrop. In addition, the Rules of Procedure for the Executive Board were updated. In the annual review of the investment guidelines the table of permitted share indices was revised. The updating of the minimum liquidity limit and the revision of the corresponding guideline also came under scrutiny. Furthermore, a report was received on the return on investment in comparison with competitors. Extensive consideration was also given to the EU Audit Reform and the corresponding resolution (including in relation to the updated Rules of Procedure for the Finance and Audit Committee). In addition, the strategic approach of acquiring capital participations in a Lloyd’s syndicate was discussed at length. As in every year, the full Supervisory Board considered the adequacy of the remuneration system for the members of the Executive Board. 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 targets for the 2015 financial year.
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 financial statement of Hannover Rück SE drawn up in accordance with the German Commercial Code (HGB) and discussed with the independent auditors their reports on these financial statements. As in the previous year, an expert opinion on the
adequacy of the loss reserves in property and casualty reinsurance was noted, the retrocession structure of the Hannover Re Group and the accumulated prefinancing volume in life reinsurance including a comparison of the expected return flows with the repayments actually made, the risk reports, the compliance report and the report on adherence to Corporate Governance principles were discussed and reports on the major subsidiaries were received and considered. In addition, the Committee examined the investment structure and investment income – including the stress tests with regard to the investments and their implications for net income and the equity base – and defined the audit concentrations for the 2016 financial year. The Committee was provided with detailed reports on the purchase of The Congregational & General Insurance Public Limited Company (CGI) as well as on the recognition and measurement of the risk-oriented book of US life reinsurance business acquired in 2009 from Scottish Re. The Committee also received an explanation of the capital market risks in life and health reinsurance and considered various M & A projects. Furthermore, the future form of the company's regular financial reporting with an eye to transposition of the EU Transparency Directive into national law was explored. The Committee prepared various resolutions to be adopted by the Supervisory Board, including a resolution on the approach to be taken in connection with the EU audit reform. The reporting on the Auditor Supervision Act and the Audit Reform Act as well as the resulting considerations and measures were a major point of emphasis in the work of the Finance and Audit Committee. Once it had been agreed that the independent auditor of the company's individual and consolidated financial statements should be changed early for the 2018 financial year, a project was set in motion to prepare and initiate the tender procedure. At an extraordinary meeting of the Committee on 30 November 2016 three auditing firms presented and enlarged upon the bids that they had submitted in writing. The validation of the report compiled by the company on the conclusions drawn by the Finance and Audit Committee in the selection process as well as the adoption of board resolutions in this connection will take place in the 2017 financial year.
The Standing Committee dealt among other things with the adequacy of the system of remuneration for the members of the Executive Board, the determination of the variable remuneration of the members of the Executive Board for the 2015 financial year on the basis of the findings with respect to attainment of their respective targets and the examination of the remuneration for the Board members who were due for review. In all these matters the Committee drew up corresponding recommendations for the full Supervisory Board. The Committee deliberated at length on the medium- and long-time succession arrangements for the Executive Board and recommended to the full Supervisory Board the reappointment of Mr. Ulrich Wallin, Mr. Sven Althoff, Mr. Jürgen Gräber and Mr. Roland Vogel.
The accounting, annual financial statements, consolidated financial statements and the combined management report were audited by KPMG AG Wirtschaftsprüfungsgesellschaft. The Supervisory Board chose the auditor and the Chairman of the Supervisory Board awarded the audit mandate. The auditor’s independence declaration was received. Along with the audit concentrations of the German Financial Reporting Enforcement Panel (DPR), the additional audit concentrations defined by the European Securities and Markets Authority (ESMA) also formed part of the scope of the audit. The mandate for the review report by the independent auditors on the Halfyearly Financial Report as at 30 June 2016 was also awarded again. The special challenges associated with the international aspects of the audits were met without reservation. Since the audits did not give rise to any objections KPMG AG Wirtschaftsprüfungsgesellschaft issued unqualified audit certificates. The Finance and Audit Committee discussed the annual financial statements and the combined management report with the participation of the auditors and in light of the audit reports, and it informed the Supervisory Board of the outcome of its examination. The audit reports were distributed to all members of the Supervisory Board and scrutinised in detail – with the participation of the auditors – at the Supervisory Board meeting held to consider the annual results. The auditors will also be present at the Annual General Meeting.
The Supervisory Board thus 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 2016 is in accordance with that of the Executive Board.
Word of thanks to the Executive Board and members of staff
We would also be pleased to send you copies of the Annual Reports of the Hannover Re Group and Hannover Rück SE in English or German. If you wish to receive paper copies of any of these versions please contact Corporate Communications on: Tel. + 49 511 5604-2343 Fax + 49 511 5604-1648 or order them online at www.hannover-re.com under “Investors / Results and reports”.