Profit for the financial year 386.8 -42.7% 674.5 665.4 843.4 949.2
Silke Sehm Member of the Executive Board Hannover Rück SE, Hannover, Germany Chairwoman of the Board of Directors Hannover Reinsurance Africa Limited, Johannesburg, South Africa Chairwoman of the Board of Directors Hannover Reinsurance Group Africa (Pty) Limited, Johannesburg, South Africa Member 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 Advisory Board Commerzbank AG, Frankfurt am Main, 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). The other details are those on comparable control boards at other domestic and foreign business enterprises pursuant to § 125 (1) Sentence 5, second half-sentence of the Stock Corporation Act (AktG).
Chairman Chief Executive Officer HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover, Germany Chief Executive Officer Talanx AG, Hannover, Germany Chairman of the Supervisory Board E+S Rückversicherung AG, Hannover, Germany Chairman of the Supervisory Board HDI Deutschland AG, Hannover, Germany Chairman of the Supervisory Board HDI Global SE, Hannover, Germany Chairman of the Supervisory Board HDI International AG, Hannover, Germany Chairman of the Supervisory Board HDI Kundenservice AG, Cologne, Germany Chairman of the Supervisory Board HDI Service AG, Hannover, Germany
Member of the Supervisory Board of the Association, Association of German Dioceses (VDD), Corporation under Public Law, Bonn, Germany Member of the Supervisory Board Mecklenburgische Krankenversicherungs-AG, Hannover, Germany Member of the Supervisory Board Mecklenburgische Lebensversicherungs-AG, Hannover, Germany Member of the Supervisory Board Württembergische Lebensversicherung AG, Stuttgart, Germany
Independent Management Consultant Deputy Chairwoman of the Supervisory Board Fronius International GmbH, Pettenbach, Austria 5
The management report of Hannover Rück SE and the Group management report are combined in accordance with § 315 (5) of the German Commercial Code (HGB) and published in the Group Annual Report 2020.
I. Accounts receivable arising out of reinsurance operations 3,971,472 3,657,608 from affiliated companies: II. Other receivables 1,025,511 549,807 from affiliated companies: 4,996,983 4,207,415
II. Current accounts with banks, cheques and cash in hand 519,576 376,850
I. Accounts payable arising out of reinsurance operations 1,262,557 1,185,478 to affiliated companies: II. Bonds 750,000 750,000
III. Miscellaneous liabilities 486,014 734,514 from taxes: for social security: to affiliated companies: Total liabilities 44,864,195 45,477,331
Profit and loss account for the 2020 financial year in EUR thousand
I. Technical account 1. Earned premiums, net of retrocession a) Gross written premiums 19,217,021 18,072,869 b) Retrocession premiums 6,097,772 5,469,582 c) Change in the gross provisions for unearned premiums (432,397) (634,858)
bb) Retrocessionaires’ share 439,173 492,397 5. Changes in other technical provisions, net of retrocession a) Net life assurance provision (101,084) (177,570)
6. Bonuses and rebates, net of retrocession 17 40 7. Operating expenses, net of retrocession a) Gross acquisition expenses 4,509,884 5,079,270 b) Less: commissions and profit commissions received on retrocession 1,213,325 1,950,521 8. Other technical charges, net of retrocession 374 86 10. Change in the equalisation reserve and similar provisions (694,004) (210,561)
II. Non-technical account 1. Investment income a) Income from participating interests 9,301 75,338 thereof affiliated companies: b) Income from other investments thereof affiliated companies: aa) Income from land and buildings, rights to land and buildings, leasehold 3,920 3,469 bb) Income from other investments 701,488 700,394 c) Appreciation on investments 1,522 50,259 d) Gains on the realisation of investments 200,925 251,624 e) Income from profit pools, profit and loss transfer agreements or partial profit and loss transfer agreements 886,124 331,573 2. Investment charges a) Expenditure for the management of investments, interest expenditure and other investment expenditure 60,944 44,695 thereof impairments in accordance with § 253 (3) sentence 5 of the Commercial Code (HGB): c) Losses on the realisation of investments 34,676 30,722 d) Expenses from loss transfer – –
6. Profit or loss on ordinary activities before tax 393,769 799,754 7. Taxes on profit and income (5,377) 115,363 9. Profit for the financial year 386,813 674,493 10. Profit brought forward from previous year 713,716 702,865 11. Allocations to other retained earnings 529 358
Notes Hannover Rück SE has its registered office in Hannover, Germany, at Karl-Wiechert-Allee 50 and is entered with the registry court of Hannover under HRB 6778.
Other intangible assets and goodwill acquired for a consideration are valued at acquisition cost less amortisation in accordance with the normal operational useful life.
Shares in affiliated companies and participations are valued on a purchase cost basis at the lower of amortised cost or fair value allowing for write-downs. Interests in funds that invest in private equity are valued at the lower of amortised cost or fair value allowing for time effects.
Shares, units or shares in investment funds and other variable -yield securities are valued according to the strict or modified lower-of-cost-or-market principle depending on the intended use. Securities intended for use on a continuing basis in the normal course of business activities are valued according to the modified lower-of-cost-or-market principle (§ 341 b (2) of the Commercial Code (HGB) in conjunction with § 253 (3) of the Commercial Code (HGB)). Permanent impairments are recognised through profit or loss.
Bearer debt securities and other fixed-income securities are valued according to the strict or modified lower-of-cost-ormarket principle depending on the intended use. Bearer debt securities intended for use on a continuing basis in the normal course of business activities are valued at initial cost plus or minus cumulative amortisation according to § 341 c (3) of the Commercial Code (HGB). Permanent impairments are recognised through profit or loss pursuant to § 253 (3) Sentence 5 of the Commercial Code (HGB).
Deposits, repurchase agreements, cash at banks in current accounts, cash in hand, other assets, deposits and accounts receivable arising out of reinsurance operations, other receivables as well as prepaid expenses and accrued income are valued at the nominal amounts. Valuation adjustments are set up for default risks.
The basis for the valuation of the provision for unearned premiums is the reinsurance premium less 92.5% of the reinsurance commission in accordance with the order of the Minister of Finance of the State of North Rhine-Westphalia dated 29 May 1974. In marine insurance the provision for unearned premiums and the provisions for outstanding claims are regarded as one unit and shown as provisions for outstanding claims.
Where the provisions indicated by the ceding companies are not expected to be adequate, they are increased by appropriate additional amounts. Where no figures are available from cedants, the provisions are estimated in the light of the business experience to date. The results of new treaties are at least neutralised. In some cases, provisions are determined on an actuarial basis. If necessary, additional or complete estimates of the corresponding profit and loss items including relevant retrocessions are made where ceding company accounts with substantial premium income are missing. Missing ceding company accounts with a low premium income are included in the following year. The estimated gross premium income for 2020 is 34.18% of the total volume.
From 2010 onwards the run-off result of the previous year’s provision for outstanding claims is calculated by Hannover Rück SE on an accident-year basis and hence appropriately allocated.
The provision for nuclear plants is calculated in accordance with § 30 (2) of the Regulation on the Accounting of Insurance Undertakings (RechVersV).
The catastrophe risk provision for pharmaceutical product liability is calculated in accordance with § 30 (1) of the Regulation on the Regulation on the Accounting of Insurance Undertakings (RechVersV).
The pension commitments are carried in the settlement amount required according to reasonable and prudent business judgement. They are discounted at 2.31% 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 1.64% 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 0.0%. The valuation is based on the decrement probabilities of the “2018G standard tables”.
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
The other provisions are established in the settlement amount required according to reasonable and prudent business judgement, in some cases on the basis of actuarial opinions. Provisions with a maturity of more than one year are discounted using the average market rate published by the German Bundesbank for the last seven years in accordance with their maturity.
In order to reduce currency risks as far as possible, matching cover is extensively established for liability items by setting up corresponding asset items 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 positions is recognised without regard to the purchase cost method or the imparity principle.
The declaration of conformity required pursuant to § 161 of the Stock Corporation Act (AktG) regarding compliance with the German Corporate Governance Code has been submitted and made permanently available to the shareholders.
A. Intangible assets 1. Purchased franchises, trademarks, patents, licences and similar rights and assets 48,334 3,678 9,264 – – 20,550 (10) 40,716
Hannover Rück Beteiligung Verwaltungs-GmbH, Hannover / Germany 100.00 EUR 4,943,869 –
holds 64.79% of the shares in: E+S Rückversicherung AG, Hannover / Germany EUR 805,347 11,500 holds 20.00% of the shares in: WeHaCo Unternehmensbeteiligungs-GmbH 1, Hannover / Germany EUR 82,093 647 holds 100.00% of the shares in: Hannover Re Holdings (UK) Limited, London / United Kingdom EUR 4,094,707 379,945 holds 100.00% of the shares in: Hannover Finance, Inc., Wilmington / USA 100.00 USD 1,777,242 7,003 holds 100.00% of the shares in: Hannover Life Reassurance Company of America (Bermuda) Ltd., Hamilton / Bermuda 100.00 USD 2,821,507 101,134 holds 100.00% of the shares in: Hannover Life Reassurance Company of America, Orlando / USA 100.00 USD 573,391 19,847 holds 100.00% of the shares in: Glencar Insurance Company, Orlando / USA USD 60,816 (5,222)
holds 100.00% of the shares in: Glencar Underwriting Managers, Inc., Chicago / USA USD 4,200 (482)
holds 100.00% of the shares in: Kubera Insurance (SAC) Ltd., Hamilton / Bermuda USD 19,542 (160)
Result for the last financial year Figures in currency units of 1,000 holds 95.00% of the shares in: Hannover ReTakaful B.S.C. (c), Manama / Bahrain BHD 77,127 8,477
Hannover America Private Equity Partners II GmbH & Co. KG, Hannover / Germany 87.00 EUR 632,862 32,843 holds 100.00% of the shares in: HAPEP II Holding GmbH, Hannover / Germany EUR 26,490 1,042
holds 20.37% of the shares in: Trinity Underwriting Managers Ltd., Toronto / Canada CAD – –
holds 15.00% of the shares in: SWISS INSUREVOLUTION PARTNERS Holding (FL) AG 1, Triesen / Liechtenstein CHF – –
U FOR LIFE SDN. BHD. 1, Petaling Jaya / Malaysia 100.00 MYR 568 (40)
HAPEP II Komplementär GmbH, Hannover / Germany 50.00 EUR 49 3
Hannover Finance (Luxembourg) S.A., Leudelange / Luxembourg 100.00 EUR 22,205 765 holds 13.49% of the shares in: Sureify Labs, Inc. 3, Wilmington / USA USD 1,995 (2,587)
Hannover Finance (UK) Limited, London / United Kingdom 100.00 GBP 681 82 holds 100.00% of the shares in: Hannover Services (UK) Limited, London / United Kingdom GBP 1,239 (46)
Result for the last financial year Figures in currency units of 1,000 holds 100.00% of the shares in: Hannover Reinsurance Africa Limited, Johannesburg / South Africa ZAR 1,102,232 39,039 holds 100.00% of the shares in: Compass Insurance Company Limited, Johannesburg / South Africa ZAR 306,470 60,247 holds 70.00% of the shares in: Lireas Holdings (Pty) Ltd., Johannesburg / South Africa ZAR 331,460 42,259
holds 100.00% of the shares in: Argenta Underwriting No.2 Limited, London / United Kingdom GBP (1,038) (2,384)
holds 100.00% of the shares in: Argenta Underwriting No.3 Limited, London / United Kingdom GBP (2,176) (1,900)
holds 100.00% of the shares in: Argenta Underwriting No.10 Limited, London / United Kingdom GBP 70 88 holds 100.00% of the shares in: Argenta Underwriting No.11 Limited, London / United Kingdom GBP (1) 16 holds 100.00% of the shares in: Argenta No.13 Limited, London / United Kingdom GBP – –
holds 100.00% of the shares in: Argenta No.16 Limited, London / United Kingdom GBP – –
holds 100.00% of the shares in: Residual Services Limited, London / United Kingdom GBP 3 –
Meribel Mottaret Limited, St. Helier / Jersey 18.92 EUR – –
Key exchange rates 1 EUR corresponds to: Exchange rates on 31.12.2020
In the 2020 financial year Hannover Re Holdings (UK) Ltd., London / United Kingdom (HHL), was established as a subsidiary of Hannover Rück Beteiligung Verwaltungs-GmbH, Hannover.
This serves as an intermediate holding company for the reinsurance entities in the United States and Bermuda. In this connection Hannover Life Reassurance Company of America, Orlando, USA (HLR US), Hannover Finance, Inc., Wilmington, USA (HF US), as well as Hannover Re (Bermuda) Ltd., Hamilton, Bermuda (HRB), and Hannover Life Reassurance Bermuda Ltd., Hamilton, Bermuda (HLRB), were included in HHL. HLR US was initially included in HF US and then in Hannover Life Reassurance Company of America (Bermuda ), Hamilton, Bermuda (HLR AmBer). Effective 31 December 2020 HLRB was also merged into HRB.
Write-downs of EUR 1,772 thousand (EUR 0 thousand) were not taken on debentures with a book value of EUR 5,000 thousand (EUR 0 thousand) based on the premise that the nominal value will be repaid in full on maturity.
The portfolio includes a special fund launched for Hannover Rück SE by an external manager. The company’s share of the fund is 100.0%. The fund in question is a high-yield fund investing principally in European fixed-income securities. An index composed of the iBoxx universe is used as the benchmark. For Hannover Rück SE a total amount of EUR 10,427 thousand (EUR 10,358 thousand) was distributed in the year under review. In addition, a gain on disposal of EUR 4,200 thousand (EUR 0 thousand) was realised through the sale of unit certificates. The units can be returned at any time within at most five days. The fund units have a fair value of EUR
N ot es 1,443,300 thousand (EUR 1,397,152 thousand) and a book value of EUR 1,231,124 thousand (EUR 1,214,413 thousand), producing unrealised gains of EUR 212,176 thousand (EUR 182,739 thousand).
The current 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.
Current values pursuant to § 54 RechVersV of asset items B. I. to B. III.
B. III. Other investments 1. Shares, units or shares in investment funds and other variable-yield securities 1,798,169 2,208,467 410,298 2. Bearer debt securities and other fixed-income securities 19,820,748 21,134,248 1,313,500 3. Other loans a) Registered debt securities 397,791 422,341 24,550 b) Debentures and loans 344,865 362,990 18,125
The fair value disclosures pursuant to § 55 (7) of the Regulation on the Accounting of Insurance Undertakings (RechVersV ) were determined entirely in the 2020 financial year.
The sundry assets relate to tax refund claims in an amount of EUR 128,706 thousand (EUR 19,474 thousand).
The company’s subscribed capital remained unchanged as at 31 December 2020 in the amount of EUR 120,597 thousand. It is divided into 120,597,134 no-par-value registered shares.
By a resolution of the Annual General Meeting of Hannover Rück SE adopted on 6 May 2020, the company was authorised until 5 May 2025 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 2020. Within the financial year just ended the company acquired shares for employees in the Group, which it subsequently sold to them.
Based on the discounting of pension obligations with the average market interest rate of the last ten years compared to discounting with the average market interest rate of the last seven years, there is an additional restriction on distribution in an amount of EUR 8.9 million (EUR 8.8 million) after allowance for deferred taxes.
On 8 July 2020 Hannover Re placed further subordinated debt in an amount of EUR 500,000 thousand on the capital market at a coupon of 1.75% and with a maturity date of 8 October 2040 as well as a first scheduled call option on 8 July 2030.
The net run-off result in property and casualty insurance (excluding health) is positive overall and amounts to EUR 263.0 million (EUR 188.7 million) or 1.5% (1.1%) relative to the original provision.
Provisions for other risks and charges in EUR thousand 2020 2019
Provision for interest pursuant to § 233a AO (Fiscal Code) 33,185 36,845
We calculated the allocated investment return transferred from the non-technical account to the technical account in accordance with § 38 of the Regulation on the Accounting of Insurance Undertakings (RechVersV).
Shares in affiliated companies and participations as well as loans to affiliated companies and enterprises in which the company has a participating interest 11,299 456
Income from discounting pursuant to § 277 (5) HGB (Commercial Code) 35 46
Compounding of interest on provisions / expense from compounding pursuant to § 277 (5) HGB (Commercial Code) 43 47
With respect to the fees paid to the independent auditor, we made use of the exemption afforded by § 285 No. 17 of the Commercial Code (HGB); the required disclosures are included in the consolidated financial statement of Hannover Re.
(IFRS) and drew up the review report on the quarterly financial statements. The solvency balance sheet as at 31 December 2020 was also audited.
Furthermore, the independent auditor performed other assurance services in connection with the combined non-financial information statement. The tax consultancy services encompass tax advice provided on specific matters.
Expenses for personnel in EUR thousand 2020 2019 1. Wages and salaries 149,786 149,248 2. Social security payments and expenses for welfare 22,580 21,454 3. Expenses for old-age pension scheme 13,914 13,138
Proposal for the appropriation of the disposable profit The Executive Board and Supervisory Board intend to propose to the Annual General Meeting that the disposable profit should be appropriated as follows: Proposal for the appropriation of the disposable profit in EUR 2020
Other notes Hannover Re has placed subordinated debt on the European capital market through its subsidiary Hannover Finance (Luxembourg ) S.A. Hannover Re has secured by subordinated guarantee the debt issued in 2012, which has a volume of EUR 500.0 million. In addition, Hannover Re has placed two subordinated debts of EUR 500.0 million each, a senior bond of EUR 750.0 million and subordinated debt of EUR 750.0 million on the European capital market. The total amount of liabilities with a remaining maturity of more than five years is EUR 3,000.0 million.
Under novation clauses in reinsurance contracts written by the subsidiaries with outside third parties we shall – in certain constellations – assume the rights and duties of the subsidiaries under the contracts. In the event of the contracts being transferred to Hannover Re, assets shall be transferred from the relevant subsidiary in the amount of the reserves. As at 31 December 2020 reserves equivalent to EUR 5,287,947 thousand (EUR 5,049,278 thousand) existed at the subsidiaries. No soft letters of comfort were provided in the financial year.
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. There were no further contingent liabilities or other financial commitments that were not evident from the annual balance sheet. The average size of the workforce was 1,542 in the year under review, of whom 90 were executive staff and 1,452 employees. The remuneration report is provided in the combined management report of the company on pages 119 to 140 of the Group Annual Report. The total remuneration of the Executive Board of Hannover Re amounted to EUR 7.6 million (EUR 9.3 million). In the year under review 8,029 share awards with a fair value of EUR 1.0 million were granted to active members of the Executive Board. Pension payments to former members of the Executive Board and their surviving dependants amounted to EUR 1,298 thousand. A liability of EUR 20,414 thousand
N ot es was recognised for current pensions of former members of the Executive Board. The remuneration of the Supervisory Board amounted to EUR 760 thousand (EUR 780 thousand).
The list of shareholdings is provided on pages 18 to 21.
Talanx AG, Hannover, holds a majority interest in our company. Talanx AG, Hannover, and HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover, include our financial statement in their consolidated financial statements, which are published in the electronic Federal Gazette.
The company combined opposing forward exchange transactions in notional amounts of ZAR 1,335.26 million (USD 77.7 million), CAD 36.0 million (USD 27.4 million), AUD 113.5 million (USD 86.2 million), GBP 116.5 million (USD 158.6 million ), SGD 56.0 million (USD 41.6 million), HKD 320.0 million (USD 41.3 million), CNY 261.0 million (USD 39.4 million), TWD 1,997.8 million (USD 70.8 million), KRW 7,206.5 million (USD 6.5 million), USD 521.4 million (EUR 426.9 million) and USD 12.5 million (INR 938.3 million) into valuation units as at the balance sheet date pursuant to § 254 of the Commercial Code (HGB). The risk entered into vis-à-vis the counterparty is passed on in full – including the default risk – to four affiliated companies. In this context, the transactions with the affiliated companies constitute the underlying transactions and those with the counterparties outside the Group constitute the hedge instruments that make up the valuation unit. Both the interest rate risks and the currency risks of the underlying transactions are hedged by means of micro-hedging. The opposing effects from the valuation units are fully correlated and recognised in the balance sheet using the net hedge presentation method. The effectiveness of the micro-hedges is assessed using the critical term method. As at 31 December 2020 the underlying transactions show positive fair values of altogether EUR 14.6 million and negative fair values totalling EUR 1.5 million. The forward exchange transactions, which were concluded in several tranches, have various maturity dates; the last transaction expires in 2022.
Hannover Re hedges against currency risks by matching foreign currency liabilities with foreign currency assets. The intention is that changes in the value of foreign currency liabilities (underlying) caused by movements in exchange rates will be offset by opposing changes in the value of the foreign currency assets (hedge instrument). Matched liabilities are combined with their matching assets per currency into a valuation unit which is recognised in the balance sheet in the context of portfolio hedges. The volume amounts to EUR 24,983.9 million (EUR 25,876.3 million). The portfolio contains derivatives associated with the technical account in a nominal volume of EUR 4.9 million which relate to earthquake risks in Japan. The risks are offset by countertrade transactions.
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 requiring compensation as defined by § 311 (1) of the Stock Corporation Act (AktG).
We have audited the annual financial statements of Hannover Rück SE, Hannover, which comprise the balance sheet as at 31 December 2020, and the statement of profit and loss for the financial year from 1 January to 31 December 2020, and notes to the financial statements, including the presentation of the recognition and measurement policies. In addition, we have audited the management report of Hannover Rück SE, which is combined with the group management report, for the financial year from 1 January to 31 December 2020. In accordance with the German legal requirements, we have not audited the content of those parts of the management report listed in the “Other Information” section of our auditor’s report.
• the accompanying management report as a whole provides an appropriate view of the Company’s position. In all material respects, this management report is consistent with the annual financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our audit opinion on the management report does not cover the content of those parts of the management report listed in the “Other Information” section of our auditor’s report.
Pursuant to § [Article] 322 Abs. [paragraph] 3 Satz [sentence] 1 HGB [Handelsgesetzbuch: German Commercial Code], we declare that our audit has not led to any reservations relating to the legal compliance of the annual financial statements and of the management report.
We conducted our audit of the annual financial statements and of the management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as “EU Audit Regulation”) in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further de-
In our view, the matters of most significance in our audit were as follows: (1) Measurement of premium reserves (2) Measurement of provisions for claims outstanding in the property reinsurance business segment (3) Calculation of estimated gross premium
Hereinafter we present the key audit matters: (1) Measurement of premium reserves (a) Premium reserves amounting to EUR 7,093.3 million
(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 industry expertise and experience, among other things.
Based on the reviews of controls, we carried out additional analytical and substantive audit procedures and tests of details relating to the measurement of the premium reserves. 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. In particular, we examined whether sufficient collateral was factored into the valuation in accordance with commercial law and whether it was necessary to strengthen reserves. Furthermore we analyzed the development of premium reserves as compared to the previous year, particularly in light of the fact that the assumptions correspond to the currently available cedant information, current business developments and our expectations based on market observations. In this context, we also assessed the executive directors’ estimate as to the impact of the coronavirus crisis.
(c) The Company’s disclosures on the premium reserve are contained in the sections of the notes entitled “measurement of equity and liabilities” and “notes to equity and liabilities”. Disclosures on risks are contained in the Company ’s management report in the section entitled “Report on risks and opportunities”, subsection “Technical risks of personal reinsurance”.
(2) Measurement of provisions for claims outstanding in the property reinsurance business segment (a) In the annual financial statements of the Company provisions for unsettled claims amounting to EUR 25,874.3 million (52.8% of total assets) are reported under the “Technical provisions” balance sheet item. A significant portion of the gross provision for unsettled claims is attributable to property reinsurance. Pursuant to § 341g HGB, provisions must be recognized for obligations incurred as a result of claims asserted but not yet settled by the end of the financial year (“claims provisions”).
The claims provisions under property reinsurance are estimated based on cedant information based on experience.
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 measurement of this provision. In light of this and also due to the material significance of the amount of this reserve for the assets liabilities and financial performance of the Company, the measurement of these reserves was of particular significance in the context of our audit.
Based on the review of controls, we carried out additional analytical and substantive audit procedures and tests of details relating to the measurement of the claims provision. In light of the significance of the claims provision for the overall business of the Company, our internal valuation specialists assessed 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 experience with recognized actuarial practice. In this context, we also assessed the executive directors’ estimate as to the impact of the coronavirus crisis on the business as a whole. In particular, we examined whether sufficient collateral was factored into the valuation in accordance with commercial law and whether it was necessary to strengthen reserves. In the course of that examination, we reviewed the valuation methods for consistency of use.
(c) The Company’s disclosures on the property reinsurance claims provisions are contained in the sections of the notes entitled “measurement of equity and liabilities” and “notes to equity and liabilities”. Disclosures on risks are contained in the Company’s management report in the section entitled “Report on risks and opportunities”, subsection “Technical risks of property reinsurance”.
(b) For the purposes of auditing the estimated gross premium, we first conducted a supplementary audit of the contribution and estimation process. In that connection, we identified the material key controls and analyzed their structure. Based on that analysis, we conducted a functional review to test the effectiveness of the key controls implemented in the process and to assess the appropriateness of the material assumptions by verifying and analyzing the procedure 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.
• the non-financial statement pursuant to § 289b Abs. 1 HGB and § 315b Abs. 1 HGB included in section “Combined non-financial information statement” of the management report
• the disclosures contained in the management report and marked as unaudited regarding Solvency II reporting.
The other information comprises further the remaining parts of the annual report – excluding cross-references to external information – with the exception of the audited annual financial statements, the audited management report and our auditor ’s report.
Our audit opinions on the annual financial statements and on the management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon.
Responsibilities of the Executive Directors and the Supervisory Board for the Annual Financial Statements and the Management Report
The executive directors are responsible for the preparation of the annual financial statements that comply, in all material respects, with the requirements of German commercial law, and that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Company in compliance with German Legally Required Accounting Principles. In addition, the executive directors are responsible for such internal control as they, in accordance with German Legally Required Accounting Principles, have determined necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.
Furthermore, the executive directors are responsible for the preparation of the management report that as a whole provides an appropriate view of the Company’s position and is, in all material respects, consistent with the annual financial statements, complies with German legal requirements, 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 management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the management report.
Auditor’s Responsibilities for the Audit of the Annual Financial Statements and of the Management Report
We exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the annual financial statements and of the management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate 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 omissions, misrepresentations, or the override of internal controls.
• Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements present the underlying transactions and events in a manner that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Company in compliance with German Legally Required Accounting Principles.
• Evaluate the consistency of the management report with the annual financial statements, its conformity with German law, and the view of the Company’s position it provides.
• Perform audit procedures on the prospective information presented by the executive directors in the management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant 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 assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.
Assurance Report in Accordance with § 317 Abs. 3b HGB on the Electronic Reproduction of the Annual Financial Statements and the Management Report Prepared for Publication Purposes
Publication Purposes (ED IDW AsS 410) and the International Standard on Assurance Engagements 3000 (Revised). Accordingly, our responsibilities are further described below in the “Auditor’s Responsibilities for the Assurance Engagement on the ESEF Documents” section. Our audit firm has applied the IDW Standard on Quality Management: Requirements for Quality Management in the Audit Firm (IDW QS 1).
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 electronic reproduction of the annual financial statements and the management report in accordance with § 328 Abs. 1 Satz 4 Nr. 1 HGB.
In addition, the executive directors of the Company are responsible for such internal control as they have considered 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.
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft sgd. Mathias Röcker sgd. ppa. Dennis Schnittger Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor)
We received an analysis of the 2019 results in property & casualty and life & health reinsurance as well as a presentation from the Executive Board covering the profit expectations for the 2020 financial year and the operational planning for the 2021 financial year. In addition, the Chairman of the Supervisory 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 2020 financial year.
Key points of deliberation in the full meetings of the Supervisory Board
In preparation for the Annual General Meeting on 6 May 2020, the agenda was discussed and approved. In addition, a resolution was adopted on updating of the Rules of Procedure for the Executive Board and for the Supervisory Board, which was essentially warranted by the growth of the company since the last revisions. The Rules of Procedure of the Supervisory Board were also subsequently published on the company‘s website ( rules-of-procedure-for-the-supervisory-board-of-hannoverrueck -se.pdf). In addition, 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 2019 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. We also considered in detail the findings of the market comparison that was commissioned regarding the occupational retirement provision for members of the Executive Board.
Following the meeting, the Supervisory Board resolved on 31 March 2020 by a written procedure that the Annual General Meeting on 6 May 2020 should be held virtually with no physical attendance in light of the pandemic situation and that corresponding use should be made of the formal special arrangements facilitated by the legislator for convening and holding the Annual General Meeting.
On 4 August 2020 the Executive Board reported at an all-day meeting again conducted in a hybrid format on the first half of 2020; in this context, as usual, it described the material indicators from the technical and non-technical accounts and outlined the attainment status of the strategic objectives. The outlook for the current financial year was followed by more concrete analyses of possible effects of the Covid-19 pandemic on the reinsurance and investment performance. We were
At the last meeting of the year held on 4 November 2020, we deliberated at length on the key preliminary results in the business performance together with the outlook for the current financial year. The effects of the Covid-19 pandemic were again a focus of the reporting. Mr. Jungsthöfel attended the meeting for the first time in his new role as Chief Financial Officer. We were provided with the report on employee capacities. The Executive Board also presented to us the operational planning for 2021; 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 supplementary report on the ongoing development of business and the status of the strategy for the cycle 2021 – 2023 was another particular focal point of our deliberations. The Supervisory Board exchanged views with the Executive Board on specific questions relating to the individual strategic business initiatives. Furthermore, we agreed that the internal Group restructuring which we had previously approved in August should already be implemented in the current year. Based on the findings of the „Fit & Proper“ self-assessment that had been conducted among the Supervisory Board members, the Supervisory Board engaged in an extensive exchange of views on a development plan for the entire Supervisory Board. It was again the case this year that the individual members of the Supervisory Board attended numerous advanced training measures in relation to various core topics; the costs incurred in this connection were paid by the company. Topics covered in 2020 included, among others, ARUG II, risk management and reporting as well as liability aspects. The presentations on taxes and accounting issues given to the full Supervisory Board at the August meeting were very well received and are planned again for 2021 in a similar form. A significant amount of our discussion time at the meeting was also devoted to corporate governance issues and we approved the amended Declaration of Conformity accordingly (for further information see below and the Declaration on Corporate Governance on p. 112 et seq. of the combined management report in the Group Annual Report). We received the yearly report of the Executive Board pursuant to § 3 Para. 5 of the Regulation on the Supervisory Law Requirements for Remuneration Schemes in the Insurance Sector (VersVergV) and exchanged opinions on the necessary changes to the Supervisory Board remuneration, which are to be submitted to the Annual General Meeting in May 2021 for adoption of a resolution. As part of implementing the process behind the Executive Board remuneration that had been newly approved in August, it was also necessary for the first time to decide in the full Supervisory Board on the target criteria for members of the Executive Board for the year 2021. The focus of our deliberations in this respect was on this year‘s findings from the Organisational Health Check, sustainability and the new strategic objectives.
As in every year, we were regularly briefed on the work of the Supervisory Board committees.
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 2019 financial year based on the findings pertaining to attainment of their respective targets and examined the remuneration for the Board members who were due for review. More specific consideration was also given to the occupational pension commitments in the adequacy review. In the summer the Standing Committee also considered the appointment of Mr. Clemens Jungsthöfel as a member of the Executive Board, in which regard Mr. Jungsthöfel – who already worked for the Group as a member of the Executive Board of HDI Global SE – attended part of the meeting as a guest. With regard to all these matters the Committee drew up corresponding recommendations for the full Supervisory Board. In addition, it was necessary to bring the Executive Board remuneration scheme into line with the requirements of ARUG II and the more extensive recommendations of the German Corporate Governance Code. Taking into account external consulting support, a new scheme was developed for this purpose after extensive adequacy analyses and submitted to the full Supervisory Board for adoption of a resolution. The Committee again deliberated at length on the medium – and long-time succession arrangements for the Executive Board. Furthermore, the individual objectives of the members of the Executive Board for 2021 were defined on the basis of the new remuneration scheme and prepared for adoption of a resolution by the full Supervisory Board.
The Government Commission on the German Corporate Governance Code (DCKG) elaborated an extensive revision of the German Corporate Governance Code, which on publication in the Federal Gazette by the Federal Ministry of Justice and Consumer Protection on 20 March 2020 formed the basis for the most recent Declaration of Conformity published by the company. Based on the review and discussion of the new recommendations in the previous year and the already implemented measures, we therefore devoted considerable attention to the topic of corporate governance. The remuneration scheme for the Executive Board was adjusted according to the requirements and will be submitted to the Annual General Meeting on 5 May 2021. Changes to the remuneration scheme for the Supervisory Board were also discussed. In the summer we also explored the process for monitoring and, as appropriate, submission and disclosure of so-called related par-
We considered the report by the Executive Board on non-financial matters (cf. page 70 et seq. of the combined management report in the Group Annual Report) and examined it. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft 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 260 et seq. in the Group Annual Report).
In addition, the Supervisory Board received a report on the design of the remuneration schemes as well as the compliance, internal audit and risk reports. It remains the assessment that at least three members of the Supervisory Board – namely Dr. Andrea Pollak, Dr. Ursula Lipowsky and Dr.
Notwithstanding the high importance that the Supervisory Board attaches to the standards of good and responsible enterprise management defined in the German Corporate Governance Code as amended on 16 December 2019, the Supervisory Board decided not to fully comply with Recommendation C. 10 in conjunction with Recommendation C. 7 regarding the independence of the Chair of the Audit Committee from the company and the management board. Justification for these divergences is provided in the Declaration of Conformity pursuant to § 161 Stock Corporation Act (AktG) regarding compliance with the German Corporate Governance Code, which is reproduced both on the company‘s website and in the present Annual Report as part of the Declaration on Corporate Governance (cf. p. 112 et seq.). The other divergences indicated therein from the recommendations of the Code as amended on 16 December 2019 are of a purely temporary nature and can be attributed to this year‘s changeover from the previous version to the newly valid Code. They were therefore disclosed and justified as a precautionary measure. Further information on the topic of corporate governance is available on the website of Hannover Rück SE.
Board meeting held to consider the annual results. The auditors will also be present at the Annual General Meeting.
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 2020 is in accordance with that of 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.
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.
A printed version of the Annual Report of Hannover Rück SE is also available in German. The report can be downloaded online in PDF format in English and German at: www.hannover-re.com