EUR 981 million for net account, some EUR 451 million higher than the loss expectancy. In view of the losses incurred in the first quarter, we had already revised our guidance downwards from EUR 650 million to a profit of more than EUR 500 million.
Overall, then, we generated income from assets under own management that for the first time surpassed EUR 1 billion. Including deposit interest and expenses, net investment income climbed by 10 percent to EUR 1.4 billion – thereby reaching the highest ever level in the history of Hannover Re.
The Executive Board and Supervisory Board intend to propose to the Annual General Meeting on 3 May 2012 that a dividend of EUR 2.10 per share be distributed. While the proposed dividend therefore does not match up to the previous year’s amount of EUR 2.30 per share, the planned distribution of 41.8% nevertheless exceeds the payout ratio of 35% to 40%
Investor Relations website was again selected as the best in the MDAX and the industry by the company NetFederation.
Hannover Re’s overall IR efforts. The company placed sixth within the MDAX category in the IR rankings published by the business magazine Capital, while it came in at number 7 in a survey conducted by Thomson Extel. In the European IR Perception Study carried out by Institutional Investor magazine we placed twelfth in the “insurers” category.
The shareholding structure of Hannover Re was stable in the year under review. The interest held by Talanx AG remained unchanged, while the stake held by private investors grew by 0.3 percentage points to 8.1%, causing the proportion in the hands of institutional investors to contract slightly to 41.7%.
For the reinsurance industry the 2011 financial year was most notable for extraordinarily heavy strains from natural disasters. Only in 2005 were the insured catastrophe losses even higher. For Hannover Re, too, the year under review was the second most expensive in its history with net major loss expenditure of EUR 981 million. As a further factor, the capital market environment again proved challenging in 2011. With this in mind, it is highly gratifying to have generated Group net income of EUR 606 million.
The European Commission’s Solvency II Directive continues to be of great significance to the insurance industry. Solvency
New York, had already eased their collateral requirements for financially strong foreign reinsurers.
newals as at 1 January 2011 prices and conditions essentially remained stable. The severe natural disasters that occurred in the first quarter ushered in a trend reversal. The earthquakes in Japan and New Zealand as well as the flooding in Australia led to significant rate increases – at least in the regions that were impacted by losses. Whilst it is true that the enormous strains imposed by these major losses curtailed our profit in non­life reinsurance, they did not diminish our business pros­
Growth came in at 3.5%, or 5.2% at constant exchange rates.
We were again able to boost our net investment income from assets under management relative to the previous year: it totalled EUR 1,045.5 million (EUR 942.5 million) in the year under review. Net investment income including income on funds withheld and contract deposits amounted to EUR
larly able to secure rate improvements over the course of the year. This was the result both of strains incurred by the US
EUR 6.8 billion (EUR 6.3 billion). At constant exchange rates, especially against the US dollar, growth would have come in at 9.4%. The level of retained premium climbed from 88.9%
Within the Hannover Re Group the German market is served by our subsidiary E+S Rück. As the dedicated “reinsurer for
Geographical breakdown of gross written premium 22.1% North America 22.6% Rest of Europe 12.4% Germany 13.8% United Kingdom 15.2% Australasia 9.7% Other 4.2% Africa
America grew appreciably in the year under review. This can be attributed inter alia to a substantial number of major losses as well as the updating of the RMS loss simulation model.
The explosion of the “Deepwater Horizon” drilling rig last year also continued to have reverberations for business written in the year under review. The insurance industry had expected a far­reaching reform of the Oil Pollution Act to usher in changes to the general framework for underwriting such off­
On the claims side the year under review was characterised by a high frequency of smaller and mid­sized losses. The largest single event involved the damaging and putting out of operation of a large Danish FPSO (floating production, storage and offloading) unit, causing a market loss of some USD
ency II framework. In view of attractive prices in UK motor busi ness, we made the most of the available market opportuni­
The year under review brought a strong inflow of cash into the
ILS market. Investors find this market interesting because it has no correlation to the other risks associated with the trad­
Following on from marked rate rises in the previous year, pre­
surance Ltd., a subsidiary of Hannover Re Africa, is one of the leading players in this segment in South Africa. In the year under review the company again pursued its strategic object­
cial year. The premium volume for our total portfolio in Latin
After years of moderate loss expenditure, the result for the 2011 financial year was adversely impacted by the severe earthquake. With a net loss burden in the order of EUR
quake in Christchurch, New Zealand, resulted in a loss of EUR
121.4 million for our company. The hurricane season, on the other hand, again passed off relatively unremarkably in 2011; only Hurricane Irene caused comparatively moderate expend­
ited. It is our hope that these entry barriers will be dismantled and fair competition – which also benefits local clients – will once again be possible.
We write retakaful business – that is to say, insurance trans­
Breakdown of gross written premium by business centers before consolidation 24.2% HlR international 25.4% HlR Germany 19.7% HlR ireland 16.2% HlR America 6.5% HlR Australasia 3.1% HlR United Kingdom 2.3% HlR Bermuda 2.6% HlR Africa
The gross premium income booked in the year under review totalled EUR 5.3 billion, an increase of 3.5% relative to the pre vious year’s premium volume of EUR 5.1 billion. At con­
London, our local team supports the conventional reinsurance market from the initial customer contact through underwriting to claims management. This is complemented by an extensive range of services. The reinsurance of longevity risks from the assumption of pension funds as well as private annuities for individuals with a reduced life expectancy (enhanced annu­
EUR 25.7 million for the year under review fell only marginally short of the previous year’s level of EUR 26.7 million; relative to the net premium earned we generated a highly gratifying
Our clients in these markets are supported by service offices in Madrid and Milan, although risk assessment and under­
tional sales channel as well as to access to existing customer relationships. As a reinsurer, we provide our business partners with crucial support for the implementation of point­of­sale systems.
The markets in this region are supported directly by our local service office in Mexico City as well as by our team in Han­
HLR Australasia further enlarged its business volume in the year under review, with occupational retirement provision on a group basis (in the form of superannuation funds) as well as individual primary insurance business serving as the main drivers of growth.
ence, the operating profit (EBIT) fell sharply to EUR 8.7 mil­
ised gains of EUR 11.6 million, as against unrealised losses of
The balance of our deposit interest and expenses was again higher at EUR 338.5 million (EUR 316.4 million).
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 – at 4.2 years (3.5 years) – is geared largely to the average maturity of the technical liabilities. We thereby adjust the maturity pattern of the fixed­income securi­
Group as well as from the marked appreciation of the Austra­
controlling interests in E+S Rück in an amount of EUR 24.1 million as well as to those in Hannover Re Real Estate Holding
ness, investments and financing measures. Regular liquidity planning and a liquid investment structure ensure that Han­
in order to receive alerts of suitable new openings by e­mail.
Last but not least, we should also mention our applicant pool.
Profit and value creation are indispensable prerequisites for sustainable development in the interests of our clients, share­
ports the highly renowned Geo Research Center in Potsdam, an institution that engages in the systematic investigation and early detection of earthquakes.
century art thanks to its extensive collection and diverse range of temporary exhibitions. The Foundation’s mission is to pro­
mote Hannover as a centre for the fine arts through the acqui­
national regulatory and internal corporate approaches and, all in all, we believe that we are well­equipped to provide the markets with tailored products. We see market opportunities in the area of structured reinsurance solutions designed to reduce solvency requirements, individual financing solutions and in the transfer of risks to the capital market. Thanks to our broad Group diversification, we enjoy the advantage of being able to offer our clients attractive solutions for improving their solvency margin. For Hannover Re itself, the capital require­
ments for non­life reinsurance. The valuation reserves for life and health reinsurance climbed above all due to the positive development of new business.
ure and standards for implementation of the ICS across all organisational units of Hannover Re.
pliance with guidelines and to reduce risks in the interests of secure execution of corporate strategy. This includes, among other things: OPPORTUNiTy ANd RiSK REPORT ManageMent report
tablished by the Hannover Re Group amounted to EUR 4,795.2 million in the year under review. Asbestos­ and pollution­
Life Executive Committee are kept regularly updated on the degree of capacity utilisation. The limits and thresholds for the 100­year and 200­year aggregate loss as well as the utilisation thereof are set out in the following table.
As part of our holistic approach to risk management across business groups, we take into account numerous relevant scen arios and extreme scenarios, determine their effect on portfolio and performance data, evaluate them in relation to the planned figures and identify alternative courses of action.
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 puts the accumu­
Alongside traditional retrocessions in non­life reinsurance we also transfer risks to the capital market. Yet credit risks are relevant to our investments and in life and health reinsurance, too, because we prefinance acquisition costs for our ceding companies. Our clients, retrocessionaires and broker relation­
(75.7%) are rated “A” or better. Our investment portfolio under own management does not contain any directly written credit derivatives.
fidentiality or availability of systems and information. Losses and damage caused by unauthorised access to IT systems or by computer viruses, for example, pose a serious threat to the Hannover Re Group. Given the broad spectrum of such risks, a diverse range of steering and monitoring measures and organisational standards have been put in place. Among other things, our employees are made more conscious of such security risks through practically oriented tools, for example for the secure communication of information by e­mail.
posal strategy software that assists them with the planning, elaboration and management of strategic objectives and meas­
Above and beyond the foreseeable payments, unexpected and exceptionally large payments may pose a threat to liquidity.
tion refers to the inclusion of a cap on severance payments when concluding or renewing an Executive Board contract
(Code Item 4.2.3 Para. 4). The reason for this divergence is set out in the following Declaration of Conformity pursuant to
able development in the interests of our clients, shareholders, employees and business partners. Our goal is to increase the
tivities. Based on our strategic human resources planning, we align the size and qualifications of our workforce with the cur­
ory Board held at the Annual General Meeting in 2011. The
bers of the Executive Board bear joint responsibility for the overall management of business. Irrespective of their over­
Board. Only persons under the age of 65 may be appointed to the Executive Board. The term of appointment shall be deter­
Supervisory Board appropriate candidates for the nominations that it puts forward to the Annual General Meeting for election to the Supervisory Board.
The remuneration report summarises the principles used to determine the remuneration of the Executive Board of Han­
The remuneration is also guided by the tasks of the specific member of the Executive Board, his individual performance and the performance of the full Executive Board.
Measurement basis and payment procedures for fixed remuneration component Measurement basis/parameter condition of payment Paid out
Goals according to area of Board responsibility indicator for performance measurement
stalments – on the last occasion for the month in which the contract of employment ends. The salary is reviewed at two­
IVC in the remuneration year, absolute amount of the IVC in the remuneration year, IVC in the remuneration year relative to the target value, payout ratio or profit transfer ratio of the business group relative to the target value and the general market environment. Upon complete fulfilment of the criteria the amount stipulated in the contract of employment for 100%
ing the bonus bank (cf. next section “Payment of the variable remuneration”).
M an ag em en t re p or t bonus corresponds roughly to the individual bonus in the new remuneration model. The old remuneration structure does not include any partially deferred disbursement through a bonus bank. Instead of the virtual Hannover Re share awards, stock appreciation rights are awarded under the old remuneration structure. The detailed conditions of this share­based remuner­
ed, but not yet exercised stock appreciation rights with a fair value of EUR 4.9 million (EUR 4.7 million).
If the Board member is permanently incapacitated for work, he shall receive after termination of the contract of employ­
incapable of exercising his profession or another occupation that can be performed on the basis of his training and experi­
The spouse’s pension and orphan’s pension combined may not exceed the pension that the eligible benefit recipient re­
Ass. jur. Otto Müller3 Member of the Supervisory Board Fixed remuneration 30.0 10.0 variable remuneration 19.3 34.3
nover Re’s Executive Board or Supervisory Board, nor did the company enter into any contingent liabilities for members of the management boards.
ance. At the subsidiaries abroad agreements are reached on the basis of net income, EBIT, EPS contribution and IVC.
At Home Office the cash value of the basic allocation of stock appreciation rights corresponds on average to 5.9% of the total cash compensation and is awarded to the entitled man­
The 1 January 2012 treaty renewals for our business in North
mised geographical diversification over the coming years. Our premium volume should increase in the year under review.
dle­class with purchasing power is emerging here, and its ranks are increasingly interested in preservation of their wealth, healthcare and provision for their surviving depend­
and technical risks that need to be borne in mind; the latter include, most notably, mortality and longevity, morbidity and disability as well as lapse. These factors are fully integrated into our risk management. We conduct regular adequacy checks with respect to the underlying pricing assumptions, carry out fundamental research into developments affecting the biometric actuarial bases and ensure complete reserving of all technical liabilities as well as risk diversification (both geographically and in terms of risk types, e.g. between mortal­
Reinsurance recoverables on other technical reserves 5.7 7,810 1,831 deferred acquisition costs 5.4 1,926,570 1,834,496 deferred tax assets 6.5 682,888 622,136 accrued interest and rent 5,931 11,182 assets held for sale 5.1, 4.4 2,391 1,529,355 total assets 49,866,952 46,725,293
An interest of 50.22% in Hannover Rückversicherung AG is held by Talanx AG, which in turn is wholly owned by HDI
ments” and IFRS 11 “Joint Arrangements” will replace the previous standards governing consolidated financial state­
Benefits”. IAS 1 requires entities to group items presented in OCI based on whether they are potentially reclassifiable to profit or loss subsequently, i.e. those that might be reclas­
The following table provides an overview of all other standards and interpretations that have not yet entered into force or are not yet applicable. Hannover Re is currently reviewing the potential implications of their application in future reporting periods.
(i) the same taxable entity or for (ii) different taxable entities.
Income and expenses in connection with reinsurance treaties are recognised on a basis consistent with the underlying risk of the reinsured business.
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 non­
Non-current assets held for sale and discontinued operations: 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 relevant carrying amount 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 operational and accounting purposes and were classified as sold or for sale are recognised as discontinued operations. Measurement is at the lower of carrying amount and fair value less costs to sell. Scheduled depreciation is not taken on non­current assets classified as held for sale. Impairment 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 carrying amount of the corresponding non­current assets, the need to establish a provision within the meaning of IAS 37 “Provisions, Contingent Liabilities and
ence. The same is true of special purpose entities, the consoli­
nificant influence are normally consolidated “at equity” as associated companies with the proportion of the sharehold­
In the course of the second quarter Funis GmbH & Co. KG, a wholly owned subsidiary of Hannover Re, acquired a par­
North America 8,217,365 7,202,980 1 after elimination of internal transactions within the Group across segments
Financial assets at fair value through profit or loss due in one year 35,186 35,186 76,542 76,542 due after one through two years 66,826 66,826 28,498 28,498 due after two through three years 5,399 5,399 60,257 60,257 due after three through four years 7,510 7,510 4,876 4,876 due after four through five years 2,595 2,595 – –
Government debt securities of Eu member states 10,375 424 – 203 11,002
Currency translation at 31 December of the year under review (3,510) – 7,574
In the year under review the contract deposits on the assets side fell by EUR 605.7 million from EUR 715.4 million to EUR
FASB ASC 944-30-25-1 requires that acquisition costs be capitalised as assets and amortised in proportion to the earned premium.
Net book value at 31 December of the previous year 31,808 38,844
ment pattern is calculated for each homogenous category of our portfolio – making allowance for the business sector, geographical considerations, treaty type and the type of re­
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
Net book value at 31 December of the year under review 2,215,864 91,823 2,124,041 1,910,422 83,224 1,827,198
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 amount of the commitments is deter­
The calculation of the provisions for pensions is based upon the following assumptions: The change in the projected benefit obligation of the pension commitments as well as their breakdown into plans that are unfunded or are wholly or partially funded was as follows: Change in the projected benefit obligation in eUr thousand 2011 2010
The fair value of the plan assets developed as follows: The expected long-term return on plan assets was derived from the anticipated long­term yields of the individual asset classes and weighted pro rata. The plan assets consist exclu­
Reconciliation of the net provision for pensions in eUr thousand 2011 2010
Projected benefit obligation from wholly or partially funded plans (before deduction of fair value of plan assets) 14,888 12,542
No actuarial gains (previous year: none) were recognised as at the balance sheet date in other comprehensive income.
240.5 million of the new bond issue. The cash component of the new bond in the amount of nominally EUR 259.5 million was placed predominantly with institutional investors in
Gross written premium1 in eUr thousand 31. 12. 2011 31. 12. 2010
188 Hannover Re Group annual report 2011Notes 6.5 Taxes on income
sulted in an improvement of EUR 128.0 million in Group net income in the year under review.
Instruments: Recognition and Measurement” and recognised under investments. Fluctuations in the fair value of the deriva­
The Hannover Re Group provides reinsurance protection for the HDI Group. To this extent, numerous underwriting busi­
lion) as well as recognition of liabilities from the derivatives resulting from technical items in an amount of EUR 13.0 mil­
The allocations for the years 2002 to 2004 as well as 2006, 2007, 2009 and 2010 gave rise to commitments in the 2011 financial year shown in the following table. No allocations were
Executive Board (20% of the defined variable remuneration) by the value per share, rounded up to the next full share.
exception of resignation/termination by the Board member for a compelling reason, (ii) non­acceptance by the Board member of a contract extension offered on at least the same contract terms (exception: the Board member has reached the age of 60 and served as a member of the Executive Board for two terms of office), (iii) extraordinary termination without notice of the
Code (HGB) totalled EUR 2.0 million (EUR 2.5 million). This included a fee of EUR 1.3 million (EUR 1.9 million) for the au­
N ot es 7.11 evenTs afTer The Balance sheeT DaTe Notes 7.11 events after the balance sheet date
mate at this point in time. Given that Hannover Re is one of the world’s leading marine reinsurers, the total loss for the com­
As in every year, we were given a description of the major pending legal proceedings. We were regularly updated on the work of the Supervisory Board committees and received reports on the current structure of the protection covers, especially in light of the heavy burden of major losses in 2011, on capital market risks as they affect the technical account of
Annual General Meeting on 3 May 2011 for the remaining term of office of the Supervisory Board, i.e. until the end of the
Bancassurance: partnership between a bank and an insur ance company for the purpose of selling insurance prod ucts through the banking partner’s branches. The link between the insurer and the bank is often characterised by an equity participation or a long­term strategic cooper ation between the two parties.
Financial Accounting Standards (FAS): cf. Statement of Financial Accounting Standards (SFAS)
Modified Coinsurance­ (Modco) Treaty: type of reinsur ance treaty where the ceding company retains the assets supporting the reinsured reserves by withholding a fund, thereby creating an obligation to render payments to the reinsurer at a later date. Such payments include a proportional share of the gross premium plus a return on the assets.
Rating: systematic evaluations of companies with respect to their credit status or the credit status of issuers with regard to a specific obligation. They are awarded by a rating agency or bank.
Reserve ratio: ratio of (gross or net) technical provisions to the
Spread loss treaty: treaty between an insurer and a reinsurer that covers risks of a defined portfolio over a multi­year period.
Major loss(­es, events) 2 ff, 6, 18, 21 f, 24 ff, 31 ff, 65, 71, 76,
Non­life reinsurance 4, 6, 8, 21 f, 24 ff, 64 ff, 68, 70 f, 76,
Stock appreciation rights (STAR) 93, 95, 101 ff, 194 ff 106 f