Group strategy at a glance
- Growing Hannover Re profitably
- We aspire to be the best option for our business partners when it comes to choosing a reinsurance provider
Our claim: “Somewhat different”
- Well diversified, global player, above-average profitability
- Swift, flexible and undogmatic
- Lean structures, efficient organisation
1. Business model
We transact reinsurance in our business groups of non-life and life & health reinsurance as well as direct business in niche markets. Through our global presence and our activities in all lines of reinsurance we achieve optimal risk diversification while maintaining a balanced opportunity/risk profile. Most significantly, diversification into both the non-life and life & health reinsurance enables us to effectively deploy our capital and is thus crucial to our ability to generate an exceptionally high return on equity.
Non-life reinsurance: In non-life reinsurance, we consider ourselves to be an undogmatic, flexible and innovative market player that is amongst the best in any given market.
Life and health reinsurance: In life and health reinsurance, we have established ourselves as one of the major professional globally operating reinsurers that combines sophisticated solution models with a long-term partnership-based approach.
2. Profit and growth targets
Our goal is to increase the IFRS pre- and post-tax profit as well as the value of the company – including dividends – by double-digit margins every year. We commit to growing our premium volume, in the long term, at a pace that exceeds that of the reinsurance sector, primarily through organic growth.Temporary market share losses are not contrary to this objective.
Based on our Economic Capital Model, we aim to achieve a profit in excess of the cost of capital. This profit, which we refer to as Intrinsic Value Creation (IVC), is the key ratio used to manage our business activities.
We offer our shareholders the prospect of a sustained above-average return on their capital. As such, we seek to generate an IFRS return on equity of at least 750 basis points above the risk-free interest rate. We strive to outperform the weighted Global Reinsurance Index over a three-year rolling period.
Non-life reinsurance: Cost leadership, cycle management and risk management make us one of the most profitable companies in this industry
Life and health reinsurance: The business group is an important contributor to the performance of Hannover Re Group through stable earnings
3. Risk management
The foundation of our risk management strategy is our Economic Capital Model. Based on this model we manage our risk exposure to achieve a positive IFRS net income with a probability of 90%. We also ensure that the probability of a complete loss of our economic as well as IFRS shareholders' equity does not exceed 0.03%. On this basis, our shareholders' equity is allocated to the individual areas of our business activity with the aim of maximising the risk-adjusted profits.
Non-life reinsurance: Risk taking is methodically steered through our underwriting guidelines. As inadequate reserves constitute our highest risk, we take care to ensure that our reserving level is conservative.
Life and health reinsurance: In order to be able to reliably meet future obligations from our long-term customer relationships we strive for a balanced mix of risks. Our global underwriting guidelines equip underwriters with a sound framework.
4. Preferred business partner
Our goal is to enhance our clients' commercial success through the services that we provide as a reinsurer and we respond flexibly and quickly to the needs of our clients. We offer all standard reinsurance products as well as specially tailored solutions that add value to both contracting parties. Irrespective of the size of the account, we offer risk-appropriate prices, adequate capacities and a reliable promise to fulfil our contractual obligations.
We seek to maintain a rating from the rating agencies most relevant to our industry that facilitates and ensures access to all desirable business worldwide. Currently, this means ensuring AA- from Standard & Poor's (with an "excellent" for Enterprise Risk Management) and A+ from A.M. Best.
Non-life reinsurance: We offer our clients a diverse range of products. Particular attention is devoted to clients with a medium- to long-term requirement for reinsurance.
Life and health reinsurance: Our business relationships are of a long-term nature and are intended to bring long-term benefit to both parties. Our value-creating customers enjoy preferential access to our resources.
We pay close attention to the qualifications, experience and commitment of our staff and foster these attributes through our excellent personnel development, leadership practices and an attractive workplace. As such, our strategic human resources planning enables us to harmonise the size and skills of our workforce with the current and future requirements of our global market presence.
We ensure the greatest possible delegation of tasks, responsibilities and authority. This is supported by management by objectives and an approach that allows our employees to participate in the sustained success of the business. Where qualifications are equivalent, vacant management posts are occupied from within the Group, wherever possible.
Our equity resources are determined by the requirements of our economic capital model, solvency regulations, the expectations of the rating agencies in relation to our target rating and the expectations of our clients and shareholders. A sufficient equity buffer to enable us to act on available business opportunities at all times.
Our IFRS shareholders' equity is managed in such a way that our targeted return of 750 basis points above risk-free is not endangered. For the sake of optimisation we use capital substitutes such as hybrid capital and we transfer risks to the capital or retrocession markets.
7. Investment income
The structure of our investment holdings is guided by the requirements of our technical liabilities and our capitalisation. With this in mind, we pursue an investment policy that emphasises the stability and predictability of the return that is to be generated. As such, our portfolio is broadly diversified and ensures a well-balanced risk/return ratio. As a return on our investments we strive for the risk-free interest rate plus the cost of capital.
8. Lean organisation
We believe that our lower administrative expense ratio – relative to our competitors – gives us a sustained competitive advantage. We ensure this through an effective and efficient organisation that preserves both expertise and high-quality service for our clients. Our information and communication systems assure optimal support for our business processes. We support the acquisition of new technology, provided that the cost/benefit considerations are favourable.
9. Sustained compliance
Our activities are conform to all legal requirements. Considered and pragmatic principles of corporate governance play a central role in guiding our activities. At the core of our Corporate Governance principles is integrity in our dealings with our business partners, employees, shareholders and other stakeholders.
We also encourage sustainability in the transaction of our business, with a special focus on the avoidance of adverse impacts on the environment. We support social objectives particularly in the area of skilled training, not only within but also outside the company.
10. Performance Excellence
To ensure the execution of our strategy across all areas of our organisation, we apply our holistic management system of Performance Excellence 2.0. In this way, we ensure that the actions of all our corporate units are geared to the accomplishment of our strategic objectives and that our goal-oriented performance is continuously enhanced.