dz bank equity conference - talanx/media/files/t/talanx/reports-and-presentations/... · global...

Dr Immo Querner, CFO 17 November 2014

DZ Bank Equity Conference

Warburg German Ideas Day, 19 November 20142

Talanx - Key Investment Highlights

Commitment to continuously fulfill a „AA“ capital requirement by Standard & Poor‘s

Focus on long-term increase in value by sustainable and profitable growth

Global insurance group with leading market positions and strong German roots

Target to achieve Group net income of at least €700m in 2014. Target for at least €700m in 2015 despite material increase in large-loss budget

Dedication to pay-out 35-45% of IFRS earnings to shareholders

Dedication to focus on insurance rather than market risks

Leading and successful B2B insurer


Appendix

II Outlook and targets

I Talanx in a nutshell


Talanx in a nutshell – A global insurance player

Countries with local presence

Location overview in Primary and in Reinsurance

Global networks in Industrial Lines and Reinsurance. Leading positions in retail target markets

2000 2013

Branch / office location Primary Insurance Branch / office location Reinsurance

GWP split (Primary/Reinsurance): 44% / 56%Employees (Germany/abroad): 4,539 / 1,511

GWP split (Primary/Reinsurance): 53% / 47%Employees (Germany/abroad): 11,302 / 10,227


Talanx in a nutshell – Among the leading European insurance groups

European insurers by global GWP (2013, €bn)German insurers by global GWP (2013, €bn)

Listed insurers

Third-largest German insurance group with leading p osition in Europe and strong roots in Germany

1 Figure of 2012 2 Gross premiums earnedSource: SNL Financial, annual reports

Top 10 European insurersTop 10 German insurers

3.9

4.2

5.5

5.6

7.2

9.3

12.8

28.2

51.1

103.4

Gothaer1

Signal Iduna1

HUK1

Vk Bayern

Debeka1

R+V

Munich Re

Allianz

26.0

26.4

27.7

28.2

36.0

39.1

51.1

66.1

85.5

103.4

Aviva

Crédit Agricole

CNP

Prudential2

Zurich

Munich Re

Generali

AXA

Allianz

W&W


Talanx in a nutshell - Shareholders and divisions

Industrial Lines Retail Germany Retail International Reinsurance

Life/HealthNon-Life

V.a.G.Free float

6.5 %79.0 %14.5 %1

� Lead insurer of choice

� Extremely strong home market position, i.e. lead mandates with most German DAX companies and strong position with German Mittelstand

� Bluechip client base in Europe

� Highly effective network of distribution partners

� Market leader in bancassurance

� Market leader in employee affinity business

� Leading provider of corporate pension solutions

� Hannover Re – world #3 reinsurer by GWP4

� Well diversified between life/non-life and geographically

� Consistently amongst sector leaders on profitability5

� Superior underwriting know-how

� Focused exposure to CEE and LatAm (#2 insurer in Poland2, #6 in Brazilian motor3)

� Attractive rates of organic growth

� Experienced underwriter in motor

� Focused M&A track record

1 Including employee shares2 Combined ranking based on November 2013 data of Polish regulator as per local GAAP 3 According to Siscorp based on local GAAP4 Based on A.M. Best ranking (September 2012)5 Based on S&P ranking by average RoE 2002-2010 and also number 1 by average RoE as per KPMG 2012

Integrated insurance group with leading market posi tions in all segments


Talanx in a nutshell – Strategic group pillars

Profit target

� RoE1>∅ TOP20 European insurers

� RoE1≥risk-free interest rate2

+750bps

Capital management

� Fulfill S&P “AA”capital requirement

� Efficient use of available financing instruments

Risk management

� Generate positive annual earnings with a probability of 90%

� Sufficient capital to withstand at least an aggregated 3,000-year shock

� Investment risk ≤50%

Growth target

� 50% of primary GWP from foreign operations

� Selective profitable growth in Retail Germany and Reinsurance

Human resource policy

� Continuous development and promotion of own workforce

� Individual responsibility and entrepreneurial spirit

Focus of the Group is on long-term increase in value by sustainable and profitable gro wth

and vigorous implementation of our B2B-expertise

Group and divisional strategies define goals and ac tions to be taken

1 In accordance with IFRS2 Risk-free rate is defined as the 5-year rolling average of the 10-year German government bond yield


Talanx in a nutshell - Industrial Lines

Key figures

Recent trends

� GWP slightly down in Q3 2014by -1.8%, while growing by 2.7% y/y in first 9 months 2014 (curr.-adj: +3.8%)

� Sustainable growth resulting from international activities, incl. Northern America and Asia Pacific� Self-retention in 9M 2014 at 50.5% (9M 2013: 45.7%) - well on track to reach the FY2014 target of ca. 50%, despite

€115m reinstatement premium (€74m in Q3 2014 alone)� Reinstatement premium also negatively impact the expense ratio (Q3 2014 effect of ~3%pts) and loss ratio. Key

driver of the loss ratio are significant large losses, e.g. flood in Michigan (USA) and various man-made losses, such as a major industrial explosion near Bremen

1 Based on total GWP adjusted for 50.2% share in Hannover Re2 Including income from interest on deposits

2013 geographic split (GWP)Share in 2013 group GWP 1

(2.2 pts)104.7106.9102.4Combined ratio (net)2 in %

Key financials (€m) FY2013 9M 2013 9M 2014 Change

Gross written premium 3,835 3,128 3,213 +3%

Net premium earned 1,744 1,345 1,401 +4%

Net underwriting result (43) (93) (66) n/m

Net investment income 240 167 209 +25%

Operating result (EBIT) 129 50 125 +148%

Return on Equity in % 5.1 2.0 5.8 +3.8 pts

Talanx is a leading European industrial lines insur er with global ambitions

Germany International

17%

83%

46%

54%


Talanx in a nutshell - Retail Germany

2013 business mix (GWP)Share in 2013 group GWP 1

Key figures

Recent trends

� In line with targets, slight reduction in GWP, primarily reflecting a decline in traditional life business and a profitabilisation of the motor line

� Loss ratio close to normalized level, while cost ratio impacted by additional pre-seasonal service capacities � Decline in underwriting results largely due to higher RfB contribution on the back of higher realised capital gains to

finance ZZR� ~75% of anticipated 2014 ZZR allocation booked (forecast of ~€355m for FY2014; FY 2013: €313m, both according

to HGB). Total ZZR stock expected to rise to ~€1.1bn-level until year-end 2014� Higher ordinary capital gains contribute to profit growth

+0.1 pts101.7101.6102.4Combined ratio (net)2 in %


Gross written premium 6,954 5,196 5,079 (2%)

Net premium earned 5,605 4,036 3,917 (3%)

Net underwriting result (1,515) (1,130) (1,264) n/m

Net investment income 1,786 1,319 1,430 +8%


Return on Equity in % 3.0 3.2 3.6 +0.4 pts

Strong German retail insurance business – more than 80% from B2B distribution channels (2013)

1 Based on total GWP adjusted for 50.2% share in Hannover Re 2 Including interest income on funds withheld and contract deposits; net, property/casualty only

32% 78%22%

Life Non-life


Talanx in a nutshell - Retail International

Key figures

+0.7 pts96.595.895.8Combined ratio (net) in %


Gross written premium 4,220 3,133 3,307 +6%

Net premium earned 3,513 2,597 2,820 +9%

Net underwriting result 32 23 (6) n/m

Net investment income 284 214 241 +13%


Return on Equity in % 5.9 7.2 7.2 -

2013 geographic split (GWP)

LatAm2

Western Europe2

CEE/CIS2

� 9M 2014 GWP growth of 5.5% (curr.-adj.:+10.0%), while currency-effects slighly fading out: Q3 2014 growing strong at 7.1% (+8.5%)� Brazil and Mexico gaining significant growth momentum in Q3 2014� Slight increase in segment CoR in Q3 2014 by 1%pt. due to a severe bus accident insured by Warta (effect on segment CoR of

0.4%pts) and currency-effect (1.4%pts; compensated in „other result“) � Turkey continues its positive trend (9M 2014 EBIT: €1.9m), Mexico and TU Europa with CoRs well below the 100%-level� Increase in asset base and higher interest rates in Brazil support improvement in investment income

Recent trends

Focus on major growth markets in Latin America and CEE

1 Based on total GWP adjusted for 50.2% stake in Hannover Re2 CEE/CIS including Turkey and Russia; LatAm including Mexico; Western Europe including Italy, Austria, Liechtenstein and Luxembourg

Share in 2013 group GWP 1

19%

2013 business split (GWP)

66%

34%

Non-Life Life

51%

28%

21%


� 9M 2014 GWP: +1.4% (+2.6% adj. for currency effects), mainly from Australia and Longevity BATs

� Technical result improved significantly due to normalised result from Australian disability business

� Net investment income at expected level, minor negative impact from ModCo derivatives

� Other income improved due to f/x effects� Strong increase in EBIT1 by ~45% � 9M 2014 EBIT margins1 in financial solutions/longevity business as well

as in mortality and morbidity business ahead of targets

Talanx in a nutshell - Reinsurance

Key figures

Recent trends

� 9M 2014 GWP up by 1.7%y/y (adj. for currency effects: +3.2%) with growth effects mainly from China and Southeast Asia. NPE +0.2% y/y (curr.-adj.:+1.5%)

� Large losses of €242m (4.7% of NPE) below budget (€491m for 9M 2014)

� Conservative loss reserving policy maintained for the large lossbudget

� Net investment income increased despite the low yield environment.

� „Other income and expenses“ influenced by positive currency effects in particular in Q3 2014

� EBIT margin2 of 17.0% (9M 2013: 16.3%) is well above target

---95.395.094.9Comb.Ratio2 in %

Key financials (€m)Non-Life Life / Health

FY2013 9M 2013 9M 2014 FY2013 9M 2013 9M 2014

Gross written premium 7,818 5,956 6,060 6,145 4,582 4,644

Net premium earned 6,866 5,093 5,104 5,360 4,024 3,861

Net investment income 811 599 666 610 460 461

Operating result (EBIT) 1,097 833 868 139 164 237

GWP development (total, €bn)Share in 2013 group GWP 1

Hannover Re is one of the largest and most profitab le reinsurers globally

1 Based on total GWP adjusted for 50.2% share in Hannover Re2 EBIT and EBIT margins reflect a Talanx Group view

32%

Reinsurance

15.415.215.9Return on Equity in %

9M 20149M 2013FY2013

2011 2012 2013

12.113.8 14.0

Non-Life Life / Health


Talanx in a nutshell – Sources for growth

� International growth

� Increase retentionIndustrial Lines

� Lever successful bancassurance

� Elimination of cost disadvantagesRetail Germany

� Growth in selected emerging markets

� Role-out of best practise examplesRetail International

� Efficient cycle management

� Expansion into emerging marketsReinsurance


Appendix




Targets are subject to no large losses exceeding bu dget ( cat ), no turbulences on capital markets ( capital ), and no material currency fluctuations ( currency )

Gross written premium 2 +2-3%

Return on investment ≥ 3.4%

Group net income ≥ €700m

Return on equity 9-10%

Dividend payout ratio 35 - 45% target range

1 The outlook is subject to a thorough assessment of the protracted low interest rate environment and of the Life Insurance Reform Act (“LIRA”) impact on German retail activities2 On divisional level, Talanx expects gross written premium growth of +3-5% in Industrial Lines, -(1-2)% in Retail Germany, +4-8% in Retail International and a flat to low single-digit growth rate in Reinsurance

Outlook for Talanx Group 20141


Targets are subject to no large losses exceeding bu dget ( cat ), no turbulences on capital markets ( capital ), and no material currency fluctuations ( currency )

Gross written premium 2 +1-3%

Return on investment > 3.0%

Group net income ≥ €700m

Return on equity ~ 9%

Dividend payout ratio 35-45% target range

1 The targets are based on an increased large loss budget of €290m (from €185m) in Primary Insurance 2 On divisional level, Talanx expects gross written premium growth of +1-3% in Industrial Lines, unchanged premium in RetailGermany, +6-8% in Retail International and a flat to low single-digit growth rate in Reinsurance

IV Targets for Talanx Group 20151


Appendix




0

100

200

300

400

500

600

700

800

900

2009 2010 2011 2012 2013

in mn €

0

100

200

300

400

500

600

700

800

900

2009 2010 2011 2012 2013

in mn €

10.0%10.0%

4.5%

11.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2009 2010 2011 2012 2013

0

100

200

300

400

500

600

700

800

900

2009 2010 2011 2012 2013

in mn €

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2009 2010 2011 2012 2013

in €bn

3.7%4.2% 4.0%

4.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2009 2010 2011 2012 2013

2013 Outlook Rol > 3.5%

2013 Outlook RoE ≥ 750 bps + risk-free1 2013 Outlook Net income ~€700m; pay-out ratio 35-45%2

2013 Outlook GWP growth ≥4%

+12.6% +5.6%

+3.6%+9.3%+10.1%

Return on Investment GWP growth

Return on Equity Net income and Payout

(€1.05 p.s.)

485

216

515

626750

17

(€1.20 p.s. 3)

��

��

4.0%

10.6%

target ROE

Appendix - FY2013 target achievement

1 Risk-free rate is defined as the 5-year rolling average of the 10-year German government bond yield (ROE target 2013: 9.8%)2 pay-out ratio 2013: 39.8% (2012: 42.1%)Note: figures restated on the base of IAS8; 2013 Outlook reflects increased targets as presented in Aug 2013


Appendix – 9M 2014 results – Key financials

Summary of 9M 2014

€m, IFRS 9M 2014 9M 2013 ChangeGross written premium 21,732 21,380 +2 %

Net premium earned 17,131 17,103 +0 %

Net underwriting result (1,353) (1,228) n/m

Net investment income 2,996 2,814 +6 %

Operating result (EBIT) 1,444 1,376 +5 %

Net income after minorities 530 528 +0 %

Key ratios 9M 2014 9M 2013 Change

Combined ratio non-lifeinsurance and reinsurance 97.7% 97.6% 0.1%pts

Return on investment 4.0% 4.0% 0.0%pts

Balance sheet 9M 2014 FY2013 ChangeInvestments underown management 94,053 86,310 +9 %

Goodwill 1,108 1,105 +0 %

Total assets 144,845 132,793 +9 %

Technical provisions 99,643 91,717 +9 %

Total shareholders' equity 12,562 11,124 +13 %

Shareholders' equity 7,937 7,127 +11 %

Comments

Note: numbers adjusted on the basis of IAS8

� GWP growth in line with 2014 Outlook, still dampened by currency effects. All segments apart from Retail Germany with positive growth

� Slightly lower growth in net premium earnedreflects lower self-retention in Life&HealthReinsurance – while self-retention ratio in Industrial Lines is up by 5%pts

� Return on investment at 4.0%, well above the2014 Outlook

� 9M 2014 net income (€530m) exceeds 9M 2013 level, even before adjusting for the base effect of partial disposal of SwissLife stake (~€100m)

� Shareholders’ equity up to €7,937m, or €31.40 per share. Solvency I ratio up to 240.5% (FY2013: 210.2%)

Bottom-line result slightly ahead of 9M 2013


Appendix - Large losses1 in 9M 2014

� Net burden from large losses of overall €501m in 9M 2014 (9M 2013: €668m)

� Q3 net burden of €113m in Primary and €138m in Reinsurance

� Primary Insurance affected by significant amount of man-made losses in Industrial Lines

� Reinsurance mainly impacted by aviation loss, but very well within large loss budget

1definition „large loss“: in excess of €10m gross in either Primary insurance or Reinsurance

197.436.0161.4Fire/Property

341.3162.4178.9Total other large losses

667.5446.7220.8Total large losses (9M 2013)

5.4% pts4.7% pts6.1% ptsImpact on Combined Ratio

500.7242.2258.5Total large losses

Transport

10.010.0Other

Credit

133.9126.47.5Aviation

159.479.879.6Total NatCat

30.030.0August 2014Flood, USA

11.511.5August 2014 Hail, Canada

92.743.948.8June 2014Storm “Ela”, Germany, Belgium, France

8.18.1June 2014Storm, USA

6.96.10.8April 2014Earthquake, Chile

10.210.2February 2014Snowstorm, Japan

Talanx GroupReinsurancePrimary

insurance(€m, net)


Appendix - Solvency capital position

� Talanx has extensive experience in innovative capital management

� As of 30 September 2014, available funds include €1.6bn of subordinated debt2

� Goodwill of €1.1bn as of 30 September 2014(relative to shareholders’ equity excl. minorities of €7.9bn)

(€bn)

Solid solvency and high-quality capital with relati vely low goodwill supporting optimal balance sheet strength

1 Talanx Group based on the solvency of HDI V.a.G. (HDI V.a.G. is the relevant legal entity for the calculation of group solvency from a regulatory perspective)2 €1.6bn of the Group’s total subordinated debt (€2.7bn) are eligible for Solvency I capital (after accounting for minority interest and capped by regulatory thresholds)

CommentsSolvency I capital position

Solvency I margin1

202% 225% 210% 241%

8.2

6.8

9.4

3.93.4

3.9

2011 2012 2013 9M 2014

Available funds Solvency capital requirements

8.4

3.7


Appendix - Rating overview

16/05/1430/06/14last update

22/05/1430/06/14last update

Standard & Poor’s A. M. Best

Grade Outlook Grade Outlook

Talanx Group1 - - A Stable

Talanx Primary Group2 A+ Stable - -

Hannover Re subgroup3 AA– Stable A+ Stable

rating of Talanx Primary GroupCurrent financial strength ratings

Financial strength underpinned by S&P and A.M. Best ratings

1 The designation used by A. M. Best for the Group is “Talanx AG and its leading non-life direct insurance operation and its leading life insurance operation”2 This rating applies to the core members of Talanx Primary Group (the subgroup of primary insurers in Talanx Group)3 This rating applies to Hannover Re and its major core companies. The Hannover Re subgroup corresponds to the Talanx Reinsurance segment4 Insurance Industry and Country Risk Assessment

Business Risk Profile

Strong

Financial Risk Profile

Very Strong

ERM

Strong

Management & Governance

Satisfactory

Capital & Earnings

Very Strong

IICRA 4)

Intermediate Risk

Risk Position

Intermediate Risk

Competitive Position

Strong

Risk Position

Strong

Liquidity

Exceptional

Anchor rating a+ Modifiers

Modifiers

Neutral


Appendix - Focus on insurance risk

Market risk 3

Non-life risk 2

Further life risk

Operational riskOther risk

� Total market risk of 37%, of solvency capital requirements, which is comfortably below the 50% limit

� Risk capacity priority for insurance risk

� Non-life is the dominating insurance risk category, comprising premium and reserve risk, NatCat and counterparty default risk

� Equities ~1% of investments under own management

� GIIPS sovereign exposure 1.7% of total assets (9M 2014)37%

38%

16%

8%1%

Talanx Group

Market risk sensitivity (limited to less than 50% o f solvency capital requirement) is deliberately low

1 Figures show approximate risk categorisation, in terms of solvency capital requirements,of the Talanx Group after minorities, after tax, post diversification effects as of 2013

2 Includes premium and reserve risk (non-life), net NatCat and counterparty default risk3 Refers to the combined effects from market developments on assets and liabilities

CommentsRisk components of Talanx Group 1


Appendix – B2B distribution as a key differentiator

Brokers

Bancassurance

Automotive

Retail International

Retail GermanyIndustrial Lines

Reinsurance

Employee affinity

business

Retail Industrial

Brazil

Core value proposition:

B2B competence

B2B2C

B2B2C

Superior service of corporate relationships lies at heart of our value proposition

1 Samples of clients/partners

Excellence in B2B2C channels 1Linkage between different Group segments


Appendix - HDI V.a.G. history and structure

HistoryOverview V.a.G.

� HDI V.a.G. is a mutual insurance company and majority-owner of the holding company Talanx AG

� The organisational setup reflects the historic roots of HDI, an association of important companies of the German industry that offers mutual insurance cover

� Approx. 0.8m members of HDI V.a.G.

� Alignment of interests of HDI V.a.G. and Talanx Group through

- Providing efficient and reliable insurance to mutual members at market rates, often syndicate-based

- Same decision makers: Mr Haas, Dr Hinsch, Dr Querner

- HDI V.a.G. has no other investments besides Talanx and is interested to further strengthen and enable Talanx to provide stable insurance capacity to industrial clients

- Talanx and HDI V.a.G. committed to capital market oriented dividend policy

Foundation as ‘Haftpflichtverband derdeutschen Eisen- und Stahlindustrie‘ in Frankfurt

Companies of all industry sectors are able to contract insurance with HDI V.a.G.

Foundation of Hannover Rück-versicherungs AG

Diversification into life insurance

IPO of Hannover Rückversicherung AG

Renaming of HDI Beteiligungs AG to Talanx AG

Start transfer of insurance business from HDI V.a.G. to individual entities

Acquisition of Gerling insurance group by Talanx AG

IPO of Talanx AG

1903

1953

1966

1991

1994

1998

2001

2006

2012

Listing at Warsaw Stock Exchange2014


Talanx Investor Relations

Contact

Talanx AGRiethorst 230659 [email protected]

Carsten Werle, CFAPhone: +49 511 3747 [email protected]

Marcus Sander, CFAPhone: +49 511 3747 [email protected]

Wiebke ErlerPhone: +49 511 3747 [email protected]

Christian MarxPhone: +49 511 3747 [email protected]

Financial Calendar

23 March 2015Annual Report 2014

7 May 2015AGM 2015

11 May 2015Interim Report Q1 2015

12 August 2015Interim Report 6M 2015

12 November 2015Interim Report 9M 2015


This presentation contains forward-looking statements which are based on certain assumptions, expectations and opinions of the management of Talanx AG (the "Company") or cited from third-party sources. These statements are, therefore, subject to certain known or unknown risks and uncertainties. A variety of factors, many of which are beyond the Company’s control, affect the Company’s business activities, business strategy, results, performance and achievements. Should one or more of these factors or risks or uncertainties materialize, actual results, performance or achievements of the Company may vary materially from those expressed or implied as being expected, anticipated, intended, planned, believed, sought, estimated or projected in the relevant forward-looking statement.

The Company does not guarantee that the assumptions underlying such forward-looking statements are free from errors nor does the Company accept any responsibility for the actual occurrence of the forecasted developments. The Company neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.

Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by the Company as being accurate. Presentations of the company usually contain supplemental financial measures (e.g., return on investment, return on equity, gross/net combined ratios, solvency ratios) which the Company believes to be useful performance measures but which are not recognised as measures under International Financial Reporting Standards, as adopted by the European Union ("IFRS"). Therefore, such measures should be viewed as supplemental to, but not as substitute for, balance sheet, statement of income or cash flow statement data determined in accordance with IFRS. Since not allcompanies define such measures in the same way, the respective measures may not be comparable to similarly-titled measures used by other companies. This presentation is dated as of 13 November 2014. Neither the delivery of this presentation nor any furtherdiscussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. This material is being delivered in conjunction with an oral presentation by the Company and should not be taken out of context.

Disclaimer

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