Letter from the Chairman of the Executive Board

Dear Shareholders, ladies and gentlemen

Jean-Jacques Henchoz,
Chairman of the
Executive Board

At the time of writing we all have close to six months of the Covid-19 crisis behind us. The world continues to face an exceptional situation on account of the pandemic. We would like to extend our condolences to everyone who has lost friends and family to the virus and our sympathies to those who have been affected in any other way.

At Hannover Re, we attach the utmost priority to protecting the health and wellbeing of our employees – particularly in times such as these – just as we do to providing reliable support for our clients around the world. The majority of our staff continue to work from home. Thanks to our good level of technology readiness, our changeover from office working to the home environment was accomplished smoothly.

This seamless transition would not have been possible without the dedication and cooperation of our employees. Many members of staff had to entirely reorganise their everyday routine on account of the considerable restrictions placed on public life. Undoubtedly, this was not always easy. I would therefore like to take this opportunity to extend my sincerest thanks – also on behalf of the entire Executive Board – for this significant commitment.

Even though considerable uncertainty remains surrounding the further course of the pandemic, it may be stated for the half-year just ended that Hannover Re has come through this crisis in relatively good shape. Our business model is designed with such extreme events in mind. As a reliable partner, we stand ready to give our clients unqualified support.

This was borne out by the treaty renewals in property and casualty reinsurance in April, June and July, which passed off without a hitch despite the restrictions on physical contact and travel. Particularly in uncertain times, reinsurance protection is an essential tool for risk management purposes. After years of price declines, we are now seeing a sustained trend reversal towards higher prices and rising demand for our covers.

Insurers and reinsurers alike play a pivotal role when it comes to minimising risks for society. Such risks include not only pandemics, but also the consequences of climate change, natural disasters and developments in technology. Given the global nature and the immense costs associated with the worldwide spread of a pandemic, comprehensive risk coverage can only work through partnership- based solutions and with the involvement of government institutions. Existing coverages for terrorism risks can serve as a template here. We are aware of our responsibility and we intend to play our part.

This is also in the spirit of our corporate purpose: Beyond risk sharing - we team up to create opportunities. After all, collaborative partnership-driven solutions are especially vital when it comes to dealing with crises. Only if we, as a society, learn the right lessons from the Covid-19 crisis and take the right steps can we ensure that we are better prepared to face the next pandemic.

As a reinsurer, we make our contribution by checking whether the contractual clauses used between policyholders and primary insurers unambiguously regulate the coverage of pandemic risks, or by participating in the design of new coverage concepts. As one of the largest and most financially robust reinsurers in the world, we support the solvency, liquidity and capital position of our clients with tailor-made reinsurance solutions and thereby help them to navigate the current challenges.

Hannover Re’s financial strength is geared to managing even extreme risks. This is also one of the basic constants in the cyclical review of our Group strategy, which is underway at the present time. There is no doubt that we are on the right track here. In a continuously shifting landscape, however, we must keep evolving. This has been demonstrated once again by the Covid-19 crisis.

I would now like to briefly summarise below the development of your company’s business in the first half of 2020.

Despite the burden of the Covid-19 pandemic, Hannover Re can look back on a first six months that demonstrated again the risk-bearing capacity of our business model. In the first half-year we dealt with strains of around EUR 600 million from the complex of losses surrounding Covid-19 in our Property & Casualty reinsurance business group. Combined with other large losses, total expenditure on major losses amounted to EUR 737 million for net account and was thus significantly higher than our half-year budget.

With Group net income coming in at EUR 402 million in the first half of 2020, we are well below the previous year’s level of EUR 663 million. Bearing in mind the losses directly attributable to the Covid-19 pandemic, considerable volatility on capital markets and an extremely uncertain outlook for the entire global economy, we can nevertheless be satisfied with this result. The gross premium booked by Hannover Re grew by 12 percent in the first six months adjusted for exchange rate effects, clearly showing that our clients value our risk protection.

In view of the uncertainty surrounding the future course of the Covid-19 pandemic, however, the results for the first half-year cannot be used to draw any conclusions about the full financial year. What is more, we still have peak hurricane season ahead of us.

Faced with these uncertainties, we had already withdrawn our full-year guidance for 2020 in April and we are still not in a position to reliably quantify the effects on our business and our investments over the course of the year. The various scenarios produce a broad spectrum of potential impacts on earnings. We are making the relevant calculations on an ongoing basis and will announce new guidance as soon as this can be done with the backing of reliable estimates.

We are retaining our dividend policy unchanged. Hannover Re continues to envisage a payout ratio for the ordinary dividend in the range of 35 to 45 percent of its IFRS Group net income. Provided the comfortable level of capitalisation remains stable and subject to a Group result in line with expectations, the ordinary dividend will be supplemented by payment of a special dividend.

As I mentioned at the outset, the dedication shown by our employees has made it possible for Hannover Re to withstand relatively well so far what are challenging times for all of us. I would like to express again to them my sincerest thanks, just as I would to our clients and business partners for the trust that they place in us. Furthermore, I join the entire Executive Board in stating how grateful we are to you, our valued shareholders, for your commitment to Hannover Re. Going forward, as in the past, our primary objective will be to lead your company with the necessary foresight and to constantly safeguard the Group’s robust financial strength, even in times of crisis.

Yours sincerely,

Jean-Jacques Henchoz
Chairman of the Executive Board