Our holistic management system Performance Excellence 2.0 ensures implementation of Hannover Re's corporate strategy across the various areas of business. Based on the Excellence Model of the EFQM (European Foundation for Quality Management), it enables each of our Group's organisational units to define and examine its own contribution to the Group strategy. In this way, we ensure that all initiatives and activities within our Group are rigorously linked to the corporate strategy.
Our integrated system of enterprise management constitutes the basis for accomplishment of our strategic objectives. Located at its core are, first and foremost, our profit and growth targets, which are summarised for the Group and the individual business groups in the so-called target matrix. In addition to traditional performance indicators geared to the IFRS balance sheet, our system of strategic targets also includes economic targets derived from our certified internal capital model. These targets are analysed annually and adjusted in the context of the strategy review conducted at regular (three-year) intervals – which is ongoing at the present time. In making adjustments our focus is on long-term strategic target attainment.
|Business group||Key data||Targets for 2017||Target attainment|
|2017||2016||2015||Ø 2015 – 2017 1|
|Group||Investment return 2||≥ 2.7%||3.8%||3.0%||3.5%||3.4%|
|Return on equity 3||≥ 9.8%||10.9%||13.7%||14.7%||13.1%|
|Growth in earnings per share (year-on-year comparison)||≥ 6.5%||-18.2%||1.8%||16.7%||-0.9%|
|Value creation per share 4||≥ 7.5%||1.5%||18.6%||13.6%||10.6%|
|Property & Casualty reinsurance||Gross premium growth||3 – 5% 5||18.7%||-0.2%||8.1%||8.6%|
|Combined ratio||≤ 96% 6||99.8%||93.7%||94.4%||96.2%|
|EBIT margin 7||≥ 10%||12.2%||16.8%||16.6%||15.1%|
|xRoCA 8||≥ 2%||1.1%||7.1%||7.4%||5.4%|
|Life & Health reinsurance||Gross premium growth||5 – 7% 9||1.4%||-4.3%||9.5%||2.1%|
|Value of New Business (VNB) 10||≥ EUR 220 million||EUR 364 million||EUR 893 million||EUR 543 million||–|
|EBIT margin 7
Financial Solutions / Longevity
|EBIT margin 7
Mortality / Morbidity
|xRoCA 8||≥ 3%||-8.5%||2.8%||8.9%||0.5%|
1 Annual average growth, otherwise weighted averages
2 Excluding effects from ModCo derivatives
3 After tax; target value: 900 basis points above the five-year average return on ten-year German government bonds
4 Growth in book value per share including dividend paid
5 Average over the reinsurance cycle; at constant exchange rates
6 Including large loss budget of EUR 825 million
7 EBIT / net premium earned
8 Excess return on allocated economic capital
9 Organic growth only; target: annual average growth over a five-year period; at constant exchange rates
10 Since 2016 based on Solvency II principles and pre-tax reporting; in 2015 based on MCEV principles with cost of capital of 6% and post-tax reporting
Especially in terms of its return on equity, our Group has performed very favourably in recent years despite the intensely competitive environment faced by reinsurers and the heavy losses of the 2017 financial year. Our return on equity target of 900 basis points above risk-free – which is enshrined in the corporate strategy – already represents a substantial target value creation. Through our business operations on all continents and the diversification between our Property & Casualty and Life & Health reinsurance business groups we are able to effectively allocate our capital in light of opportunity and risk considerations and among other things generate a higher-than-average return on equity.
The following chart shows that our annual return on equity in recent years comfortably surpassed the set minimum targets.
* After tax; target: 900 bps above 5-year rolling average of 10-year German government-bond rate („risk free”)