Letter from the Chairman of the Executive Board
Dear Shareholders, Ladies and Gentlemen
Chairman of the
Hannover Re can look back on a very successful 2019 financial year. Personally, I am absolutely
delighted that we are able to present to you a record result for the year just ended.
In my first few months as Chief Executive Officer, a role which I took over in May, the positive impression that I had previously formed of Hannover Re as an outsider was unreservedly confirmed. The dedication and expertise of our employees, our long-standing and partnership-based customer relationships and our efficient business model establish the foundations for our superb positioning – and this will remain the case going forward.
With a view to ensuring that Hannover Re continues to enjoy this exceptional level of success, we shall be revising our Group strategy as part of the regular review process in the 2020 financial year. Without doubt, Hannover Re is on the right track. Nevertheless, given the changing landscape in our industry, we too must continue to evolve and will have to make ongoing course adjustments going forward.
I am able to report on some of the early initiatives that we have already set in motion in the 2019 financial year. We shall, for example, expand our footprint in Asia so as to better participate in the growth of this region’s insurance markets. Furthermore, we remain committed to improving our customer relationships and to strategic projects in the areas of digital innovation and talent development.
In the second half of 2019 we also grappled with the definition of a Purpose Statement for Hannover Re. More than 400 members of staff around the world engaged in a frank exchange about the purpose of our work, about our culture and values and about the future orientation of our company. On this basis, we formulated a corporate purpose that – to my mind – perfectly encapsulates the strengths and ambition of Hannover Re:
“Beyond risk sharing - we team up to create opportunities”.
In keeping with our corporate values, our Purpose Statement highlights our desire to deliver added value for our clients that goes above and beyond pure risk coverage (“Beyond risk sharing”). We aim to do this on a partnership basis and as a global team (“we team up”). At the same time, we see ourselves in a proactive role as an innovation partner for our clients (“to create opportunities”).
One very good example of how we act on our purpose is the cooperation that we announced in December with Global Parametrics, the Federal Ministry of Economic Cooperation and Development, Kreditanstalt für Wiederaufbau (KfW) and the Department for International Development (DFID) in the United Kingdom. Working together, we have developed an innovative concept for the coverage of climate risks in developing countries based on parametric indices. As our experience shows, partnering with government institutions on solutions of this type offers an effective means of closing the protection gap.
In the reinsurance industry the capacity for innovation is becoming an increasingly key differentiating factor. Technological changes in the context of digitalisation will further accelerate this trend.
Hannover Re is well positioned for this transformation. We were one of the first players in our industry to enable investors to participate directly in insurance risks and to this day we still enjoy a leading role in the insurance-linked securities market. The same is true of bespoke covers offered in structured reinsurance: in both property & casualty and life & health reinsurance we played a pioneering role here in shaping the market and we have cemented our position over the years as one of the top providers.
We also make systematic efforts to foster the internal power of innovation within Hannover Re, including for example through an in-house ideas competition – the “Hannover Re Intrapreneurship Programme”. Our employees around the world submitted almost 150 business ideas to the programme, giving rise to a number of projects that we intend to implement. Launched at the start of 2019, our insurtech platform “hr | equarium” has already been well received on the market. It enables our customers to connect with insurtechs and other innovative solution providers on a worldwide basis.
In general terms, the continued inadequate supply of insurance protection offers a great opportunity for insurers and reinsurers alike. This is especially true of emerging markets in Asia and Latin America. Yet even in industrial nations that are already more advanced, the protection gap remains large in many areas. Our industry can help here with innovative products, thereby underscoring its social relevance.
I would like to turn now to the results of the financial year just ended. With Group net income of EUR 1.28 billion Hannover Re achieved another record result. The fact that we did this even though 2019 was another relatively costly year for the reinsurance industry merely underlines our profitability.
The crucial success factors in the property & casualty reinsurance business group were the high quality and diversification of our portfolio, a leading position in specialty lines and a disciplined underwriting policy coupled with our risk management. Our life&health reinsurance business group contributed good results in traditional reinsurance and in the areas of longevity risks and financial solutions. The continuous improvements in our in-force US mortality portfolio were also beneficial. We similarly generated a very good performance with our investments. We benefited here from a number of positive one-time effects, while at the same time maintaining ordinary income on a stable level despite the challenging situation on capital markets.
This is now the eleventh year in succession that we are reporting a double-digit return on equity. In view of Hannover Re’s robust equity base, the Executive Board and Supervisory Board will propose to the Annual General Meeting that an increased dividend of EUR 5.50 per share should be paid to you, our valued shareholders. This proposed dividend consists of an increased ordinary dividend of EUR 4.00 per share and an unchanged special dividend of EUR 1.50 per share.
Based on the thoroughly successful results of the 2019 financial year, our guidance for 2020 is optimistic even though the competitive environment remains challenging. This optimism is reinforced by the fact that the renewals in property and casualty reinsurance as at 1 January 2020 once again passed off successfully for our company. For the current financial year we are expecting to grow our Group gross premium by around 5 percent and we anticipate Group net income of around EUR 1.2 billion.
Our employees are the basis on which Hannover Re has built this track record of success. I would like to thank them most sincerely, also on behalf of the entire Executive Board. As the Executive Board of Hannover Re, we similarly extend our thanks to you, our shareholders, just as we do to our customers and business partners for the trust that is placed in us. Going forward, as in the past, it remains our primary goal to lead Hannover Re responsibly, securely and with the necessary foresight into a profitable future.
Chairman of the Executive Board