The business model
Our worldwide activities in the reinsurance of the life, annuity and health lines are brought together under the Hannover Life Re brand name. We also write the accident line in this business group, to the extent that it is transacted by life insurers, as well as some Islamic insurance products, the so-called family takaful products.
The core business policy of Hannover Life Re is given concrete shape in our tried and trusted Five Pillar model. It consists of the pillars of conventional reinsurance, new markets, multinationals, bancassurance and financial solutions.
We are able, on the one hand, to selectively tap into attractive business potential in the traditional market through conventional reinsurance offerings, while at the same time working systematically on the development of special product and sales solutions through our four specialist segments. To a significant extent Hannover Life Re is thus able to decouple itself from developments on the standard reinsurance markets.
In many instances Hannover Life Re has been able to operate as a pioneer for new markets and has played a crucial role in shaping the dynamic growth of these markets – our entry into the UK private annuity sector with enhanced annuities in the years 1994/95 may be cited as a well-known example of this approach.
At the present time conventional reinsurance accounts for the lion’s share of our portfolio. In the medium term, however, we anticipate stronger growth from the pillars of new markets and bancassurance; it should therefore be possible to restore the desired long-term balance between conventional reinsurance (at around 40% of our portfolio) and the other four pillars (at around 60% of our portfolio) in the next few years.
We devote particularly close attention to optimal risk diversification – something which is also evident in the relevant risk models under Solvency II. The negative correlation between the biometric components of mortality and longevity plays a special role here.
The growth in longevity business diversifies our mortality risk, while the growth on emerging markets in Asia, Africa and Latin America serves to improve the geographical spread of our portfolio from the major markets of the United States, United Kingdom and Germany; financial solutions provide an additional element of structural diversification.
All in all, we consider Hannover Life Re to be a superbly diversified reinsurer that optimally combines the prospects for long-term growth and profitability over the next 20 to 30 years.
Certain risks that enjoy occasional demand as growth drivers in the international reinsurance markets have been considered unreinsurable by our company for quite some years. We include here derivative financial options and guarantees deriving from variable annuity products, the longevity risk for affluent socio-economic groups and life-long guarantees for morbidity products.
Our business model is founded on a concept of organic growth, although we are open to acquisitions. Going forward, as in the past, we expect to maintain our growth on an average level of 10% – 12% per year through appropriate portfolio acquisitions, thereby systematically gaining market shares in the global market without this detrimentally impacting the quality of our acceptances.