Notes to the consolidated financial statements 2018 1. Company information 2. Accounting principles 172 172 3. Accounting policies 175 Summary of major accounting policies 175 Major discretionary decisions and estimates 3.1 3.2 183 4. Consolidation 4.1 Consolidation principles 4.2 Consolidated companies and complete list of shareholdings 185 Major acquisitions and new formations 197 Major disposals and retirements 198 4.3 4.4 184 184 5. Segment reporting 6. Notes on the individual items of the Investments under own management Funds withheld (assets) Contract deposits (assets) balance sheet 6.1 6.2 6.3 6.4 Technical assets 6.5 Goodwill 6.6 Other assets 6.7 6.8 6.9 6.10 Technical provisions Funds withheld (liabilities) Contract deposits (liabilities) Provisions for pensions and other post-employment benefit obligations 199 204 204 222 222 222 224 225 229 234 234 234 6.11 Other liabilities 6.12 Long-term debt and notes payable 6.13 Shareholders’ equity and treasury shares 6.14 Non-controlling interests 7. Notes on the individual items of the statement of income 7.1 Gross written premium 7.2 Investment income 7.3 Reinsurance result 7.4 Other income / expenses 7.5 Taxes on income 8. Other notes 8.1 Derivative financial instruments and financial guarantees Related party disclosures 8.2 8.3 Share-based payment 8.4 8.5 Staff and expenditures on personnel Earnings per share and dividend proposal Lawsuits Contingent liabilities and commitments 8.6 8.7 8.8 Rent and leases 8.9 8.10 Fee paid to the auditor Events after the balance sheet date s t n e m e t a t s l a i c n a n i f l a u n n A 238 240 242 243 245 245 246 248 249 251 254 254 257 260 264 265 265 266 267 268 269 Hannover Re | Annual Report 2018 171

New accounting standards or accounting standards applied for the first time The IASB published amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” which give certain insurance entities the option to defer man- datory application of IFRS 9 “Financial Instruments” to 2021. At its meeting on 14 November 2018 the IASB also tentatively decided to defer the date of initial application of IFRS 17 “In- surance Contracts” by one year to annual reporting periods beginning on or after 1 January 2022. In this connection it was further decided to correspondingly extend the period for exercise of the optional temporary exemption from applying IFRS 9 that is available to companies whose activities are pre- dominantly connected with insurance. Hannover Re is exer- cising the deferral option, inter alia due to the interdependen- cy between the recognition of financial instruments and insurance contracts. The new disclosures required as part of the deferral approach, which are intended to facilitate some comparability with entities already applying IFRS 9, are pro- vided for the first time in section 6.1 of the notes to the con- solidated financial statement “Investments under own man- agement”. Hannover Re is applying IFRS 15 “Revenue from Contracts with Customers” for the first time with effect from 1 January 2018. The standard specifies when and in what amount reve- nue is to be recognised and which disclosures are required for this purpose. Financial instruments and other contractual rights and obligations which are to be recognised under sep- arate standards as well as (re)insurance contracts within the scope of IFRS 4 “Insurance Contracts” are expressly exempt- ed from the standard’s scope of application. The predominant activity of the Hannover Re Group falls within the scope of application of IFRS 4. As expected, therefore, the services falling within the scope of application of IFRS 15 did not have any significant implications overall for the Group’s net assets, financial position or results of operations. The modified retro- spective approach was chosen for initial application. In addi- tion, the practical transition relief provided in the standard with respect to completed contracts and contract modifica- tions was utilised. Disclosure of the amount restated for each item of the financial statement affected by application of IFRS 15 in the year of initial application, which arises due to the adjustment of prior-year comparatives recognised according to the requirements of IAS 18 and associated interpretations applicable prior to the change, is similarly omitted in accord- ance with the materiality concept. Disclosures regarding revenue as defined by IFRS 15 are provided in section 7.4 of the notes to the consolidated financial statement “Other in- come / expenses”. In addition, the amendments to existing standards listed be- low were applicable for the first time in the year under review and had no significant implications overall for the net assets, financial position or result of operations of Hannover Re. • Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2), • Transfers of Investment Property: Amendments to IAS 40 “Investment Property” • Amendments as part of the “Annual Improvements to IFRS Standards 2014 – 2016 Cycle” with respect to IAS 28 “Investments in Associates and Joint Ventures” and IFRS 1 “First-time Adoption of International Financial Reporting Standards” • IFRIC 22 “Foreign Currency Transactions and Advance Consideration“. Standards or changes in standards that have not yet entered into force or are not yet applicable In May 2017 the IASB published the final version of IFRS 17 “Insurance Contracts”, which has still to be endorsed by the EU. IFRS 17 replaces IFRS 4 and thereby establishes for the first time consistent principles for the recognition, measure- ment, presentation and disclosure of insurance contracts, re- insurance contracts and investment contracts with discretion- ary participation features. The measurement model of IFRS 17 requires entities to measure groups of insurance contracts based on estimates of discounted future cash flows with an explicit risk adjustment for non-financial risks (“fulfilment cash flows”) as well as a contractual service margin, repre- senting the expected (i. e. unearned) profit for the provision of insurance coverage in the future. Instead of reporting premium income when it is received, in- surance revenue is reported when it is earned by recognising in each period the changes in the liability for providing cover- age for which the insurance entity receives compensation as well as the part of the premiums that covers acquisition costs. Receipts and payments relating to savings components are not recognised as revenue or as profit or loss in the statement of income. Insurance finance income and expenses result from discounting effects and financial risks. For each portfo- lio of insurance contracts they may either be recognised in profit or loss in the statement of income or in other compre- hensive income. Changes in assumptions that do not relate to interest rates or financial risks are not recognised directly in the statement of income but are booked against the contractual service margin and hence spread across the remaining coverage period. Changes in estimates are only recognised immediately in Hannover Re | Annual Report 2018 173 s t n e m e t a t s l a i c n a n i f l a u n n A

Further IFRS Amendments and Interpretations N 06 Published October 2018 October 2018 March 2018 February 2018 December 2017 October 2017 October 2017 June 2017 Title Amendments to IAS 1 and IAS 8: Definition of Material Initial application to annual periods beginning on or after the following date: 1 January 2020 (still to be endorsed by the EU) Amendment to IFRS 3 Business Combinations 1 January 2020 (still to be endorsed by the EU) Amendments to References to the Conceptual Framework in IFRS Standards Amendments to IAS 19: Plan Amendment, Curtailment or Settlement Annual Improvements to IFRS Standards 2015 – 2017 Cycle Amendments to IFRS 9: Prepayment Features with Negative Compensation Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures IFRIC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2020 (still to be endorsed by the EU) 1 January 2019 (still to be endorsed by the EU) 1 January 2019 (still to be endorsed by the EU) 1 January 2019 (endorsed by the EU) 1 January 2019 (endorsed by the EU) 1 January 2019 (endorsed by the EU) s t n e m e t a t s l a i c n a n i f l a u n n A 3. Accounting policies 3.1 Summary of major accounting policies Reinsurance contracts: IFRS 4 “Insurance Contracts” repre- sents the outcome of Phase I of the IASB project “Insurance Contracts” and constitutes a transitional arrangement. IFRS 17, which was issued by the IASB in May 2017, establishes binding principles for the measurement of insurance con- tracts effective for annual reporting periods beginning on or after 1 January 2021. At a meeting of the IASB in November 2018 it was tentatively decided to defer mandatory applica- tion of IFRS 17 by one year to 1 January 2022. IFRS 4 sets out basic principles for the accounting of insur- ance contracts. Underwriting business is to be subdivided into insurance and investment contracts. Contracts with a sig- nificant insurance risk are considered to be insurance con- tracts, while contracts without significant insurance risk are to be classified as investment contracts. The standard is also applicable to reinsurance contracts. IFRS 4 contains funda- mental rules governing specific circumstances, such as the separation of embedded derivatives and unbundling of de- posit components, but it does not set out any more extensive provisions relating to the measurement of insurance and rein- surance contracts. In conformity with the basic rules of IFRS 4 and the IFRS Framework, reinsurance-specific transactions therefore continue to be recognised in accordance with the pertinent provisions of US GAAP (United States Generally Accepted Accounting Principles) as applicable on the date of initial application of IFRS 4 on 1 January 2005. Financial assets: as a basic principle we recognise the pur- chase and sale of directly held financial assets including de- rivative financial instruments as at the settlement date. The recognition of fixed-income securities includes apportionable accrued interest. Financial assets held to maturity are comprised of non- derivative assets that entail fixed or determinable payments on a defined due date and are acquired with the intent and ability to be held until maturity. They are measured at amortis- ed cost. The corresponding premiums or discounts are recog- nised in profit or loss across the duration of the instruments using the effective interest rate method. An impairment loss is taken in the event of permanent impairment. Please refer to our comments on impairments in this section. Loans and receivables are non-derivative financial instru- ments that include fixed or determinable payments on a de- fined due date, are not listed on an active market and are not sold at short notice. They are carried at amortised cost. Premiums or discounts are deducted or added within the statement of income using the effective interest rate method until the amount repayable becomes due. An impairment loss is taken only to the extent that repayment of a loan is unlikely or no longer expected in the full amount. Please refer to our comments on impairments in this section. Hannover Re | Annual Report 2018 175

instruments belonging to fair value hierarchy level 3) are for the most part measured on the basis of proven valuations drawn up by knowledgeable, independent experts, e. g. audit- ed net asset value, the plausibility of which has previously been subjected to systematic review. For further information please see our explanatory remarks on the fair value hierar- chy in section 6.1 “Investments under own management”. Impairments: As at each balance sheet date we review our financial assets with an eye to the need to take impairments. Permanent impairments on all invested assets are recognised directly in the statement of income. In this context we take as a basis the same indicators as those subsequently discussed for fixed-income securities and securities with the character of equity. Qualitative case-by-case analysis is also carried out. IAS 39 “Financial Instruments: Recognition and Measure- ment” contains a list of objective, substantial indications for impairments of financial assets. In the case of fixed-income securities and loans reference is made, in particular, to the rating of the instrument, the rating of the issuer / borrower as well as the individual market assessment in order to establish whether they are impaired. With respect to held-to-maturity instruments as well as loans and receivables recognised at amortised cost, the level of impairment is arrived at from the difference between the book value of the asset and the pres- ent value of the expected future cash flows. The book value is reduced directly by this amount which is then recognised as an expense. With the exception of value adjustments taken on accounts receivable, we recognize impairments directly on the assets side – without using an adjustment account – sep- arately from the relevant items. If the reasons for the write- down no longer apply, a write-up is made in income up to at most the original amortised cost for fixed-income securities. With respect to impairments on securities with the character of equity, IAS 39 “Financial Instruments: Recognition and Measurement” states, in addition to the aforementioned prin- ciples, that a significant or prolonged decrease in fair value below acquisition cost constitutes objective evidence of im- pairment. Hannover Re considers equity securities to be im- paired under IAS 39 if their fair value falls significantly, i. e. by at least 20%, or for a prolonged period, i. e. at least nine months, below acquisition cost. In accordance with IAS 39 the reversal of impairment losses on equities to the statement of income once impairment has been taken is prohibited, as is adjustment of the cost basis. Impairment is tested in each reporting period using the criteria defined by Hannover Re. If an equity security is considered to be impaired on the basis of these criteria, IAS 39 requires that a value adjustment be rec- ognised in the amount of the fair value less historical cost and less prior value adjustments, meaning that depreciation is taken on the fair value as at the closing date – if available, on the publicly quoted stock exchange price. We also apply this method to participations in funds that invest in private equity. In order to reflect the specific character of these funds (in this case initially negative yield and liquidity flows from the so- called “J curve” effect during the investment period of the funds), we take an impairment to net asset value as an ap- proximation of the fair value for the first time after a two-year waiting period if there is a significant or prolonged decrease in value. If, however, significant changes in value occur with- in the funds during this period that are not attributable to the J curve effect in addition to the increased investment expens- es, the resulting impairment is recognised directly as a write- down. Netting of financial instruments: financial assets and liabili- ties are only netted and recognised in the appropriate net amount if a corresponding legal claim (reciprocity, similarity and maturity) exists or is expressly agreed by contract, in oth- er words if the intention exists to offset such items on a net basis or to effect this offsetting simultaneously. Other invested assets are for the most part recognised at nominal value. Insofar as such financial assets are not listed on public markets (e g. participating interests in private equi- ty firms), they are carried at the latest available net asset val- ue as an approximation of the fair value. Loans included in this item are recognised at amortised cost. Investments in associated companies are valued at equity on the basis of the proportionate shareholders’ equity attrib- utable to the Group. Further information is provided in sec- tion 4.1 “Consolidation principles”. Investment property is valued at cost less depreciation and impairment. Straight-line depreciation is taken over the ex- pected useful life – at most 50 years. Under the impairment test the market value of investment property (recoverable amount) is determined using accepted valuation methods, compared with the book value and, where necessary, impair- ments are recognised. Maintenance costs and repairs are ex- pensed. Value-enhancing expenditures are capitalised if they extend the useful life. Cash and cash equivalents are carried at face value. Cash collateral that we have received for the hedging of positive fair values of derivatives is shown under other liabilities. Funds withheld are receivables due to reinsurers from their clients in the amount of the cash deposits contractually with- held by such clients; they are recognised at acquisition cost (nominal amount). Appropriate allowance is made for credit risks. s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 177

Deferred tax assets may only be netted with deferred tax lia- bilities if an enforceable right exists to net actual tax refund claims with actual taxes owing. A precondition here is that the deferred tax assets and deferred tax liabilities refer to in- come taxes that are levied by the same revenue authority ei- ther for (i) the same taxable entity or for (ii) different taxable entities. In this regard, there must be an intention – in every future period in which the discharge or realisation of substan- tial amounts of deferred tax liabilities / deferred tax assets is to be expected – either to bring about the settlement of the actual taxes owing and refund claims on a net basis or to dis- charge the liabilities at the same time as the claims are real- ised. Own-use real estate: The portfolio of own-use real estate is measured at cost less straight-line depreciation over a useful life of no more than 50 years. The fair values are determined for comparative purposes using the discounted cash flow method. Other assets are accounted for at amortised cost. Technical reserves: the technical reserves are shown for gross account in the balance sheet, i. e. before deduction of the share attributable to our reinsurers; cf. here the remarks concerning the corresponding assets. The reinsurers’ portion is calculated and accounted for on the basis of the individual reinsurance contracts. Loss and loss adjustment expense reserves are constituted for payment obligations from reinsurance losses that have oc- curred but have not yet been settled. They are subdivided into reserves for reinsurance losses reported by the balance sheet date and reserves for reinsurance losses that have already been incurred but not yet reported (IBNR) by the balance sheet date. The loss and loss adjustment expense reserves are based on estimates that may diverge from the actual amounts payable. In reinsurance business a considerable pe- riod of time may elapse between the occurrence of an insured loss, notification by the insurer and pro-rata payment of the loss by the reinsurer. For this reason the realistically estimat- ed future settlement amount based on long-standing estab- lished practice is carried. Recognised actuarial methods are used for estimation purposes. In this regard we make allow- ance for past experience, currently known facts and circum- stances, the expertise of the market units as well as other as- sumptions relating to the future development, in particular economic, social and technical influencing factors. Subse- quently, based on Group-wide analyses, we give separate consideration in this context to the inherent volatility of the reserves constituted for the reinsurance business, e. g. due to large losses. The interest rate-induced portion of the change in the reserve is shown in the statement of income on a con- sistent Group basis. Benefit reserves are comprised of the underwriting reserves for guaranteed claims of ceding companies in life and health reinsurance. Benefit reserves are determined using actuarial methods on the basis of the present value of future payments to cedants less the present value of premium still payable by cedants. The calculation includes assumptions relating to mortality, disability, lapse rates and the future interest rate development. The actuarial bases used in this context allow an adequate safety margin for the risks of change, error and random fluctuation. They correspond to those used in the premium calculation and are adjusted if the original safety margins no longer appear to be sufficient. Provisions for pensions are established in accordance with IAS 19 “Employee Benefits” using the projected unit credit method. They are calculated according to actuarial principles and are based upon the commitments made by the Hannover Re Group for retirement, disability and widows’ benefits. The amount of the commitments is determined according to length of service and salary level. The pension plans are de- fined benefit plans. The basis of the valuation is the estimated future increase in the rate of compensation of the pension beneficiaries. The benefit entitlements are discounted by ap- plying the capital market rate for highest-rated securities. All changes in valuation, especially actuarial gains and losses, are captured immediately in cumulative other comprehensive income. Service cost and interest cost are recognised in the statement of income. Returns on plan assets are determined using the same interest rate as that used in the calculation of the present value of the defined benefit obligation. Contributions to defined contribution plans are expensed when the beneficiary of the commitment has performed the work that entitles them to such contributions. Deferred tax liabilities: in accordance with IAS 12 “Income Taxes” deferred tax liabilities must be recognised if assets are to be recognised in a higher amount or liabilities in a lower amount in the consolidated balance sheet than in the tax bal- ance sheet and if these temporary differences will lead to ad- ditional tax loads in the future; please see our explanatory remarks on deferred tax assets. Under the balance sheet item Other liabilities we recognise not only the sundry non-technical provisions but also minori- ty interests in partnerships. Direct minority interests in part- nerships, i. e. liabilities to holders of minority shares in part- nerships arising out of long-term capital commitments, which are puttable at fair value by the holder of the interest, are s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 179

the balance sheets of the individual companies and the trans- fer of these items to the consolidated financial statement are effected at the mean rates of exchange on the balance sheet date. In accordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates” differences from the currency translation of financial statements of foreign Group compa- nies must be recognised in the consolidated financial state- ment as a separate item in shareholders’ equity. Currency translation differences resulting from long-term loans or lendings without specified maturity between Group companies are similarly recognised outside the statement of income in a separate item of shareholders’ equity. s t n e m e t a t s l a i c n a n i f l a u n n A • Fixed-income securities • Equities, equity funds and other variable-yield securities • Other financial assets – at fair value through profit or loss • Real estate funds • Other invested assets • Short-term investments • Certain financial assets in the balance sheet item “Other assets” • Certain financial assets in the balance sheet item “Other liabilities” • Long-term debt • Notes payable This grouping into classes is not, however, solely determina- tive for the type and structure of each disclosure in the notes. Rather, guided by the underlying business model of reinsur- ance, the disclosures are made on the basis of the facts and circumstances existing in the financial year and in light of the principle of materiality. Currency translation: financial statements of Group subsidi- aries were drawn up in the currencies corresponding to the economic environment in which each subsidiary primarily operates. These currencies are referred to as functional cur- rencies. The euro is the reporting currency in which the con- solidated financial statement is prepared. Transactions in foreign currencies reported in Group compa- nies’ individual financial statements are converted into the functional currency at the transaction rate. In accordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates” the recognition of exchange differences on translation is guided by the nature of the underlying balance sheet item. Exchange differences from the translation of monetary assets and liabilities are recognised directly in the statement of in- come. Currency translation differences from the translation of non-monetary assets measured at fair value via the statement of income are recognised as profit or loss from fair value measurement changes. Exchange differences from non-mon- etary items – such as equity securities – classified as available for sale are initially recognised outside income in a separate item of shareholders’ equity and only booked to income when such non-monetary items are settled. The individual companies’ statements of income prepared in the local currencies are converted into euro at the average rates of exchange and transferred to the consolidated finan- cial statement. The conversion of foreign currency items in Hannover Re | Annual Report 2018 181

3.2 Major discretionary decisions and estimates In the consolidated financial statement it is to some extent necessary to make estimates and assumptions which affect the assets and liabilities shown in the balance sheet, the in- formation on contingent claims and liabilities as at the bal- ance sheet date and the disclosure of income and expenses during the reporting period. Key facts and circumstances subject to such assumptions and estimates include, for exam- ple, the recoverability of contingent reinsurance liabilities, the recoverability of investments in associated companies, the valuation of derivative financial instruments as well as as- sets and liabilities relating to employee benefits. The actual amounts may diverge from the estimated amounts. Supplementary or complete estimates of the corresponding profit and loss items, assets and liabilities including relevant retrocessions are made where ceding company accounts with substantial premium income are missing. Missing ceding company accounts with a low premium volume are included in the following year. In order to measure the ultimate liability in property and casualty reinsurance the expected ultimate loss ratios are cal- culated for all lines. Actuarial methods such as the “chain lad- der” method provide the starting point for these calculations. The realistically estimated future settlement amount is recog- nised in the balance sheet. The development until completion of the run-off is projected on the basis of statistical triangles from the original notifications of ceding companies. The more recent underwriting years in actuarial projections are of course subject to greater uncertainty, although this can be considerably reduced with the aid of a variety of additional information on improvements in the rates and conditions of the business written and on loss trends. The amounts arrived at as the difference between the ultimate losses and the re- ported losses are set aside as the IBNR reserve for losses that have been incurred but are not yet known or have still to be reported. In applying statistical methods, separate considera- tion is given to large losses. By analysing a broad range of observable information it is possible to classify losses as major individual loss events. Measurement of the obligations existing in this connection is carried out using a separate process, which is based largely on contract-specific estimates. For further particulars, including information required by IFRS 4, the reader is referred to our remarks on the under- writing risks in property and casualty reinsurance on page 105 et seq. of the management report – including, for exam- ple, with regard to the modelling of natural catastrophe sce- narios and the assumptions relating to asbestos and pollution risks. We would further refer to our explanatory remarks on the technical reserves in section 3.1 “Summary of major ac- counting policies” and section 6.7 “Technical provisions”. In life and health reinsurance, too, the calculation of reserves and assets is crucially dependent on actuarial projections of the covered business. So-called model points are defined ac- cording to the type of business covered. The main distin- guishing criteria are the age, sex and (non-)smoker status of the insured, tariff, policy period, period of premium payment and amount of insurance. The portfolio development is simu- lated for each model point, in which regard the key input pa- rameters are either predefined by the tariff (e. g. allowance for costs, amount of premium, actuarial interest rate) or need to be estimated (e. g. mortality or disability rates, lapse rates). These assumptions are heavily dependent on country-specific parameters and on the sales channel, quality of the cedant’s underwriting and claims handling, type of reinsurance and other framework conditions of the reinsurance treaty. The su- perimposition of numerous model points gives rise to a pro- jection, which incorporates inter alia assumptions concerning the portfolio composition and the commencement of covered policies within the year. Such assumptions are estimated at the inception of a reinsurance treaty and subsequently adjust- ed to the actual projection. The projections, which cover various model scenarios (“con- servative assumptions” versus “best estimate”), constitute the starting point for numerous areas of application encom- passing quotation, the determination of carrying amounts and embedded values as well as contract-specific analyses, e. g. regarding the appropriateness of the recognised reinsur- ance liabilities (“liability adequacy test”). In this context we would refer the reader to our comments on technical assets and provisions in section 3.1 “Summary of major accounting policies” and on the liability adequacy tests in section 6.7 “Technical provisions”. In determining the carrying amounts for certain financial as- sets it is sometimes necessary to make assumptions in order to calculate fair values. In this regard we would refer the reader to our remarks in section 3.1 “Summary of major ac- counting policies” concerning financial assets at fair value through profit or loss and securities held as available for sale as well as in section 6.1 “Investments under own manage- ment” concerning investment property. Assumptions con- cerning the appropriate applicability criteria are necessary when determining the need for impairments on non-mone- tary financial assets held as available for sale. In this regard we would again refer the reader to our explanatory remarks in section 3.1 “Summary of major accounting policies”. Hannover Re | Annual Report 2018 183 s t n e m e t a t s l a i c n a n i f l a u n n A

4.2 Consolidated companies and complete list of shareholdings In addition to Hannover Rück SE as the parent company of the Group, the scope of consolidation of the Hannover Re Group encompasses the companies listed in the table below. 2018 16 100 116 2 6 8 N 09 2017 16 98 114 2 5 7 List of shareholdings The following list of shareholdings is provided in the present Group annual financial report in accordance with § 313 Para. 2 German Commercial Code (HGB). The stipulations of IFRS 12.10 and IFRS 12.21 have also been observed. The figures for the capital and reserves as well as the result for the last financial year are taken from the local financial statements drawn up by the companies. With regard to the major acquisitions and disposals in the year under review please see our remarks in the following paragraphs of this section. s t n e m e t a t s l a i c n a n i f l a u n n A Information on subsidiaries Scope of consolidation Number of companies Consolidated companies (Group companies) Germany Abroad Total Companies included at equity Germany Abroad Total Information on the non-controlling interests in shareholders’ equity and profit or loss as well as on the major non-con- trolling interests is provided in section 6.14 “Non-controlling interests”. On the balance sheet date there were no signifi- cant restrictions on access to or the use of Group assets due to protective rights in favour of non-controlling interests. The sale or transfer of shares of E+S Rückversicherung AG takes place by way of an endorsement and is permissible only with the approval of the company’s Supervisory Board. The Supervisory Board enjoys the right to grant or deny approval unconditionally, without being obliged to state reasons in the event of denial. Under a purchase agreement concluded on 1 August 2018 with HDI Global SE, Hannover Rück SE sold 50.2% of the shares in International Insurance Company of Hannover SE. Hannover Rück SE gave an undertaking in the purchase agreement – as is customary with such transactions – not to dispose of and, in particular, not to encumber the shares prior to payment of the purchase price and transfer of the shares. This commitment remained in force beyond the balance sheet date. Following payment of the agreed purchase price the shares were transferred to the purchaser on 8 January 2019. National provisions of company law or requirements of super- visory law may in certain countries limit the ability of the Hannover Re Group to transfer assets between companies belonging to the Group. These limitations result principally from local minimum capital and solvency requirements as well as to a lesser extent from foreign exchange restrictions. Hannover Re | Annual Report 2018 185

Name and registered office of the company in currency units of 1,000 Foreign companies Affiliated consolidated companies Hannover Finance (Luxembourg) S. A. 1, Luxembourg / Luxembourg Hannover Finance (UK) Limited 1, London / United Kingdom Hannover Life Reassurance Bermuda Ltd. 1, Hamilton / Bermuda Hannover Life Reassurance Company of America 1, Orlando / USA Hannover Life Reassurance Company of America (Bermuda) Ltd. 1, Hamilton / Bermuda Hannover Re (Ireland) Designated Activity Company 1, Dublin / Ireland Hannover Life Re of Australasia Ltd 1, Sydney / Australia Hannover Re (Bermuda) Ltd. 1, Hamilton / Bermuda Hannover ReTakaful B. S.C. (c) 1, Manama / Bahrain Hannover Services (UK) Limited 1, London / United Kingdom Inter Hannover (No. 1) Limited 1, London / United Kingdom Integra Insurance Solutions Limited 7, Bradford / United Kingdom Argenta Holdings Limited 1, 9, London / United Kingdom Argenta Private Capital Limited 1, 9, London / United Kingdom APCL Corporate Director No.1 Limited 1, 9, London / United Kingdom APCL Corporate Director No.2 Limited 1, 9, London / United Kingdom Argenta Insurance Research Limited 1, 9, 10, London / United Kingdom Fountain Continuity Limited 1, 9, Edinburgh / United Kingdom Names Taxation Service Limited 1, 9, London / United Kingdom Argenta Secretariat Limited 1, 9, London / United Kingdom Argenta Continuity Limited 1, 9, London / United Kingdom Argenta General Partner Limited 1, 9, Edinburgh / United Kingdom Argenta LLP Services Limited 1, 9, London / United Kingdom Argenta SLP Continuity Limited 1, 9, Edinburgh / United Kingdom Argenta Syndicate Management Limited 1, 9, London / United Kingdom Argenta Tax & Corporate Services Limited 1, 9, London / United Kingdom Participation in % Currency Capital and reserves Result for the last financial year 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 EUR GBP USD USD USD USD AUD USD BHD GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP 35,030 2,694 452,380 551,466 1,122,202 857,255 678 (13) 55,988 36,288 64,825 68,234 469,676 (11,637) 1,234,010 163,495 63,150 1,287 968 – 4,859 46,436 4,852 – – – – 10 – – – – – 75 – (978) 3,720 1,802 – – – – – – – – – – 7,474 712 1,580 462 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 187

Name and registered office of the company in currency units of 1,000 Hannover Reinsurance Africa Limited 1, Johannesburg / South Africa Compass Insurance Company Limited 1, Johannesburg / South Africa Hannover Re Real Estate Holdings, Inc. 9, Orlando / USA HR US Infra Equity LP 1, 9, Wilmington / USA 320AUS LLC 1, 9, Wilmington / USA GLL HRE CORE Properties, L. P. 1, 9, Wilmington / USA 101BOS LLC 1, 9, Wilmington / USA 402 Santa Monica Blvd, LLC 1, 9, Wilmington / USA 111ORD LLC 1, 9, Wilmington / USA 140EWR LLC 1, 9, Wilmington / USA 7550IAD LLC 1, 9, Wilmington / USA Nashville West, LLC 1, 9, Wilmington / USA 1225 West Washington, LLC 1, 9, Wilmington / USA 975 Carroll Square, LLC 1, 9, Wilmington / USA Broadway 101, LLC 1, 9, Wilmington / USA River Terrace Parking, LLC 1, 9, Wilmington / USA 3290ATL LLC 1, 9, Wilmington / USA 1600FLL LLC 1, 9, Wilmington / USA M8 Property Trust 1, Sydney / Australia Markham Real Estate Partners (KSW) Pty Limited 1, Sydney / Australia PAG Real Estate Asia Select Fund Limited 1, George Town / Cayman Islands HR US Infra Debt LP 1, 9, George Town / Cayman Islands Orion No.1 Professional Investors Private Real Estate Investment LLC 1, Seoul / South Korea Peace G. K. 1, Tokyo / Japan Kaith Re Ltd. 1, Hamilton / Bermuda 3541 PRG s. r.o. 1, Prague / Czech Republic Participation in % Currency Capital and reserves Result for the last financial year 100.00 100.00 95.25 95.25 95.15 95.15 95.15 95.15 95.15 95.15 95.15 95.15 95.15 95.15 95.15 95.15 95.15 95.15 94.72 94.72 94.72 94.71 94.39 93.77 88.00 87.67 ZAR ZAR USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD AUD AUD USD USD 820,846 250,242 828,831 32,528 92,447 656,081 50,439 (847) 69,582 61,889 68,438 27,324 33,123 47,090 13,174 18,553 70,595 30,795 67,100 – 173,810 118,517 87,934 55,312 25,011 (328) 3,354 (275) 1,545 931 2,370 (1,390) 428 964 6,878 (308) (2) 254 3,821 439 (500) – 972 3,721 KRW 28,889,876 1,671,894 JPY 5,081,293 175,556 USD CZK 373 901,512 (181) 17,955 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 189

Name and registered office of the company in currency units of 1,000 Participation in % Currency Capital and reserves Result for the last financial year Hannover Services (México) S. A. de C. V. 7, Mexico City / Mexico Hannover Re Services USA, Inc., Itasca / USA Hannover Mining Engineering Services LLC, Itasca / USA Hannover Rück SE Escritório de Representação no Brasil Ltda. 7, Rio de Janeiro / Brasil Hannover Re Risk Management Services India Private Limited 14, New Delhi / India Hannover Re Services Italy S. r.l., Milan / Italy U FOR LIFE SDN. BHD. 1, Petaling Jaya / Malaysia Svedea Skadeservice AB 7, Stockholm / Sweden Associated companies ITAS Vita S.p.A. 7, Trento / Italy Clarendon Transport Underwriting Managers (Pty) Ltd. 1, Johannesburg / South Africa Clarenfin (Pty) Ltd. 1, Johannesburg / South Africa Pineapple Tech (Pty) Ltd 1, Johannesburg / South Africa Vela Taxi Finance (Pty) Ltd 1, Johannesburg / South Africa Marmic Taxi Parts (Pty) Ltd 15, Durban / South Africa Other participations Reaseguradora del Ecuador S. A. 1, Guayaquil / Equador Sureify Labs, Inc. 1, 8, Wilmington / USA Meribel Topco Limited 1, St. Helier / Jersey Monument Insurance Group Limited 16, 17, Hamilton / Bermuda Trinity Underwriting Managers Ltd. 18, Toronto / Canada Inlife Holding (Liechtenstein) AG 7, Triesen / Liechtenstein Life Invest Holding AG 7, Zürich / Schweiz Somerset Reinsurance Ltd. 19, Hamilton / Bermuda Qinematic AB 7, Lidingö / Schweden Acte Vie S. A. 7, Schiltigheim / France B3i Services AG 20, Zurich / Switzerland 100.00 100.00 100.00 MXN USD USD 7,877 3,889 340 100.00 BRL 3,016 828 111 40 457 100.00 99.65 60.00 53.00 27.10 22.87 22.87 17.50 12.58 6.86 30.00 20.69 20.11 20.00 20.00 15.00 15.00 12.31 10.71 9.38 7.94 INR EUR MYR SEK EUR ZAR ZAR ZAR ZAR ZAR USD USD EUR GBP CAD CHF CHF USD SEK EUR CHF 49,875 (9,723) 471 93 (24,057) (2,153) 50 – 104,540 15,311 97 1,927 (5,316) 2,484 3,660 13,306 (25) (3,254) (1,394) 2,484 17,381 2,274 (489) (2,134) (4,775) 58,472 (1,711) 3,803 43,631 411,713 1,818 9,453 – (162) 11,640 29 1,996 15,583 9,247 (1,262) 194 – s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 191

Material branches of the Group We define the branch of a Group company as an unincorpo- rated business unit that is physically and organisationally separate from the Group company, is bound by the latter’s instructions in their internal relationship and has its own in- dependent market presence. The Hannover Re Group companies listed in the following ta- ble maintain branches that we consider to be material to an understanding of the Group’s position. Gross written premium 1 Net income 1 2018 2017 2018 2017 N 11 Material branches of the Group Group company / Branch Figures in EUR thousand Hannover Rück SE Hannover Rueck SE Australian Branch, Sydney / Australia Hannover Rück SE Canadian Branch, Toronto / Canada Hannover Rück SE, Hong Kong Branch, Wanchai / Hong Kong Hannover Rueck SE Malaysian Branch, Kuala Lumpur / Malaysia Hannover Rück SE, Tyskland Filial, Stockholm / Sweden Hannover Rück SE Succursale Francaise, Paris / France Hannover Rueck SE Bahrain Branch, Manama / Bahrain Hannover Rück SE Shanghai Branch, Shanghai / China Hannover Rück SE Korea Branch, Seoul / South Korea Hannover Re UK Life Branch, London / United Kingdom Hannover Rück SE – India Branch, Mumbai / India International Insurance Company of Hannover SE 3 International Insurance Company of Hannover SE, Australian Branch, Sydney / Australia International Insurance Company of Hannover SE, Canadian Branch, Toronto / Canada International Insurance Company of Hannover SE 2, Italian Branch, Milan / Italy International Insurance Company of Hannover SE, Scandinavian Branch, Stockholm / Sweden International Insurance Company of Hannover SE, UK Branch, London / United Kingdom IFRS figures before consolidation. 1 2 Branch is in liquidation. 3 Effective 1 January 2019 renamed HDI Global Specialty SE (1,737) 23,472 15,456 10,363 29,188 26,197 (414) 8,325 3,315 (31,338) (2,547) s t n e m e t a t s l a i c n a n i f l a u n n A 489,319 220,125 247,225 225,366 291,101 288,928 397,170 376,970 253,390 242,045 783,872 777,357 16,168 19,432 11,803 44,681 35,184 42,425 101,820 125,675 (12,523) 1,193,529 775,684 47,822 47,134 307,867 298,933 104,217 58,437 81,407 62,858 – 62,296 54,364 – 25,515 2,889 (5,150) (5,203) 577 – 1,945 2,151 417 – 108 230,861 198,462 2,652 373,283 368,196 (10,454) (200) In addition, other companies belonging to the Hannover Re Group maintain further branches in New Zealand, Canada, Malaysia and Australia that both individually and collectively are to be classified as immaterial to the Group. Hannover Re | Annual Report 2018 193

Unconsolidated structured entities The business relations of Hannover Re Group companies with structured entities set out below do not give rise to consolida- tion because the criteria for control pursuant to IFRS 10 con- tained in our consolidation principles are not met. Investing activities and investments in catastrophe bonds (ILS) Within the scope of its investment activities Hannover Re par- ticipates inter alia in numerous structured entities. These are predominantly special purpose entities in the form of funds, which for their part transact certain types of equity and debt capital investments. These investments encompass private equity funds, fixed income funds, collateralised debt obliga- tions, real estate funds, index funds and other public funds. The volume of these transactions is derived from the book values of the respective investments and amounted to EUR 2,916.5 million (EUR 3,016.9 million) as at the balance sheet date. The maximum risk of loss corresponds to the book val- ues. tities that issue catastrophe bonds for the securitisation of catastrophe risks by investing in such bonds. Leine Invest- ment General Partner S.à.r.l. is the managing partner of the asset management company Leine Investment SICAV-SIF, the business object of which is to build, hold and manage a port- folio of insurance-linked securities (catastrophe bonds) – in- cluding for third-party investors outside the Group. In addi- tion, a portfolio of such securities is also managed by Hannover Insurance-Linked Securities GmbH & Co. KG, Han- nover. The volume of these transactions is derived from the book values of the respective investments and amounted to EUR 86.3 million (EUR 56.0 million) as at the balance sheet date. The maximum risk of loss corresponds to the book val- ues. Hannover Re participates through its subsidiary Leine Invest- ment SICAV-SIF, Luxembourg, in a number of structured en- Retrocession and securitisation of reinsurance risks The securitisation of reinsurance risks takes place largely through the use of structured entities. By way of its “K” transactions Hannover Re has raised under- writing capacity for catastrophe risks on the capital market. The “K Cession”, which was placed with investors in North and South America, Europe and Asia, involves a quota share cession on worldwide natural catastrophe business as well as aviation and marine risks. Of the total volume of the “K Ces- sion”, a large part equivalent to EUR 389.0 million (EUR 349.3 million) was securitised via structured entities as at the balance sheet date. The transaction has an indefinite term and can be cancelled annually by the investors. Segregated accounts of Kaith Re Ltd. are used for transformer purposes s t n e m e t a t s l a i c n a n i f l a u n n A for part of this transaction. Hannover Re also uses further segregated accounts of Kaith Re Ltd. and other structured en- tities outside the Group for various retrocessions of both its traditional and ILS covers, which in each case are passed on to institutional investors in securitised form. The volume of these transactions is measured by the ceded exposure limit of the underlying retrocession agreements and amounted to al- together EUR 2,992.4 million (EUR 2,635.3 million) as at the balance sheet date. The structured entities are in all cases fully funded by contractually defined investments in the form of cash and equivalent liquid assets. Given that the entire ex- posure limit of the structured entities is therefore wholly col- lateralised in each case, there is no risk of loss for Hannover Re. Hannover Re | Annual Report 2018 195

Book values from business relations with unconsolidated structured entities N 13 General investing activities 31.12.2017 Investment in catastrophe bonds (ILS) Retrocession: securitisations and ILS transactions 828 6,015 1,734,835 – 11,326 384,693 773,316 105,868 – – – – – – 55,952 – – – – – – – 3,016,881 55,952 – – – – – – – – – – – – 633,344 45,307 39,798 718,449 231,232 231,232 nover Re. Effective 31 December 2018 the segregated ac- count concluded a contract with a non-Group life insurance company for the assumption of a reinsurance portfolio, which is partially retroceded. In the context of this retrocession Hannover Re also concluded a reinsurance treaty with the segregated account to protect against the peak exposure through its wholly owned subsidiary Hannover Life Reassur- ance Company of America (Bermuda) Ltd. With regard to commitments and obligations that we do not consider to be support, particularly outstanding capital com- mitments from special investments, please see our remarks in section 8.7 “Contingent liabilities and commitments”. s t n e m e t a t s l a i c n a n i f l a u n n A in EUR thousand Assets Fixed-income securities – held to maturity Fixed-income securities – loans and receivables Fixed-income securities – available for sale Fixed-income securities – at fair value through profit or loss Equity securities – available for sale Real estate and real estate funds Other invested assets Short-term investments Reinsurance recoverables on unpaid claims Prepaid reinsurance premium Accounts receivable Total assets Liabilities Reinsurance payable Total liabilities The income and expenses from business relations with un- consolidated structured entities are shown in investment in- come insofar as they result from general investment activities or investments in catastrophe bonds and are recognised in the technical account insofar as they are attributable to retro- cessions and securitisations. As at the balance sheet date Hannover Re had not rendered any financial or other support for an unconsolidated struc- tured entity. Hannover Re does not intend to render financial or other support for one or more of such entities without be- ing contractually required to do so. In December 2018 Kubera Insurance (SAC) Ltd established its first segregated account, the owner of which is not Han- 4.3 Major acquisitions and new formations Within the 95.2%-owned US subgroup Hannover Re Real Es- tate Holdings, Inc., the special purpose property company 1600FLL LLC, Wilmington, USA, was established via the sub- sidiary GLL HRE Core Properties, LP, for the purpose of real estate acquisition. An amount of roughly EUR 30.4 million was invested in this connection. Effective 11 January 2018 Hannover Re acquired all the shares in The Omaha Indemnity Company, Madison, via its wholly owned subsidiary Hannover Finance, Inc., Wilming- ton. The company now trades as Glencar Insurance Company, Orlando. The purchase price of the shares amounted to EUR 21.2 million. The business was included in the consolidated financial statement in the first quarter. In the context of pur- chase price allocation, goodwill of EUR 3.5 million resulted from the calculation of the fair values of the acquired assets and liabilities made for initial consolidation. Hannover Re | Annual Report 2018 197

Assets and liabilities of the disposal group in EUR thousand Assets Fixed-income securities – loans and receivables Fixed-income securities – available for sale Real estate and real estate funds Short-term investments and other invested assets Cash and cash equivalents Reinsurance recoverables on unpaid claims Prepaid reinsurance premium Deferred acquisition costs Accounts receivable Other assets Assets held for sale Liabilities Loss and loss adjustment expense reserve Unearned premium reserve Other liabilities Liabilities related to assets held for sale N 14 31.12.2018 21,750 216,349 12,370 7,041 78,594 87,253 26,567 126,833 443,459 18,968 1,039,184 1,642,408 564,230 39,491 2,246,129 5. Segment reporting Based on the “management approach” of IFRS 8, which requires segment information to be presented as it is reported internally to management and normally used by the chief operating deci- sion maker to decide upon the allocation of resources to a seg- ment and evaluate its performance, Hannover Re has identified the reportable segments of property & casualty reinsurance and life & health reinsurance. With regard to the object of business operations within the two segments please see our explanatory remarks on Hannover Re’s business model on page 19 of the management report. The report on economic position on page 26 et seq. contains remarks on the economic environment in which the Group operates. The segment information shown follows the system used for in- ternal reporting purposes, on the basis of which the full Execu- tive Board regularly evaluates the performance of segments and decides on the allocation of resources to them. The “Consolidation” column includes not only the elimination of cross-segment transactions but also, more significantly, compa- nies whose business operations cannot be unambiguously allo- cated to property and casualty reinsurance or life and health re- insurance. These are principally the service and financing companies belonging to the Group. s t n e m e t a t s l a i c n a n i f l a u n n A During the financial year no material changes occurred in the organisational structure that could have influenced the composi- tion of the segments. Since the performance indicators used to steer the segments correspond to the system according to which the consolidated financial statement is prepared, a separate rec- onciliation of the segment results with the Group result is not provided. There are no cross-segment gross premiums between the two segments of property & casualty reinsurance and life & health reinsurance. To this extent, the gross premiums shown are exclu- sively amounts from business with external third parties. The life and health reinsurance segment now includes the com- pany Kubera Insurance (SAC) Ltd, Hamilton, Bermuda, which was established in October 2018. All other companies consolidat- ed for the first time or deconsolidated in 2018 are allocated to the property and casualty reinsurance segment. The same is true of International Insurance Company of Hannover SE, Hannover, which is classified as a disposal group. Hannover Re | Annual Report 2018 199

Life and health reinsurance Consolidation Total 31.12.2018 31.12.2017 31.12.2018 31.12.2017 31.12.2018 31.12.2017 N 15 51,347 34,635 8,531,051 – 656,176 263,917 159,867 333,031 10,030,024 8,760,514 170,693 18,961,231 181,341 909,056 64 6,627 1,381,069 1,287,072 565,346 – 71,898 37,270 7,617,113 – 244,222 189,441 615,925 213,065 8,988,934 9,098,019 167,975 18,254,928 207,660 959,533 19 6,032 1,386,335 1,363,610 792,297 – – 15,049 19,512 – – 35,686 15 4,942 75,204 – – 75,204 – – – – – 5,000 – 2,085 – – 49,219 – 12,056 68,360 – – 68,360 (194) – – – – (378) (1,165,321) (1,859) (524) (671,162) – 249,943 2,398,950 33,239,685 28,729 750,509 4,034,657 421,950 1,072,915 42,197,338 10,691,768 172,873 53,061,979 2,084,630 909,056 93,678 7,170 2,155,820 3,975,778 1,181,342 1,039,184 336,182 2,455,164 31,281,908 37,520 300,874 3,851,455 958,669 835,706 40,057,478 10,735,012 167,854 50,960,344 1,651,335 959,533 96,402 7,301 2,228,246 3,821,124 1,472,561 – 23,291,806 22,970,414 (1,092,354) (603,520) 64,508,637 61,196,846 4,215,749 9,184,356 251,060 275,903 579,507 3,540,047 383,918 – 4,248,296 8,977,946 209,111 231,840 574,496 3,877,151 467,869 – 2,192,760 1,705,864 – – – – – – – – – (194) – – – – – – 2,235,649 (1,173,150) – 1,491,951 (682,176) – 28,758,575 9,184,356 3,166,964 575,996 969,261 3,611,654 1,156,231 2,558,884 2,738,559 2,246,129 28,378,545 8,977,946 3,541,194 394,460 974,786 3,949,207 980,241 1,742,073 2,971,836 – 20,623,300 20,292,573 1,062,499 809,581 54,966,609 51,910,288 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 201

Life and health reinsurance Consolidation Total 1.1. – 31.12.2018 1.1. – 31.12.2017 1.1. – 31.12.2018 1.1. – 31.12.2017 1.1. – 31.12.2018 1.1. – 31.12.2017 N 15 7,200,358 6,484,807 491,801 30,632 31 172,177 5,341,606 50,791 7,079,562 6,472,779 560,597 36,500 44 217,126 5,666,843 (571) 1,263,529 1,081,775 216,854 172,062 275,890 – 275,890 88,348 187,542 1,616 185,926 210,708 170,589 245,210 – 245,210 66,294 178,916 6,282 172,634 – 154 3,120 – – – – – – 318 (4,772) (1,816) 78,261 (80,077) (24,536) (55,541) – (55,541) – 159 3,994 – – – – – 227 149 (4,829) (1,052) 71,736 (72,788) (21,369) (51,419) – (51,419) 19,176,358 17,289,133 1,530,029 31,160 49,124 207,987 12,569,150 50,791 4,296,959 423,343 117,730 1,596,649 78,261 1,518,388 372,861 1,145,527 86,034 1,059,493 17,790,506 15,631,670 1,773,889 38,569 70,949 234,915 12,193,079 (571) 3,516,370 411,297 78,971 1,364,355 71,736 1,292,619 248,042 1,044,577 86,022 958,555 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 203

Maturities of the fixed-income and variable-yield securities N 17 2018 2017 Amortised cost 1 Fair value Amortised cost 1 Fair value in EUR thousand Held to maturity due in one year due after one through two years due after two through three years due after three through four years due after four through five years due after five through ten years due after more than ten years 27,597 35,210 138,040 – 48,280 – 816 28,255 37,680 150,358 – 53,358 – 266 86,359 29,586 39,097 156,064 – 54,789 263 366,158 130,841 188,653 233,670 320,436 235,151 1,126,196 505,538 2,740,485 5,346,842 2,721,829 3,364,264 3,675,048 2,814,657 10,218,549 4,935,094 33,076,283 177,634 8,620 – – 7,075 – 18,713 212,042 s t n e m e t a t s l a i c n a n i f l a u n n A 85,411 28,055 35,145 138,465 – 48,278 828 336,182 129,159 179,739 218,893 302,243 214,455 942,722 467,953 Total 249,943 269,917 Loans and receivables due in one year due after one through two years due after two through three years due after three through four years due after four through five years due after five through ten years due after more than ten years 178,975 200,522 303,603 213,694 228,382 842,190 431,584 182,670 209,143 314,716 232,687 252,883 959,706 453,879 Total 2,398,950 2,605,684 2,455,164 Available for sale due in one year 2 due after one through two years due after two through three years due after three through four years due after four through five years due after five through ten years due after more than ten years Total Financial assets at fair value through profit or loss due in one year due after one through two years due after two through three years due after three through four years due after four through five years due after five through ten years due after more than ten years 6,159,368 3,217,098 3,264,200 2,828,576 3,047,032 10,040,715 6,086,028 34,643,017 427,918 86,411 13,075 10,358 17,740 4,248 – 6,157,352 3,230,856 3,253,202 2,831,536 3,043,361 10,051,258 6,166,985 34,734,550 427,918 86,411 13,075 10,358 17,740 4,248 – Total 559,750 559,750 1 2 Including accrued interest Including short-term investments, cash and cash equivalents 5,345,018 2,711,972 3,310,919 3,659,321 2,748,835 9,992,925 4,601,225 32,370,215 177,634 8,620 – – 7,075 – 18,713 212,042 Hannover Re | Annual Report 2018 205

Amortised cost, unrealised gains and losses and accrued interest on loans and receivables as well as their fair value N 20 in EUR thousand Loans and receivables Debt securities issued by semi-governmental entities Corporate securities Covered bonds / asset-backed securities Total Amortised cost including accrued interest thereof accrued interest 2018 Unrealised gains Unrealised losses Fair value 1,451,697 482,638 464,615 2,398,950 22,045 2,776 7,511 32,332 132,424 16,857 62,684 211,965 2,487 2,744 – 5,231 1,581,634 496,751 527,299 2,605,684 Amortised cost, unrealised gains and losses and accrued interest on loans and receivables as well as their fair value N 21 in EUR thousand Loans and receivables Debt securities issued by semi-governmental entities Corporate securities Covered bonds / asset-backed securities Total Amortised cost including accrued interest thereof accrued interest 2017 Unrealised gains Unrealised losses Fair value 1,544,933 396,794 513,437 2,455,164 22,830 2,326 9,331 34,487 187,976 25,988 78,032 291,996 5,221 1,454 – 6,675 1,727,688 421,328 591,469 2,740,485 The carrying amount of the loans and receivables is arrived at from the amortised cost plus accrued interest. s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 207

Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as available for sale as well as their fair value N 23 in EUR thousand Available for sale Fixed-income securities Government debt securities of EU member states US Treasury notes Other foreign government debt securities Debt securities issued by semi-governmental entities Corporate securities Covered bonds / asset-backed securities Investment funds Equity securities Shares Investment funds Short-term investments Amortised cost including accrued interest thereof accrued interest 2017 Unrealised gains Unrealised losses Fair value 3,101,426 6,945,508 1,893,711 5,137,974 10,945,807 2,427,624 123,608 30,575,658 12,794 12,865 25,659 958,851 19,901 28,144 16,513 37,859 119,725 23,942 – 246,084 – – – 5,582 132,208 19,192 10,214 97,721 3,223,420 6,866,979 26,766 16,290 1,904,187 183,998 401,952 116,370 31,690 912,176 6,388 5,692 12,080 58 45,058 29,217 6,497 929 5,276,914 11,318,542 2,537,497 154,369 205,926 31,281,908 17 202 219 240 19,165 18,355 37,520 958,669 Total 31,560,168 251,666 924,314 206,385 32,278,097 s t n e m e t a t s l a i c n a n i f l a u n n A The carrying amounts of the fixed-income securities and eq- uity securities classified as available for sale as well as the short-term investments allocated to this category correspond to their fair values, in the case of interest-bearing assets in- cluding accrued interest. Hannover Re | Annual Report 2018 209

Rating structure of fixed-income securities N 26 in EUR thousand Fixed-income securities – held-to-maturity Fixed-income securities – loans and receivables Fixed-income securities – available-for-sale Fixed-income securities – at fair value through profit or loss Total fixed-income securities AAA AA A BBB BB 2018 164,531 37,132 48,280 – – 1,767,020 145,622 85,243 211,295 19,316 B – – C – – Other Total – 249,943 170,454 2,398,950 15,546,636 5,496,061 4,970,072 5,874,243 637,336 237,103 1,433 476,801 33,239,685 56,144 271,933 – – 27,611 – – 204,062 559,750 17,534,331 5,950,748 5,103,595 6,085,538 684,263 237,103 1,433 851,317 36,448,328 Rating structure of fixed-income securities N 27 in EUR thousand Fixed-income securities – held-to-maturity Fixed-income securities – loans and receivables Fixed-income securities – available-for-sale Fixed-income securities – at fair value through profit or loss Total fixed-income securities AAA AA A BBB BB 2017 196,454 77,734 51,993 10,001 – 1,745,927 272,116 136,439 221,632 19,030 B – – C – – Other Total – 336,182 60,020 2,455,164 13,754,622 4,892,769 5,138,558 5,890,327 1,105,067 170,001 1,847 328,717 31,281,908 s t n e m e t a t s l a i c n a n i f l a u n n A – – – – 31,543 – – 180,499 212,042 15,697,003 5,242,619 5,326,990 6,121,960 1,155,640 170,001 1,847 569,236 34,285,296 The maximum credit risk of the items shown here corre- sponds to their carrying amounts. Hannover Re | Annual Report 2018 211

Breakdown of investments by currencies N 29 in EUR thousand Fixed-income securities – held to maturity Fixed-income securities – loans and receivables Fixed-income securities – available-for-sale Fixed-income securities – at fair value through profit or loss Equity securities – available-for-sale Other financial assets – at fair value through profit or loss Other invested assets Short-term investments, cash AUD CAD CNY EUR 2017 GBP USD ZAR Other Total – 3,715 – 278,120 42,918 11,429 22,805 – 33,813 1,983,946 39,755 374,777 – – – 336,182 68 2,455,164 2,198,566 1,153,025 453,079 7,672,596 3,003,948 15,314,560 212,714 1,273,420 31,281,908 – – – – – – – – – – – – – – 212,042 19,838 102 17,580 835 58,964 29,033 – – – – – – 212,042 37,520 88,832 1,947,949 6,177 1,767,771 7,087 122,471 3,851,455 130,430 32,278 65,322 155,369 149,182 518,588 184,820 558,386 1,794,375 Total 2,351,801 1,189,018 552,214 12,058,653 3,301,046 18,245,780 404,621 1,954,345 40,057,478 The maximum credit risk of the items shown here corre- sponds to their carrying amounts. Associated companies The associated companies included at equity in the consoli- dated financial statement that both on an individual basis and in their entirety are not material for the Hannover Re Group pursuant to IFRS 12 are comprised of • WeHaCo Unternehmensbeteiligungs-GmbH, Hannover, Germany, • HANNOVER Finanz GmbH, Hannover, Germany, • ITAS Vita S.p.A., Trento, Italy, as well as the following companies included at equity within the subgroup Hannover Reinsurance Group Africa (Pty) Ltd., Johannesburg, South Africa: • Clarendon Transport Underwriting Managers (Pty) Ltd., Johannesburg, South Africa, • Clarenfin (Pty) Ltd., Johannesburg, South Africa, • Vela Taxi Finance (Pty) Ltd., Johannesburg, South Africa, • Marmic Taxi Parts (Pty) Ltd., Durban, South Africa, • Pineapple Tech (Pty) Ltd., Johannesburg, South Africa. Information on the percentage share held by the Hannover Re Group in the capital of the associated companies as well as on the amount of capital and reserves and the result for the last financial year of these companies is provided in the list of shareholdings in section 4.2 “Consolidated companies and complete list of shareholdings”. s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 213

Development of investment property in EUR thousand Gross book value at 31 December of the previous year Currency translation at 1 January Gross book value after currency translation Additions Disposals Currency translation at 31 December Gross book value at 31 December of the year under review Cumulative depreciation at 31 December of the previous year Currency translation at 1 January Cumulative depreciation after currency translation Disposals Depreciation Impairments Appreciation Currency translation at 31 December Cumulative depreciation at 31 December of the year under review Net book value at 31 December of the previous year Net book value at 1 January of the year under review Net book value at 31 December of the year under review 2018 1,712,667 36,660 1,749,327 117,253 23,166 994 1,844,408 128,939 3,131 132,070 3,708 34,001 324 3,616 405 159,476 1,583,728 1,617,257 1,684,932 N 32 2017 1,502,800 (89,740) 1,413,060 388,308 82,453 (6,248) 1,712,667 100,557 (6,172) 94,385 9,895 31,013 15,642 912 (1,294) 128,939 1,402,243 1,318,675 1,583,728 The fair value of investment property amounted to EUR 1,945.4 million (EUR 1,743.6 million) as at the balance sheet date. The additions to this item are attributable to investment activ- ities at the relevant real estate companies belonging to the Hannover Re Group, specifically in Australia and the United States. In terms of diversification across various real estate sectors the focus is on office properties (68%), followed by retail properties (19%). The allocation is complemented by invest- ments in further sectors, including for example logistics and parking facilities. In geographical terms, exposures are spread across the United States (36%), Europe (excluding Germany; 33%) as well as Germany (20%) and Asia (11%). The real estate in the investment portfolio is normally subject to internal and external valuation by an appraiser as at the balance sheet date. The two analyses do not differ from one another in the methodology used, which means that the find- ings are comparable at all times and on a continuous basis. Generally speaking, the fair value of the real estate is deter- mined using the discounted cash flow (DCF) method, with rental income capitalised in consideration of the associated management costs. The valuation result is also influenced by increases and reductions based on specific property circum- stances (upkeep, vacancies, rent divergences from the market level, etc.). The evaluation of international real estate also draws primarily on the discounted cash flow method. The main feature of this method is the present value estimation of projected annual free cash flows. Real estate which is held for sale as defined by IFRS 5 is rec- ognised separately in the consolidated balance sheet. Inten- tions to sell are substantiated by individual real estate market conditions and specific property circumstances, taking into consideration current and future opportunity / risk profiles. In the year under review no property had to be reclassified to assets held for sale. In addition, we held indirect real estate investments meas- ured at fair values in an amount of EUR 433.9 million (EUR 385.0 million) in the year under review, the amortised costs of which amounted to EUR 379.8 million (EUR 327.2 million). The differences between the carrying amounts and amortised costs were recognised as unrealised gains of EUR 57.5 mil- lion (EUR 59.5 million) and unrealised losses of EUR 3.4 mil- lion (EUR 1.7 million) under cumulative other comprehensive income. s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 215

Fair value hierarchy of financial assets and liabilities recognised at fair value N 33 in EUR thousand Fixed-income securities Equity securities Other financial assets Real estate funds Other invested assets Short-term investments Other assets Total financial assets Other liabilities Total financial liabilities Level 1 28,040 28,729 – – – 421,950 – 2018 Level 2 33,771,395 – 58,420 – – – 988 Level 3 – – 132,339 433,899 1,647,992 – – Total 33,799,435 28,729 190,759 433,899 1,647,992 421,950 988 478,719 33,830,803 2,214,230 36,523,752 – – 57,940 57,940 24,548 24,548 Fair value hierarchy of financial assets and liabilities recognised at fair value in EUR thousand Fixed-income securities Equity securities Other financial assets Real estate funds Other invested assets Short-term investments Total financial assets Other liabilities Total financial liabilities Level 1 34,043 35,521 – – – 958,669 1,028,233 – – 2017 Level 2 31,459,907 1,897 39,793 – – – 31,501,597 78,838 78,838 Level 3 – 102 49,039 384,973 1,639,065 – 2,073,179 185,498 185,498 82,488 82,488 N 34 Total 31,493,950 37,520 88,832 384,973 1,639,065 958,669 34,603,009 264,336 264,336 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 217

The breakdown of income and expenses recognised in the statement of income in the financial year in connection with financial assets and liabilities assigned to level 3 is as follows: Income and expenses from level 3 financial assets and liabilities N 37 2018 Other financial assets Real estate funds Other invested assets Other liabilities Equities, equity funds and other varia- ble-yield securities – – – (10) 56,694 – – 350 5,775 – – 5,775 – N 38 s t n e m e t a t s l a i c n a n i f l a u n n A in EUR thousand Total in the financial year Ordinary investment income Realised gains and losses on investments Change in fair value of financial instruments Total depreciation, impairments and appreciation of investments Thereof attributable to financial instruments included in the portfolio at 31 December of the year under review Ordinary investment income Change in fair value of financial instruments Total depreciation, impairments and appreciation of investments – – 29,037 – – 29,037 – – – – – – – (2,601) (15,299) – – (10) 512 – (2,601) (15,299) Income and expenses from level 3 financial assets and liabilities 2017 Other financial assets Real estate funds Other invested assets Other liabilities Equities, equity funds and other varia- ble-yield securities – (79) – (9) – – (9) – – 2,024 – – 2,024 – – – 108 15,538 1,887 (2,341) (8,440) – – 108 1,392 – (2,341) (8,440) – – 29,818 – – 29,818 – in EUR thousand Total in the financial year Ordinary investment income Realised gains and losses on investments Change in fair value of financial instruments Total depreciation, impairments and appreciation of investments Thereof attributable to financial instruments included in the portfolio at 31 December of the year under review Ordinary investment income Change in fair value of financial instruments Total depreciation, impairments and appreciation of investments Hannover Re | Annual Report 2018 219

Disclosures relating to deferred adoption of IFRS 9 Fair value disclosures for financial assets N 41 in EUR thousand Fixed-income securities – held to maturity Fixed-income securities – loans and receivables Fixed-income securities – available for sale Fixed-income securities – at fair value through profit or loss Equity securities – available for sale Other financial assets – at fair value through profit or loss Real estate funds Other invested assets Short-term investments Other assets Total 2018 Financial assets that give rise solely to All other financial assets payments of principal and interest Fair value as at 31.12. Fair value change in the financial year Fair value as at 31.12. Fair value change in the financial year 269,651 2,602,013 32,746,438 – – – – 133,262 380,590 146,641 (14,398) (35,616) (70,690) – – – – (1,525) (532) – 266 3,671 493,247 559,750 28,729 173,865 433,899 1,537,851 41,360 933 216 (3,544) (18,879) (19,933) (1,170) (9,619) (41,181) (78,798) 345 1,767 36,278,597 (122,761) 3,273,571 (170,796) The above table shows the financial assets that are to be rec- ognised in future in accordance with IFRS 9 and splits them into a group that satisfies the cash flow criterion for financial assets as well as all other financial assets. The latter encom- pass the financial assets currently measured at fair value through profit or loss, especially equity instruments held and shares in investment funds that by their very nature cannot fulfil the cash flow criterion enshrined in IFRS 9. The cash flow criterion is met if the contractual conditions of the finan- cial instrument give rise to cash flows at set times that are solely payments of principal and interest (SPPI test). Rating structure of financial assets that give rise to solely payments of principal and interest N 42 s t n e m e t a t s l a i c n a n i f l a u n n A in EUR thousand AAA AA A BBB BB or lower No rating low credit risk more than a low credit risk Total The fair value for financial assets that meet the cash flow cri- terion and have more than a low credit risk corresponds to the carrying amount before impairment shown in the table. 2018 Carrying amount before impairment 17,440,918 5,642,495 5,067,975 6,017,406 936,185 630,371 175,447 35,910,798 Hannover Re | Annual Report 2018 221

For further explanatory remarks please see section 3.1 “Sum- mary of major accounting policies”. The age structure of the accounts receivable which were un- adjusted but considered overdue as at the balance sheet date is presented below. Age structure of overdue accounts receivable in EUR thousand Accounts receivable 2018 Three months to one year 241,637 More than one year 90,747 N 44 2017 More than one year 130,437 Three months to one year 303,242 Within the scope of our management of receivables we ex- pect to receive payment of accounts receivable within three months of the date of creation of the debit entry unless other- wise agreed – a period for which we also make allowance in our risk analysis. Please see our comments on the counter- party default risk within the risk report on page 114 et seq. The default risks associated with accounts receivable under reinsurance business are determined and recognised on the basis of case-by-case analyses. The value adjustments on accounts receivable that we recog- nise in adjustment accounts changed as follows in the year under review: Value adjustments on accounts receivable in EUR thousand Cumulative value adjustments at 31 December of the previous year Currency translation at 1 January Cumulative value adjustments after currency translation Value adjustments Reversal Utilisation Reclassifications pursuant to IFRS 5 Cumulative value adjustments at 31 December of the year under review Gross book value of accounts receivable at 31 December of the year under review Cumulative value adjustments at 31 December of the year under review Net book value of accounts receivable at 31 December of the year under review 2018 17,391 182 17,573 19,151 5,506 1,500 (215) 29,503 4,005,281 29,503 3,975,778 N 45 2017 40,468 (321) 40,147 9,299 31,427 628 – 17,391 3,838,515 17,391 3,821,124 s t n e m e t a t s l a i c n a n i f l a u n n A In addition, we took specific value adjustments on reinsurance recoverables on unpaid claims in the year under review. We would refer the reader to the corresponding remarks on the loss and loss adjustment expense reserve in section 6.7 “Tech- nical provisions”. With regard to the credit risks resulting from technical assets we would also refer the reader to our comments on page 114 et seq. of the risk report. Hannover Re | Annual Report 2018 223

CGU. The value adjustment on the level of Glencar Under- writing Managers Inc. amounts to EUR 5.0 million and en- compasses the entire goodwill. The value adjustment taken on the level of Integra Insurance Solutions Limited amounts to EUR 3.4 million. The expense was in each case recognised under the other income / expenses in the property and casualty reinsurance segment. We would also refer to our basic remarks in section 3.1 “Sum- mary of major accounting policies”. 6.6 Other assets Other assets in EUR thousand Present value of future profits on acquired life reinsurance portfolios Other intangible assets Insurance for pension commitments Own-use real estate Tax refund claims Fixtures, fittings and equipment Receivables from advance payments and services Other Total 2018 39,609 129,397 93,962 63,551 83,173 29,804 74,018 115,906 629,420 N 48 2017 63,285 133,713 90,789 64,036 78,016 29,653 58,491 386,270 904,253 The item “Other” includes receivables of EUR 50.4 million (EUR 286.8 million) which correspond to the present value of future premium payments in connection with derivative fi- nancial instruments arising from transactions in the life and health reinsurance business group. For further explanation please see section 8.1 “Derivative financial instruments and financial guarantees”. The other receivables include unadjusted items of EUR 0.3 million (EUR 0.3 million) that were overdue by more than twelve months as at the balance sheet date. s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 225

Fixtures, fittings and equipment Fixtures, fittings and equipment in EUR thousand Gross book value at 31 December of the previous year Currency translation at 1 January Gross book value after currency translation Additions Disposals Reclassifications Change in the consolidated group Reclassifications pursuant to IFRS 5 Currency translation at 31 December Gross book value at 31 December of the year under review Cumulative depreciation at 31 December of the previous year Currency translation at 1 January Cumulative depreciation after currency translation Disposals Depreciation Reclassifications Change in the consolidated group Reclassifications pursuant to IFRS 5 Currency translation at 31 December Cumulative depreciation at 31 December of the year under review Net book value at 31 December of the previous year Net book value at 31 December of the year under review With regard to the measurement of fixtures, fittings and equipment, the reader is referred to our explanatory notes on the other assets in section 3.1 “Summary of major accounting policies”. 2018 157,511 953 158,464 11,791 5,567 – (64) (5,101) (158) 159,365 127,858 1,143 129,001 5,199 10,042 – (39) (4,119) (125) 129,561 29,653 29,804 N 50 2017 155,812 (5,474) 150,338 12,743 3,974 (4,451) 2,696 – 159 157,511 128,578 (4,592) 123,986 3,773 8,047 (793) 294 – 97 127,858 27,234 29,653 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 227

6.7 Technical provisions In order to show the net technical provisions remaining in the retention the following table compares the gross provisions with the corresponding retrocessionaires’ shares, which are shown as assets in the balance sheet. Technical provisions in EUR thousand Loss and loss adjustment expense reserve Benefit reserve Unearned premium reserve Other technical provisions 2018 gross retro net gross 2017 retro N 52 net 28,758,575 2,084,630 26,673,945 28,378,545 1,651,335 26,727,210 9,184,356 3,166,964 575,996 909,056 93,678 7,170 8,275,300 3,073,286 568,826 8,977,946 3,541,194 394,460 959,533 96,402 7,301 8,018,413 3,444,792 387,159 Total 41,685,891 3,094,534 38,591,357 41,292,145 2,714,571 38,577,574 The loss and loss adjustment expense reserves are in princi- ple calculated on the basis of the information supplied by ceding companies. Additional IBNR reserves are established for losses that have been incurred but not as yet reported. The development of the loss and loss adjustment expense re- serve is shown in the following table. Commencing with the gross reserve, the change in the reserve after deduction of the reinsurers’ portions is shown in the year under review and the previous year. Loss and loss adjustment expense reserve in EUR thousand gross retro net gross 2018 2017 retro N 53 net Net book value at 31 December of the previous year 28,378,545 1,651,335 26,727,210 28,129,418 1,506,292 26,623,126 Currency translation at 1 January 385,920 38,332 347,588 (1,917,751) (120,535) (1,797,216) Net book value after currency translation 28,764,465 1,689,667 27,074,798 26,211,667 1,385,757 24,825,910 Reclassifications pursuant to IFRS 5 (1,642,408) (87,253) (1,555,155) – – – s t n e m e t a t s l a i c n a n i f l a u n n A Incurred claims and claims expenses (net) 1 Year under review Previous years Less: Claims and claims expenses paid (net) 1 11,553,628 1,383,873 10,169,755 10,434,270 1,022,795 2,849,915 450,520 2,399,395 3,163,944 382,340 9,411,475 2,781,604 14,403,543 1,834,393 12,569,150 13,598,214 1,405,135 12,193,079 Year under review Previous years (3,435,681) (145,670) (3,290,011) (2,910,584) (9,337,763) (1,192,926) (8,144,837) (8,531,198) (393,551) (724,128) (2,517,033) (7,807,070) (12,773,444) (1,338,596) (11,434,848) (11,441,782) (1,117,679) (10,324,103) Changes in the consolidated group Specific value adjustment for retrocessions Reversal of impairments Portfolio entries / exits Currency translation at 31 December Net book value at 31 December of the year under review – – – (8,160) 14,579 – – 164,813 41,964 122,849 9,257 1,155 (3,274) (2,205) (9,257) (1,155) (4,886) 16,784 – – 2,171 43,609 (43,609) 519 – (519) 2,171 (156,538) (20,752) (135,786) 28,758,575 2,084,630 26,673,945 28,378,545 1,651,335 26,727,210 1 Excluding effects from portfolio entries / exits recognised in income Hannover Re | Annual Report 2018 229

Net loss reserve and its run-off in the property and casualty reinsurance segment N 54 in EUR million 31.12. 2008 31.12. 2009 31.12. 2010 31.12. 2011 31.12. 2012 31.12. 2013 31.12. 2014 31.12. 2015 31.12. 2016 31.12. 2017 31.12. 2018 Loss and loss adjustment expense reserve (from balance sheet) 13,625.3 13,945.3 15,206.4 16,555.1 17,178.8 17,746.8 19,644.7 21,672.5 22,592.5 22,727.8 24,194.7 1 Cumulative payments for the year in question and previous years One year later 2,958.7 2,755.7 2,445.8 3,127.5 2,899.2 3,185.9 3,509.3 3,267.6 3,732.6 4,430.3 Two years later 4,602.2 3,984.5 4,085.4 4,856.9 4,518.3 4,988.8 5,252.3 5,175.1 5,800.2 Three years later 5,363.2 4,805.9 5,073.6 5,788.3 5,715.3 6,106.1 6,517.7 6,534.7 Four years later 5,951.1 5,452.1 5,722.8 6,724.0 6,564.7 7,098.9 7,511.2 Five years later 6,432.9 5,957.8 6,483.4 7,442.5 7,355.9 7,911.2 Six years later 6,763.2 6,459.9 7,026.2 8,037.0 7,994.7 Seven years later 7,109.9 6,808.5 7,463.5 8,525.0 Eight years later 7,372.5 7,136.9 7,849.4 Nine years later 7,661.0 7,425.7 Ten years later 7,899.0 Loss and loss adjustment expense reserve (net) for the year in question and previous years plus payments made to date on the original reserve End of year 13,625.3 13,945.3 15,206.4 16,555.1 17,178.8 17,746.8 19,644.7 21,672.5 22,592.5 22,727.8 24,194.7 One year later 14,728.2 13,430.2 14,565.5 16,263.2 16,697.7 17,558.2 19,146.1 20,777.6 21,424.6 21,731.1 Two years later 13,465.6 12,674.5 13,960.8 15,867.4 16,343.6 16,922.2 18,031.5 19,349.6 20,457.2 Three years later 12,597.5 12,097.9 13,516.2 15,421.6 15,823.4 15,884.1 17,062.9 18,374.2 Four years later 12,101.3 11,669.8 13,060.1 14,797.0 15,122.4 15,012.6 16,197.3 Five years later 11,761.3 11,210.0 12,492.2 14,133.0 14,408.4 14,297.4 Six years later 11,266.3 10,680.5 11,961.4 13,485.1 13,792.2 Seven years later 10,778.1 10,313.0 11,361.3 12,896.0 Eight years later 10,451.7 9,817.6 11,030.0 Nine years later 10,026.2 9,575.8 Ten years later 9,865.3 Change relative to previous year Net run-off result 160.9 80.9 89.5 257.8 27.2 99.0 150.4 109.8 (8.0) 29.2 As percentage of original loss reserve 1.2 0.6 0.6 1.6 0.2 0.6 0.8 0.5 (0.0) 0.1 1 The net loss reserve shown in the run-off triangle for the 2018 financial year in an amount of EUR 24,194.7 million includes the assets and liabilities held for sale in connection with assets held for sale of International Insurance Company of Hannover SE in an amount of EUR 1,555.2 million. s t n e m e t a t s l a i c n a n i f l a u n n A The run-off profit of altogether EUR 996.7 million (EUR 1,058.0 million) in the 2018 financial year derives, as in the previous year, above all from positive run-offs of reserves in the areas of general liability and marine / aviation as well as in short-tail property business. Hannover Re | Annual Report 2018 231

The parameters used to calculate the benefit reserve are in- terest income, lapse rates and mortality / morbidity rates. The values for the first two components (interest income and lapse rates) differ according to the country concerned, prod- uct type, investment year etc. The mortality and morbidity rates used are chosen on the ba- sis of national tables and the insurance industry standard. Empirical values for the reinsured portfolio, where available, are also taken into consideration. In this context insights into the gender, age and smoker structure are incorporated into the calculations, and allowance is also made for factors such as product type, sales channel and the frequency of premium payment by policyholders. At the inception of every reinsurance contract, assumptions about the three parameters are made and locked in for the purpose of calculating the benefit reserve. At the same time, safety / fluctuation loadings are built into each of these com- ponents. In order to ensure at all times that the originally cho- sen assumptions continue to be adequate throughout the contract, checks are made on a regular – normally annual – basis in order to determine whether these assumptions need to be adjusted (“unlocked”). The benefit reserve is established in accordance with the principles set out in SFAS 60. The provisions are based on the Group companies’ information regarding mortality, interest and lapse rates. Development of the benefit reserve in EUR thousand Net book value at 31 December of the previous year Currency translation at 1 January Net book value after currency translation Changes Portfolio entries / exits Currency translation at 31 December Net book value at 31 December of the year under review 2018 gross retro net gross 2017 retro N 57 net 8,977,946 61,871 9,039,817 (27,007) 173,143 (1,597) 959,533 28,384 987,917 (77,798) (1,691) 628 8,018,413 10,313,952 33,487 (675,675) 1,189,420 (123,427) 9,124,532 (552,248) 8,051,900 9,638,277 1,065,993 8,572,284 50,791 174,834 (2,225) 41,738 42,309 (571) (698,166) (153,049) (545,117) (3,903) 4,280 (8,183) 9,184,356 909,056 8,275,300 8,977,946 959,533 8,018,413 s t n e m e t a t s l a i c n a n i f l a u n n A The development in the year under review was influenced by portfolio entries attributable principally to UK single premi- um business. The unearned premium reserve derives from the deferral of ceded reinsurance premium. The unearned premium is deter- mined by the period during which the risk is carried and es- tablished in accordance with the information supplied by ced- ing companies. In cases where no information was received, the unearned premium was estimated using suitable meth- ods. Premium paid for periods subsequent to the date of the balance sheet was deferred from recognition within the state- ment of income. Hannover Re | Annual Report 2018 233

As at 1 July 2000 the 2000 pension plan came into force for the entire Group. Under this plan, new employees included in the group of beneficiaries are granted an indirect commit- ment from HDI Unterstützungskasse e.V. This pension plan provides for retirement, disability and surviving dependants’ benefits. Effective 1 December 2002 Group employees have an oppor- tunity to accumulate additional old-age provision at un- changed conditions by way of deferred compensation through membership of HDI Pensionskasse AG. In addition to these pension plans, senior executives and members of the Executive Board, in particular, enjoy individ- ual commitments as well as commitments given under the benefits plan of the Bochumer Verband. The commitments to employees in Germany predominantly comprise benefit obligations financed by the Group compa- nies. The provisions for pensions in Germany and abroad were calculated on the basis of uniform standards according to prevailing economic circumstances. Provisions for pensions are established in accordance with actuarial principles and are based upon the commitments made by the Hannover Re Group for retirement, disability and widows’ benefits. The amount of the commitments is deter- mined according to length of service and salary level. The defined benefit plans expose Hannover Re to the follow- ing actuarial risks: • disablement • pension progression • rate of compensation increase Longevity entails the risk that the mortality contained in the actuarial bases does not correspond to the actual mortality and that pension payments have to be rendered and funded for a longer duration than had been assumed. Disablement entails the risk that the assumed number of re- tirements from the subportfolio of eligible beneficiaries on grounds of disability does not correspond to the actual expe- rience and for this reason increased benefit obligations have to be met. The pension progression entails the risk that the anticipated development of the consumer price index factored into the trend assumptions was too low and that increased benefit ob- ligations arise on account of the pension indexation required by law. The rate of compensation increase entails the risk that the increases in pensionable salaries factored into the trend as- sumptions on a parallel basis do not adequately reflect the actual developments. In addition, in the case of plans under which the determinative income components above and be- low the income threshold for contributions to the statutory pension insurance scheme are differently weighted for the purpose of calculating the benefit, there is a risk of a diverg- ing trend in the future with respect to salary and income threshold. The calculation of the provisions for pensions is based upon the following assumptions: s t n e m e t a t s l a i c n a n i f l a u n n A • longevity • currency • interest rate Measurement assumptions in % Discount rate Rate of compensation increase Pension indexation 2018 Germany Australia 1.60 2.50 1.74 2.87 3.00 3.00 United Kingdom 2.90 2.15 2.15 2017 Germany Australia 1.75 2.50 1.74 3.62 3.00 3.00 N 59 United Kingdom 2.60 2.25 2.15 Hannover Re | Annual Report 2018 235

The reconciliation of the projected benefit obligations with the recognised provisions for pensions is as follows: Provisions for pensions in EUR thousand Projected benefit obligations at 31 December of the financial year Fair value of plan assets at 31 December of the financial year Effect of minimum funding requirement on asset ceiling Recognised pension obligations at 31 December of the financial year thereof: Capitalised assets thereof: Recognised pension obligations from IFRS 5 Provisions for pensions In the current financial year Hannover Re anticipates contri- bution payments of EUR 3.3 million under the plans set out above. The weighted average duration of the defined benefit obligation is 18.0 (18.3) years. Sensitivity analysis An increase or decrease in the key actuarial assumptions would have the following effect on the present value of the defined benefit obligation as at the balance sheet date: 2018 223,604 39,989 41 183,656 349 1,714 182,291 N 61 2017 210,855 33,675 135 177,315 471 – 177,786 Effect on the defined benefit obligation N 62 in EUR thousand Discount rate Rate of compensation increase Pension indexation Parameter increase Parameter decrease (+ / – 0.5%) (+ / – 0.25%) (+ / – 0.25%) (17,832) 470 6,224 20,372 (463) (5,931) Furthermore, a change is possible with respect to the as- sumed mortality rates and lifespans. The underlying mortality tables were adjusted by reducing the mortalities by 10% in order to determine the longevity risk. Extending the lifespans in this way would have produced a EUR 6.6 million (EUR 6.6 million) higher pension commitment at the end of the finan- cial year. Defined contribution plans In addition to the defined benefit plans, some Group compa- nies have defined contribution plans that are based on length of service and the employee’s income or level of contribu- tions. The expense recognised for these obligations in the fi- nancial year in accordance with IAS 19 “Employee Benefits” was EUR 20.6 million (EUR 20.2 million), none of which (EUR 0.8 million) was attributable to commitments to em- ployees in key positions. Of the expense for defined contribu- tion plans, an amount of EUR 11.5 million (EUR 10.8 million) relates to state pension schemes, thereof EUR 7.9 million (EUR 7.6 million) to contributions to the statutory pension insurance scheme in Germany. Hannover Re | Annual Report 2018 237 s t n e m e t a t s l a i c n a n i f l a u n n A

Reclassifications pursuant to IFRS 5 Reclassifications and other changes Changes in consolidated group Additions Utilisation Release Currency translation at 31 December Balance at 31 December 2018 – – – (24) (626) (143) (2,223) (21) (3,037) – – (28) 845 – – – (124) 693 (10) – (52) – (19) – – – (81) 5,323 4,703 3,257 96 6,047 477 36,943 13,465 70,311 6,803 1,324 3,681 772 6,208 22 29,501 6,468 54,779 750 271 807 – 21 – 3,357 8,682 13,888 (10) (2) 95 (7) (15) 4 (17) (33) 15 6,698 5,878 3,918 1,371 10,032 4,849 77,949 69,717 180,412 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 239

Long-term debt and notes payable in EUR thousand Coupon Maturity Currency N 67 2017 Amortised cost Fair value measure- ment Accrued interest Fair value Notes payable Hannover Rück SE, 2014 3.375 Hannover Finance (Luxembourg) S. A., 2012 Hannover Finance (Luxembourg) S. A., 2010 5.00 5.75 Long-term debt Other long-term liabilities Total n / a 2043 2040 EUR EUR EUR 495,033 59,342 8,692 563,067 497,822 104,038 12,603 614,463 499,096 1,491,951 71,004 234,384 8,507 29,802 578,607 1,756,137 250,083 39 1,141 – 918 – 252,142 39 1,742,073 235,525 30,720 2,008,318 The aggregated fair value of the extended subordinated loans is based on quoted, active market prices. If such price infor- mation was not available, fair value was determined on the basis of the recognised effective interest rate method or esti- mated using other financial assets with similar rating, dura- tion and return characteristics. Under the effective interest rate method the current market interest rate levels in the rel- evant fixed-interest-rate periods are always taken as a basis. Maturities of financial liabilities N 68 in EUR thousand Less than three months Other financial liabilities 1 93,888 Long-term debt Notes payable Other long-term liabilities – – – Three months to one year 248,687 74,152 – – 2018 One to five years Five to ten years Ten to twenty years More than twenty years No maturity 2,910 208,896 – 35 3,708 40,152 742,537 – – – – – – – – – – 997,496 495,616 – – 997,496 495,616 Total 93,888 322,839 211,841 786,397 1 Excluding sundry non-technical provisions and derivative financial instruments; the maturities of these items are broken down separately. Maturities of financial liabilities N 69 in EUR thousand Less than three months Other financial liabilities 1 76,155 Long-term debt Notes payable Other long-term liabilities – – – Three months to one year 124,661 77,826 – – 2017 One to five years Five to ten years Ten to twenty years More than twenty years No maturity 5,168 134,684 – 1 2,672 37,573 – – – – – – – – – – – 996,918 495,033 – 38 996,918 495,071 Total 76,155 202,487 139,853 40,245 1 Excluding sundry non-technical provisions and derivative financial instruments; the maturities of these items are broken down separately. Hannover Re | Annual Report 2018 241 s t n e m e t a t s l a i c n a n i f l a u n n A

to a total distribution of EUR 603.0 million (EUR 603.0 mil- lion). The distribution consists of a dividend of EUR 3.50 per share and a special dividend of EUR 1.50 per share. The increase in the other reserves arising out of currency translation, which is recognised in equity, was attributable in an amount of EUR 16.0 million (EUR 51.4 million) to the translation of long-term debt or loans with no maturity date extended to Group companies and branches abroad. The disclosures on capital management arising out of IAS 1.134 – 136 “Presentation of Financial Statements” are pro- Treasury shares IAS 1 requires separate disclosure of treasury shares in share- holders’ equity. As part of this year’s employee share option plan Hannover Rück SE acquired altogether 16,530 (18,805) treasury shares during the second quarter of 2018 on the le- gal basis of § 71 Para. 1 No. 2 Stock Corporation Act (AktG) and delivered them to eligible employees at preferential con- 6.14 Non-controlling interests Non-controlling interests in the shareholders’ equity of sub- sidiaries are reported separately within Group shareholders’ equity in accordance with IAS 1 “Presentation of Financial Statements”. They amounted to EUR 765.2 million (EUR 758.1 million) as at the balance sheet date. Non-controlling interests in partnerships are reported in ac- cordance with IAS 32 “Financial Instruments: Presentation” under long-term liabilities. The non-controlling interest in profit or loss, which forms part of net income and is shown separately after net income as a “thereof” note, amounted to EUR 86.0 million (EUR 86.0 million) in the year under review. vided in the “Financial position” section of the management report, to which the reader is referred. This includes both a presentation of our capital management objectives and procedures (page 60 et seq., section entitled “Investment policy”) and a description of our policyholders’ surplus (page 62 et seq., section entitled “Management of policyholders’ surplus”), together with a summary of the diverse external capital requirements to which we are subject. The Solvency II regulatory framework, in particular, gives rise to capital re- quirements and consequences for capital management, which we discuss more closely on pages 95 et seq. of the risk report. ditions. These shares are blocked until 31 May 2022. This transaction resulted in an expense of EUR 0.4 million (EUR 0.4 million), which was recognised under personnel expendi- ture, as well as a negligible change in retained earnings rec- ognised in equity. The company was no longer in possession of treasury shares as at the balance sheet date. s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 243

7. Notes on the individual items of the statement of income 7.1 Gross written premium The following table shows the breakdown of the gross written premium according to regional origin. Gross written premium in EUR thousand Regional origin Germany United Kingdom France Other Europe USA Other North America Asia Australia Australasia Africa Other Total 2018 1,168,186 2,560,443 813,904 2,389,166 6,931,699 5,812,457 796,322 6,608,779 2,955,658 1,263,171 4,218,829 524,109 892,942 N 74 2017 1,215,478 2,455,796 748,266 2,215,680 6,635,220 5,479,354 681,468 6,160,822 2,535,295 997,036 3,532,331 495,844 966,289 19,176,358 17,790,506 s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 245

Net gains and losses on investments N 77 in EUR thousand Held to maturity Fixed-income securities Loans and receivables Fixed-income securities Available for sale Fixed-income securities Equity securities Other invested assets Short-term investments At fair value through profit or loss Fixed-income securities Other financial assets Other invested assets Other Total 2018 Ordinary investment income 1 Realised gains and losses Impairments / appreciation Change in fair value Net income from assets under own management 2 10,078 (18) 78,911 36,373 835,225 935 219,298 25,729 14,165 – 24 142,324 1,326,689 17,275 800 64,382 246 2,431 2,558 (981) 4,593 127,659 – – 510 – 17,900 4 – – – 30,710 49,124 – – – – – – (20,324) 34,317 2,423 14,744 31,160 10,060 115,284 851,990 1,735 265,780 25,971 (3,728) 36,875 1,466 130,951 1,436,384 Including income from associated companies, for reconciliation with the consolidated statement of income 1 2 Excluding other investment expenses Net gains and losses on investments N 78 in EUR thousand Held to maturity Fixed-income securities Loans and receivables Fixed-income securities Available for sale Fixed-income securities Equity securities Other invested assets Short-term investments At fair value through profit or loss Fixed-income securities Other financial assets Other invested assets Other Total 2017 Ordinary investment income 1 Realised gains and losses Impairments / appreciation Change in fair value Net income from assets under own management 2 12,147 (18) 76,339 2,794 772,776 20,565 254,202 20,711 11,936 – – 136,363 1,305,039 129,982 226,502 16,998 41 – – (5,915) 6,709 377,093 – – 309 3,681 21,342 – – – – 45,617 70,949 – – – – – – 7,809 2,972 2,449 25,339 38,569 12,129 79,133 902,449 243,386 249,858 20,752 19,745 2,972 (3,466) 122,794 1,649,752 Including income from associated companies, for reconciliation with the consolidated statement of income 1 2 Excluding other investment expenses s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 247

Commissions and brokerage, change in deferred acquisition costs in EUR thousand Commissions paid (gross) Reinsurance recoverables Change in deferred acquisition costs (gross) Reinsurance recoverables Change in provision for contingent commissions (gross) Reinsurance recoverables 2018 4,411,114 212,516 113,861 1,500 185,231 (268) N 81 2017 3,801,302 213,196 128,466 (17,589) 52,849 (4,370) Commissions and brokerage, change in deferred acquisition costs (net) 4,271,736 3,499,270 Other technical expenses in EUR thousand Other technical expenses (gross) Reinsurance recoverables Other technical expenses (net) 7.4 Other income / expenses Other income / expenses in EUR thousand Other income Exchange gains Reversals of impairments on receivables Income from contracts recognised in accordance with the deposit accounting method Income from services Deconsolidation Other interest income Sundry income Other expenses Other interest expenses Exchange losses Expenses from contracts recognised in accordance with the deposit accounting method Separate value adjustments on receivables Expenses for the company as a whole Depreciation, amortisation, impairments Expenses for services Sundry expenses Total 2018 5.537 733 4.804 2018 723,822 6,661 206,525 72,064 2,459 27,599 45,381 1,084,511 14,163 681,786 2,375 32,948 88,923 11,790 46,555 88,241 966,781 117,730 s t n e m e t a t s l a i c n a n i f l a u n n A N 82 2017 5.901 2.120 3.781 N 83 2017 645,544 31,946 198,088 47,712 191 28,881 37,812 990,174 25,059 655,614 5,951 64,280 71,891 10,261 36,085 42,062 911,203 78,971 Hannover Re | Annual Report 2018 249

7.5 Taxes on income Actual taxes on income at the domestic companies, compara- ble actual taxes on income at foreign subsidiaries as well as deferred taxes in accordance with IAS 12 “Income Taxes” are recognised under this item. trade earnings tax rate of 16.8%. The Group tax rate conse- quently also amounts to 32.7% (32.7%). The deferred taxes at the companies abroad were calculated using the applicable country-specific tax rates. The reader is referred to the remarks in section 3.1 “Summa- ry of major accounting policies” regarding the basic approach to the recognition and measurement of deferred taxes. Tax-relevant bookings on the Group level are made using the Group tax rate unless they refer specifically to individual companies. An unchanged tax rate of 32.63% (rounded to 32.7%) was used to calculate the deferred taxes of the major domestic companies. It is arrived at from the corporate income tax rate of 15.0%, the German solidarity surcharge of 5.5% and a Deferred tax liabilities on profit distributions of significant af- filiated companies are established in the year when they are received. Breakdown of taxes on income The breakdown of actual and deferred income taxes was as follows: Income tax in EUR thousand Actual tax for the year under review Actual tax for other periods Deferred taxes due to temporary differences Deferred taxes from loss carry-forwards Change in deferred taxes due to changes in tax rates Value adjustments on deferred taxes Total Domestic / foreign breakdown of recognised tax expenditure / income in EUR thousand Actual taxes Germany Abroad Deferred taxes Germany Abroad Total 2018 328,355 (33,330) 562,259 (473,668) (3,160) (7,595) 372,861 2018 249,690 45,335 30,306 47,530 372,861 s t n e m e t a t s l a i c n a n i f l a u n n A N 85 2017 290,675 (13,245) (28,873) (24,482) (30,430) 54,397 248,042 N 86 2017 254,125 23,305 (74,067) 44,679 248,042 Hannover Re | Annual Report 2018 251

In view of the unrealised components of profit and loss actual and deferred tax expenditure – including amounts attributa- ble to non-controlling interests – of EUR 186.7 million (EUR 61.8 million) was also recognised directly in equity. The fol- lowing table presents a reconciliation of the expected ex- pense for income taxes with the actual expense for income taxes reported in the statement of income. The pre-tax result is multiplied by the Group tax rate in order to calculate the Group’s expected expense for income taxes. Reconciliation of the expected expense for income taxes with the actual expense N 89 in EUR thousand Profit before taxes on income Group tax rate Expected expense for income taxes Change in tax rates Differences in tax rates affecting subsidiaries Non-deductible expenses Tax-exempt income Tax expense / income not attributable to the reporting period Value adjustments on deferred taxes / loss carry-forwards Trade tax modifications Other Actual expense for income taxes The expense for income taxes in the financial year was EUR 124.8 million higher than in the previous year at EUR 372.9 million (EUR 248.0 million). In addition to the increased pre- tax profit compared to the previous year, this was due largely Availability of non-capitalised loss carry-forwards Unused tax loss carry-forwards, deductible temporary differ- ences and tax credits of EUR 2,924.7 million (EUR 601.2 mil- lion) existed as at the balance sheet date. The increase is at- tributable primarily to the transfer of extensive portfolios of reinsurance treaties to US Group companies as part of the restructuring of US mortality business. Of existing tax loss carry-forwards, EUR 329.4 million (EUR 367.3 million) was not capitalised in consideration of local tax rates since reali- sation is not sufficiently certain. The assets-side unadjusted deferred taxes on loss carry-for- wards and tax credits amounting to EUR 545.6 million (EUR 55.1 million) will probably be realised in an amount of EUR 18.1 million (EUR 15.5 million) within one year and in an amount of EUR 527.5 million (EUR 39.6 million) in the subse- quent years. In the year under review the actual taxes on income were reduced by EUR 2.2 million (EUR 5.2 million) because loss carry-forwards were used for which no deferred tax assets were established. 2018 1,518,388 32.7% 496,513 (3,160) (72,848) 47,807 (37,374) (26,752) (7,595) (27,288) 3,558 372,861 2017 1,292,619 32.7% 422,686 (30,430) (62,843) 76,312 (140,821) (42,861) 54,397 (32,769) 4,371 248,042 s t n e m e t a t s l a i c n a n i f l a u n n A to considerable tax-exempt income from the disposal of equi- ties and equity funds. The effective tax rate amounted to 24.6% (19.2%). The write-down of deferred tax assets recognised in previous years resulted in a deferred tax expense of EUR 0.8 million (EUR 10.1 million) in the year under review. This is opposed by deferred tax income of EUR 6.3 million (none) from the reversal of earlier write-downs. Excess deferred tax assets are recognised with respect to losses in the year under review or in the previous year only to the extent that, based on strong evidence, it is likely that the company concerned will generate sufficiently positive taxable results in the future. This evidence was provided for deferred tax assets of EUR 60.7 million (EUR 23.0 million). No deferred taxes were established on liabilities-side taxable temporary differences amounting to EUR 40.6 million (EUR 50.6 million) in connection with interests in Group companies because the Hannover Re Group can control their reversal and will not reverse them in the foreseeable future. Hannover Re | Annual Report 2018 253

The maturities of the fair values and notional values of the hedging instruments described above can be broken down as follows: Maturity structure of derivative financial instruments N 91 in EUR thousand Interest rate hedges Fair values Notional values Currency hedges Fair values Notional values Share price hedges Fair values Notional values Total hedging instruments Fair values Notional values Maturity structure of derivative financial instruments in EUR thousand Interest rate hedges Fair values Notional values Currency hedges Fair values Notional values Share price hedges Fair values Notional values Total hedging instruments Fair values Notional values Less than one year One to five years 31.12.2018 2018 13 65,213 13,202 886,485 988 24,572 14,203 976,270 35 33,822 (2,980) 10,670 – – (2,945) 44,492 48 99,035 10,222 897,155 988 24,572 11,258 1,020,762 N 92 Less than one year One to five years 31.12.2017 2017 (240) 58,948 (10,219) 411,208 (779) 34,775 (11,238) 504,931 (256) 94,932 (5,635) 43,583 – – (5,891) 138,515 (496) 153,880 (15,854) 454,791 (779) 34,775 (17,129) 643,446 s t n e m e t a t s l a i c n a n i f l a u n n A The net changes in the fair value of these instruments in- creased the result of the financial year by EUR 3.2 million (reduction in the result of EUR 3.8 million). Hannover Re enters into derivative transactions on the basis of standardised master agreements that contain global net- ting agreements. The netting agreements set out below nor- mally do not meet the criteria for netting in the balance sheet, since Hannover Re has no legal right whatsoever at the pres- ent moment in time to netting of the recognised amounts. The right to netting can, as a matter of principle, only be enforced upon occurrence of certain future defined events. Collateral furnished or received is recognised per counterparty up to at most the amount of the respective net liability or net asset. Hannover Re | Annual Report 2018 255

rivative was recognised with a positive fair value of EUR 22.7 million (EUR 2.2 million) as at the balance sheet date under other financial assets at fair value through profit or loss. In the course of the year the change in the fair value of the de- rivative resulted in income of EUR 19.8 million (charge of EUR 7.4 million). Conversely, the performance of the struc- tured bond, which is also measured at fair value, gave rise to an expense (income) in the same amount. In the area of life and health reinsurance a reinsurance treaty with a financing component was also written in the previous year under which the amount and timing of the return flows are dependent on lapse rates within an underlying primary insurance portfolio. This treaty and a corresponding retroces- sion agreement, which were classified as financial instru- ments pursuant to IAS 39, resulted in the recognition of other liabilities of EUR 24.5 million (EUR 20.4 million) and other financial assets at fair value through profit or loss in an amount of EUR 79.2 million (EUR 49.0 million). Altogether, these arrangements gave rise to an improvement in income of EUR 1.9 million (EUR 1.8 million) in the year under review. Financial guarantees Structured transactions were entered into in the life and health reinsurance business group in order to finance statuto- ry reserves (so-called Triple-X or AXXX reserves) of US ced- ing companies. In each case such structures necessitated the involvement of a special purpose entity. The special purpose entities carry extreme mortality risks securitised by the ced- ants above a contractually defined retention and transfer these risks by way of a fixed / floating swap to a member com- pany of the Hannover Re Group. The total amount of the con- tractually agreed capacities of the transactions is equivalent to EUR 3,268.7 million (EUR 3,229.1 million); an amount equivalent to EUR 2,623.4 million (EUR 2,525.9 million) had been taken up as at the balance sheet date. The variable pay- ments to the special purpose entities that are guaranteed by the Hannover Re Group cover their payment obligations. Un- der some of the transactions the payments resulting from the 8.2 Related party disclosures IAS 24 “Related Party Disclosures” defines related parties as group entities of a common parent, associated entities, legal entities under the influence of key management personnel and the key management personnel of the entity itself. Trans- actions between Hannover Rück SE and its subsidiaries, which are to be regarded as related parties, were eliminated through consolidation and are therefore not discussed in the notes to the consolidated financial statement. In the year un- der review the following significant business relations existed with related parties. At the end of the previous financial year under review an in- dex-linked cover was written for longevity risks. The resulting derivative was recognised as at the balance sheet date with a negative fair value of EUR 45.5 million (EUR 52.6 million) under other liabilities. The change in the fair value of the de- rivative gave rise to income of EUR 7.1 million (EUR 0 mil- lion) in the course of the year. All in all, application of the standards governing the account- ing for derivatives in connection with the technical account led to recognition of assets totalling EUR 173.9 million (EUR 86.3 million) as well as recognition of liabilities in an amount of EUR 75.9 million (EUR 244.7 million) from the derivatives resulting from technical items as at the balance sheet date. Improvements in investment income amounting to EUR 62.4 million (EUR 40.2 million) as well as charges to income of EUR 14.5 million (EUR 8.6 million) were recognised in the year under review from all separately measured derivatives in connection with the technical account. s t n e m e t a t s l a i c n a n i f l a u n n A swaps in the event of a claim are reimbursed by the parent companies of the cedants by way of compensation agree- ments. In this case the reimbursement claims from the com- pensation agreements are to be capitalised separately from and up to the amount of the provision. Under IAS 39 these transactions are to be recognised at fair value as financial guarantees. To this end Hannover Re uses the net method, according to which the present value of the agreed fixed swap premiums is netted with the present value of the guarantee commitment. The fair value on initial recog- nition therefore amounted to zero. The higher of the fair value and the amount carried as a provision on the liabilities side pursuant to IAS 37 is recognised at the point in time when utilisation is considered probable. This was not the case as at the balance sheet date. Talanx AG holds an unchanged majority interest of 50.22% in Hannover Rück SE. For its part, HDI Haftpflichtverband der Deutschen Industrie Versicherungsverein auf Gegenseitigkeit (HDI), Hannover, holds a stake of 79.0% in Talanx AG The business relationship between Hannover Rück SE and its subsidiary E+S Rückversicherung AG is based on a coopera- tion agreement. A retrocession by Hannover Rück SE to E+S Rückversicherung AG exists in property and casualty reinsur- ance. The exclusive responsibilities of E+S Rückversicherung AG for German business and of Hannover Rück SE for inter- national markets have been preserved. Hannover Re | Annual Report 2018 257

In addition, other assets of EUR 3.4 million (EUR 3.5 mil- lion) as well as other liabilities of EUR 18.3 million (EUR 17.6 million) exist with respect to Talanx AG and its subsi- diaries which are not part of the scope of consolidation of Hannover Re. Under a purchase agreement dated 1 August 2018, 50.22% of the shares in International Insurance Company of Han- nover SE, which is wholly owned by Hannover Rück SE, were sold to HDI Global SE, a subsidiary of Talanx AG, with eco- nomic effect from 1 January 2019 for a purchase price of EUR 107.2 million. For details please refer to the information provided in section 4.4 “Major disposals and retirements”. In the context of a bond issue by Talanx AG the Group com- panies Hannover Rück SE and E+S Rückversicherung AG in- vested in a nominal amount of EUR 47.0 million in the issued bearer debt, which has a coupon of 3.125%. The carrying amount of the instrument, which is recognised under fixed-in- come securities held to maturity, was EUR 48.3 million (EUR 48.3 million) including accrued interest of EUR 1.3 million (EUR 1.3 million). HDI Lebensversicherung AG, Cologne, participated in a nom- inal amount of EUR 50.0 million in the subordinated bond is- sued by Hannover Rück SE in September 2014 with a coupon of 3.375%. Within the contractually agreed framework Ampega Asset Management GmbH (name change in January 2019, former- ly: Talanx Asset Management GmbH) performs investment and asset management services for Hannover Rück SE and the vast majority of its subsidiaries. A total amount of EUR 42.2 million (EUR 43.2 million) was expensed for the render- ing of these services in the financial year just ended. Assets in special funds are managed by Ampega Investment GmbH. Ampega Real Estate GmbH (name change in January 2019, formerly: Talanx Immobilien Management GmbH) performs services for Hannover Re under a number of management contracts. In 2014 Hannover Rück SE concluded an agreement with Am- pega Asset Management GmbH that allows Ampega Asset Management GmbH to use screening software for checking sanctions lists. Under long-term lease arrangements companies belonging to the Hannover Re Group rented out business premises in 2015 to HDI Service AG, Hannover (name change in January 2019, formerly: Talanx Service AG). In addition, lease agreements exist with HDI Service AG for use of a portion of the space in our data centre. Furthermore, IT and management services were performed for Talanx Reinsurance Broker GmbH, Hannover, under ser- vice contracts. Actuarial opinions with respect to the pension commitments given to staff are drawn up for Hannover Rück SE and E+S Rückversicherung AG by HDI Pensionsmanagement AG (name change in January 2019, formerly: Talanx Pensions- management AG) and HDI Lebensversicherung AG under an actuarial service contract. Talanx AG performs various services in the area of taxes for a number of investment vehicles of the Hannover Re Group in the asset classes of private equity and real estate. In this re- gard corresponding agreements have been concluded with altogether nine Hannover Re companies. Since 2012 a service agreement has existed between Han- nover Rück SE and Talanx AG regarding the purchase of ser- vices for operation of data acquisition software. Hannover Rück SE has concluded a service contract with HDI Service AG in the area of flight services as well as a contract regarding the reciprocal provision of business continuity management services. Since 2004 a service agreement has existed between Han- nover Rück SE, E+S Rückversicherung AG and Talanx Rein- surance Broker GmbH regarding the use of market security services and access to the business partner information sys- tem of Hannover Rück SE. s t n e m e t a t s l a i c n a n i f l a u n n A Remuneration and shareholdings of the management boards of the parent company The remuneration of the active members of the Executive Board of Hannover Re amounted to altogether EUR 8.4 mil- lion (EUR 8.0 million). The total remuneration (excluding pension payments) of former members of the Executive Board and their surviving dependants stood at EUR 0.1 million (EUR 0.3 million). The pension payments to previous members of the Executive Board and their surviving dependants, for whom 17 (17) pension commitments existed, totalled EUR 1.7 million (EUR 1.6 million) in the year under review; altogether, a provision of EUR 26.0 million (EUR 24.7 million) has been set aside for these commitments. The members of the governing bodies did not receive any advances or loans in the year under review. Nor were there any other material reportable circumstances or contractual relationships as defined by IAS 24 between companies of the Hannover Re Group and the members of the governing bod- ies or their related parties in the year under review. Further- The total remuneration of the Supervisory Board of Hannover Re amounted to EUR 1.0 million (EUR 1.0 million). There are no pension commitments to former members of the Supervi- sory Board or their surviving dependants. Hannover Re | Annual Report 2018 259

spect of which the waiting period has not yet expired shall lapse. Retirement, disability or death of the member of man- agement shall not be deemed to be termination of the em- ployment relationship for the purpose of exercising stock appreciation rights. Stock appreciation rights of Hannover Rück SE in EUR thousand Award date Period Waiting period Basic price (in EUR) Participants in year of issue Number of rights granted Fair value at 31 December 2018 (in EUR) Maximum value (in EUR) Weighted exercise price Number of rights existing at 31 December 2018 Provisions at 31 December 2018 (in EUR million) Amounts paid out in the 2018 financial year (in EUR million) Expense in the 2018 financial year (in EUR million) The allocations for the years 2009 to 2011 gave rise to com- mitments in the 2018 financial year shown in the following table. No commitments exist for years prior to 2009. 2011 15.3.2012 10 Jahre 4 Jahre 40.87 143 263,515 32.21 32.21 32.21 13,561 0.44 1.61 – Allocation year 2010 8.3.2011 10 Jahre 4 Jahre 33.05 129 1,681,205 8.92 8.92 8.92 70,266 0.63 0.22 – N 96 2009 15.3.2010 10 Jahre 2 Jahre 22.70 137 1,569,855 8.76 8.76 8.76 5,050 0.04 0.15 – The existing stock appreciation rights are valued on the basis of the Black-Scholes option pricing model. The calculations were based on the price of the Hannover Re share of EUR 118.80 as at the reference date of 12 December 2018, expected volatility of 19.74% (historical volatility on a five-year basis), an expected dividend yield of 4.21% and risk-free interest rates of -0.68% for the 2009 allocation year, -0.62% for the 2010 allocation year and -0.53% for the 2011 allocation year. In the 2018 financial year the waiting period expired for 100% of the stock appreciation rights awarded in 2009, 2010 and 2011. 17,460 stock appreciation rights from the 2009 al- location year, 24,276 stock appreciation rights from the 2010 allocation year and 49,972 stock appreciation rights from the 2011 allocation year were exercised. The total amount paid out stood at EUR 2.0 million. On this basis the aggregate provisions – included in the sun- dry non-technical provisions – amounted to EUR 1.1 million (EUR 3.1 million) for the 2018 financial year. No expense (EUR 0.3 million) was recognised in the year under review. Share Award Plan With effect from the 2011 financial year the Supervisory Board of Hannover Rück SE implemented a Share Award Plan for the members of the Executive Board of Hannover Re; this provides for the granting of stock participation rights in the form of virtual shares (referred to as “share awards”). The Executive Board of Hannover Re decided to adopt a Share Award Plan for certain management levels at Hannover Re as well with effect from the 2012 financial year. The members of the Executive Board and management of Hannover Re who are eligible recipients under the Share Award Plan are those who have been allowed a contractual claim to the granting of share awards and whose service / em- ployment relationship exists at the time when the share awards are granted and does not end through cancellation or a termination agreement on an effective date prior to expiry of the vesting period. The Share Award Plan replaced the cancelled Stock Appreci- ation Rights Plan. Please see our remarks under “Stock Ap- preciation Rights Plan” in this section. The share awards do not establish any claim against Hannover Re to the delivery of stock, but merely to payment of a cash amount in accordance with the conditions set out below. Share awards were granted separately for the first time for the 2011 financial year and then for each financial year (allo- cation year) thereafter. The first payout of share awards took place in the 2016 financial year for those share awards that had been allocated in the 2011 financial year to the eligible members of the Executive Board. In the 2017 financial year Hannover Re | Annual Report 2018 261 s t n e m e t a t s l a i c n a n i f l a u n n A

Share awards of Hannover Rück SE N 97 Allocation year 2018 Antici- pated allocation 2017 2016 2015 2014 Final allocation 2018 for 2017 Antici- pated allocation Final allocation 2017 for 2016 Antici- pated allocation Final allocation 2016 for 2015 Antici- pated allocation Final allocation 2015 for 2014 Antici- pated allocation Valuation date Executive Board 28.12.2018 16.03.2018 29.12.2017 16.03.2017 30.12.2016 17.03.2016 30.12.2015 17.03.2015 30.12.2014 Senior executives 28.12.2018 23.03.2018 29.12.2017 23.03.2017 30.12.2016 24.03.2016 30.12.2015 24.03.2015 30.12.2014 Value per share award in EUR Executive Board Senior executives Number of allocated share awards in the allocation year Executive Board Senior executives Other adjustments 1 Total 117.70 117.70 111.65 111.32 104.90 104.90 107.15 107.03 102.80 102.80 97.64 95.30 105.65 105.65 89.06 87.26 74.97 74.97 9,010 67,421 – 76,431 9,060 57,642 (657) 66,045 9,537 64,902 – 74,439 10,244 77,325 (3,341) 84,228 10,704 81,322 – 92,026 11,244 79,383 (4,002) 86,625 9,355 65,107 – 74,462 12,172 85,460 (6,018) 91,614 13,308 85,159 – 98,467 1 This figure results from originally granted share awards that have since lapsed. Development of the provision for share awards of Hannover Rück SE in EUR thousand Allocation 2012 Allocation 2013 Allocation 2014 Allocation 2015 Allocation 2016 Allocation 2017 Utilisation 2017 Provision at 31 December of the previous year Allocation 2018 Utilisation 2018 Provision at 31 December of the year under review 2018 2017 2016 2015 2014 Allocation year – – – – – – – – 2,018 – – – – – – 1,559 – 1,559 2,002 – – – – – 1,918 2,127 – 4,045 2,739 – – – – 1,658 2,429 2,284 – 6,371 2,920 – – – 1,534 3,102 1,920 2,409 – 8,965 3,263 – 2013 – 1,426 2,364 4,288 2,177 2,861 2012 1,839 1,442 2,549 5,020 2,133 881 – 13,864 13,116 1,212 14,328 – – – 2,018 3,561 6,784 9,291 12,228 – N 98 Total 1,839 2,868 6,447 14,068 10,577 12,121 13,864 34,056 14,154 14,328 33,882 s t n e m e t a t s l a i c n a n i f l a u n n A The aggregate provision – recognised under the sundry non-technical provisions – amounted to EUR 33.9 million (EUR 34.1 million) as at the balance sheet date. The personnel expense for share awards in the case of mem- bers of the Executive Board is spread on an accrual basis across the relevant term of the share awards or the shorter term of the service contracts; in the case of senior executives the personnel expense is spread across the relevant term of the share awards. The allocation of the financial year recog- nised in the expenditures on personnel totalled altogether EUR 14.2 million (EUR 12.1 million). This consists of the ex- pense for share awards of the 2018 financial year as well as the dividend claim and the additionally earned portion of the share awards granted in earlier financial years. The value of the share awards finally granted is also influenced by move- ments in the share price. The sum total of the dividends in- cluded in the expenditures on personnel for earlier financial years amounted to EUR 1.6 million (EUR 2.0 million). The distributed dividend is recognised, with no allowance made for expected dividend payments. Dividend claims are recog- nised in the discounted amounts. Hannover Re | Annual Report 2018 263

8.5 Earnings per share and dividend proposal Calculation of the earnings per share Group net income in EUR thousand Weighted average of issued shares Basic earnings per share in EUR Diluted earnings per share in EUR 2018 1,059,493 120,596,995 8.79 8.79 N 101 2017 958,555 120,596,977 7.95 7.95 The earnings per share is calculated by dividing the net in- come attributable to the shareholders of Hannover Rück SE by the weighted average number of shares outstanding with- in the period under review. of shares does not include 16,530 (18,805) treasury shares pro rata temporis for the duration of the holding period. For further details please see our comments in section 6.13 “Shareholders’ equity and treasury shares”. Neither in the year under review nor in the previous reporting period were there any dilutive effects. The weighted average of the issued shares was, as in the previous year, slightly low- er than the value of the shares in circulation on the balance sheet date. In the context of the employee share option plan Hannover Re acquires treasury shares and sells them at a lat- er date to eligible employees. The weighted average number Dividend per share A dividend of EUR 603.0 million (EUR 603.0 million) was paid in the year under review for the 2017 financial year. It will be proposed to the Annual General Meeting on 8 May 2019 that a dividend of EUR 3.75 per share as well as a spe- There were no other extraordinary components of income which should have been recognised or disclosed separately in the calculation of the earnings per share. The earnings per share could potentially be diluted in future through the issue of shares or subscription rights from the authorised or conditional capital. cial dividend of EUR 1.50 per share should be paid for the 2018 financial year. This corresponds to a total distribution of EUR 633.1 million. The dividend proposal does not form part of this consolidated financial statement. s t n e m e t a t s l a i c n a n i f l a u n n A 8.6 Lawsuits Member companies of the Hannover Re Group are involved in judicial and supervisory procedures as well as in arbitration proceedings as part of the conduct of insurance and reinsur- ance business. Depending upon the subject matter of the pro- cedure, the Hannover Re Group sets aside provisions for the amount in dispute in such proceedings – for the most part in the technical account and in exceptional cases as a charge to other income / expenses – if and to the extent that the result- ing commitments are likely to materialise and their amount can be estimated with sufficient accuracy. The provision es- tablished in each case covers the expense that can be expect- ed in our assessment as at the balance sheet date. Neither the outcome nor the duration of pending procedures can be definitively foreseen at the time when provisions are established. The final liabilities of Hannover Re may diverge considerably from the constituted provisions because the as- sessment of probability and the quantification of these uncer- tain liabilities in large measure require estimates that may prove not to be accurate as the proceedings in question con- tinue to progress. This is also true of procedures for which no provisions were established. Insofar as a commitment exists under such procedures as at the balance sheet date that may possibly but will probably not result in a loss, the Hannover Re Group estimates this potential loss – where practicable – and reports a contingent liability. For estimation purposes Han- nover Re takes into account a number of factors. These in- clude, among others, the nature of the claim, the status of the procedure concerned, decision of courts and arbitration bod- ies, prior settlement discussions, experience from comparable cases as well as expert opinions and the assessments of legal advisers and other experts. If a provision has been established for a particular procedure, a contingent liability is not recog- nised. The lawsuits pending in the year under review and as at the balance sheet date were not material for the Hannover Re Group either individually or combined. Furthermore, there were no contingent liabilities from lawsuits to report as at the balance sheet date. Hannover Re | Annual Report 2018 265

8.8 Rent and leases Non-cancellable operating leases will give rise to the follow- ing future minimum payments payable and receivable in sub- sequent years. Leased properties Future minimum lease payments payable in EUR thousand 2019 2020 2021 2022 2023 Subsequent years In the year under review expenses from operating leases of EUR 15.3 million (EUR 13.7 million) were included in the re- sult for the period. Rented properties Future minimum lease payments receivable in EUR thousand 2019 2020 2021 2022 2023 Subsequent years The rental payments receivable result principally from the long-term renting out of properties by the Group’s real estate companies. N 102 Amounts payable 16,013 12,906 11,296 8,461 8,086 163,852 s t n e m e t a t s l a i c n a n i f l a u n n A N 103 Amounts receivable 106,090 104,500 95,519 81,388 69,309 188,778 Hannover Re | Annual Report 2018 267

8.10 Events after the balance sheet date No significant events beyond the scope of ordinary business activities have occurred since the balance sheet date. Hannover, 4 March 2019 Executive Board Wallin Althoff Chèvre Dr. Miller Dr. Pickel Vogel s t n e m e t a t s l a i c n a n i f l a u n n A Hannover Re | Annual Report 2018 269