hannover re®
Certified Translation from German into English
CONVERSION REPORT by the Management Board of Hannover Rückversicherung AG
concerning the change of corporate form
of Hannover Rückversicherung AG, Karl-Wiechert-Allee 50, 30625 Hannover, Germany
- “Hannover Rück AG“ hereafter -
into
the legal form of Societas Europaea (SE)
with the company name
Hannover Rück SE
- “Hannover Rück SE“ hereafter - hannover re®
Table of Contents
I. INTRODUCTION 7
II. HANNOVER RÜCK AG 9
1. REGISTERED OFFICES, HEAD OFFICE, FISCAL YEAR AND PURPOSE OF THE COMPANY 9
2. BUSINESS ACTIVITIES 9 2.1 Business segments and company history 9
(a) Indemnity reinsurance 9
(b) Personal reinsurance 10
2.2 The Hannover Rück-Group 10
2.3 Business development 12
3. CAPITAL AND SHAREHOLDERS 13 3.1 Share capital 13
3.2 Conditional capital 13
3.3 Authorised capital 14
3.4 Shareholders 15
4. CONSTITUTION OF THE COMPANY 15 4.1 Management Board 15
4.2 Supervisory Board 19
4.3 Corporate Governance 23
4.4 Employees and codetermination 23
III. FUNDAMENTAL ASPECTS OF THE CHANGE OF CORPORATE FORM 25
1. FUNDAMENTAL REASONS FOR THE CHANGE OF CORPORATE FORM 25
2. COSTS OF THE CHANGE OF CORPORATE FORM 26
IV. IMPLEMANTATION OF THE CONVERSION OF HANNOVER RÜCK AG TO HANNOVER RÜCK SE 27
3. PREPARATION OF THE DRAFT TERMS OF CONVERSION AND THE CONVERSION REPORT 27
4. CONVERSION AUDIT 27
5. GENERAL MEETING OF HANNOVER RÜCK AG 28
6. IMPLEMENTATION OF THE PROCEDURE FOR THE INVOLVEMENT OF EMPLOYEES IN THE FUTURE HANNOVER RÜCK SE 28
7. REGISTRATION AND EFFECTIVENESS OF THE CONVERSION TO HANNOVER RÜCK SE 29
8. ESTABLISHMENT OF THE FIRST SUPERVISORY BOARD AND APPOINTMENT OF THE FIRST MANAGEMENT BOARD OF HANNOVER RÜCK SE 29
V. COMPARISON OF THE LEGAL POSITION OF THE SHAREHOLDERS OF HANNOVER RÜCK AG AND OF HANNOVER RÜCK SE 31
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9. INTRODUCTION 31
10. GENERAL PROVISIONS 31 10.1 Registered offices 31
10.2 Share capital / share features 32
10.3 Notification duties 33
11. FOUNDATION OF THE SE 33
12. LEGAL RELATIONSHIPS OF THE COMPANY AND THE SHAREHOLDERS 33
13. STATUTES OF THE COMPANY: TWO-TIER SYSTEM – ONE-TIER SYSTEM 34 13.1 Management Board 34
(a) Management of the Company 34
(b) Size and composition of the Management Board 34
(c) Management 34
(d) Representation of the Company 35
(e) Appointment and removal of the Management Board / term of office 35
(f) General principles for the compensation of members of the Management Board, prohibition on competition and granting loans to members of the Management Board 36
(g) Reports to the Supervisory Board 36
(h) Duties of the Management Board in the case of losses, over-indebtedness or inability to meet on-going payment obligations 37
(i) Duty of due diligence and responsibilities 37
(j) Using influence on the Company – liability for damages 39
13.2 Supervisory Board 39
(a) Responsibilities and rights of the Supervisory Board 39
(b) Duty of due diligence and duty of confidentiality 40
(c) Representation of the Company towards the members of the Management Board 40
(d) Size and composition of the Supervisory Board 40
(e) Status proceedings about the composition of the Supervisory Board 41
(f) Personal qualifications for members of the Supervisory Board 41
(g) Appointment of the Supervisory Board 42
(h) Term of office 42
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(i) Removal from office 43
(j) Appointment by court 44
(k) Incompatibility of simultaneous membership on the Management Board and the Supervisory Board 44
(l) Chair / deputy chair of the Supervisory Board 45
(m) Adopting resolutions in the Supervisory Board 45
(n) Convening meetings and frequency of meetings 46
(o) Remuneration of Supervisory Board members, contracts with Supervisory Board members, granting of loans to Supervisory Board members 46
13.3 General Meeting 47
(a) Responsibilities of the General Meeting 47
(b) Formal approval of the actions of the Management Board and the Supervisory Board 48
(c) Convening of the General Meeting 48
(d) Convening of the General Meeting upon request of a minority / supplementing the agenda upon request of a minority 49
(e) Organisation and conduct of the General Meeting 49
(f) Rights of the shareholders to request information, to speak and to ask questions in the General Meeting. 50
(g) Rules of Procedure of the General Meeting 50
(h) Simple resolutions of the General Meeting (not amending the Statutes/Statute) 51
(i) Resolutions to amend the Statutes / Statute 51
(j) Preference shares without voting right / separate resolution 52
(k) Special audit 52
(l) Assertion of compensation claims against executive bodies of the Company / derivative suits 52
14. ANNUAL STATEMENT / CONSOLIDATED FINANCIAL STATEMENT 52
15. MEASURES ON OBTAINING CAPITAL AND REDUCING CAPITAL 52
16. ALTERATION OF THE RELATIONSHIP BETWEEN SEVERAL CLASSES OF SHARES TO THE DETRIMENT OF ONE CLASS (IN GENERAL) 52
17. INVALIDITY OF RESOLUTIONS OF THE GENERAL MEETING AND OF THE APPROVED ANNUAL STATEMENTS / SPECIAL AUDIT BECAUSE OF AN INADMISSIBLE UNDERVALUATION 53
18. WINDING- UP AND DECLARATION OF NULLITY IN RESPECT OF THE COMPANY 53
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19. AFFILIATED AND ASSOCIATED COMPANIES 53
20. WINDING-UP BY COURT ORDER 54
21. CRIMINAL LAW AND CIVIL PENALTY PROVISIONS 54
VI. EXPLANATION OF THE DRAFT TERMS OF CONVERSION AND THE STATUTE OF HANNOVER RÜCK SE AND OF THE EFFECTS ON SHAREHOLDERS AND EMPLOYEES 55
22. EXPLANATION OF THE DRAFT TERMS OF CONVERSION 55 22.1 Conversion of Hannover Rück AG to Hannover Rück SE (Article 1 of the Draft Terms of Conversion) 55
22.2 Effectiveness of the change of corporate form (Article 2 of the Draft Terms of Conversion) 55
22.3 Company name, registered offices, share capital and Statute of Hannover Rück SE (Article 3 of the Draft Terms of Conversion) 55
22.4 Management Board (Article 4 of the Draft Terms of Conversion) 56
22.5 Supervisory Board (Article 5 of the Draft Terms of Conversion) 56
22.6 Information on the procedure for establishing arrangements for employee involvement (Articles 6 and 7 of the Draft Terms of Conversion) 57
(a) Basic Principles for the regulation of the involvement of the employees (Article 6.1 of the Draft Terms of Conversion) 57
(b) Actual situation and consequences of the change of corporate form (Article 6.2. of the Draft Terms of Conversion) 57
(c) Initiation of the procedure for the involvement of the employees (Article 6.3 of the Draft Terms of Conversion) 58
(d) Constituent meeting of the Special Negotiating Body and negotiation procedure (Articles 6.4 and 6.5 of the Draft Terms of Conversion) 59
(e) Agreement on the involvement of the employees (Articles 7.1 to 7.3 of the Draft Terms of Conversion) 61
(f) Subsidiary regulation by operation of law (Article 7.4 and 7.5 of the Draft Terms of Conversion) 62
(g) Costs of the Special Negotiating Body (Article 7.6 of the Draft Terms of Conversion) 63
22.7 Other effects of the change of corporate form for employees and their representations (Article 8 of the Draft Terms of Conversion) 64
22.8 No additional rights or special advantages (Article 9 of the Draft Terms of Conversion) 64
23. EXPLANATORY NOTES REGARDING THE STATUTE OF HANNOVER RÜCK SE 64 23.1 Article 1 of the Statute of Hannover Rück SE (company name, registered offices) 64
23.2 Article 2 of the Statute of Hannover Rück SE (subject of the Company) 65
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23.3 Article 3 of the Statute of Hannover Rück SE (fiscal year) 65
23.4 Article 4 of the Statute of Hannover Rück SE (announcements and information) 65
23.5 Article 5 of the Statute of Hannover Rück SE (amount and division of the share capital) 65
23.6 Article 6 of the Statute of Hannover Rück SE (conditional capital) 66
23.7 Article 7 of the Statute of Hannover Rück SE (authorised capital) 67
23.8 Article 8 of the Statute of Hannover Rück SE (Management Board: composition, term of office) 68
23.9 Article 9 of the Statute of Hannover Rück SE (Management Board: management, representation) 68
23.10 Article 10 of the Statute of Hannover Rück SE (Supervisory Board: composition, term of office, resignation) 68
23.11 Article 11 of the Statute of Hannover Rück SE (Supervisory Board: Chairman, deputy, committees) 69
23.12 Article 12 of the Statute of Hannover Rück SE (Supervisory Board: Convening, adoption of resolutions) 69
23.13 Article 13 of the Statute of Hannover Rück SE (measures and transactions requiring approval) 69
23.14 Article 14 of the Statute of Hannover Rück SE (Supervisory Board: Remuneration) 70
23.15 Article 15 of the Statute of Hannover Rück SE (General Meeting: Venue, convention, ordinary General Meeting) 70
23.16 Article 16 of the Statute of Hannover Rück SE (General Meeting: participation right and voting right) 70
23.17 Article 17 of the Statute of Hannover Rück SE (General Meeting: Chair, transmission of the meeting) 71
23.18 Article 18 of the Statute of Hannover Rück SE (General Meeting: Adoption of resolutions) 71
23.19 Article 19 of the Statute of Hannover Rück SE (General Meeting: Elections) 71
23.20 Article 20 of the Statute of Hannover Rück SE (Advisory Board) 72
23.21 Article 21 of the Statute of Hannover Rück SE (annual financial statement) 72
23.22 Article 22 of the Statute of Hannover Rück SE (profit appropriation) 72
23.23 Article 23 of the Statute of Hannover Rück SE (Statute) 72
23.24 Article 24 of the Statute of Hannover Rück SE (formation expenses) 72
VII. EFFECTS OF THE CHANGE OF CORPORATE FORM ON BALANCE SHEET AND TAXATION 73
VIII. SECURITIES AND TRADE IN THE STOCK EXCHANGE 74
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I. Introduction
Hannover Rück AG is a public limited-liability company under German law, with registered offices and head offices in Hannover, Germany.
Management Board and Supervisory Board will submit the proposal to the General Meeting of Hannover Rück AG on 3 May 2012 to convert Hannover Rück AG into a European Company (Societas Europaea, SE) ("SE") as provided for in Article 2(4) in conjunction with Article 37 of Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE) (“SE-Reg.”).
To implement the conversion with change of corporate form, the Law on the Implementation of Council Regulation (EC) No. 2157/2001 of 8 October 2001 on the Statute for a European Company (SE) (“SEAG”) of 22 December 2004 (“SEAG”) shall be applied. Involvement of the employees in Hannover Rück SE (entrepreneurial and operational codetermination) is governed by the provisions of the Act on the involvement of employees in a European Company of 22 December 2004 (SE- Beteiligungsgesetz, "SEBG") which implements Council Directive 2001/86/EC of 8 October 2001, supplementing the Statute for a European Company with regard to the involvement of employees ("SE Employee Involvement Directive”). In addition, the respective conversion provisions in respect of the SE Employee Involvement Directive in the other member states of the European Union ("EU") and in the signatory states of the European Economic Area ("EEA") in which Hannover Rück-Group has employees apply. The German One-Third Participation Act (Drittelbeteiligungsgesetz; „DrittelbG“), which has been applicable to Hannover Rück AG, will not be applicable to Hannover Rück SE, however. Hannover Rück AG and its group companies will also be described as “Hannover Rück-Group”.
The Draft Terms of Conversion drafted by the Management Board of Hannover Rück AG (“Draft Terms of Conversion”), which were notarized on 20 March 2012, (register of deeds no. 399/2012 of notary public Dr. Ulrich Haupt, Hannover) form the basis for the change of legal form to an SE. The draft Statute of Hannover Rück SE is attached as an annex to the Draft Terms of Conversion of Hannover Rück SE and thus incorporated in the Draft Terms of Conversion (”Statute of Hannover Rück SE”).
In its meeting on 13 March 2012, the Supervisory Board has approved the project of a change of corporate form into an SE. The conversion can only take effect when the Draft Terms of Conversion are approved and the SE-Statute is adopted by the General Meeting of Hannover Rück AG (Article 37(7) SE-Reg.) (“Conversion Resolution”).
The conversion will neither cause winding-up of Hannover Rück AG nor will it lead to the establishment of a new legal entity (Article 37(2) SE-Reg.). The participation of shareholders in the Company will continue, due to the identity of the legal entity.
To assist the shareholders, the Management Board of Hannover Rück AG has compiled the following Conversion Report pursuant to Article 37(4) SE-Reg., explaining and justifying the legal and economic aspects of the conversion and indicating the implications for the shareholders and for the employees resulting from the conversion from the German legal form of "Aktiengesellschaft" (public limited-liability company) to the legal form of an SE (“Conversion Report”). With regard to
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the business activity of Hannover Rück AG, the Conversion Report is limited to a summary because the business activity of the Company will remain unaffected, as the legal identity will be preserved. For further information on the business activity of Hannover Rück AG, please refer to the Management Report contained in the annual report 2011.
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II. Hannover Rück AG
1. Registered offices, head office, fiscal year and purpose of the Company
Hannover Rück AG has its statutory registered offices and its head office in Hannover, Germany. It is registered in the commercial register of the Local Court of Hannover under HRB 6778. Its business address is Karl-Wiechert-Allee 50, DE-30625 Hannover, Germany. The fiscal year of Hannover Rück AG is equal to the calendar year Hannover Rück AG is the largest operational company of the Hannover Rück-Group and holds – directly or indirectly –the shares in the companies forming part of the Hannover Rück-Group.
The statutory purpose of Hannover Rück AG is reinsurance. The Company may also operate other classes of insurance. The Company shall be entitled to perform any and all business activities and measures appearing suitable to serve its entrepreneurial purpose. It may also establish or acquire other enterprises of the same or a similar type, participate in them, sell them or its share in them, manage such enterprises or limit itself to the management of such shares. It may outsource its operations to affiliated companies in whole or in part (cf. Article 2 of the Statutes of Hannover Rück AG).
2. Business activities
2.1 Business segments and company history
With a premium volume of approx. EUR 11 Billion, Hannover Rück AG is the third-largest reinsurer world-wide. It operates all lines of indemnity and personal reinsurances and maintains reinsurance relations with more than 5,000 insurance companies in approx. 150 countries. Its global infrastructure is composed of more than 100 affiliated and holding companies, branch offices and representations all over the world, employing about 2,100 staff. The business of the Group in Germany is operated by the affiliated company E+S Rückversicherung AG, Hannover, Germany ("E+S Rück"). Rating agencies, which play an important role in the insurance business, have granted Hannover Rück AG as well as E+S Rück excellent marks for their financial standing (Standard & Poor’s AA- "Very Strong"; A.M. Best A "Excellent").
Hannover Rück AG was founded 1966 in Bochum under the name "Aktiengesellschaft für Transport- und Rückversicherung". In 1970, the registered offices of the company were transferred to Hannover and in 1976, the company was renamed "Hannover Rückversicherungs-Aktiengesellschaft”. In 1994, Hannover Rück AG went public. Majority shareholder is HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover, which, through Talanx AG, Hannover, is holding 50.2 % of the shares in Hannover Rück AG. In 2003, renaming to "Hannover Rückversicherung AG“ took place.
Hannover Rück AG diversified is portfolio under geographic aspects as well as relating to products. The Company operates its reinsurance business in the business segments indemnity and personal reinsurances. (a) Indemnity reinsurance
Hannover Rück-Group offers its customers in the indemnity reinsurance line a comprehensive product range in the contractual and optional reinsurance underwriting business. This refers to the segment of structured reinsurance solutions as well as the direct underwriting business. Hannover Rück-Group is also
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providing consultation services to its business partners. In 2010, indemnity reinsurance contributed approx. 56 %, and in 2011 approx. 56 % to the gross- premiums of the Group. (b) Personal reinsurance
In personal reinsurance, Hannover Rück-Group organizes its customer relations as long-term partnerships, pursuing the aim of achieving solutions tailored to the concerns of each individual customer. It supports its customers with the financing of new policies and offers product partnerships to achieve strategic market positioning. In 2010, personal reinsurance contributed approx. 45 %, and in 2011 approx. 43.6 % to the gross-premiums of the Group. 2.2 The Hannover Rück-Group
Principal shareholder of Hannover Rück AG is HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover, which, through Talanx AG, Hannover, holds 50.2 % of the shares in Hannover Rück AG. The following shareholding overview shows the principal companies and branch offices of the Hannover Rück-Group.
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HDI Haftpflichtverband der Deutschen Industrie V.a.G. Hannover Rück-
Hannover/Germany Group
100%
Talanx AG
Hannover/Germany
50,22%
Hannover Rückversicherung AG
Hannover/Germany
100% 100%
Hannover Life Re AG Hannover Rück Hannover Re Beteiligung Verwaltungs-GmbH 1% Consulting Services 99% Hannover/Germany India Private Limited Hannover/Germany Mumbai/India
Hannover Re 95% 5% Takaful (Bahrain) B.S.C. (c)
Manama/Bahrain
100% Hannover Life Reassurance 63,69% E+S Rückversicherung AG Funis GmbH & Co. KG 100% 99% Hannover Re (Ireland) Public Limited Company Services Italy Srl Dublin/Ireland Hannover/Germany Hannover/Germany Mailand/Italy
100% Hannover Life Reassurance 100% Hannover Re Hannover Finance, 100% 100% Hannover Re Services Company of America (Bermuda ) Ltd. Inc. USA, Inc., Itasca Orlando/USA Hamilton/Bermuda Wilmington, Delaware/USA Illinois/USA
100% 100% Hannover Life Reassurance Hannover Services Bermuda Ltd. (México) S.A. de C.V. Hamilton/Bermuda Mexico City/Mexico
100% Hannover Life Re Hannover Reinsurance Group Africa 100% 100% HR Hannover Re, of Australasia Ltd. (Pty) Limited, Johannesburg/SA Correduría de Reaseguros, S.A. Sydney/Australia and affiliates Madrid/Spain
100% 100% 100% Hannover Reinsurance Hannover Finance Hannover Re (Ireland) Public Limited Company (Luxembourg) S.A. Services Japan Dublin/Ireland Luxemburg/Luxemburg Tokyo/Japan
100% Hannover Re (Guernsey) Hannover Rückversicherung AG 100% Hannover Finance (UK) Limited PCC Limited Stockholm Branch Virginia Water/Great Britain Dublin/Ireland Stockholm/Sweden
Hannover Rückversicherung AG Hannover Services (UK) Ltd. 100% Succursale française Virginia Water/Great Britain Paris/France ATTENTION: *Hannover Reinsurance (Ireland) and Hannover Life Reassurance (Ireland) Hannover Rückversicherung AG Hannover Life 100% Limited – Imminent Changes = Public Canadian Branch Reassurance (UK) Ltd. Limited Companies Toronto/Canada Virginia Water/Great Britain
Hannover Rückversicherung AG International Insurance 100% Australian Branch Company of Hannover Ltd. Sydney/Australia Bracknell/Great Britain
100% Hannover Rückversicherung AG Inter Hannover Malaysian Branch Scandinavian Branch Kuala Lumpur/Malaysia Stockholm/Sweden
Hannover Rückversicherung AG 100% Hannover Rückversicherung AG Hong Kong Branch Escritório de Representação Hong Kong/China no Brazil Ltda. Rio de Janeiro/Brazil
Hannover Rückversicherung AG Hannover Rückversicherung AG Bahrain Branch Taipei Representative Office Manama/Bahrain Taipei/Taiwan As of March 2, 2012 * Remaining shareholding of 1 % is held by E*S Rück Hannover Rückversicherungg AG Hannover Rückversicherung AG Shanghai Branch Bogotá Representative Office Shanghai/China Bogotá/Columbia
Hannover Rückversicherung AG Korea Branch Seoul/Korea
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2.3 Business development
The business of the Hannover Rück-Group showed the following development:
Key figures in Mill. EUR 2009 2010 2011
Result
Booked gross premium 10,274.8 11,428.7 12,096.1
Earned net premium 9,307.2 10,047.0 10,751.5
Underwriting result -100.4 -185.1 -535.8
Result of capital investments 1,120.4 1,258.9 1,384.0
Result of operations (EBIT) 1,142.5 1,173.8 841.4
Group result 733.7 748.9 606.0
Balance sheet
Risk-bearing capital 5,621.6 6,987.0 7,338.2
Equity capital 3,714.4 4,509.0 4,970.6
Shares of other shareholders 542.1 608.9 636.0
Hybrid capital 1,356.1 1,869.1 1,731.6
Capital investments (excluding 22,507.0 25,411.1 28,341.2 retained deposits)
Balance sheet total 40,837.6 46,725.3 49,867.0
Share
Earnings per share (diluted and 6.08 6.21 5.02 undiluted) in EUR
Carrying value per share in EUR 30.80 37.39 41.22
Dividend 253.3 277.4 253.3
Dividend per share in EUR 2.10 2.30 Proposed: 2.10
Share price at year-end in EUR 32.71 40.14 38.325
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Key figures in Mill. EUR 2009 2010 2011
Market capitalisation at year-end 3,944.7 4,840.8 4,621.9
Key figures
Combined ratio of indemnity 96.6 % 98.2 % 104.3% reinsurance
Major claims as percentage of the 4.6 % 12.3 % 16.5 % earned net premium of indemnity reinsurance
Franchise 92.6 % 90.1 % 91.2 %
Return on capital investments 4.0 % 3.9 % 3.9 % (excluding retained deposits)
Return on EBIT 12.3 % 11.7 % 7.8 %
Return on equity 22.4 % 18.2 % 12.8 %
In fiscal year 2011, the gross premium written increased by 5.8% to 12.1 Bill. EUR (2010: 11.4 Bill. EUR). Assuming constant exchange rates – particularly in relation to the US-Dollar – the increase would have been 7.5%. The franchise rose slightly to 91.2 % (2010: 90.1 %). The net premium earned increased by 7.0 % to 10.8 Bill. EUR (2010: 10.0 Bill. EUR).
The result of operations (EBIT) as per 31 December 2011, at 841.4 Mill. EUR, fell behind the value of the previous year (2010: 1.2 Bill. EUR), as had been expected. The result for the Group amounted to 606.0 Mill. EUR (2010: 748.9 Mill. EUR), thus clearly exceeding the forecast of 500 Mill. EUR. That results turned out so well is on the one hand due to the quality of the underlying business and on the other hand to an excellent result from capital investments. In addition to that, the Group benefitted from the reimbursement of taxes paid in excess as well as interest on these overpayments in the amount of 128 Mill. EUR. The earnings per share thus reached 5.02 EUR (2010: 6.21 EUR).
3. Capital and shareholders
3.1 Share capital
The share capital of Hannover Rück AG today amounts to EUR 120,597,134 and is divided into 120,597,134 no-par shares. According to Article 5 Subsection 1 of the Statutes of Hannover Rück AG, the shares are registered. Any shareholder’s entitlement to securisation of his share is excluded (Article 5 Subsection 2 Phrase 3 of the Statutes of Hannover Rück AG). 3.2 Conditional capital
Under Article 6 of the Statutes of Hannover Rück AG, the share capital has been increased conditionally by up to EUR 60,298,567 by issuing 60,298,567 new, registered no-par shares
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carrying a profit pay-out entitlement as from the beginning of the fiscal year in which they were issued. The conditional capital increase serves the following purposes:
• granting shares to the holders of convertible bonds and bonds with warrants which will be issued by Hannover Rück AG or subordinate group companies until 02 May 2016, based on the authorisation resolution under agenda item 8 which was adopted by the General Meeting of Hannover Rück AG of 03 May 2011
• granting shares to the holders of profit-sharing bonds with entitlements to convertible bonds and bonds with warrants which will be issued by Hannover Rück AG or subordinate group companies until 02 May 2016, based on the authorisation resolution under agenda item 9 which was adopted by the General Meeting of Hannover Rück AG of 03 May 2011; and
• granting shares to the holders of profit participation rights with entitlements to convertible bonds and bonds with warrants which will be issued by Hannover Rück AG or subordinate group companies until 02 May 2016, based on the authorisation resolution under agenda item 10 which was adopted by the General Meeting of Hannover Rück AG of 03 May 2011
The share will be issued at the price stipulated as swap or subscription price in the three above-mentioned authorisation resolutions. The conditional capital increase shall only be executed to the extent that the holders of the above convertible bonds and bonds with warrants, profit-sharing bonds with entitlements to convertible bonds and bonds with warrants and of profit participation rights with entitlements to convertible bonds and bonds with warrants exercise their swap or subscription rights and/or fulfil the conversion obligations they may have. 3.3 Authorised capital
Under Article 7 Subsection1 of the Statutes of Hannover Rück AG, the Management Board of Hannover Rück AG shall be authorised to increase the share capital, with approval of the Supervisory Board, during the period up to 03 May 2015 by issuing new registered no-par shares one time or several times, in total, however by a maximum of EUR 60,298,567.00 against cash or non-cash contributions (Authorised Capital 2010/I). The Management Board of Hannover Rück AG is authorised to exclude subscription rights of shareholders, with approval of the Supervisory Board:
• in order to exclude peak amounts from the subscription right,
• in as far as this is necessary to grant holders of subscription warrants, convertible bonds, option bonds, profit-sharing bonds and profit participation rights which have been issued by Hannover Rück AG or subordinate Group Companies subscription rights to new shares to the extent to which they would be entitled after exercising their conversion or subscription rights or after fulfilling their conversion obligations, or
• if the amount allotted to the new shares in proportion to the share capital does not exceed 10 % of the share capital at the time this authorisation enters into force and at the time of the resolution concerning exercising of this authorisation and if the issue price does not essentially fall short of the market price. The amount allotted to shares which are issued or sold due to a relating authorisation under exclusion of
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subscription rights in direct or corresponding application of Section 186 Para. 3 Phrase 4 Corporation law [Aktiengesetz], (“AktG”) is to be offset against the amount of 10 % of the share capital.
In addition to that, the Management Board of Hannover Rück AG shall, with approval of the Supervisory Board, be entitled to exclude subscription rights in the case of capital increases against contribution in kind if the exclusion is in the predominant interest of the company Furthermore, the Management Board shall be authorised to determine the further content of the rights linked with shares and the terms of issue, with approval of the Supervisory Board.
Under Article 7 Subsection 2 of the Statutes of Hannover Rück AG, the Management Board shall be authorised with approval of the Supervisory Board to use an amount of up to EUR 1,000,000.00 of the authorised capital according to Article 7 Subsection 1 for the issue of new registered no-par shares as employee shares. For this purpose, the Management Board shall be authorised - with approval of the Supervisory Board - to exclude the subscription rights for shareholders in order to issue the new shares to persons with an employment relation with Hannover Rück AG or with one of its Group companies. The authorisation can be used one time or several times, in total however only up to a maximum of EUR 1,000,000. 3.4 Shareholders
The share capital of Hannover Rück AG has the form of no-par shares issued as registered shares.
Principal shareholder of Hannover Rück AG is HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover, which, through Talanx AG, Hannover, holds 50.2 % of the shares in Hannover Rück AG. The remainder of 49.8 % is held in wide-spread shareholdings, 41.7 % of which are held by institutional investors and 8.1 % by private shareholders (status: 31 December 2011). 4. Constitution of the Company
Constitutional bodies of Hannover Rück AG are the Management Board, the Supervisory Board and the General Meeting. Responsibilities as well as rights and duties of these bodies are laid down in the law - in particular the AktG –, the Statutes of Hannover Rück AG and the rules of procedure for the Management and the Supervisory Boards as well as their committees.
In keeping with AktG-regulations, Hannover Rück AG disposes of a two-tier administration and monitoring system consisting of Management Board and Supervisory Board. These two bodies work independently of each other and nobody can be a member in both bodies at the same time.
4.1 Management Board
The Management Board of Hannover Rück AG consists of seven members. The Management Board conducts the business and represents the Company in dealings with third parties. As per the Rules of Procedure of the Management Board, members of Management Board jointly bear the responsibility for all aspects of business management. Such overall responsibility notwithstanding, each individual member of the Management Board shall, however, lead the section allocated to him under his own responsibility within the framework of the resolutions of the Management Board. As per its Statutes, Hannover Rück AG is represented by two members of the Management Board or by one member of the Management Board jointly with one procuration holder (Article 8 Subsection 3 of the Statutes of Hannover Rück AG).
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The Management Board shall inform the Supervisory Board regularly, comprehensively and in good time about any and all relevant issues of planning, the development of the business, as well as risk situation, risk management and compliance of Hannover Rück AG and major Group companies. The full Management Board shall decide in all matters where law, Statutes or rules of procedure prescribe that decisions are to be taken by the full Management Board, as well as all business transactions which are of fundamental importance under aspects of business policy or exceed the area of responsibility of one Section. Relating to certain measures and business transactions defined in the Rules of Procedure for the Management Board, the Management Board has to obtain approval by the Supervisory Board.
The members of the Management Board of Hannover Rück AG can be contacted under the business address of Hannover Rück AG, Karl-Wiechert-Allee 50, D-30625 Hannover, Germany.
Hannover Rück AG has the following Management Board members: Name Year of Initial Responsibility/function Seats in Supervisory Boards / birth appointment memberships in other supervisory committees
Ulrich 1954 2001 Chairman of the Board Member of the Advisory Board Wallin Barmenia Allgemeine Versicherungs- Opportunity AG, Wuppertal* management; Barmenia Krankenversicherung a.G., controlling; personnel; Wuppertal* auditing; risk Barmenia Lebensversicherung a.G., management; company Wuppertal* development; company communication Chairman of the Board E+S Rückversicherung AG, Hannover
Chairman of the Board of Directors Hannover Life Reassurance Company of America, Orlando, USA Hannover Re (Bermuda) Ltd., Hamilton, Bermuda Hannover Reinsurance (Ireland) plc, Dublin, Ireland
Board member Talanx AG, Hannover
Member of the Board of Directors Hannover Life Reassurance (Ireland) plc, Dublin, Ireland Hannover Life Re of Australasia Ltd., Sydney, Australia
* Group-external seats
André 1950 2001 Global reinsurance: Member of the Supervisory Board Arrago optional underwriting Mutuelle des Transports Assurances business, catastrophe (MTA), Paris, France*
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Name Year of Initial Responsibility/function Seats in Supervisory Boards / birth appointment memberships in other supervisory committees
underwriting, indemnity April Group, Lyon, France* reinsurance business Groupement Français de Caution, Grenoble, France*
Chairman of the Board of Directors Hannover ReTakaful B.S.C. (c), Manama, Bahrain
Deputy Chairman of the Board of Directors Hannover Re (Bermuda) Ltd., Hamilton, Bermuda
Board member E+S Rückversicherung AG, Hannover
Member of the Board of Directors Hannover Re Services Japan K.K., Tokyo, Japan Sciemus Power MGA Ltd., London, Great Britain*
* Group-external seats
Claude 1967 2011 Personal reinsurance Member of the Supervisory Board Chèvre (Africa, Asia, Australia, Hannover Life Re AG, Hanover Latin America, Southern and Western Europe) Board member E+S Rückversicherung AG, Hannover
Chairman of the Board of Directors Hannover Life Reassurance Africa Limited, Johannesburg, South Africa
Member of the Board of Directors Hannover Life Re of Australasia Ltd., Sydney, Australia Hannover Re Services Japan K.K., Tokyo, Japan Hannover Reinsurance Group Africa (Pty) Limited, Johannesburg, South Africa
Jürgen 1956 1997 Coordination of world- Member of the Supervisory Board Gräber wide indemnity Talanx International AG, Hannover reinsurance; quotation of indemnity reinsurance; Chairman of the Board of Directors retrocessions and Hannover Reinsurance Africa Limited, retrocession coverage; Johannesburg, South Africa Hannover Reinsurance Group Africa special underwriting (Pty) Limited, Johannesburg, South
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Name Year of Initial Responsibility/function Seats in Supervisory Boards / birth appointment memberships in other supervisory committees
business world-wide: Africa Credit, fidelity and International Insurance Company of political exposures; Hannover Limited, Bracknell, Great aviation and space Britain travel; structured reinsurance including Board member E+S Rückversicherung AG, Hannover insurance-linked
securities; marine Member of the Board of Directors including offshore Energi Holdings Inc., Peabody, USA energy; UK & Ireland Hannover Re (Guernsey) PCC Ltd., and London Market, St. Peter Port, Guernsey direct underwriting Hannover Reinsurance (Ireland) plc, business Dublin, Ireland
Dr. 1960 2010 Personal reinsurance: Chairman of the Supervisory Board Klaus Longevity Solutions, Hannover Life Re AG, Hannover Miller Northern and Central Europe, Eastern Europe, Chairman of the Board of Directors North America (incl. Hannover Life Reassurance (UK) Bermuda) Limited, Virginia Water, Great Britain Hannover Life Reassurance Bermuda Ltd., Hamilton, Bermuda
Board member E+S Rückversicherung AG, Hannover
Member of the Board of Directors Hannover Life Reassurance Company of America, Orlando/Charlotte/Denver/New York, USA Hannover Life Rassurance (Ireland) plc, Dublin, Ireland (appointment in all probability at the meeting on 26 March 2012)
Dr. 1960 2000 Legal department, Chairman of the Board of Directors Michael compliance; run-off Glencar Underwriting Managers, Inc. Pickel solutions; target markets Itasca, USA of indemnity Mediterranean Reinsurance Services reinsurance: Germany, Ltd., Hong Kong, China Italy, Austria, Hannover Re Services Italy S.r.l., Milan, Italy Switzerland, North Hannover Re Services USA, Inc., America Illinois, USA
Board member E+S Rückversicherung AG, Hannover
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Name Year of Initial Responsibility/function Seats in Supervisory Boards / birth appointment memberships in other supervisory committees
Member of the Management Hannover Rück Beteiligung Verwaltungs-GmbH, Hannover
Roland 1959 2009 Finance and accounting; Member of the Supervisory Board Vogel information technology; Hannover Life Re AG, Hannover capital investments; Talanx Asset Management GmbH, administration Cologne
Member of the Advisory Board Hannover Finanz GmbH, Hannover* WeHaCo Unternehmensbeteiligungs- GmbH, Hannover*
Chairman of the Board of Directors Hannover Finance, Inc. (HFI), Wilmington, USA Hannover Finance (Luxembourg) S.A., Luxemburg, Luxemburg Hannover Finance (UK) Limited, Virginia Water, Great Britain
Deputy Chairman of the Board of Directors Hannover Life Reassurance Bermuda Ltd., Hamilton, Bermuda
Board member E+S Rückversicherung AG, Hannover
Member of the Board of Directors Hannover Life Reassurance Company of America, Orlando, USA Hannover Life Reassurance (Ireland) plc, Dublin, Ireland Hannover Life Reassurance (UK) Limited, Virginia Water, Great Britain Hannover Re (Bermuda) Ltd., Hamilton, Bermuda Hannover Reinsurance (Ireland) plc, Dublin, Ireland International Insurance Company of Hannover Limited, Bracknell, Great Britain
* Group-external seats
4.2 Supervisory Board
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Hannover Rück AG disposes of a Supervisory Board, the composition of which is in keeping with the provisions of the One-Third Participation Act, and which, according to Article 9 Subsection 1 of the Statutes of Hannover Rück AG, is comprised of nine members. Of these nine members, six are representatives of the shareholders and three are representatives of the employees.
The Supervisory Board monitors the activities of the Management Board and appoints the members of the Board. To organise its work, the Supervisory Board has formed three committees from among its members. These are: The Committee for Management Board Matters, the Finance and Audit Committee and the Nomination Committee. Each committee consists of three members. The committees prepare the resolutions of the Supervisory Board which are within their respective remit and, within the sphere of competence laid down in the rules of procedure for the respective committee, make decisions in place of the Supervisory Board. Specific tasks of the Finance and Audit Committee consist in monitoring of the financial accounting process and the effectiveness of the internal control system, the risk management and internal audit systems and engaging in auditing the annual financial statements.
According to Article 5 Subsection 2 of the Draft Terms of Conversion, the term of office of the current Supervisory Board members shall end when the change of corporate form takes effect, i.e. when it is entered in the commercial register.
The members of the Supervisory Board of Hannover Rück AG can be contacted under the business address of Hannover Rück AG, Karl-Wiechert-Allee 50, D-30625 Hannover, Germany. The Supervisory Board has the following members:
Name Year of birth Member Position Seats in Supervisory Boards / since memberships in other supervisory Principal professional committees activity
Herbert K. Haas 1954 2002 Chairman Chairman of the Supervisory Board E+S Rückversicherung AG, Hannover Chairman of the HDI Direkt Versicherung AG, Management Boards of Hannover Talanx AG, HDI HDI-Gerling Firmen und Privat Haftpflichtverband der Versicherung AG, Hannover Deutschen Industrie HDI-Gerling Industrie Versicherung V.a.G. AG, Hannover HDI-Gerling Lebensversicherung AG, Cologne HDI-Gerling Leben Betriebsservice GmbH, Cologne Talanx Deutschland AG, Hannover Talanx International AG, Hannover Talanx Systeme AG, Hannover
Member of the Advisory Board Norddeutsche Landesbank Girozentrale, Hannover
Member in committees of the Supervisory Board of Hannover Rück AG Committee for Management Board Matters Finance and Audit Committee
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Name Year of birth Member Position Seats in Supervisory Boards / since memberships in other supervisory Principal professional committees activity
Nomination Committee
Dr. Klaus Sturany 1946 2000 Deputy Member of the Supervisory Board Chairman Bayer AG, Leverkusen Former Board member Heidelberger Druckmaschinen Aktien- RWE AG gesellschaft, Heidelberg Österreichische Industrieholding AG, Vienna, Austria
Member of the Board of Administration Sulzer AG, Winterthur, Switzerland
Member in committees of the Supervisory Board of Hannover Rück AG Committee for Management Board Matters Nomination Committee
Wolf-Dieter Baumgartl 1943 1993 Chairman of the Supervisory Board Talanx AG, Hannover Former Chairman of HDI Haftpflichtverband der Deutschen the Management Industrie V.a.G., Hannover Boards of Talanx AG, HDI Haftpflichtverband Member of the Advisory Board der Deutschen E+S Rückversicherung AG, Hannover Industrie V.a.G. Member of the Board of Administration HDI Assicurazioni S.p.A., Rome, Italy
Member in committees of the Supervisory Board of Hannover Rück AG Committee for Management Board Matters Finance and Audit Committee Nomination Committee
Uwe Kramp 1964 2007 Represen- Member of the Supervisory Board tative of E+S Rückversicherung AG, Hannover Employee of Hannover employees Rück AG
Otto Müller 1957 1992 Represen- Member of the Supervisory Board tative of Talanx AG, Hannover Employee of Hannover employees Rück AG
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Name Year of birth Member Position Seats in Supervisory Boards / since memberships in other supervisory Principal professional committees activity
Dr. Andrea Pollak 1959 2011 Chair of the Advisory Board Kuchen-Peter Backwaren GmbH, Business Consultant Hagenbrunn, Austria
Deputy chair of the Supervisory Board Birner Gesellschaft m.b.H., Perchtoldsdorf, Austria
Dr. Immo Querner 1963 2006 Chairman of the Supervisory Board Talanx Asset Management GmbH, Member of the Cologne Management Boards of Talanx AG, HDI Deputy chairman of the Supervisory Haftpflichtverband der Board Deutschen Industrie AmpegaGerling Investment GmbH, V.a.G. Cologne ASPECTA Assurance International AG (Liechtenstein), Liechtenstein ASPECTA Assurance International AG (Luxembourg) S.A., Luxemburg, Luxemburg HDI Asekuracja T.U.S.A., Warsaw, Poland HDI-Gerling Lebensversicherung AG, Cologne Talanx Immobilien Management GmbH, Cologne Talanx Reinsurance Broker AG, Hannover
Member of the Supervisory Board E+S Rückversicherung AG, Hannover HDI Direkt Versicherung AG, Hannover HDI-Gerling Firmen und Privat Versicherung AG, Hannover HDI-Gerling Leben Betriebsservice GmbH, Cologne HDI-Gerling Zycie T.U.S.A., Warsaw, Poland Talanx Deutschland AG, Hannover Talanx Finanz (Luxembourg) S.A., Luxemburg, Luxemburg Talanx International AG, Hannover Talanx Service AG, Hannover Talanx Systeme AG, Hannover
Dr. Erhard Schipporeit 1949 2007 Member of the Supervisory Board BDO AG, Hamburg
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Name Year of birth Member Position Seats in Supervisory Boards / since memberships in other supervisory Principal professional committees activity
Former member of the Deutsche Börse AG, Frankfurt am Management Board of Main E.ON AG Fuchs Petrolub AG, Mannheim SAP AG, Walldorf Talanx AG, Hannover HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover
Member of the Board of Directors Fidelity Funds SICAV, Luxemburg, Luxemburg TUI Travel, PLC, London, Great Britain
Member in committees of the Supervisory Board of Hannover Rück AG Finance and Audit Committee
Gert Wächtler 1952 2007 Represen- None tative of Employee of Hannover employees Rück AG
4.3 Corporate Governance
Hannover Rück AG, being a listed German public limited-liability company, is governed by the German Corporate Governance Code. Under Section 161 AktG, it is required to issue a yearly statement disclosing which of the recommendations of the Government Commission on the German Corporate Governance Code it complies with and to which extent it deviates from the recommendations (declaration of compliance). With one exception, Hannover Rück AG complies with the recommendations of the German Corporate Governance Code (please refer to the declaration of compliance dated 13 December 2011, accessible on the internet under www.hannover-rueck.de).
4.4 Employees and codetermination
As per 31 December 2011, Hannover Rück-Group employed 2217 staff on a world-wide level, 1512 of these in eight member states of the EU.
Hannover Rück AG currently has a Supervisory Board with nine members, one third of which, in accordance with the German DrittelbG, is composed of employees’ representatives. Regarding the election of the three employees’ representatives on the Supervisory Board of Hannover Rück AG, presently only the employees of the group companies employed in Germany have the active and passive voting right in accordance with the DrittelbG.
Apart from the Supervisory Board of Hannover Rück AG and the Supervisory Board of its affiliate E+S Rück, no other supervisory bodies exist in the other companies of the Hannover Rück- Group, where employees have codetermination rights.
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Furthermore, bodies representing employees in accordance with applicable national law exist within the Hannover Rück-Group. In Germany, a works council exists for the joint operation of Hannover Rück AG and E+S Rück. Currently, the Works Council has 15 Members. Other employees‘ representations do not exist in Germany. In Sweden, employees‘ representation has been established under national law at "Hannover Rückversicherung AG Stockholm Branch", being a direct operation of the German Hannover Rückversicherung AG, as well as at "Inter Hannover Scandinavian Branch", being a Swedish operation of the English "International Insurance Company of Hannover Ltd.", which in turn is an indirect wholly-owned subsidiary of Hannover Rück AG. Other than that, no employees‘ representations are in place in the operations and companies of Hannover Rück AG in the EU-member states concerned.
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III. Fundamental Aspects of the Change of Corporate Form
1. Fundamental Reasons for the Change of Corporate Form
The legal form of the SE is the visible expression of a Europe put into practice at entrepreneurial level. The Management Board of Hannover Rück AG considers this legal form as particularly suitable to take account of the increasing internationalisation of the Company and its employees. By the change of corporate form, the Management Board of the Company wishes to emphasise the importance of the international, particularly the European, business for Hannover Rück-Group by reflecting its orientation beyond Germany in the company name of the Group already.
The change of corporate form is not intended to dilute the current one-third codetermination scope in the Supervisory Board. Also, the size of the Supervisory Board is to remain unchanged. The change of corporate form will enable the employees‘ representatives in branch offices and affiliates of the Hannover Rück-Group within the EU to influence the composition of the Supervisory Board. Considering that the affiliates of Hannover Rück AG in Great Britain and Ireland as well as the branch offices in France and Sweden contribute about 22 % to the gross premium volume of the Hannover Rück-Group by now, this will be particularly welcome. The future SE is to maintain the two-tier system of Supervisory Board and Management Board, which has applied until now. By creating an open, international corporate culture, the proposed change of corporate form will thus contribute to an even better balancing of the well-proven corporate governance model of Hannover Rück AG.
The Management Board of Hannover Rück AG is convinced that the change of legal form represents a logically consistent step in the future development of the Company. The new legal form is to ensure a visible expression of the international orientation of Hannover Rück in the public.
At the same time, the legal form SE permits the Company to relocate its registered offices within the European Union. This might become important in the context of the introduction of Solvency II. However, Hannover Rück AG currently has no concrete plans to relocate its registered offices. Furthermore, a relocation of the registered offices of an SE cannot take place simultaneously with the decision to establish the SE by virtue of change of corporate form under Article 2(4) in conjunction with Article 37 of the SE-Reg.
Prior to the change of the legal form, the Management Board of Hannover Rück AG has examined the alternatives to the legal form of the SE in great detail. It arrived at the conclusion that there are no alternatives to the change of corporate form to an SE, which accommodate the interests of the Company and its shareholders in the same way. It was clear from the outset that only such supranational legal forms could be contemplated which allow for a continued stock market listing of the Company.
As a supranational legal form comparable to the Aktiengesellschaft (public limited-liability company) and providing the opportunity of a stock market listing, the SE is currently the only available option. The SE is a stock corporation which is, in terms of both financing and management, the form most suited to the needs of a company carrying on business on a European scale – like Hannover Rück AG – and which allows a stock market listing. The legal form of SE will offer an appropriate platform for the Hannover Rück-Group with its international scope of operations.
It is clear from the above that conversion of Hannover Rück AG into an SE is the only option for achieving the goals outlined above in the best interest of the Company and its shareholders.
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2. Costs of the change of corporate form
Current estimations by the Management Board of Hannover Rück AG suggest that the costs of the change of corporate form will amount to up to EUR 1.5 Mill.
This estimate includes especially the costs for preparatory measures, the costs for the conversion audit by the court-appointed conversion auditor, the costs for the notarization of the Draft Terms of Conversion, the costs for entries in the register, the costs for external advisors, the costs for required publications, the costs for implementing the procedure to regulate the involvement of employees and the costs for converting the listing on the stock exchanges of shares in Hannover Rück AG to shares in Hannover Rück SE. The costs for staging the ordinary General Meeting of Hannover Rück AG are not covered by this estimate, as it has to be carried out anyway.
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IV. Implemantation of the Conversion of Hannover Rück AG to Hannover Rück SE
3. Preparation of the Draft Terms of Conversion and the Conversion Report
Pursuant to Article 37(4) SE-Reg., the Management Board has to prepare Draft Terms of Conversion and a Conversion Report for the conversion of the Company into an SE.
The SE-Reg. does not stipulate any requirements as to the content of the Draft Terms of Conversion (cf. Article 37 SE-Reg.). To the extent that Article 37(4) SE-Reg. stipulates requirements, these refer to the Conversion Report to be prepared by the management Board. The Conversion Report has to explain and justify the legal and economic aspects of the conversion and indicate the implications for the shareholders and the employees resulting from the conversion to the legal form of SE.
In the case concerned here, the Management Board consulted the specifications contained in Article 20 SE-Reg. relating to merger plans as a guideline for the contents of the Draft Terms of Conversion, unless these are specifically tailored to the particular characteristics of a merger. On the basis of these provisions, the Draft Terms of Conversion have, inter alia, to contain stipulations regarding the name and registered offices of the company, the statute, special rights and special advantages as well as details regarding the procedure for the involvement of employees.
The Draft Terms of Conversion and the Statute of Hannover Rück SE drafted by the Management Board will be explained in more detail in Section VI. of this conversion report.
Following the Management Board’s submission of the Draft Terms of Conversion (including the Statute of Hannover Rück SE) in its final version to the Supervisory Board, the Supervisory Board, in its meeting on 13 March 2012, resolved to submit the Draft Terms of Conversion (including the Statute of Hannover Rück SE) to the ordinary General Meeting of Hannover Rück AG on 3 May 2012 for adoption. The Draft Terms of Conversion were notarised on 20 March 2012.
From the convening of the ordinary General Meeting 2012, the Draft Terms of Conversion (including the Statute of Hannover Rück SE), the certificate issued by the conversion auditor as well as this Conversion Report will be accessible via internet under www.hannover-rueck.de.
4. Conversion audit
Under Articles 3, 15(1) SE-Reg. in conjunction with Section 32 AktG, the founders principally have to submit a report on the circumstances of the formation when founding an SE. From the application of the rationale of Section 75 Para. 2 of the Reorganisation Act (Umwandlungsgesetz, “UmwG”) which provides that in the case of a merger, a formation report and a formation audit are not required if the transferring entity is a corporation, follows however, that no formation report is required in the case on hand, as Hannover Rück AG, being a corporation, is converted into another legal form of corporation, i.e. that of an SE.
A formation audit by the members of the Management Board and the Supervisory Board of Hannover Rück SE is required, however (cf. Article 15(1) SE-Reg. in conjunction with Section 33 Para. 1 AktG). It is intended that the members of the Management Board and the Supervisory Board will perform such a formation audit once the relevant resolution has been adopted by the General Meeting and the constituting meeting of the Supervisory Board has taken place.
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Pursuant to Article 37(6) SE-Reg., it is furthermore required that one or several independent experts ("Conversion Auditors") issue a certificate prior to the adoption of the resolution for the conversion into an SE by the General Meeting of Hannover Rück AG certifying that the net assets of the Company are at least equivalent to its share capital plus those reserves which, pursuant to statutory provisions or the Statutes, may not be distributed (so-called impairment test).
By order dated 24. January 2012, the Regional Court of Hannover (Landgericht Hannover) has appointed Deitmer und Partner GmbH Wirtschaftsprüfungsgesellschaft, Münster, as independent experts. The conversion auditor commenced his audit on 1 February 2012. On 16 March 2012, he issued the certificate provided for in Article 37(6) SE-Reg. The certificate is exhibited as an annex to this Conversion Report. It arrives at the following conclusion:
„Based on the findings of our dutiful audit in accordance with article 37 (6) of Council Regulation (EC) No. 2157/2001 of 8 October 2001 on the Statute for a European Company (SE) and the documents, account books and papers presented to us as well as the explanations and evidence with which we were provided, we certify that Hannover Rückversicherung AG has net assets at least in the amount of its share capital plus those reserves which, by act of law or the Statutes are not distributable.”
It is not required that a formation audit is conducted by external auditors pursuant to Article 15(1) SE-Reg. in conjunction with Section 33 Para. 2 AktG, since the rationale of Section 75 Para. 2 UmwG which was described above, is also applicable in this respect.
Besides, Hannover Rück AG does not cease to exist as a consequence of the conversion, it merely changes its legal form (cf. Article 37(2) SE-Reg.).
5. General Meeting of Hannover Rück AG
The Draft Terms of Conversion require the approval of the general meeting and the Statute of Hannover Rück SE requires authorisation by the General Meeting of Hannover Rück AG (Article 37(7) SE-Reg.).
Management Board and Supervisory Board of Hannover Rück AG will thus, under agenda item 7, submit the Draft Terms of Conversion, including the Statute of Hannover Rück SE, for a resolution to be taken by the General Meeting.
6. Implementation of the procedure for the involvement of employees in the future Hannover Rück SE
In order to safeguard the rights to participate in the decisions of the Company acquired by the employees of Hannover Rück AG, in the course of the conversion of Hannover Rück AG into an SE, a procedure for the involvement of the employees in the future Hannover Rück SE is to be implemented. The objective of this procedure is the conclusion of an agreement on the involvement of employees in the SE, in particular regarding the codetermination of the employees in the Supervisory Board of Hannover Rück SE and the procedure for the information and consultation of employees either by establishment of an SE works council or in another way to be agreed upon with the Management Board of Hannover Rück AG. In this context, at least the same level of employee rights as currently existing at Hannover Rück AG must be ensured with regard to all components of the employee participation (cf. Section 21, Para. 6 SEBG).
For the conduction of the negotiations, a Special Negotiating Body is to be established by the employees (“Special Negotiating Body"). Upon its establishment, the negotiations between the management of Hannover Rück AG and the Special Negotiating Body regarding an agreement on employee involvement may begin which - subject to an extension to up to one year by mutual consent of the parties – may last up to six months. In case no agreement is reached within this negotiation period, the subsidiary regulation by operation of law (Sections 22 et seqq. SEBG) shall be applicable.
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The details of this procedure are described in Articles 6 and 7 of the Draft Terms of Conversion and will be explained in Section VI.1.6 of the conversion report.
7. Registration and effectiveness of the conversion to Hannover Rück SE
After approval has been granted by the General Meeting of Hannover Rück AG and after the conduction of the employee involvement procedure, the conversion can be filed with the commercial register of Hannover Rück AG and the registration can take place. Upon registration in the commercial register, the change of the legal form of Hannover Rück AG into Hannover Rück SE shall take effect.
The Management Board must declare in the filing of the change of corporate form for registration in the commercial register that no complaint has been filed against the effectiveness of the resolution on the change of corporate form or that such a complaint has not been filed within the prescribed time limit or that such a complaint has been finally dismissed or withdrawn (so-called no action declaration, cf. Article 15(1) SE-Reg. in conjunction with Sections 198 Para. 3, 16 Para 2 UmwG). If this declaration is not submitted, the change of corporate form may not be registered (so-called ban on registration).
If a complaint is filed against the validity of the General Meeting’s resolution to change the corporate form of Hannover Rück AG, a clearance procedure as provided for in Article 15 (1) SE- Reg. in conjunction with Sections 198 Para. 3, 16 Para. 2 UmwG may be carried out. Following that, the ban on registration can be overcome upon application by Hannover Rück AG if the filed complaint is inadmissible or apparently unfounded or if, in the court's free opinion, taking into account the degree of the violations asserted by the action, it seems most important that the conversion becomes effective soon to avert material disadvantages for the Company and its shareholders as stated by Hannover Rück AG (cf. Section 16 Para 3 Phrase 2 UmwG).
Furthermore, an SE may only be registered by the commercial register and thus established when the procedure regulating the involvement of employees has been completed (refer to Article 6 of the Draft Terms of Conversion and the explanation in Section VI.1.6 of this Conversion Report). This will be the case if either an agreement on the involvement of employees has been entered into or the negotiation period for such negotiations has expired without an agreement having been concluded (Article 12(2) SE-Reg.).
The Statute of the future Hannover Rück SE must not at any time be in conflict with the arrangements for employee involvement which have been so negotiated (Article 12(4) SE-Reg.). In the event of such a conflict, the Statute has to be adapted by resolution of the General Meeting of Hannover Rück AG.
When all official prerequisites for registration are satisfied, the change of corporate form must be registered in the commercial register at the registered offices of Hannover Rück AG. The SE acquires its legal capacity with the entry in the commercial register (cf. Article 16(1) SE-Reg.). However, the principle of identity of the legal entity applies, i.e. Hannover Rück AG does not cease to exist as a company, but only changes its legal form.
8. Establishment of the first Supervisory Board and appointment of the first Management Board of Hannover Rück SE
Upon effectiveness of the change of corporate form, the terms of office of the current members of the Management Board and Supervisory Board of Hannover Rück AG shall terminate. The members of the Management Board of Hannover Rück SE shall be appointed by the first Supervisory Board of Hannover Rück SE (cf. Article 39(2) Phrase 1 SE-Reg.), with the appointment already having to be made prior to the conversion becoming effective.
The six shareholders‘ representatives of the initial Supervisory Board will be appointed by the Statute of Hannover Rück SE (cf. Article 40(2) Phrase 2 SE-Reg. and Article 10 Subsection 2 of
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the Statute of Hannover Rück SE). Since the appointment of the employee representatives can only be made after conclusion of the procedure for the involvement of employees by virtue of an agreement and since this procedure will not be concluded at the time of the General Meeting, their appointment in the Statute of Hannover Rück SE will not be possible. Therefore, the employee representatives are appointed by court order following the conclusion of the procedure for the involvement of employees by virtue of an agreement and after the filing of the change of corporate form for registration (Article 9(1) lit. c)(ii) SE- Reg. in conjunction with Section 104 AktG), unless the agreement on the involvement of employees stipulates a different appointment procedure.
The Supervisory Board appointed by the Statute of Hannover Rück SE shall establish itself before filing the change of corporate form, it will comprise the members appointed under the approval provided in the Statute of Hannover Rück SE, elect the chairman of the Supervisory Board and appoint the members of the Management Board. The members of the Management Board have to be registered at the time when the change of corporate form is filed in the commercial register (Article 15(1)SE-Reg. in conjunction with Section 246 Para. 2 UmwG).
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V. Comparison of the Legal Position of the Shareholders of Hannover Rück AG and of Hannover Rück SE
Below, a comparison is made between the fundamental legal and statutory provisions currently governing Hannover Rück AG and the regulations that will apply to the future Hannover Rück SE. In this context, the rights of the shareholders and aspects of corporate governance will be addressed in particular. This account will adhere to the systematic of the German AktG, which is familiar to shareholders of Hannover Rück AG. When reference is made to “the public limited- liability company” in the account below, this will relate to a public limited-liability company which was founded on the basis of the German Corporation law (AktG).
9. Introduction
Under the legal definition of Article 1(1) SE-Reg., the SE is a commercial company in the form of a European public limited-liability company. It is a supranational legal form which was created by the law of the European Union. The SE-Reg. is directly applicable law in all EU Member States. This ensures the recognition of the SE everywhere in Europe, regardless of the place of its registered offices. Subject to this Regulation, an SE shall be treated in every Member State as if it were a public limited-liability company formed in accordance with the law of the Member State in which it has its registered offices; it must neither be preferred nor disadvantaged (cf. Article 10 SE-Reg.). As is the case with the public limited-liability company under national law, it has its own legal personality (cf. Article 1(3) SE-Reg.); its share capital is divided into shares and its liability to its creditors is restricted to its corporate assets (cf. Article 1(2) SE-Reg.).
The Regulation as a regulation under Community law prevails over the provisions of national law. However, the low density of regulation provided by the SE Regulation necessitates an extensive subsidiary application of national law provisions. The SE-Reg. uses the method of comprehensive reference and of direct reference to the relevant material law. In case of a comprehensive reference, it has to be analysed in accordance with the provisions of Private International Law which national material provisions of law apply. As Hannover Rück SE will be established in Germany and will have its administration headquarters in this country, German material law will be applicable to Hannover Rück SE. In case of a direct reference to the relevant material law however, a direct reference to material law of a certain state is made; for Hannover Rück SE this will be the applicable relevant provisions of German law as well , primarily Corporation law (AktG). Generally speaking, referencing conflicts can be excluded in practice, as recourse according to general reference or direct reference to the relevant material law will always relate to the regulations under German law.
Shareholders’ rights and corporate governance of Hannover Rück SE, being an SE with registered offices in Germany, will thus be governed by the provisions of the SE-Reg., the Statute of Hannover Rück SE, the standards of SEAG and SEBG as well as the provisions of the law applicable to German public limited-liability companies (cf. e.g. Article 9(1) lit. c) (ii) SE-Reg.).
10. General Provisions
10.1 Registered offices
In a public limited-liability company, the registered offices are laid down in by the Statutes (Section 5 AktG). This also applies to the SE, meaning that the registered offices of an SE must be located within the Community, in the same Member State as its head office (Article 7(1) SE- Reg.). After the conversion, the registered offices of Hannover Rück SE will be Hanover (cf.
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Article 1 Subsection 2 of the Statute of Hannover Rück SE, Article 3.2 of the Draft Terms of Conversion as well as Section VI.2.1 relating to the explanations of the Statute).
The registered offices of a public limited-liability company as well as of an SE may only be changed by an alteration of the Statutes or the Statute (cf. with regard to the public limited-liability company Sections 179 et seqq., 45 AktG, with regard to the SE Article 8 SE-Reg. in conjunction with Article 9(1) lit. c) (ii) SE-Reg. in conjunction with Sections 179 et seqq., 45 AktG). In a public limited-liability company, the resolution of the General Meeting to transfer the registered offices to another country constitutes a winding-up resolution as defined in Section 262 Para. 1 no. 2 AktG (winding-up). In contrast, an SE may transfer its registered offices across borders within the EU without winding-up, whereas pursuant to Article 37(3) SE-Reg., the registered offices may not be transferred from one Member State to another at the same time as the conversion is effected. In the case of a transfer of the registered offices of an SE with registered offices in Germany to another country, Section 12 SEAG requires, however, that an adequate cash compensation is offered to the shareholders. The ruling is modelled after Section 29 and Section 207 UmwG respectively, which provide for comparable rulings in case of a change of corporate form.
10.2 Share capital / share features
As is the case with a public limited liability company, the share capital of an SE is made out in Euro (Article 4(1) SE-Reg.). Whereas in the case of a public limited-liability company, the minimum nominal amount of the share capital is Euro 50,000 (Section 7 AktG), the share capital of an SE may not be less than Euro 120,000 (Article 4(2) SE-Reg.). The share capital of Hannover Rück AG currently amounts to EUR 120,597,134. The share capital of Hannover Rück SE will be the same as the share capital of Hannover Rück AG at the time of the change of corporate form (cf. Articles 3.3 and 3.4 of the Draft Terms of Conversion and Section VI.1.3 of the Conversion Report). The minimum capital of EUR 120,000 is thus exceeded by far.
As is the case with the shares of a public limited-liability company, the shares of an SE can have different features, as pursuant to the direct reference to the relevant material law in Article 5 SE- Reg., the same provisions shall apply to a German SE as would be the case for a public limited- liability company. Accordingly, they can be either par value shares with minimum nominal amounts or no-par shares with a minimum nominal quota in the proportionate amount of the share capital. Besides, the shares of the SE may also be made out to the bearer or may be registered shares. Registered shares, as is the case with a public limited-liability company, may be subjected to a transfer restriction. Issuance of shares of different classes, particularly the issuance of preference shares, is permissible.
The conversion into an SE will not cause any changes in the features of the shares of Hannover Rück AG. The share capital of Hannover Rück SE will – as before – be divided into 120,597,134 registered no-par shares (cf. Article 5 Subsection 1 of the Statute of Hannover Rück SE as well as Section VI.2.5 of this Conversions Report relating to the explanations of the Statute).
Under Article 6 of the Statutes of Hannover Rück AG, the share capital has been increased conditionally by up to EUR 60,298,567 by issuing 60,298,567 new, registered no-par shares carrying a profit pay-out entitlement as from the beginning of the fiscal year in which they were issued.
Under Article 7 Subsection1 of the Statutes of Hannover Rück AG, the Management Board is authorised to increase the share capital, with approval of the Supervisory Board, during the period up to 03 May 2015 by issuing new registered no-par shares one time or several times, in total, however by a maximum of EUR 60,298,567.00 against cash or non-cash contributions (Authorised Capital 2010/I).
The conditional capital and the authorised capital 2010/I will, as a matter of principle, be maintained in the Statute of Hannover Rück SE (cf. Articles 6,7 of the Statute of Hannover Rück
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SE, Article 3.4 of the Draft Terms of Conversion as well as Sections VI.2.6 and VI.2.7 of this Conversions Report relating to the explanations of the Statute).
10.3 Notification duties
Regarding the notification duties on voting shares - as is the case for Hannover Rück AG in its property as a stock-listed public limited-liability company- the provisions of Sections 21 et seqq. of the Securities Trading Act (Wertpapierhandelsgesetz, “WpHG”) will be applicable to the future Hannover Rück SE as stock-listed SE by virtue of the comprehensive reference made in Article 9(1) lit. c) (ii) SE-Reg.. As a consequence, shareholders’ rights may also be lost if notification duties pursuant to Section 28 WpHG are not complied with – in the same manner as this would be applicable to Hannover Rück AG.
11. Foundation of the SE
The foundation regulations for a public limited-liability company, including establishment of the Statutes, special benefits, foundation expenditure, founder(s), establishment of the company, appointment of the Supervisory Board and the Management Board, foundation report, foundation audit, registration of the company, verification by the court as well as entry in the commercial register are governed by Sections 23 et seqq. AktG. With regard to a change of the legal form, Sections 190 et seqq. UmwG will apply in addition.
As the law of the state where the SE establishes its registered offices will, as a general principle, be applicable to the foundation of an SE (Article 15(1) SE-Reg.) and as the SE will be considered a public limited-liability company at its foundation (cf. Article 3(1) SE-Reg.), the foundation law of public limited-liability companies will be applicable to the foundation of Hannover Rück SE as a general principle. In the case of a conversion, the company undergoing the change of corporate form will be the founding company, i.e. Hannover Rück AG.
Pursuant to the direct reference to the relevant material law in Article 5 SE-Reg., the strict national provisions of corporation law apply to the SE in this regard. However, for the purposes of a conversion into an SE, these provisions are modified or replaced, respectively, by Art. 37 SE- Reg.. Details on the conversion of Hannover Rück AG into Hannover Rück SE, in particular to the specific foundation modalities, are available in the description under Section IV. of this Conversion Report.
12. Legal relationships of the Company and the shareholders
The fundamental principle of German corporation law is the so-called principle of equal treatment in corporations. This principle is laid down in Section 53a AktG and requires that all shareholders of a company be afforded equal treatment, provided that identical circumstances apply. By virtue of the comprehensive reference made in Article 9(1) lit. c) (ii) SE-Reg., this principle also applies to the SE without any limitations.
According to Article 5 SE-Reg., the AktG-provisions relating to the preservation of capital are also applicable to the SE. Section 56 AktG, for example, prohibits subscribing own shares, and Section 57 AktG does not allow the return of contributions. Equally, the provisions under corporation law governing the utilization of the net income and the setting aside of reserves (Section 58 Para. 1 to 3 AktG) as well as the distribution of profits (Section 58 Para. 4 AktG) also apply to the SE. Payments on account for the balance sheet profit are – as in a public limited- liability company - only admissible under stringent conditions (Article 5 SE-Reg. in conjunction with Section 59 AktG). The distribution of profits generally has to be made in accordance with the shares held by the shareholders, whereas the Statute of the SE - as is the case with an AG - may stipulate a different method of profit distribution with ordinary and preference shares. In accordance with the principle of capital preservation, in the SE too, the acquisition of own shares
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is only permissible subject to certain restricting requirements (cf. Article 5 SE-Reg. in conjunction with Sections 71, 71a, 71b, 71c and 71d AktG).
13. Statutes of the Company: two-tier system – one-tier system
The public limited-liability company follows the two-tier system with a Management Board (Section 76 at seqq. AktG) und a Supervisory Board (Sections 95 et seqq. AktG). The SE, in contrast, also permits the one-tier system (cf. Article 43 SE-Reg. in conjunction with Sections 20 et seqq. SEAG), consisting of a Board of Administration, besides the two-tier system (Article 39 et seqq. SE-Reg. in conjunction with Sections 15 et seqq. SEAG). The Statue of Hannover Rück SE however, provides for a two-tier system with Management Board and Supervisory Board - as was the case in Hannover Rück AG – (cf. Articles 8, 10 of the Statute of Hannover Rück SE and Sections VI.2.8 and VI.2.10 of this Conversion Report). The change of corporate form will not have any impact in this respect. However, there are certain changes regarding the provisions governing the Management Board and the Supervisory Board, because in some respects the SE Regulation and the SEAG contain stipulations which deviate from those of German corporation law.
In detail:
13.1 Management Board
(a) Management of the Company
Regarding the management of the future Hannover Rück SE, no changes will be brought about by the conversion of Hannover Rück AG into an SE. As is the case in Hannover Rück AG, the Management Board of Hannover Rück SE will manage the business of the SE under its own responsibility (cf. for the public limited-liability company Section 76 Para.1 AktG and for the SE Article 39(1) Phrase 1 SE-Reg.). (b) Size and composition of the Management Board
In the public limited-liability company, the Management Board shall generally consist of one or several persons (Section 76 Para. 2 Phrase 1 AktG). The Management Board of an SE with a share capital exceeding EUR 3 million must comprise at least two persons (Section 16 SEAG). Furthermore, the Management Board must consist of no less than two persons due to the regulatory needs of supervisory law (Sections 121a Para.1 Phrase 3 in conjunction with 34 Phrase 1 of the Law on the Supervision of Insurance Companies (Insurance Supervisory Law, “VAG”).
The Statute of Hannover Rück SE thus stipulates that – as was the case in Hannover Rück AG – the Management Board has to consist of no less than two persons (cf. Article 8 Subsection 1 of the Statute of Hannover Rück SE and Article 1 Subsection 1 of the Statutes of Hannover Rück AG). In case that the subsidiary regulation by operation of law with regard to the involvement of employees in the SE applies, it is stipulated that one member of the Management Board has to be responsible for "labour and social affairs” (cf. Section 16 Phrase 2 SEAG in conjunction with Section 38 Para. 2 Phrase 2 SEBG). The possibility exists to create such a functional section by an agreement within the framework of the procedure relating to the involvement of the employees. (c) Management
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As is the case with a public limited-liability company, subject to stipulations to the contrary in the Statute and the rules of procedure, the principle of joint management also applies to the SE. In addition, the principle applies which is applicable under corporation law and according to which differences of opinion in the Management Board directors cannot be decided by one or several members of the Management Board against the majority of the Board members (Article 9(1) lit. c)(ii) SE-Reg. in conjunction with Section 77 Para. 1 Phrase 2 AktG). The SE allows to grant a Board member appointed as chair of the Management Board a right to veto decisions of the Management Board. Exercising of the veto right has the consequence that the resolution of the Management Board is deemed to not have been passed. The Statute of Hannover Rück SE, like the Statutes of Hannover Rück AG, does not provide for such a veto right for the Chairman of the Management Board. (d) Representation of the Company
Pursuant to Section 78 Para. 1 and Para. 2 AktG, a public limited-liability company is, as a general rule, represented by the Management Board before courts and outside of the courts; all Board members – deviating rulings stipulated in the Statutes notwithstanding – are only authorised to represent the Company jointly. In addition, the Statutes may stipulate that individual members of the Management Board are authorised to represent the company alone or together with a holder of power of procuration (Section 78 Para. 3 AktG).
No SE-specific representation rules exist for SEs. This means that, by virtue of comprehensive reference in Article 9(1) lit. c) (ii) and (iii) SE-Reg., the rules of AktG or the rules of the Statutes permitted under that law shall be applicable. As already stipulated in the Statutes of Hannover Rück AG (cf. Article 8 Subsection 3), the Statute of Hannover Rück SE (cf. Article 9 Subsection 2 as well as Section VI.2.9 of this Conversion Report) provides that the Company shall be represented jointly by two members of the Management Board or by one member of the Management Board jointly with a holder of power of procuration. Thus, no changes will be brought about by the conversion of Hannover Rück AG into an SE in this regard. (e) Appointment and removal of the Management Board / term of office
The members of the Management Board are appointed by the Supervisory Board for a term of five years maximum. Repeat appointments or extensions of the term of office, for no more than five years in each instance, are permissible. The Supervisory Board may revoke the appointment of a Management Board member with good cause (cf. Section 84 AktG).
The members of the Management Board of an SE are appointed by the Supervisory Board for a term of office laid down in the Statute, which may not exceed six years (Article 46(1) SE-Reg.). Subject to any contrary stipulations in the Statute, reappointments are permissible (Article 46(2) SE-Reg.). The Statute of Hannover Rück SE provides for an appointment of the Management Board members for a period of no more than five years, and thus continues to apply the specifications for public limited-liability companies. Reappointments are permissible (Article 8 Subsection 2 of the Statute of Hannover Rück SE and Section VI.2.8 of this Conversion Report). With regard to the removal of members of the Management
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Board, neither the SE-Reg. nor the SEAG contain any stipulations. However, by virtue of the comprehensive reference in Article 9(1) lit. c) (ii) SE-Reg. to the national provisions applicable to public limited-liability companies, the conversion of Hannover Rück AG into an SE will not bring about any changes relating to the appointment and removal of the Management Board. (f) General principles for the compensation of members of the Management Board, prohibition on competition and granting loans to members of the Management Board
With regard to the remuneration of the members of the Management Board, the prohibition on competition and the granting of loans to members of the Management Board, the conversion of Hannover Rück AG into an SE will not lead to any changes. The regulations in the AktG applicable to Hannover Rück AG and relating to the principles of compensation of Management Board members, prohibition on competition and granting loans to Management Board members (Sections 87 to 89 AktG) also apply for Hannover Rück SE by virtue of comprehensive reference of the SE-Reg. (Article 9(1) lit. c) (ii) SE-Reg.). (g) Reports to the Supervisory Board
The reporting obligations vis-à-vis the Supervisory Board of an SE are modelled after the reporting obligations vis-à-vis the Supervisory Board of a public limited- liability company.
Pursuant to Section 90 Para. 1 AktG, the Management Board of a public limited- liability company must report to the Supervisory Board about (1) the intended business policy and other fundamental issues in the corporate planning (especially the planning with regard to finances, investments and personnel), whereby deviations in the actual course of development compared to previously reported targets must be addressed and the reasons for this must be stated; (2) the profitability of the company, especially the profitability of the equity capital; (3) the course of business, especially turnover and the situation of the company; (4) transactions which could be of substantial importance for the profitability or liquidity of the company. If the company is a parent company, the report must also address the situation of subsidiaries and joint ventures. Furthermore, the chairman of the Supervisory Board must receive a report on other important occasions, whereby an important occasion can also be a business matter at an affiliated company which comes to the attention of the Management Board and which may be of substantial influence on the situation of the Company. The AktG requires that relevant reports are given on a regular basis.
Furthermore, the Supervisory Board is entitled at any time to request a report about matters of the Company, its business relationships to affiliated companies as well as about business matters at these companies which could be of substantial influence for the situation of the Company. Such a report can also be demanded by an individual member of the Supervisory Board, but the report must only be addressed to the Supervisory Board as a body.
The reports must comply with the principles of diligent and good faith accounting. They must usually be provided in written or electronic form, in as timely a manner as
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possible (Section 90 Para. 4 AktG). Each member of the Supervisory Board has the right to obtain knowledge about the reports (Section 90 Para. 5 Phrase 1 AktG).
In an SE, too, the Management Board has to report to the Supervisory Board at least every three months on the progress of the SE's business and its foreseeable development (Article 41(1) SE-Reg.). In addition to this regular information, the report must inform the Supervisory Board in a timely manner about any events which may have a material effect on the SE (Article 41(2) SE-Reg.). The Supervisory Board of an SE can demand any and all information which the Supervisory Board requires in order to be able to exercise its controlling function (Article 41(3) SE-Reg.). Each member of the Supervisory Board can require any and all information from the Management Board as well, but the information must only be provided to the Supervisory Board as a body (Article 41(3) SE-Reg. in conjunction with Section 18 SEAG). The Supervisory Board can conduct all reviews required for the performance of its duties or have such reviews performed (Article 41(4) SE- Reg.). Each member of the Supervisory Board can have access to all information which is transmitted to this body (Article 41(5) SE-Reg.).
Even if Section 90 AktG appears to contain more detailed stipulations than Article 41 SE-Reg., there are, in effect, no substantial changes resulting from the conversion of Hannover AG into an SE with regard to the reporting obligations of the Management Board vis-à-vis the Supervisory Board. The reporting duties of the future Management Board of Hannover Rück SE vis-à-vis the Supervisory Board of Hannover Rück SE will have the same extent as those of the Management Board of Hannover Rück AG vis-à-vis the Supervisory Board of Hannover Rück AG. (h) Duties of the Management Board in the case of losses, over-indebtedness or inability to meet on-going payment obligations
As is the case with a public limited-liability company, the Management Board of an SE is, by virtue of the comprehensive reference in Article 9(1) lit. c) (ii) SE-Reg., under an obligation to convene a General Meeting in the case of a loss of half of the share capital, and to apply for the institution of insolvency proceedings in the case of illiquidity or overindebtedness (cf. Section 92 AktG). Thus, no changes will result from the conversion of Hannover Rück AG into an SE in this regard. (i) Duty of due diligence and responsibilities
Pursuant to Article 51 SE Reg., the members of the Management Board of an SE will be liable - in accordance with the provisions applicable to public limited liability companies in the state in which the registered offices of the SE are situated - for the damage sustained by the SE following any breach on their part of their legal, statutory or other obligations inherent to their duties. By virtue of the direct reference to the relevant material law in Article 51 SE-Reg., the standards of a prudent and conscientious manager (Section 93 Para. 1 Phrase 1 AktG) as well as the so-called business judgment rule (Section 93 Para. 1 Phrase 2 AktG) as well as the regulations with regard to the liability of the Management Board (cf. Section 93 Para. 2 AktG) shall also apply to the Management Board of Hannover Rück SE. Furthermore, the SE-Reg. expressly provides that the Management Board may not disclose information about the SE which could harm the interests of the company if it
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were disclosed, even after leaving office, unless the disclosure of information is required or permitted under the legal provisions applicable to public limited-liability companies of the country applicable to the SE, or if this is in the public interest (Article 49 SE-Reg.) This ruling too, is equivalent to that under German corporation law (cf. Article 49 SE-Reg. in conjunction with Section 93 AktG).
As is the case with a public limited-liability company, the Management Board of the SE may only refuse disclosure in a General Meeting if one of the reasons for refusal stipulated in Section 131 Para 3 Phrase 1 AktG applies (for details on the right to obtain information, please refer to Section V.5.3 (f) of this Conversion Report).
Thus, no changes relating to the responsibility of the Management Board will result from the conversion of Hannover Rück AG into an SE.
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(j) Using influence on the Company – liability for damages
The prohibition to cause members of the management or executives to act to the detriment of a public limited-liability company or its shareholders (cf. Section 117 AktG) shall, by virtue of Article 51 SE-Regulation, also apply to the SE. 13.2 Supervisory Board
(a) Responsibilities and rights of the Supervisory Board
The main responsibility of the Supervisory Board of a public limited-liability company is to supervise the conduct of the business by the Management Board according to Section 111 Para. 1 AktG. The conduct of the business cannot be assigned to the Supervisory Board itself (Section 111 Para. 4 AktG). This corresponds to the regulation in Article 40(1) SE-Reg., under which the Supervisory Board of a two-tier SE supervises the conduct of the business by the Management Board, but in which the Supervisory Board itself is not authorised to conduct the business of the SE. The Supervisory Board of Hannover Rück SE will thus, like the Supervisory Board of Hannover Rück AG, be responsible for the supervision of the conduct of business.
In a public limited-liability company, the Statutes or the Supervisory Board must determine that certain types of transactions can only be conducted with approval of the Supervisory Board (Section 111 Para. 4 Phrase 2 AktG). Accordingly, the Statutes of a public limited-liability company do not necessarily have to contain such a catalogue (cf. Section 111 Para. 4 Phrase 2 AktG). In the case of an SE, on the other hand, Article 48(1) SE-Reg. requires that the types of transactions requiring approval by the Supervisory Board must necessarily be included in the Statute. Without a respective stipulation in the Statute, there would be an obstacle for the registration of the SE. However, this does not prevent the Supervisory Board from stipulating further types of transactions subject to authorisation in the rules of procedure which are not mentioned in the Statute (cf. Article 48(1) Subsection 2 SE- Reg. in conjunction with Section 19 SEAG).
A catalogue of measures and transactions requiring approval is not included in the Statutes of Hannover Rück AG, but only in the rules of procedure for the Management Board which have been laid down by the Supervisory Board of Hannover Rück AG according to the standards of corporation law. To comply with the standards of the SE-Reg., a catalogue of decisions requiring approval will be included under Article 13 in the Statute of Hannover Rück SE (cf. Section VI.2.13 of this Conversion Report).
Contrary to Section 111 Para. 4 Phrases 3-5 AktG, the SE-Reg. does not provide the General Meeting of the SE with the facilities to pass a resolution of the General Meeting to replace an approval not granted by the Supervisory Board.
The Supervisory Board of a public limited-liability company must furthermore convene a General Meeting if required for the good of the company (Section 111 Para. 3 Phrase 1 AktG). Under Article 54(2) SE-Reg. in conjunction with Section 111 Para. 3 Phrase 1 AktG, the Supervisory Board of an SE is authorised to convene a
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General Meeting if required for the good of the company. Thus, no changes will result from the conversion of Hannover Rück AG into an SE in this regard.
Under Section 111 Para. 5 AktG, Supervisory Board members of a public limited- liability company may not appoint other persons to perform their respective functions – not even other members of the Supervisory Board. The same applies to the SE, under Article 9(1) lit. c) (ii) SE-Reg..
Furthermore, by virtue of the comprehensive reference in Article 9(1) lit. c) (ii) SE- Reg., AktG shall be applicable; thus no changes will be caused by the conversion of Hannover Rück AG into an SE. (b) Duty of due diligence and duty of confidentiality
The Supervisory Board of a public limited-liability company has to apply the due diligence of a prudent and conscientious Supervisory Board member when performing its functions (Section 116 Phase 1 in conjunction with Section 93 Para. 1 Phrase 1 AktG). In addition, the members of the Supervisory Board - like the members of the Management Board - are under a confidentiality obligation (Section 116 Phrase 2 AktG). The same provisions of the Corporation Law govern the duties of due diligence and the liability of the members of the Supervisory Board of the SE, since these provisions are applicable by virtue of the direct reference to the relevant material law in Article 51 SE-Reg.. The duty of confidentiality is governed by Article 49 SE-Reg. in conjunction with Section 93 AktG. The conversion of Hannover Rück AG into an SE will thus not lead to any changes. (c) Representation of the Company towards the members of the Management Board
As is the case in a public limited-liability company, the Supervisory Board of an SE shall represent the Company in and out of court towards members of the Management Board (Section 112 AktG in conjunction with Article 9 Abs. 1 lit. c) (ii) SE-Reg.). (d) Size and composition of the Supervisory Board
The size of the Supervisory Board of a public limited-liability company is governed by the number of domestic employees (cf. Section 95 Para 5 AktG.).
In an SE, the number of members of the supervisory board or the rules for the determination of such a number is laid down in the Statute ( Article 40(3) SE Regulation). Article 40(3) Phrase 2 SE-Reg. in conjunction with Section 17 Para. 1 SEAG determines that the number of members has to be divisible by 3 and that the Supervisory Board has to consist of no less than 3 and no more than 21 members. The number of members from among the employees will be determined within the framework of an agreement on the involvement of the employees (Section 21 Para. 3 No. 1 SEBG) or – should such an agreement not be achieved - the so-called subsidiary regulation by operation of law on the involvement of the employees (cf. Sections 22 et seqq. SEBG and Section IV.4 of this Conversion Report). When establishing an SE by change of corporate form, at least the same degree of employee involvement as exists in the company to be converted into an SE has to
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be guaranteed, relating to all elements of employee involvement. However, this only refers to the quality of employee involvement (i.e. for example composition on a one-third parity basis), but not to the absolute number of members on the Supervisory Board.
Applying the above principles, the Supervisory Board of Hannover Rück SE – as has been the case in the Supervisory Board of Hannover Rück AG – has, as a minimum, to be staffed on a one-third parity basis. The Statute of Hannover Rück SE provides for a Supervisory Board composed of nine members, which will be staffed on a one-third parity basis with employee representatives (cf. Article 10 Subsection 1 of the Statute of Hannover Rück SE and Section VI.2.10 of this Conversion Report).
The agreement on the involvement of the employees will stipulate whether, besides domestic employees, also employee representatives from other EU Member States will be represented in the Supervisory Board of Hannover Rück SE. Following the subsidiary regulation by operation of law on the involvement of the employees in an SE, two representatives from Germany and one representative from a so far non- represented EU member state would be elected into the Supervisory Board of Hannover Rück SE (cf. Section VI.1.6 of this Conversion Report). (e) Status proceedings about the composition of the Supervisory Board
By virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg., the national corporation law provisions applicable to public limited-liability companies shall be applicable by way of the so-called status procedure, if there is a dispute or uncertainty about the question whether the composition of the Supervisory Board is in keeping with relevant statutory provisions (Sections 97, 98, 99 AktG). In addition, Section 17 Para. 3 SEAG applies which stipulates that the SE Works Council, too, is entitled to initiate the status proceedings in court. (f) Personal qualifications for members of the Supervisory Board
Members of the Supervisory Board of a public limited-liability company can only be natural persons with unrestricted capacity (cf. Section 100 Para. 1 Phrase 1 AktG). By virtue of the direct reference to the relevant material law in Article 47(1) SE-Reg., this regulation also applies for an SE. Besides, no person who, pursuant to the law of the member state where the SE's registered office is situated, is disqualified from serving on a management, supervisory or administrative body of a public limited- liability company governed by the law of such member state or who, owing to a judicial or administrative decision delivered in a member state, is disqualified from serving on a management, supervisory or administrative body of a public limited- liability company governed by the law of a member state (Article 47(2) SE-Reg.), can be a member of the corporate body. By reference to Section 100 Para. 2 AktG, convergence with the provision of corporation law regarding the personal qualifications of members of the Supervisory Board is generated in respect of reasons to deny membership (generally no more than ten seats, legal representative of a dependent enterprise, no interlocking directorates, cf. Section 100 Para. 2 AktG). Furthermore, the standards under supervisory law as per Section 13d No.12 in conjunction with Section 7a Para. 4 VAG [Versicherungsaufsichtsgesetz,
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Insurance Supervisory Law] apply. These stipulate that the members of the Supervisory Board of an insurance company have to be characterised by particular reliability and that they have to possess the technical knowledge required to perform their controlling function and to assess and monitor the business transactions carried out. (g) Appointment of the Supervisory Board
The members of the Supervisory Board of a public limited-liability company are elected by the General Meeting unless regulations under codetermination law provide otherwise (Section 101 Para. 1 AktG). Under the DrittelbG [One-Third Participation Act] applicable to Hannover Rück AG, the Supervisory Board members of the employees are determined by the employees in Hannover Rück AG (cf. Sections 5 et seqq. DrittelbG).
The members of the supervisory board of an SE are generally appointed by the General Meeting (Article 40(2) Phase 1 SE-Reg.).
This applies to the representatives of the shareholders as well as to the employee representatives in the Supervisory Board; for the latter, this will at least be the case when the subsidiary regulation by operation of law relating to the involvement of the employees in the SE has to be applied (cf. Section 36 Para. 4 SEBG).
Whilst the representatives of the shareholders from the General Meeting are nominated by the Supervisory Board, the employee representatives are - under the subsidiary regulation by operation of law for the involvement of employees in the SE - determined in accordance with the respective applicable national laws, taking into account the geographical distribution of the employees within the EU and the EEA. Presumably, a comparable regulation will be applicable even when an agreement on the involvement of the employees is achieved. Article 10 Subsection 1 of the Statute of Hannover Rück SE contains a provision to this effect. The General Meeting shall be bound to the employee candidates determined in this manner (cf. Section 36 Para. 4 SEBG, Article 10 Subsection 1 of the Statute of Hannover Rück SE as well as Section VI.2.10 of this Conversion Report).
As a result, in contrast to the procedure currently applicable to Hannover Rück AG, the employee representatives on the supervisory board of Hannover Rück SE will no longer be determined by the employees of the Hannover Rück-Group in Germany, but in accordance with the procedure agreed on in the course of the employee involvement procedure or, respectively, the procedures stipulated by the subsidiary regulation by operation of law.
The appointment of shareholder representatives to the Supervisory Board will, contrary to the above, not undergo any changes in consequence of the change of corporate form to Hannover Rück SE. (h) Term of office
Whereas Members of the Supervisory Board of a public limited-liability company cannot be appointed for a period of time which is longer than until the end of the General Meeting which resolves about the formal approval of actions for the fourth
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fiscal year after the commencement of the term of office (with the fiscal year in which the term of office begins not being taken into account, Section 102 Para. 1 AktG), the members of the Supervisory Board of an SE are appointed for the period of time established in the Statue, which may not exceed six years (Article 46(1) SE- Reg.). Accordingly, longer terms of office are permissible in an SE as a general rule.
The Statutes of Hannover Rück AG stipulated up to now that the election is valid for the maximum term permissible under corporation law, unless a shorter term of office is determined at the election (Article 9 Subsection 2 of the Statutes of Hannover Rück AG). The Statute of Hannover Rück SE – under reservation of the appointment of the members of the first Supervisory Board of Hannover Rück SE – stipulates the same term of office, limiting it to a maximum of six years, however.
Subject to any stipulations to the contrary in the Statute, reappointments are permissible (Article 46(2) SE-Reg.). The Statute of Hannover Rück SE permits reappointment of Supervisory Board members (cf. Article 10 Subsection 3 Phrase 3 of the Statute of Hannover Rück SE).
The regulation in the Statute thus follows the maximum duration of the statutory term of office as regulated by AktG. Thus, no changes will result from the conversion of Hannover Rück AG into an SE in this regard. (i) Removal from office
In general, and subject to any stipulations to the contrary within the Statutes, members of the Supervisory Board of a public limited-liability company may be removed from office by the general meeting with a majority of at least three quarters of the votes cast (Section 103 Para 1 AktG). Furthermore, the competent court must remove a member of the Supervisory Board from office at the request of the Supervisory Board if just cause exists. The supervisory board resolves the request to the court with a simple majority. Members of the Supervisory Board of a public limited-liability company who were neither elected by the General Meeting without any obligation to a particular nomination nor posted by virtue of the Statutes may – except in the above cases where the removal from office is performed by a court – in case of a Supervisory Board with codetermination under DrittelbG (as is the case in the Supervisory Board of Hannover Rück AG) only be dismissed upon application by the Works Council or by a resolution adopted by at least one fifth of those entitled to vote (cf. Section 12 Para. 1 DrittelbG).
With regard to the removal of members of the Supervisory Board of an SE, neither the SE Regulation nor the SEAG contain any stipulations. By virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg., the provisions of corporation law are generally applicable. Regarding the removal of employee representatives however, the DrittelbG will not be applicable any more, but the following: domestic employee representatives in the Supervisory Board of an SE may – unless otherwise agreed within the framework of the employee involvement process – be removed from office upon proposal by the employees (cf. Section 37 Para. 1 SEBG). The General Meeting shall be bound by the proposal (Section 37 Para. 1 a.E. SEBG). However, the removal of a Supervisory Board member appointed by the employees from another member state is not governed by the
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SEBG, but - subject to an agreement to the contrary concerning employee involvement in the SE - by the respective applicable national legal provisions. Besides - as is the case with a public limited-liability company - employee representatives on the Supervisory Board of an SE may still be dismissed by a court as before, provided that the respective requirements under statutory law are met.
In summary, the conversion of Hannover Rück AG into an SE does not lead to any changes with regard to the removal of Supervisory Board members from office. The removal of Supervisory Board members from office will be generally governed by AktG. In addition - as a consequence of the inapplicability of the DrittelbG - and to the extent that no stipulation to the contrary is provided for in an agreement regarding the involvement of employees, a possibility for the removal of employee representatives has at least been provided for in the course of the subsidiary regulation by operation of law under SEBG. The systematic of SEBG is thus determined by the law on the codetermination of employees (Mitbestimmungsgesetz - MitbestG) ("MitbestG”). (j) Appointment by court
The SE Regulation does not expressly determine whether a Supervisory Board member may be appointed by a competent court. By virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg. however, the provisions under corporation law are applicable. In accordance with these provisions, upon a respective motion the court has to supplement the Supervisory Board to meet the number of members required to constitute a quorum (Section 104 Para. 1 Phrase 1 AktG) if the supervisory board comprises less than this number of members. In urgent cases and upon a respective motion, the court has to supplement the Supervisory Board, even when a quorum is still present and even when the period of three months normally provided for supplements when the required number of members is not maintained has not expired yet (cf. Section 104 Para. 2 AktG). If the Supervisory Board has to partly comprise members representing the employees, the court will have to supplement it in such a way that the quantitative ratio relevant for its composition is established (Section 104 Para. 4 Phrase 1 AktG). In addition, the provision in Section 17 Para. 3 SEAG applies for the SE, which stipulates that the SE Works Council, too, is entitled to initiate the appointment proceedings in court.
Thus, in principle, no changes will result from the conversion of Hannover Rück AG into an SE in this regard. (k) Incompatibility of simultaneous membership on the Management Board and the Supervisory Board
As in case of the public limited-liability company, nobody in an SE may at the same time be a member of the Management Board and the Supervisory Board. However, the Supervisory Board may delegate one of its members to assume the responsibilities of a member of the Management Board for a limited period of time of no more than one year. The office of the relevant person as a member of the Supervisory Board is suspended during this period of time. A repeated appointment or extension of the period of office is permissible if the total term of office does not exceed one year (cf. Article 39(3) SE-Reg. in conjunction with Section 15 SEAG
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relating to the SE and Section 105 Para. 1 and Para. 2 AktG relating to the public limited liability company). Save for this exception, no person can be a member of a corporate body of an SE who, pursuant to the law of the member state where the SE's registered offices are situated, is disqualified from serving on a management or supervisory body of a public limited-liability company governed by the law of such a member state (Article 47(2) lit. a) SE-Reg.).
Based on the foregoing and the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg. (in conjunction with Section 105 Para. 1 AktG), nothing will change in this regard when Hannover Rück AG changes its corporate form into an SE. (l) Chair / deputy chair of the Supervisory Board
Under Section 107 Para. 1 AktG, the Supervisory Board has to elect a chairman and a deputy chairman from among its members; details shall be regulated in the Statutes. In this respect, Article 10 Subsection 1 of the Statutes of Hannover Rück AG stipulates that following the ordinary General Meeting at which a new Supervisory Board has been elected, the Supervisory Board shall hold a meeting without special notice, under the chairmanship of the oldest member, and elect from amongst its members the chairman and his deputy. The election shall be valid for the term of membership of the respective Supervisory Board member. If one of the elected persons resigns prematurely from office, the Supervisory Board shall elect a successor without undue delay.
In the SE, the chairman and the deputy chairman of the Supervisory Board are elected by the Supervisory Board, with the majority of the votes of the members present or represented being required (Article 42 Phrase 2 SE-Reg.). Thus, no changes will result from the conversion of Hannover Rück AG into an SE in this regard. The regulation under Article 10 Subsection 1 of the Statutes of Hannover Rück AG is thus reflected in Article 11 Subsection 1 of the Statute of Hannover Rück SE (cf. Section VI.2.11 of this Conversion Report). (m) Adopting resolutions in the Supervisory Board
Pursuant to the provisions of corporation law, the supervisory board of a German stock corporation has a quorum, subject to any provisions otherwise in the Statutes, if at least one half of the members it has to consist of participate in adopting a resolution (Section 108 Para. 2 Phrase 2 AktG).
The Supervisory Board of an SE has a quorum - in each case subject to provisions otherwise in the Statute - if at least one half of its members are present or represented (Article 50(1) lit. a) SE-Reg.). Adoption of a resolution requires the majority of votes of present or represented members (Article 50(1) lit. b) SE-Reg.).
Pursuant to Article 50(2) Phrase 1 SE-Reg., the vote of the chairman of the Supervisory Board is determinative in case of a tie vote (casting vote), as is the case in the public limited-liability company. A different provision is possible in the Statute when the Supervisory Board is not composed of an equal number of shareholder and employee representatives (50% each).
Both the Statute of Hannover Rück SE and the Statutes of Hannover Rück AG
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provide, in compliance with the above-mentioned standards of law, that the Supervisory Board shall have a quorum when at least two thirds of the members it has to consist of in total are present (Article 11 Subsection 3 Phrase 1 of the Statutes of Hannover Rück AG and Article 12 Subsection 3 Phrase 1 of the Statute of Hannover Rück SE). Under Article 11 Subsection 4 of the Statutes of Rück AG and Article 12 Subsection 4 of the Statute of Hannover Rück SE respectively, resolutions have to be passed with a majority of the votes cast, unless the law stipulates otherwise. In the event of a tie vote - also in the case of elections - the vote of the chairman shall be decisive (cf. Section VI.2.12 of this Conversion Report).
Thus, no changes will be caused by the change of corporate form from Hannover Rück AG to an SE - subject to any different arrangement relating to the involvement of the employees. (n) Convening meetings and frequency of meetings
Under AktG, each member of the Supervisory Board can, upon stating the purpose and the reasons, require that the chairman of the supervisory board convene a meeting of the Supervisory Board without undue delay. If the meeting does not take place within two weeks, the member of the Supervisory Board or the Management Board can itself convene a meeting of the Supervisory Board (cf. Section 110 AktG). Neither the SE-Reg. nor the SEAG contain any provisions regarding the convening of meetings of the Supervisory Board. By virtue of the comprehensive reference provision in Article 9(1) lit. c) (ii) SE-Reg., the provisions applicable to public limited- liability companies (Section 110 AktG) apply in their entirety with the consequence that the conversion of Hannover Rück AG into an SE does lead to any changes.
In case of companies listed on the stock exchange, which also includes Hannover Rück AG and Hannover Rück SE, the Supervisory Board must hold two meetings in each calendar semester (Section110 Para. 3 Phrase 1 AktG). (o) Remuneration of Supervisory Board members, contracts with Supervisory Board members, granting of loans to Supervisory Board members
The provisions of the AktG regarding the remuneration of the Supervisory Board members, contracts with the Supervisory Board members and the granting of loans to Supervisory Board members (Sections 113 to 115 AktG) also apply to the SE on the basis of the comprehensive reference provision in Article 9(1) lit. c) (ii) SE-Reg. Whilst the rules for the remuneration of the Supervisory Board of Hannover Rück AG are stipulated in Article 12 of the Statutes of Hannover Rück AG, Article 14 of the Statute of Hannover Rück SE now stipulates that the remuneration for the members of the Supervisory Board is determined by the General Meeting.
The members of the first Supervisory Board of an SE shall – as is the case in a public limited-liability company - receive a remuneration under Section 113 Para. 2 AktG, which is in the discretion of the General Meeting as well. By way of the comprehensive reference made in Article 9(1) lit. c) (ii) SE-Reg., this ruling also applies to the SE. Accordingly, the remuneration of the first supervisory board of Hannover Rück SE has to be determined by the General Meeting resolving upon the formal approval of the actions of the members of the first Supervisory Board of
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Hannover Rück SE. 13.3 General Meeting
(a) Responsibilities of the General Meeting
The shareholders in a public limited-liability company exercise their rights concerning the matters of the Company in the General Meeting except to the extent provided otherwise in the law (Section 118 Para. 1 AktG). The members of the Management Board and the Supervisory Board shall attend the General Meeting (Section 118 Para. 2 Phrase 1 AktG). By virtue of Article 9(1) lit. c)(ii) SE-Reg. and/or Article 53 SE-Reg. this also applies to an SE with registered offices in Germany, with the consequence that the conversion of Hannover Rück AG into an SE does not lead to any changes.
Pursuant to Section 119 Para. 1 AktG, the General Meeting of a public limited- liability company – and by virtue of Article 52 of the SE-Reg. also the General Meeting of an SE - shall in the cases expressly specified by law and in the Statute resolve on:
the appointment of the Supervisory Board members;
appropriation of balance sheet profits;
formal approval of the actions of the Management Board and the Supervisory Board;
amendments of the Statute;
measures on obtaining capital and reducing capital;
appointing auditors to examine circumstances involving the establishment of the company or its management;
winding-up of the Company.
The auditor of the financial accounts shall be appointed by the Supervisory Board according to the special regulation for insurance companies (Section 341 k Para. 2 HGB); this shall apply to Hannover Rück AG as well as to the future Hannover Rück SE. With regard to measures involving the management of the Company, the General meeting of a public limited-liability company, like an SE with registered offices in Germany, can generally only make decisions if requested to do so by the Management Board (cf. Section 119 Para. 2 AktG, Article 52 SE-Reg.). According to the rulings of the German Federal Court of Justice (Bundesgerichtshof, BGH), exceptions apply with regard to structural measures which formally fall within the scope of executive competence of the Management Board, but which, because of their importance, affect the rights of the shareholders. Presumably, this principle also applies to an SE with its registered office in Germany (cf. Article 52 SE-Reg.) with the consequence that in this regard, too, the conversion of Hannover Rück AG
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into an SE does not lead to any changes.
The decision-making authority of the General Meeting of a public limited-liability company as well as of an SE with its registered office in Germany further includes measures under transformation law pursuant to the Transformation Act (e.g. mergers, divisions, transfers of assets or changes of legal form).
In addition, in an SE, pursuant to Art. 52 SE-Reg., the General Meeting decides on matters for which it is given sole responsibility by the SE Regulation or by the legislation of the member state in which the SE's registered office is situated, which was adopted in implementation of the SE Employee Involvement Directive. These include, in particular, the transfer of the registered offices (Article 8 SE-Reg.) as well as the reconversion into a national public limited-liability company (Article 66(6) SE- Reg.). A reconversion decision may only be taken after two years have elapsed since the registration of the SE or after the first two annual financial statements have been approved. (b) Formal approval of the actions of the Management Board and the Supervisory Board
The General Meeting of a public limited-liability company decides on the formal approval of actions of the Management Board and the Supervisory Board within the first eight months of the fiscal year. With the discharge resolution, it approves the management of the Company by the members of the Management Board and the Supervisory Board (cf. Sections 119 Para. 1 no. 3, 120 AktG).
By virtue of the direct reference to the relevant articles 52, 53 SE-Reg., the aforementioned provisions of the Company Act generally also apply, without restriction, to the SE. The only exception is that the time period within which the General Meeting of the SE is to be held after the end of a fiscal year is six months, cf. Article 54(1) SE-Reg. (and not eight months, as is the case with a public limited- liability company under Section 175 Para. 1 Phrase 2 AktG or, under Section 341a Para. 5 Phrase 1, 2nd clause Handelsgesetzbuch “HGB” [Commercial Code], fourteen months in case of insurance companies exclusively engaged in reinsurance business). In this respect, the Statute of Hannover Rück SE, in Article 15 Subsection 3 now provides for the ordinary General Meeting to take place within the first six months after the end of each fiscal year instead of 14 months (as specified in Article 13 Subsection 3 of the Statutes of Hannover Rück AG) (cf. Section VI.2.15 of this Conversion Report). (c) Convening of the General Meeting
In an SE, the General Meeting may be convened at any time by the Management Board or the Supervisory Board in accordance with the national law applicable to public limited-liability companies in the member state where the SE's registered offices are situated (Article 54(2) SE-Reg.). Also, organisation and conduct of the General Meeting as well as voting procedures are generally governed by the provisions of corporation law (Article 53 SE-Reg.). However, the General Meeting of an SE is held at least once each calendar year within six months of the completion of the fiscal year (Article 54(1) SE-Reg.), whereas the General Meeting of a public limited-liability company has to be held within the first eight months of the fiscal year
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(cf. Section 175 Para. 1 Phrase 2 AktG) and the General Meeting of insurance companies exclusively engaged in reinsurance business is to be held within the first fourteen months of the fiscal year (cf. Section 341a Para. 5 Phrase 1 2nd clause HGB). As explained above already, the Statute of Hannover Rück SE has been adapted accordingly (cf. Article 15 of the Statute of Hannover Rück SE). (d) Convening of the General Meeting upon request of a minority / supplementing the agenda upon request of a minority
The General Meeting of a public limited-liability company has to be convened when shareholders whose shares in the aggregate reach 5 % of the share capital demand in writing that a meeting is convened, stating purpose and reasons (Section 122 Para. 1 AktG.) The shareholders have to prove that they have owned the shares for at least three months before the date of the General Meeting and that they will continue to hold the shares until the decision on the motion is made (i.e. until the authorization by a court or until the convening of the meeting by the Management Board) (Section 122 Para. 1 Phrase 3 in conjunction Section 142 Para. 2 Phrase 2 AktG). In the same way, shareholders whose shares, in the aggregate, represent 5% of the share capital or a proportionate amount of the share capital of Euro 500,000 may request that certain items for the adoption of a resolution of a General Meeting be included in the agenda and published (Section 122 Para. 2 AktG). If the request is not granted, a court can authorise the shareholders who have submitted the request to convene the General Meeting or to publish the item for the adoption of a resolution (Section 122 Para. 3 Phrase 1 AktG).
The convening of the General Meeting of an SE and the drawing-up of the agenda therefore may be requested by one or more shareholders, provided that his or their share in the share capital is at least 5% (Article 55(1) SE-Reg., Section 50 Para. 1 SEAG). The request that a General Meeting be convened has to state the items to be put on the agenda (Article 55(2) SE-Reg.). Upon a respective request, the court may authorize the shareholders to convene the General Meeting if the General Meeting has not been held within two months, at the latest, after the request for convening a General Meeting has been made (Article 55(3) SE-Reg.). Contrary to the provisions of corporation law in Sections 122 Para. 1 Phrase 3, 142 Para. 2 Phrase 2 AktG, a minimum holding period of three months before making the request is not a condition precedent for the request in the case of an SE.
The inclusion of one or more additional items in the agenda of the General Meeting of an SE may be requested by one or more shareholders, provided that his or their share in the share capital is at least 5% or a proportionate amount of Euro 500,000 (Article 56 SE Regulation, Section 50 Para. 2 SEAG). Procedure and the deadlines are, in the case of an SE with registered offices in Germany, governed by SEAG (cf. Article 56 Phrase 2 SE-Reg. in conjunction with Section 50 SEAG).
In effect, the SE Regulation and the SEAG essentially adopt the provisions of German corporation law with the consequence that, generally, the conversion of Hannover Rück AG into an SE does not lead to any changes. (e) Organisation and conduct of the General Meeting
With regard to the organisation and conduct of the General Meeting of an SE, the
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SE-Reg. makes reference, by virtue of the direct reference in Articles 53, 54(2) SE- Reg. and the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg., to the provisions of the German AktG. Thus, no changes will result from the conversion of Hannover Rück AG into an SE in this regard. (f) Rights of the shareholders to request information, to speak and to ask questions in the General Meeting.
In order to exercise their rights, the shareholders of a public limited-liability company require sufficient information about the company. The annual statement including the notes and the management report by the Management Board (Section 175 Para. 2 AktG) as well as the report by the Supervisory Board (Section 171 Para. 2 AktG) form the primary basis for this information. In addition, Section 131 AktG grants to each shareholder, regardless of the extent of his interest in the company, a right to information in the General Meeting to the extent this is necessary for the appropriate assessment of the agenda. This right to information is mandatory law and cannot be restricted by the Statutes (cf. Section 23 Para. 5 AktG). The Statutes or the rules of procedure for the General Meeting may however authorise the chair of the Meeting to set an appropriate time limit for the right to speak and to ask questions.Only in the cases listed in Section 131 Para. 3 AktG is the Management Board authorised to refuse to provide information. For example, such a right of the Management Board to withhold information exists in cases where divulging the information could lead, in the view of a reasonable businessman, to a significant disadvantage for the company.
Also, the shareholders of an SE have the right to be provided with sufficient information. By way of the comprehensive reference made in Article 9(1) lit. c) (ii) SE-Reg., the above provisions of corporation law also apply to the SE. Thus, the information and disclosure rights of the shareholders of Hannover Rück AG are in no way affected by the conversion of Hannover Rück AG into an SE. (g) Rules of Procedure of the General Meeting
The General Meeting of a public limited-liability company may lay down rules of procedure for itself concerning the preparation and conduct of the General Meeting with a majority of at least three quarters of the share capital represented at the casting of votes for this resolution (Section 129 Para. 1 Phrase 1 AktG). The right of the General Meeting to lay down such rules of procedure also applies to an SE (cf. Article 53 SE- Reg. in conjunction with Section 129 Para. 1 AktG).
While a majority of three quarters of the represented capital is required under AktG for passing the rules of procedure concerning the preparation and conduct of the General Meeting, passing such rules of procedure for an SE requires a majority of three quarters of the (validly) cast votes, as the provisions of AktG relating to the majority of votes casts required in each individual case have to be interpreted in compliance with SE-provisions. The SE-Reg. is, in contrast to AktG, generally geared to votes cast (cf. Articles 57, 58, 59 SE-Reg.). As shares with multiple voting rights are unknown in German law anyhow, and as the majority in the capital is equivalent to the majority of votes in a German public limited-liability company or SE, this change will have no effects in practice.
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(h) Simple resolutions of the General Meeting (not amending the Statutes/Statute)
Resolutions of the General Meeting of a public limited-liability company as a general rule require a majority of the cast votes (simple majority of votes), unless the law or the Statutes require a larger majority or have further requirements (Section 133 Para. 1 AktG).
The resolutions of the General Meeting of an SE are adopted by the majority of the votes cast unless the SE-Reg., AktG or other laws applicable for public limited- liability companies with registered offices in Germany require a larger majority (Art. 57 SE-Reg.). Thus, there is no change in the principle of a simple majority of votes for resolutions of the General Meeting as a result of the conversion of Hannover Rück AG into an SE (Article 18 Subsection 2 of the Statute of Hannover Rück SE and Section VI.2.18 of this Conversion Report). (i) Resolutions to amend the Statutes / Statute
In the case of amendments to the Statutes, the General Meeting of a public limited- liability company has to adopt a resolution which requires a majority of at least three quarters of the share capital represented at the casting of votes as well as a simple majority of the votes cast (Sections 179 Para. 2, 133 AktG). The Statutes may stipulate deviating majority requirements, however, with the proviso that in respect of a change of the corporate purpose only a larger majority of the share capital may be stipulated (Section 179 Para. 2 Phrase 2 AktG). Under Article 16 Subsection 2 of the Statutes of Hannover Rück AG and in the absence of mandatory legal provisions to the contrary, a simple majority of the share capital and a simple majority of votes cast shall be sufficient to amend the Statutes.
The SE Regulation and the SEAG stipulate majorities and requirements which deviate from the AktG: amendments of the Statute of an SE require a resolution of the General Meeting adopted with a majority of at least two thirds of the votes cast, provided that the legal provisions applicable to public limited-liability companies do not stipulate or allow for larger majority requirements (Article 59(1) SE-Reg.). Pursuant to Article 59(2) SE-Reg. in conjunction with Section 51 SEAG, the Statue of an SE can determine, contrary to this, that the simple majority of the votes is sufficient for resolutions amending the Statute if at least one half of the share capital is represented when the resolution is adopted. Pursuant to Section 51 Phrase 2 SEAG, this shall not apply to changes of the object of business of the SE, resolutions on the relocation of the registered offices pursuant to Article 8(6) of the SE-Reg. and to cases for which a higher capital majority is required by mandatory law. Therefore, those amendments of the Statute which according to the AktG already require a majority of three quarters of the share capital, also require a majority of three quarters of the votes (validly) cast in the case of an SE. In accordance with the SE Regulation which always uses majorities of votes cast and not capital majorities as the basis (Articles 57, 58, 59 of the SE-Reg.), the requirement of a three-quarter majority as a parameter is not based on the represented share capital any more, but on the votes cast.
The Statute of Hannover Rück SE makes use of the option granted by Section 51
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Phrase 1 SEAG, so that a simple majority of the votes cast suffices for a resolution on an amendment of the Statute provided that at least half of the share capital is represented and that no larger capital majority is required by mandatory law (cf. Article 18 Subsection 2 Phrase 2 of the Statute of Hannover Rück SE and Section VI.2.18 of this Conversion Report). (j) Preference shares without voting right / separate resolution
Neither the SE-Reg. nor the SEAG contain express provisions regarding preference shares. By virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE Regulation and the direct reference provision in Article 5 SE-Reg., the provisions under corporation law regarding preference shares (in particular, Sections 139 et seqq. AktG) apply, with the consequence that in this regard there are no changes in the case of an SE. (k) Special audit
By virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg. and the direct reference provision in Article 52 SE-Reg., the corporation law provisions regarding special audits (Sections 142, 258 AktG) apply; in this regard, the conversion of Hannover Rück AG into an SE does not lead to any changes. (l) Assertion of compensation claims against executive bodies of the Company / derivative suits
The SE Regulation and the SEAG do not contain any provisions regarding the assertion of compensation claims and/or derivative suits. By virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg., the provisions of AktG are generally applicable to an SE (Sections 147 et seqq. AktG). 14. Annual statement / consolidated financial statement
As regards the preparation of its annual statement and consolidated financial statements including the accompanying management report, and the auditing and publication of such financial statements, corporation law shall be applicable (Article 61 SE-Reg.). In addition, the provisions of corporation law and of the Commercial Code apply by virtue of Article 9(1) lit. c)(ii) SE Regulation and Article 52 Subsection 2 SE-Reg., and, due to the fact that the Company is listed at the stock exchange, also WpHG, with the consequence that the conversion of Hannover Rück AG into an SE does not lead to any changes in this regard.
15. Measures on obtaining capital and reducing capital
Generally, capital measures of the SE are subject to the provisions of corporation law.
16. Alteration of the relationship between several classes of shares to the detriment of one class (in general)
In the public limited-liability company, the alteration of the relationship between several classes of shares to the detriment of one class requires the approval of the affected shareholders in the form of a separate resolution adopted with a simple majority of the share capital and a simple majority of the votes cast (Section 179 Para. 3 Phrase 2 AktG in conjunction with Article 16 Subsection 2 of the Statutes of Hannover Rück AG).
In an SE with several share classes, any resolution of the General Meeting additionally requires a separate voting of the group of shareholders whose specific rights are affected by the resolution
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(Article 60(1) SE-Reg.). In this regard, the same majority requirements apply as are applicable to a resolution which affects the specific rights of the respective class of shares, i.e. which is detrimental to them (Article 60(2) SE-Reg.).
In so far, the conversion of Hannover Rück AG into an SE does not lead to any changes, especially since Hannover Rück AG presently has only issued one class of shares.
17. Invalidity of resolutions of the General Meeting and of the approved annual statements / special audit because of an inadmissible undervaluation
With regard to invalidity of resolutions of the General Meeting (Sections 241 et seqq. AktG), invalidity of the approved annual statements (Sections 256 et seq. AktG) and the special audit because of an inadmissible undervaluation (Sections 258 et seqq. AktG), the AktG contains specific provisions for the public limited-liability company which are also applicable to the SE, by virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE-Reg..
A separate provision applies to the SE in the context of avoidance of a resolution on the appointment of employee representatives to the Supervisory Board.
At least in cases where the subsidiary regulation by operation of law applies, the unlawful bringing about of election proposals for the employee representatives on the Supervisory Board may only be asserted pursuant to the national provisions of the member states regarding appointments in respect of the seats allocated to them. Therefore, with regard to domestic employee representatives, pursuant to Section 37 Para 2 SEBG the election of a Supervisory Board member representing employees may be challenged where substantive provisions concerning the right to vote, eligibility for election or the election procedure have been infringed and such infringement has not been remedied, unless the result of the vote could not be altered or influenced by the infringement. Such challenges may be asserted by those persons who are entitled to submit a motion for the dismissal of employee representatives from the Supervisory Board (cf. Section 37 Para. 1 Phrase 2 SEBG), by the SE works council and the Management of the SE. Any action for avoidance has to be lodged within one month following the appointment resolution of the General Meeting.
18. Winding- up and declaration of nullity in respect of the Company
With regard to the winding- up, liquidation, insolvency, cessation of payments and similar procedures, an SE is governed by the legal provisions applicable to a public limited-liability company; this includes the provisions relating to the adoption of resolutions by the General Meeting (Article 63 SE-Reg.) with the consequence that the conversion of Hannover Rück AG into an SE does not lead to any changes.
However, in contrast to a public limited-liability company, a resolution to transfer the registered offices to another member state does not constitute a winding-up resolution in the case of an SE, since the transfer of the registered offices of an SE into another member state is permitted by Article 8 SE-Reg.. The transfer of the registered offices is subject to a resolution of the General Meeting requiring the same majority applicable to amendments of the Statute. The SE has to offer any shareholder whose declaration of objection to the transfer resolution is recorded in the minutes of the General Meeting to acquire his shares against payment of an adequate cash compensation (Section 12 Para. 1 Phrase 1 SEAG).
19. Affiliated and associated companies
The German law on corporate groups is also generally applicable to an SE. Pursuant to the prevailing opinion, this also applies to a controlled SE. Therefore, in the event of the conclusion of a control and/or profit and loss transfer agreement, the outside shareholders are entitled to the rights to adequate compensation payments which are provided for in a public limited-liability
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company. This shall also apply if minority shareholders are excluded against an adequate cash compensation (Sections 327a et seqq. AktG). Therefore- pursuant to the prevailing opinion - the conversion of Hannover Rück AG into an SE does not lead to any changes.
20. Winding-up by court order
By virtue of the comprehensive reference provision in Article 9(1) lit. c)(ii) SE Regulation and Article 63 SE Regulation, the provisions governing the winding- up of public limited-liability companies by court order (Sections 396 to 398 AktG) also apply to an SE the registered offices of which are situated in Germany, with the consequence that the conversion of Hannover Rück AG into an SE does not lead to any changes in this regard.
21. Criminal law and civil penalty provisions
As the criminal law and civil penalty provisions under corporation law (Sections 399 et seqq. AktG) also apply to an SE (Section 53 SEAG and Article 9(1) lit. c) (ii) SE-Reg.), no changes will be brought about in this regard by the change of corporate form to an SE.
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VI. Explanation of the draft terms of conversion and the Statute of Hannover Rück SE and of the effects on shareholders and employees
22. Explanation of the Draft Terms of Conversion
22.1 Conversion of Hannover Rück AG to Hannover Rück SE (Article 1 of the Draft Terms of Conversion)
According to Article 1 of the Draft Terms of Conversion, Hannover Rück AG shall be converted into an European Company (Societas Europaea, SE) as provided for in Article 2(4) in conjunction with Article 37 of the SE-Reg..
With Hannover Finance (UK) Limited with registered offices in Virginia Water, Great Britain, established 28 October 1999 and registered by the Registrar of Companies for England and Wales under Company Number 3870985 on 29 October 1999, Hannover Rück AG has, for more than two years, disposed of an affiliate which is governed by the law of another EU Member State, i.e. Great Britain. The necessary requirement for a conversion of Hannover Rück AG into Hannover Rück SE under Article 2(4) of the SE-Reg. is thus fulfilled.
The conversion of Hannover Rück AG into a SE will neither cause the winding- up of the Company nor will it lead to the establishment of a new legal entity. The participation of shareholders in the Company will continue unchanged, due to the identity of the legal entity.
22.2 Effectiveness of the change of corporate form (Article 2 of the Draft Terms of Conversion)
The change of corporate form will become effective upon its entry in the commercial register of Hannover Rück AG. The registration can only be effected when the General Meeting has consented and when the employee involvement procedure has been completed.
22.3 Company name, registered offices, share capital and Statute of Hannover Rück SE (Article 3 of the Draft Terms of Conversion)
Article 3 of the Draft Terms of Conversion defines the company name, registered offices, share capital and Statute of Hannover Rück SE and clarifies that no cash exit offer has to be made.
Hannover Rück AG will in future bear the company name of Hannover Rück SE (Article 3.1 of the Draft Terms of Conversion). Inclusion of the element "SE" in the name is mandatory under Article 11(1) SE-Reg.. The registered offices of the Company will remain in Hannover, Germany, as before (Article 3.2 of the Draft Terms of Conversion).
Article 3.3 of the Draft Terms of Conversion contains stipulations regarding the share capital. Under this Article, the entire share capital of Hannover Rück AG in the amount existing at the time when the change of corporate form is entered in the commercial register (currently EUR 120,597,134) and the division into registered common shares applying at the time when the change of corporate form is entered in the commercial register (current number of shares: 120,597,134) shall become the share capital of Hannover Rück SE. The shareholders of Hannover Rück AG will hold an interest in the share capital of Hannover Rück SE in the same volume and with the same number of shares as the interest they held in the share capital of Hannover Rück AG immediately before the change of corporate form became effective. The
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accounting par value of each no-par share in the share capital shall be maintained in the same state as immediately before effectiveness of the change of corporate form.
Article 3.4 of the Draft Terms of Conversion stipulates that Hannover Rück SE shall be given the Statute attached to the Draft Terms of Conversion and forming an integral part of the Draft Terms of Conversion. The Statute is explained in detail in Section VI.2 of this Conversion Report. Article 3.4 of the Draft Terms of Conversion further stipulates that the share capital of Hannover Rück SE corresponds to the share capital of Hannover Rück AG (Article 5 Subsection 1 of the Statutes of Hannover Rück AG) at the point in time when the conversion of Hannover Rück AG into an SE becomes effective.
It is further stipulated that the amount of the conditional capital will be equal to the amount of the conditional capital of Hannover Rück AG (Article 6 of the Statutes of Hannover Rück AG) and that the amount of the authorised capital will be equal to the amount of the authorised capital of Hannover Rück AG (Article 7 of the Statutes of Hannover Rück AG) at the point in time when the conversion of Hannover Rück AG into an SE becomes effective.
In order to be able to make adjustments, if necessary, to the Statute of Hannover Rück SE regarding the share capital, the conditional capital and the authorised capital, the Supervisory Board of Hannover Rück SE is authorised and instructed to make any adjustments, if necessary, to the wording of the draft Statute of Hannover Rück SE prior to the registration of the change of corporate form. Accordingly, the provisions in Article 3.4 of the Draft Terms of Conversion will synchronise the sum of individual share amounts and the amount of the conditional and authorised capital of Hannover Rück AG with the corresponding capitalia of the future Hannover Rück SE. The amount of the conditional and/or authorised capital can thus only correspond to the amount of the conditional and/or authorised capital which represents the conditional and/or authorised capital stipulated in the Statutes of Hannover Rück AG at the point in time when Hannover Rück AG is converted into an SE. This ensures that the conditional and/or authorised capital of Hannover Rück SE will be the same in height as that of Hannover Rück AG.
Article 3.5 of the Draft Terms of Conversion clarifies that shareholders who object to the change of corporate form will not be offered any compensation in cash, as such an offer is not provided for by law.
22.4 Management Board (Article 4 of the Draft Terms of Conversion)
Article 4 of the Draft Terms of Conversion stipulates that the term of office of all Management Board members shall terminate when the change of corporate form becomes effective, i.e. when it is entered in the commercial register. The competences of the Supervisory Board of Hannover Rück SE under corporation law notwithstanding, it is to be expected that the acting members of the Management Board of Hannover Rück AG will be appointed as members of the Management Board of Hannover Rück SE. Current members of the Management Board of Hannover Rück AG are Ullrich Wallin (Chairman), André Arrago, Claude Chèvre, Jürgen Gräber, Dr. Klaus Miller, Dr. Michael Pickel and Roland Vogel.
22.5 Supervisory Board (Article 5 of the Draft Terms of Conversion)
The terms of office of all Supervisory Board Members shall end when the change of corporate form becomes effective, i.e. upon its entry in the commercial register. Unless other provisions have been laid down in an agreement on the involvement of employees in the SE, a Supervisory Board consisting of nine members will be established at Hannover Rück SE in accordance with Article 10 Subsection 1 of the Statute of Hannover Rück SE. It will consist of six shareholders' representatives and three employees' representatives.
Of the shareholder representatives in the Supervisory Board of Hannover Rück AG, the following members of are to be appointed as members of the Supervisory Board of Hannover Rück SE (cf.
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Article 10 Subsection 2 of the Statute of Hannover Rück SE): Herbert K. Haas, Dr. Klaus Sturany, Wolf-Dieter Baumgartl, Dr. Andrea Pollak, Dr. Immo Querner and Dr. Erhard Schipporeit.
22.6 Information on the procedure for establishing arrangements for employee involvement (Articles 6 and 7 of the Draft Terms of Conversion)
Article 6 of the Draft Terms of Conversion contains the particulars regarding the procedure by which the agreement regarding employee involvement is concluded pursuant to the SEBG and the national law implementing the SE Employee Involvement Directive in the other EU member states in which the Hannover Rück-Group has business activities. The provision further contains statements regarding the effects of the change of corporate form on the employees of the Hannover Rück-Group.
The information in the Draft Terms of Conversion and the explanations in this conversion report can only be provided from a perspective directed towards the future. The reason is that the invitation for the constituent meeting of the Special Negotiating Body which conducts the negotiations with the Management Board of Hannover Rück AG can only be issued after its members have been appointed, but no later than ten weeks after the proceedings have been initiated with the required notification pursuant to Section 4 Para, 2 SEBG (cf. Section 12 Para. 1 in conjunction with Section 11 Para. 1 Phrase 1 SEBG). Taking into account this ten-week period, this means that the negotiations can start from June 2012 onwards.
(a) Basic Principles for the regulation of the involvement of the employees (Article 6.1 of the Draft Terms of Conversion)
To safeguard the rights to participate in the decisions of the Company acquired by the employees of Hannover Rück AG, in the course of its conversion into a SE, a procedure regarding the involvement of employees in Hannover Rück SE is to be conducted. The objective is the conclusion of an agreement on the involvement of employees in the SE, in particular regarding the codetermination of the employees in the Supervisory Board of Hannover Rück SE and the procedure for the information and consultation of employees either by establishment of an SE works council or in another way to be agreed upon with the Management Board of Hannover Rück AG.
Section 6.1 of the Draft Terms of Conversion explains the basic principles for the regulation of the involvement of the employees of Hannover Rück SE and the related terms. (b) Actual situation and consequences of the change of corporate form (Article 6.2. of the Draft Terms of Conversion)
Article 6.2 described the actual situation of the Supervisory Board of Hannover Rück AG against the background of the applicability of the DrittelbG and contains information on the consequences of the change of corporate form.
Hannover Rück AG currently has a Supervisory Board with nine members one third of which, in accordance with the DrittelbG [One-Third Participation Act], is composed of employees’ representatives. Regarding the election of the three employees’ representatives on the Supervisory Board of Hannover Rück AG, presently only the employees of the group companies employed in Germany have the active and passive voting right in accordance with the DrittelbG.
Upon effectiveness of the conversion of Hannover Rück AG into an SE, the terms of
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office of the employees’ representatives as well as the terms of office of the shareholder representatives on the Supervisory Board of Hannover Rück AG shall terminate (see Article 5 of the Draft Terms of Conversion). The regulations of the DrittelbG regarding the representation of employees on the Supervisory Board of Hannover Rück AG will be replaced by the body of rules and regulations of the SEBG and the instructions contained therein. (With regard to the other consequences of the change of corporate form for the employees and their representative bodies refer below to Article 8 of the Draft Terms of Conversion). The shareholder representatives on the new Supervisory Board of Hannover Rück SE are already appointed in the Statute of Hannover Rück SE. The first employee representatives on the Supervisory Board of Hannover Rück SE will be appointed after the completion of the procedure for the involvement of employees.
Apart from the Supervisory Board of Hannover Rück AG and the Supervisory Board of E+S Rück, no other supervisory bodies exist in the other companies of the Hannover Rück-Group, where employees have codetermination rights.
In the companies of the Hannover Rück-Group in the EU, there are bodies representing employees in accordance with legal requirements under applicable national laws. In Germany, a works council with a total of 15 members exists for the joint operation of Hannover Rück AG and E+S Rück. Other employees‘ representations do not exist in Germany. In Sweden, employees‘ representation have been established under national law at "Hannover Rückversicherung AG Stockholm Branch", being a direct operation of the German Hannover Rückversicherung AG, as well as at "Inter Hannover Scandinavian Branch", being a Swedish operation of the English "International Insurance Company of Hannover Ltd.", which in turn is an indirect wholly-owned subsidiary of Hannover Rückversicherung AG. Other than that, no employees‘ representations are in place in the operations and companies of Hannover Rück AG in the EU member states concerned. (c) Initiation of the procedure for the involvement of the employees (Article 6.3 of the Draft Terms of Conversion)
Article 6.3 of the Draft Terms of Conversion describes the initiation of the procedure for the involvement of the employees by the statutory notification of the employees or, respectively, their relevant representative bodies. The procedure is to be initiated unrequested and without undue delay after the Management Board of Hannover Rück AG has disclosed the Conversion Plan. As a company governed by German law, Hannover Rück AG is required in this regard to file the disclosure with the competent commercial register in Hannover and to include in the filing the Draft Terms of Conversion attested by a notary public (cf. Section 12 Para. 1 HGB). The required information for the employees or their relevant representatives extends especially to (i) the identity and structure of Hannover Rück AG, the subsidiaries and operations affected by the establishment of the SE and how these are distributed among the Member States; (ii) the employee representative bodies existing in these companies and operations, (iii) the number of the employees employed in each of these companies and operations and the resulting total number of employees employed in a Member State, and (iv) the number of employees who are entitled to co-determination rights in the corporate bodies of these companies.
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(d) Constituent meeting of the Special Negotiating Body and negotiation procedure (Articles 6.4 and 6.5 of the Draft Terms of Conversion)
Article 6.4 stipulates the constituent meeting of the Special Negotiating Body. In accordance with Section 11 Para. 1 SEBG, employees or their relevant employee representative bodies shall elect or appoint the members of the Special Negotiating Body within 10 weeks after initiation of the procedure by means of the statutory notification of the employees or their relevant employee representative bodies.
This Special Negotiating Body has the task to negotiate with the management the procedural details of the involvement procedure and the determination of the participation rights of the employees in the SE.
Establishment and composition of the Special Negotiating Body are, in principle, governed by German law (Section 4 to Section 7 SEBG). Regarding the formation of an SE with registered offices in Germany, Section 5 Para 1 SEBG governs the allocation of the seats in the Special Negotiating Body to the individual member states of the EU in which Hannover Rück-Group has employees. Under this act, each member state of the EU and the EEA in which Hannover Rück-Group has employees is allocated at least one seat in the Special Negotiating Body. The number of seats allocated to a member state of the EU or the EEA is increased by 1 in each case where the number of employees employed in this EU-member state exceeds the thresholds of respectively 10%, 20%, 30% etc. of all European employees of Hannover-Rück-Group. For the purpose of seat allocation, the date of notification is the decisive date (refer to Section 4 Para. 4 SEBG), as a general rule. In the case on hand, there is no requirement to take account of employees’ representatives from member states of the EEA in addition to the employees’ representatives from member states of the EU, as Hannover Rück-Group has no employees in any member state of the EEA which is not a member state of the EU.
On the basis of the employee figures of Hanover Rück-Group in the individual member states of the EU as of 20 March 2012, seats shall the distributed as follows:
Country Number of % Delegates in the Special Employees (rounded) Negotiating Body
Germany 1,135 73.32 8
Great Britain 179 11.56 2
Sweden 121 7.82 1
France 48.17* 3.11 1
Ireland 45 2.91 1
Italy 11.75* 0.76 1
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Spain 7 0.45 1
Luxemburg 1 0.06 1
Total (8 countries) 1,547.92 100 16
In the countries marked with an “*”, employees are, according to the provisions of national law, also counted on a pro rata basis relating to their respective employment terms.
If, during the term of office of the Special Negotiating Body, changes in the structure of or number of employees in the participating companies occur, the composition of the Special Negotiating Body is to be amended accordingly (Section 5 Para. 4 SEBG).
With regard to the election or appointment, respectively, of the members of the Special Negotiating Body from the individual EU member states, the relevant national rules and regulations shall apply. Election or appointment of the members of the Special Negotiating Body as well as its organisation are, as a matter of principle, within the scope of responsibility of the employees and their respective representation bodies or the trade unions responsible for them
The members of the Special Negotiation Body apportionable to Germany must be elected by an election body in secret and direct election according to Section 8 Para. 1 Phrase 1 SEBG. Pursuant to Section 8 Para. 2 Phrase 2 SEBG, the representation by the election body also includes, in principle, those employees who have not elected a works council in their operations or enterprises. Two-thirds of the members of the election body, which must represent at least two-thirds of the employees, must be present at the election. The number of votes that each member of the election body has is equivalent to the number of employees each represents.
The manner according to which the composition of the election body is determined depends on which employee representative bodies already exist at the establishing company or a subsidiary or operation involved. In principle, those employee representative bodies which, in each case, exist at the highest level of works councils are to assume the task of the election. If - as in the case of the conversion of Hannover Rück AG to an SE - only one domestic corporate group is participating in the foundation of the SE, the election body shall consist of the members of the group works council or, if there is no group works council, of the members of the central works council or, if a company does not have a central works council, of the members of the works council or works councils.
In Germany, there is only one works council for the joint operation of Hannover Rück AG and E+S Rück; thus the election body will have to be established from among the 15 members of this works council.
Article 6.5 of the Draft Terms of Conversion stipulates that after the determination of all members of the Special Negotiating Body at the earliest, but no later than 10 weeks after the notification pursuant to Section 4 Para. 2 and Para. 3 SEBG (cf. Sections 12 Para. 1, 11 Para. 1 SEBG), the Management Board of Hannover Rück
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AG has to issue, without undue delay, the invitations for the constituent meeting of the Special Negotiating Body. On the day of the constituent meeting the negotiations begin, for which a duration of up to six months is provided for under statutory law. This may be extended to a period of up to one year by mutual consent of the parties to the negotiation.
The negotiation procedure shall also take place if the period for the election or appointment of individual or all members of the Special Negotiating Body is exceeded for reasons within the responsibility of the employees (Section 11 Para 2 Phrase 1 SEBG).
Members elected or appointed in the course of the negotiations may participate in the negotiating procedure at any time (Section 11 Para. 2 Phrase 2 SEBG). However, a member joining the on-going negotiations has to accept the current status of the negotiations at that time. There is no entitlement to an extension of the six-months’ negotiation period (Section 20 SEBG).
Target of the negotiations is the conclusion of an agreement on the involvement of employees in Hannover Rück SE. The subject matter of the negotiations is the codetermination of the employees in the Supervisory Board of Hannover Rück SE and the determination of the procedure for the information and consultation of employees either by establishment of an SE works council or otherwise. (e) Agreement on the involvement of the employees (Articles 7.1 to 7.3 of the Draft Terms of Conversion)
Articles 7.1 to 7.3 describe the minimum content of an agreement regarding the involvement of employees.
Any agreement concluded between the Management Board of Hannover Rück AG and the Special Negotiating Body regarding the involvement of employees for the purposes of employees’ codetermination in the Supervisory Board should, as a minimum, contain information on the number of employees’ representatives in the Supervisory Board, on the procedure applied to appoint these employees’ representatives as well as on their rights. As required by Article 40(3) SE-Reg., Section 17 Para. 1 SEAG, the Statute of Hannover Rück SE has to stipulate the number of members of the Supervisory Board or the rules for the determination of such a number. Article 10 Subsection 1 of the Statute of Hannover Rück SE provides for a Supervisory Board with nine members. The principle of one-third codetermination applicable up to now shall be maintained as a minimum standard (Section 21 Para 6 SEBG). Accordingly, the Statute of Hannover Rück SE provides that three of the members of the Supervisory Board are to be appointed by the General Meeting upon the proposal of the employees. The proposals concerning the appointment of employees shall be binding for the General Meeting. Further, more extensive participation rights may be stipulated in the agreement; the geographic allocation and mode of appointment have to be laid down in any event, however.
With regard to the rights of the employees’ representatives on the Supervisory Board, the framework for negotiations is restricted by the right of the Supervisory Board to organise its own affairs
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Furthermore, in the agreement between the Management Board and the Special Negotiating Body, a procedure is to be stipulated for the purpose of the information and consultation of employees in the SE. This may be achieved by establishing an SE works council or by another procedure stipulated by the parties to the negotiations which warrants the information and consultation of the employees of Hannover Rück SE. In the case of the establishment of an SE works council, the following has to be stipulated: the scope of application, the number of its members and the allocation of seats, authorisations and procedure for its information and consultation, the frequency of meetings, the financial and material resources to be made available, the date of entry into force and the duration of the agreement as well as the circumstances in which the agreement is to be renegotiated and the procedure to be applied in this process. Further, it is to be stipulated in the agreement that further negotiations concerning the participation of employees in the SE shall also be opened prior to structural changes to the SE.
Article 7.3 of the Draft Terms of Conversion stipulates that the conclusion of an agreement on the involvement of the employees requires a resolution of the Special Negotiating Body, which, as a general rule, adopts the resolution with a majority of its members who must also represent the majority of the employees represented. A resolution which results in a reduction of employee codetermination rights (cf. Section 15 Para. 5 SEBG) may not be adopted Further, no resolution may be adopted to the effect that no negotiations should be entered into or that negotiations already entered into should be broken off (cf. Section 16 Para. 3 SEBG). (f) Subsidiary regulation by operation of law (Article 7.4 and 7.5 of the Draft Terms of Conversion)
If no agreement regarding the involvement of employees can be reached within the stipulated period, a subsidiary regulation by operation of law shall apply, which is detailed in Articles 7.4 and 7.5 of the Draft Terms of Conversion; the latter may also be agreed upon from the outset as the content of the agreement.
For Hannover Rück SE, the subsidiary regulation by operation of law would have the consequence with regard to codetermination on the Supervisory Board that the principle of employee involvement on a one-third parity basis currently existing at the Supervisory Board of Hannover Rück AG would be continued for Hannover Rück SE on a mandatory basis, so that one third of the members of the Supervisory Board of Hannover Rück SE would consist of employees. However, the employees’ representatives would no longer be exclusively appointed by the employees in Germany, but by all employees in the member states of the EU. The employees would have to appoint, in accordance with the respective provisions applicable in these countries, their employees' representatives who are to be appointed by the General Meeting of Hannover Rück SE. If no appointment were made, the SE works council would have to make it.
On the basis of the current number of employees and their distribution by countries, one would, in accordance with Section 36 Para. 1 SEBG and on the basis of the d'Hondt highest averages method to be applied to the allocation, actually arrive at the following result for the Supervisory Board, the nine members of which have to be appointed on a one-third parity basis: all seats for which an employee
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codetermination right exists would be allocated to Germany and all other member states where employees of Hannover Rück SE or its affiliates are engaged would not be taken into account. In this event, the last allocable seat is, at the expense of the employees from Germany, to be allocated to one of the so far non-represented member states (cf. Section 36 Para 1 Phrase 3 SEBG). The SE Works Council shall decide on the allocation of seats. When appropriate, this allocation is to be made to the member state where the SE has its registered offices. As this would be Germany, this would however concern a member state which has not been left unconsidered in the allocation of seats before.
With regard to the protection of the right to information and consultation of the employees of Hannover Rück SE, the subsidiary regulation by operation of law would have the consequence that an SE works council would have to be established, the function of which would be to safeguard the right to information and consultation of the employees in the SE. It would be responsible for matters which affect the SE itself, one of its subsidiaries or one of its operations in other member states or which go beyond the powers of the competent bodies at the level of the individual member states. The SE works council would have to be informed and consulted on an annual basis on the development of business conditions and the perspectives of the SE as well as extraordinary circumstances. The composition of the SE Works Council and the election of its members would generally adhere to the provisions in force for the composition of the Special Negotiating Body and the appointment of its members.
In case the subsidiary regulation by operation of law applies, it is to be reviewed every two years during the existence of the SE by the management of the SE whether changes within the SE, its subsidiaries or its operations require an alteration of the composition of the SE works council. Besides, in case the subsidiary regulation by operation of law applies, four years after its establishment the SE works council has to resolve with the majority of its members whether negotiations shall be reopened with regard to an agreement for the involvement of employees within the SE or whether the existing regulations are to remain in place. If a resolution is adopted to enter into negotiations for an agreement regarding the involvement of employees, for the purpose of these negotiations the SE works council shall take the place of the Special Negotiating Body. (g) Costs of the Special Negotiating Body (Article 7.6 of the Draft Terms of Conversion)
Article 7.6 of the Draft Terms of Conversion stipulates furthermore that the necessary costs arising from the establishment and operation of the Special Negotiating Body will be borne by Hannover Rück AG and, after its formation, by Hannover Rück SE. The obligation to bear costs includes the material and personal expenses incurred in connection with the activities of the Special Negotiating Body, including the negotiations. In particular, rooms, material resources (e.g. telephone, telefax, required literature), interpreters and clerical staff required for meetings are to be provided and the travel and subsistence expenses of the members of the Special Negotiating Body are to be met.
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22.7 Other effects of the change of corporate form for employees and their representations (Article 8 of the Draft Terms of Conversion)
Article 8 of the Draft Terms of Conversion describes the effects of the change of corporate form for employees and their representations. This article states that the conversion will in principle not have any effects on the employees of the Hannover Rück-Group. Their employment contracts are being continued as before with the respective group company; in the case of the employees of Hannover Rück AG, their employment contracts are being continued unchanged with Hannover Rück SE. Equally, with the exception of the procedure for the involvement of employees described in Articles 6 and 7 of the Draft Terms of Conversion, the conversion of Hannover Rück AG into an SE does not have any consequences for the employees of Hannover Rück- Group and the individual companies in the Hannover Rück- Group with regard to the participation rights of the employees. The works council established for the joint operation of Hannover Rück AG and E+S Rück shall remain in office unchanged and the present labour-management agreements shall remain valid unaltered. Membership in the employers’ association for insurances and the corresponding collective bargaining coverage shall remain in force unaltered.
No other measures are contemplated or planned under the change of corporate form which would affect the situation of the employees.
22.8 No additional rights or special advantages (Article 9 of the Draft Terms of Conversion)
Article 9 of the Draft Terms of Conversion states that persons within the meaning of Section 194 Para. 1 No. 5 UmwG [Conversion Act] and/or of Article 20(1) Phrase 2 lit. f) SE-Reg. will not be granted any rights in addition to the issuance of shares referred to in Article 3.3 of the Draft Terms of Conversion and that no special measures are planned for these persons. Neither will persons within the meaning of Article 20(1) Phrase 2 lit. g) SE-Reg. be granted special benefits in the course of the conversion.
23. Explanatory notes regarding the Statute of Hannover Rück SE
Upon effectiveness of the change of corporate form, the former Statutes of Hannover Rück AG will be replaced by the Statute of Hannover Rück SE. The draft Statute is an appendix to the Draft Terms of Conversion and forms an integral part of it. Pursuant to Article 37(7) SE-Reg., the Statute of Hannover Rück SE is subject to the approval of the General Meeting of Hannover Rück AG resolving on the change of corporate form.
The draft Statute of Hannover Rück SE attached as an appendix to the Draft Terms of Conversion is based on the Statutes of Hannover Rück AG as amended on 03 May 2011. References to the Statutes of Hannover Rück AG are thus to be understood as references to the latest version of the Statutes of Hannover Rück AG of 03 May 2011. Changes compared to the Statutes of Hannover Rück AG have in the majority of cases been made when these were necessary or advisable on the grounds of SE-specific law. In a very limited number of cases, additional amendments were made which, irrespective of the change of corporate form, seemed to the advisable.
Hereinafter, the draft Statute for Hannover Rück SE is explained, mainly commenting on changes compared to the Statutes of Hannover Rück AG.
23.1 Article 1 of the Statute of Hannover Rück SE (company name, registered offices)
Upon effectiveness of the change of corporate form, the Company will, according to Article 1 Subsection1 of the Statute of Hannover Rück SE no longer bear the name "Hannover Rückversicherung AG", but "Hannover Rück SE". The alteration of the adjunct indicating the legal form is a mandatory requirement under Article 11(1) SE-Reg.. Apart from the change of the adjunct indicating the legal form, the name of the Company will change insofar, as the name
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"Rückversicherung" will be abbreviated to "Rück". After the change of corporate form, the registered offices of Hannover Rück SE will still be in Hanover.
23.2 Article 2 of the Statute of Hannover Rück SE (subject of the Company)
The subject of the company under Article 2 of the Statute of Hannover Rück SE will be to the same as that of Article 2 of the Statutes of Hannover Rück AG.
23.3 Article 3 of the Statute of Hannover Rück SE (fiscal year)
The fiscal year of the Company shall continue to be the calendar year.
23.4 Article 4 of the Statute of Hannover Rück SE (announcements and information)
Announcements by the Company shall – as provided by Article 4 of the Statutes of Hannover Rück AG before - be published in the electronic Bundesanzeiger [Federal Gazette]. Information to registered shareholders of the Company may be transmitted by electronic means.
23.5 Article 5 of the Statute of Hannover Rück SE (amount and division of the share capital)
Article 5 Subsection1 of the Statute of Hannover Rück SE contains the rulings concerning the share capital and its division in registered no-par shares. In this regard, the provisions in the Statute have not changed on account of the change of corporate form. Article 5 Subsection 1 Phrase 3 of the Statute of Hannover Rück SE has been added. It stipulates that the share capital of Hannover Rück SE shall be contributed by way of converting the former Hannover Rück AG into Hannover Rück SE while maintaining its identity. With regard to the application of the law of incorporation, such provision is required and therefore a corresponding note regarding the provision of the subscribed capital has been included in the Statute of Hannover Rück SE.
In order to achieve synchronisation of the sum of individual share amounts of Hannover Rück AG with those of Hannover Rück SE at the time when the change of corporate form becomes effective, the Draft Terms of Conversion stipulate expressly that the Supervisory Board of Hannover Rück SE is authorised and at the same time instructed to make any adjustments, if necessary, to the wording of the draft Statute of Hannover Rück SE prior to the registration of the change of corporate form.
The provisions on Article 5 Subsections 2 to 4 of the Statute of Hannover Rück SE correspond to the provisions in Article 5 Subsections 2 to 4 of the Statutes of Hannover Rück AG: Form and content of the share certificates, of the dividend coupons and the renewal talons shall be determined by the Management Board of Hannover Rück SE. One certificate can be issued for several shares. Entitlements of the shareholders to securisation of their share shall be excluded. Contributions to capital for registered shares need not be paid up in full if outstanding contributions towards the previous share capital are still payable. In the event of an increase in share capital, profit sharing of new shares can be determined in deviation of Section 60 AktG.
Regardless of the amendments which are specifically related to the change of corporate form, Article 5 Subsection 5 of the Statute of Hannover Rück SE was inserted. It stipulates that the registration of shares belonging to another person into the share register under one's own name shall be permissible under the following conditions:
in case of registration of no more than 0.2 % of the statutory share capital per registered party without any further requirements;
in case of registration of more than 0.2 % of the statutory share capital up to and including 3 % of the statutory share capital per registered party, registration shall be possible for the part of the share capital exceeding 0.2 % of the statutory share capital in so far as the data pertaining to the persons on behalf of whom the
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registered party holds more than 0.2 % of the statutory share capital have been disclosed to the Company according to Section 67, Para 1 Phrase 1 AktG;
registration shall be permissible up to a limit of 3 % of the statutory share capital per registered party.
In the absence of such a ruling, so-called nominee shareholders might be entered into the shareholder register without identifying who really owns the shares. This ruling thus hinders “stalking” of the Company.
23.6 Article 6 of the Statute of Hannover Rück SE (conditional capital)
Article 6 of the Statue of Hannover Rück SE is to the largest part identical with the provisions of Article 6 of the Statutes of Hannover Rück AG.
Under Article 6 Subsection 1 of the Statute of Hannover Rück SE, the share capital has been increased conditionally by up to EUR 60,298,567 by issuing 60,298,567 new, registered no-par shares carrying a profit pay-out entitlement as from the beginning of the fiscal year in which they were issued. The conditional capital increase serves the following purposes:
granting shares to the holders of convertible bonds and bonds with warrants which will be issued by Hannover Rück SE or subordinate group companies until 02 May 2016, based on the authorisation resolution under agenda item 8 which was adopted by the General Meeting of Hannover Rück AG of 03 May 2011;
granting shares to the holders of profit-sharing bonds with entitlements to convertible bonds and bonds with warrants which will be issued by Hannover Rück SE or subordinate group companies until 02 May 2016, based on the authorisation resolution under agenda item 9 which was adopted by the General Meeting of Hannover Rück AG of 03 May 2011, and
granting shares to the holders of profit participation rights with entitlements to convertible bonds and bonds with warrants which will be issued by Hannover Rück SE or subordinate group companies until 02 May 2016, based on the authorisation resolution under agenda item 10 which was adopted by the General Meeting of Hannover Rück AG of 03 May 2011.
The shares will be issued at the price stipulated as swap or subscription price in the three above- mentioned authorisation resolutions. The conditional capital increase shall only be executed to the extent that the holders of the above convertible bonds and bonds with warrants, profit-sharing bonds with entitlements to convertible bonds and bonds with warrants and of profit participation rights with entitlements to convertible bonds and bonds with warrants exercise their swap or subscription rights and/or fulfil the conversion obligations they may have.
This conditional capital of Hannover Rück SE will thus assume the functions of the conditional capital currently existing at Hannover Rück AG. Complementing the provisions of the Statutes of Hannover Rück AG, the provision has been added in Article 6 Subsection 2 of the Statute of Hannover Rück SE that in the event that Hannover Rück AG makes use of the conditional capital prior to its change of form to an SE, the respective authorised scope for the increase of share capital according to Article 6 section 1 of the Statute shall decrease and the sum of all individual share amounts as well as the information on the number of shares in Article 5 Subsection 1 of the Statute of Hannover Rück SE shall increase accordingly The amount of the conditional capital can thus as a maximum correspond to the amount of the conditional capital which represents the conditional capital stipulated in the Statutes of Hannover Rück AG at the point in time when Hannover Rück AG changes its corporate form. This ensures that the conditional capital of Hannover Rück SE will be the same in height as that of Hannover Rück AG.
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Accordingly, the amount of the conditional capital shown in Article 6 Subsection 1 of the Statute of Hannover Rück SE has to be adjusted if Hannover Rück AG increases its capital by utilisation of the conditional capital before the change of corporate form takes effect. Article 3.4 of the Draft Terms of Conversion contains an authorisation and instruction of the Supervisory Board of Hannover Rück SE to perform an amendment in the wording of the draft Statute of Hannover Rück SE to this effect.
23.7 Article 7 of the Statute of Hannover Rück SE (authorised capital)
Article 7 of the Statute of Hannover Rück SE is to the largest part identical with the provisions of Article 7 of the Statutes of Hannover Rück AG.
Under this Article, the Management Board of Hannover Rück SE is authorised to increase the share capital with approval of the Supervisory Board during the period up to 03 May 2015 by issuing new registered no-par shares one time or several times, in total, however by a maximum of EUR 60,298,567.00 against cash or non-cash contributions (Authorised Capital 2010/I). The Management Board is authorised to exclude subscription rights of shareholders, with approval of the Supervisory Board,
in order to exclude peak amounts from the subscription rights,
in as far as this is necessary to grant holders of subscription warrants, convertible bonds, option bonds, profit-sharing bonds and profit participation rights which have been issued by the Company or subordinate Group Companies subscription rights to new shares to the extent to which they would be entitled after exercising their conversion or subscription rights or after fulfilling their conversion obligations, or
if the amount allotted to the new shares in proportion to the share capital does not exceed 10 % of the share capital at the time this authorisation enters into force and at the time of the resolution concerning exercising of this authorisation and if the issue price does not essentially fall short of the market price. The amount allotted to shares which are issued or sold due to a relating authorisation under exclusion of subscription rights in direct or corresponding application of Section 186 Para. 3 Phrase 4 AktG is to be offset against the amount of 10 % of the share capital.
Furthermore, the Management Board of Hannover Rück SE shall, with approval of the Supervisory Board, be entitled to exclude subscription rights in the case of capital increases against contribution in kind if the exclusion is in the predominant interest of the company
The Management Board shall furthermore, with approval of the Supervisory Board, be authorised to define the further contents of the entitlements to shares and the conditions for the issuance of shares and use an amount of up to EUR 1,000,000.00 of the existing authorised capital by the issue of new registered no-par shares as employee shares. For this purpose, the Management Board shall be authorised, with approval of the Supervisory Board, to exclude the subscription rights of shareholders in order to issue the new shares to persons with an employment contract with the Company or one of its Group companies. The authorisation can be used once or several times, but only up to the limit of the authorised capital 2010/I.
This authorised capital of Hannover Rück SE will thus assume the functions of the authorised capital currently existing at Hannover Rück AG (authorised capital 2010/I). Complementing the provisions of the Statutes of Hannover Rück AG and corresponding to the newly inserted provision in Article 6 Subsection 2 of the Statute of Hannover Rück SE – the provision has been added in Article 7 Subsection 3 Statute of Hannover Rück SE - that in the event that Hannover Rück AG makes use of the authorised capital 2010/I prior to its change of form to an SE, the respective authorised scope for the increase of share capital according to Article 7 Subsection 1 and 2 of the Statute of Hannover Rück SE shall decrease and the sum of all individual share
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amounts as well as the information on the number of shares in Article 6 Subsection 1 of the Statute of Hannover Rück SE shall increase accordingly. This provision also clarifies that the authorised capital 2010/I shall only apply to Hannover Rück SE to the extent that it still exists at the time when the change of corporate form becomes effective, i.e. to the extent that it has not been utilised yet.
Accordingly, the amount of the authorised capital shown in Article 7 Subsection 1 of the Statute of Hannover Rück SE has to be adjusted when Hannover Rück AG increases its capital by utilisation of the authorised capital before the change of corporate form takes effect. The authorisation and instructions in Article 3.4 of the Draft Terms of Conversion applies here, too.
23.8 Article 8 of the Statute of Hannover Rück SE (Management Board: composition, term of office)
Article 8 Subsection 1 of the Statute of Hannover Rück SE relating to the composition of the Management Board corresponds to the provision in Article 8 Subsection1 of the Statutes of Hannover Rück AG, according to which the Management Board shall consist of no less than two persons and it shall be up to the Supervisory Board to determine the number of members of the Management Board. The Supervisory Board can furthermore appoint a Chairman of the Management Board (Article 8 Subsection 1 Phrase 2 of the Statute of Hannover Rück SE).
According to the newly inserted Article 8 Subsection 2 of the Statute of Hannover Rück SE, the members of the Management Board are appointed by the Supervisory Board for a term of five years maximum. Re-appointments for five years maximum shall be permissible. In an SE, the maximum term of appointments for members of statutory bodies is six years (Article 46(1) SE- Reg.), this has to be defined by the Statute. The newly inserted Article 8 Subsection 2 of the Statute follows the specifications for public limited-liability companies, however. These stipulate that the maximum term for appointments is five years (Section 84 Para. 1 AktG).
23.9 Article 9 of the Statute of Hannover Rück SE (Management Board: management, representation)
Due to the fact that the two-tier system is continued in Hannover Rück SE, no amendments are required in the Statute of Hannover Rück SE relating to the management and representation of Hannover Rück SE. Hannover Rück SE shall be represented jointly by two members of the Management Board or by one member of the Management Board jointly with one holder of power of procuration. Resolutions of the Management Board shall be passed with a simple majority of votes, unless a different majority is prescribed by mandatory law.
23.10 Article 10 of the Statute of Hannover Rück SE (Supervisory Board: composition, term of office, resignation)
Article 10 of the Statute of Hannover Rück SE stipulates the composition, appointment and term of office of the members of the Supervisory Board of Hannover Rück SE.
According to Article 10 Subsection 1 of the Statute of Hannover Rück SE, the Supervisory Board consists of nine members who are appointed by the General Meeting. Of these nine members, three shall be appointed on recommendation of the employees. The General Meeting shall be bound by the recommendations for the appointment of the employees' representatives. Other than that, the General Meeting shall not be bound to proposed candidates. In the event that an agreement on the involvement of employees, which was concluded under SEBG, provides for a different appointment procedure for representatives of the employees to the Supervisory Board, the employees' representatives shall be appointed according to the agreed appointment procedure.
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In compliance with Sections 21 Para. 6 Phrase 1, 35 Para. 1 SEBG, the former scope of codetermination of Hannover Rück AG by way of one-third parity shall be maintained in Hannover Rück SE subject to an agreement to this effect to be concluded within the framework of employee involvement.
In Article 10 Subsection 2 of the Statute, the six shareholder representatives of the first Supervisory Board are appointed until termination of the General Meeting providing formal approval for the first fiscal year of the Hannover Rück SE, but no longer than three years. The other three members of the first Supervisory Board shall be appointed upon recommendation by the employees, following the conclusion of the procedure relating to the involvement of the employees. Appointment of the members of the first Supervisory Board by Statute is permissible under Article 40(2) Phrase 2 SE-Reg..
Under Article 10 Subsection 3 of the Statute of Hannover Rück SE, the members of the Supervisory Board are appointed for a period ending upon termination of the General Meeting providing formal approval for the fourth fiscal year after commencement of their term of office, however, for no longer than six years. The fiscal year in which the term of office commences shall not be included in this calculation. This provision in the Statute takes up Article 46(1) SE- Reg., according to which the term of office of members of statutory bodies may amount to six years maximum and is to be stipulated in the Statute. To clarify that re-appointments are permitted irrespective of the new regulations, a clause to this effect has been included in the Statute of Hannover Rück SE (cf. Article 10 Subsection 3 Phrase 3 of the Statute of Hannover Rück SE).
The provisions regarding resignations from office as well as elections of successors under Article 10 Subsections 4 und 5 of the Statute of Hannover Rück SE correspond to the provisions in Article 9 Subsections 3 and 4 of the Statutes of Hannover Rück AG. In Article 10 Subsection 4 of the Statute of Hannover Rück SE, it was – independently of the conversion-specific amendments - only added that the Chairman of the Supervisory Board may choose to forgo adherence to the notice for resignation from office in the Supervisory Board.
23.11 Article 11 of the Statute of Hannover Rück SE (Supervisory Board: Chairman, deputy, committees)
The provisions relating to the Chairman, his deputy and the possibility to establish committees shall remain unchanged for Hannover Rück SE (cf. Article 10 of the Statutes of Hannover Rück AG).
23.12 Article 12 of the Statute of Hannover Rück SE (Supervisory Board: Convening, adoption of resolutions)
The provisions of the Statute relating to the convening of Supervisory Board meetings and the adoption of resolutions in the Supervisory Board will not change, due to the fact that the two-tier system is maintained.
Only Article 12 Subsection 4 of the Statute of Hannover Rück SE (see also Article 11 Subsection 4 of the Statutes of Hannover Rück AG), under which resolutions require the majority of votes cast, has been amended in so far as this shall only apply unless provided differently by law. This concerns only an adaption of wording for the purpose of clarification, which seemed to be advisable, independently of the change of corporate form.
23.13 Article 13 of the Statute of Hannover Rück SE (measures and transactions requiring approval)
Article 13 of the Statute of Hannover Rück SE, defining reservations of approval by the Supervisory Board for certain transactions of the Management Board, has been newly included.
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This provision is necessary, as Article 48 of the SE-Reg. prescribes that transactions requiring approval have to be listed in the Statute of the SE – although not conclusively.
Under Article 13 of the Statute of Hannover Rück SE, approval by the Supervisory Board is required for:
adoption of strategic principles and objectives;
adoption of the annual profit planning;
issuing or changing of investment guidelines;
concluding, changing or terminating of intercompany agreements as well as of essential cooperation agreements;
adoption of medium and long-term Company and partial group planning
In so far as the annual profit planning according to Article 13 Subsection 1 of the Statute of Hannover Rück SE contains transactions which require approval as defined by Article 13 Subsection 1 of the Statute of Hannover Rück SE, individual approvals by the Supervisory Board shall not be required if it has expressly declared them superfluous when adopting the annual profit planning (Article 13 Subsection 2 of the Statute of Hannover Rück SE).
The Supervisory Board may by way of a resolution identify other measures which shall require its approval. It may grant its approval in the form of a general authorisation for a certain group of identified business transactions. Such authorisation must name the exact transactions in question as well as give the purpose and the time frame during which they have to be executed.
23.14 Article 14 of the Statute of Hannover Rück SE (Supervisory Board: Remuneration)
Under the newly inserted Article 14 of the Statute of Hannover Rück SE, the remuneration of the Supervisory Board shall be determined by the General Meeting.
23.15 Article 15 of the Statute of Hannover Rück SE (General Meeting: Venue, convention, ordinary General Meeting)
Article 15 of the Statue of Hannover Rück SE is to the largest part identical with the provisions of Article 13 of the Statutes of Hannover Rück AG.
The General meeting shall – as stipulated before in Article 13 Subsection 2 of the Statutes of Hannover Rück AG - be convened at least 36 days prior to the day of the meeting.
According to Article 54(1) SE-Reg., the General meeting shall convene at least once per calendar year within six months after the end of the fiscal year. Accordingly, Article 15 Subsection 3 of the Statute of Hannover Rück SE now stipulates that the ordinary General Meeting which shall pass resolutions particularly concerning the formal approval of the actions of the members of the Management Board and the Supervisory Board as well as concerning profit appropriation shall take place within the first six months – and not within the first fourteen months as laid down in Article 13 Subsection 3 of the Statutes of Hannover Rück AG – after the end of each fiscal year.
23.16 Article 16 of the Statute of Hannover Rück SE (General Meeting: participation right and voting right)
The provisions governing participation in the General Meeting under Article 16 of the Statute of Hannover Rück SE are to the largest part identical with the provisions in Article 14 of the Statutes
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of Hannover Rück AG. Only those shareholders who have signed up in due time for participation in the annual shareholders' meeting in compliance with the provisions of the Statute shall be eligible for participation in the General Meeting and exercising voting rights.
Independently of the conversion-specific amendments, Article 16 Subsection 2 of the Statute of Hannover Rück SE has been inserted, which stipulates that voting can be exercised by proxy. The grant of authorisation, its withdrawal and proof of authorisation towards the Company have to be in written or electronic form. The details for such authorisations shall be announced together with the invitation to the General Meeting. This announcement may also contain a provision that the requirement of written or electronic form is alleviated. Section 135 AktG shall remain unaffected. This provision serves information purposes only and is useful insofar as the provision on the authorisation of proxies exercising voting rights follows immediately in the Statute (Article 16 Subsection 3 of the Statute of Hannover Rück SE).
23.17 Article 17 of the Statute of Hannover Rück SE (General Meeting: Chair, transmission of the meeting)
Article 17 of the Statute of Hannover Rück SE has - independently of the conversion-specific amendments of the Statute – been worded more clearly and amended insofar as the original second subsection of Article 15 of the Statutes of Hannover Rück AG was replaced by two new subsections. In Article 17 Subsection 2 of the Statute of Hannover Rück SE, the standard has now been laid down, that the chair of the meeting shall regulate the procedure of the General Meeting. He shall in particular determine the order in which the items on the agenda are discussed, the type, form and sequence of votes as well as the order of speakers. Under Article 17 Subsection 3 of the Statute of Hannover Rück SE, the chair of the meeting can allocate and restrict appropriate time for questions and speeches of the shareholders. He is particularly entitled to set, at the beginning of the General Meeting, an appropriate timeframe for the entire procedure of the General Meeting as well as for individual items on the agenda or for individual speakers.
23.18 Article 18 of the Statute of Hannover Rück SE (General Meeting: Adoption of resolutions)
Article 18 Subsection 1 and Subsection 2 Phrase 1 of the Statute of Hannover Rück SE correspond to the provisions on the adoption of resolutions in Article 16 of the Statutes of Hannover Rück AG. Under these provisions, every no-par share accords one vote in the General Meeting. Unless there are contradictory mandatory provisions of law, resolutions of the General Meeting shall be adopted by simple majority of the votes cast, and, in as far as a capital majority is required by law, by simple majority of the share capital represented at the time of adoption of the resolution.
A special, SE-specific ruling has been included in Article 18 Subsection 2 Phrase 2 of the Statute of Hannover Rück SE. Under this provision, a simple majority of the votes cast suffices for a resolution on an amendment of the Statute provided that at least half of the share capital is represented and that no larger capital majority is required by mandatory law. This provision is based on Article 59(2) SE-Reg. in conjunction with Section 51 SEAG, under which the Statue of an SE can determine that the simple majority of the votes is sufficient for resolutions amending the Statute if at least one half of the share capital is represented. Pursuant to Section 51 Phrase 2 SEAG, this shall not apply to changes of the object of business of the SE, resolutions on the relocation of the registered office pursuant to Article 8(6) of the SE-Reg. and to cases for which a higher capital majority is required by mandatory law.
23.19 Article 19 of the Statute of Hannover Rück SE (General Meeting: Elections)
In comparison to the original Article 17 of the Statutes of Hannover Rück AG, Article 19 of the Statute of Hannover Rück SE has essentially remained the same and now reads, in a clear
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language, that in cases where no majority can be achieved at the first voting in elections, a short- listed election between the two contenders who have achieved most votes shall take place. In the event of a tie within the framework of the short-listed election or in the event that more than two contenders have received the same number of votes at the first ballot, the lot drawn by the chairman shall decide.
23.20 Article 20 of the Statute of Hannover Rück SE (Advisory Board)
It is intended that Hannover Rück SE will continue to have the option of establishing an Advisory Board for the furtherance of business relations. Accordingly, the provisions in this respect have been taken over in Article 20 of the Statute of Hannover Rück SE. Independently of SE-specific amendments, the amended provisions now read that the Advisory Board is established by the Supervisory Board and that its members are appointed by the Supervisory Board. Furthermore, the Advisory Board advises the Management Board in fulfilling its tasks – it does not support it, as Article 18 of the Statutes of Hannover Rück AG still stipulates.
23.21 Article 21 of the Statute of Hannover Rück SE (annual financial statement)
The provisions governing the annual financial statement follow the rulings in Article 19 of the Statutes of Hannover Rück AG.
23.22 Article 22 of the Statute of Hannover Rück SE (profit appropriation)
The contents of Article 22 of the Statute of Hannover Rück SE have not changed when compared to Article 20 of the Statutes of Hannover Rück AG. Independently of the conversion-specific amendments, only the first phrase of Article 22 Subsection 3 of the Statute of Hannover Rück SE was amended for the sake of clarification and now reads that in the case of partially paid shares, dividends are calculated according to the amount of the paid contribution.
23.23 Article 23 of the Statute of Hannover Rück SE (Statute)
Article 23 of the Statute of Hannover Rück SE has not changed when compared to Article 21 of the Statutes of Hannover Rück AG.
23.24 Article 24 of the Statute of Hannover Rück SE (formation expenses)
Article 24 of the Statute of Hannover Rück SE has been newly inserted due to the change of corporate form and stipulates that formation expenses relating to the conversion of Hannover Rückversicherung AG to an SE shall be borne in full by the Company.
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VII. Effects of the Change of Corporate Form on Balance Sheet and Taxation
The conversion of Hannover Rück AG to an SE will neither cause winding-up of the Company nor will it lead to the establishment of a new legal entity (cf. Article 37(2) SE-Reg.). The legal and economic identity of the Company will be maintained. Preparation and other rulings concerning the annual financial statement, the management report as well as the consolidated financial statement and the group report shall be governed by the relevant German and international accounting rules, in particular IFRS, AktG, HGB and WpHG. The change of corporate form will not affect the balance sheet.
Hannover Rück AG assumes that the identity-maintaining conversion into an SE with registered offices in Germany will not be taxable under German tax legislation. Future distributions of dividends of Hannover Rück SE as well as sales of shares of Hannover Rück will, for the purposes of German tax on earnings, generally have the same tax effects on the shareholders of Hannover Rück SE after the change of corporate form as distributions of dividends and sales before the change of corporate form, unless applicable law or actual bases change. Upon conversion of Hannover Rück AG into an SE, neither capital transaction tax nor sales tax or stamp duty shall be due in Germany.
We recommend shareholders of Hannover Rück AG to consult their tax advisor with regard to any tax-relevant specifics which may apply to them.
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VIII. Securities and Trade in the Stock Exchange
The conversion of Hannover Rück AG into Hannover Rück SE will have no fundamental effects on the shares of the Company and their listing on the stock exchange.
Upon effectiveness of the change of corporate form, the shareholders of Hannover Rück AG will become shareholders of Hannover Rück SE and their rate of participation will remain unchanged. As in Hannover Rück AG before the change of corporate form, the shares of Hannover Rück SE will be registered no-par shares. As the shares of Hannover Rück AG, the shares of Hannover Rück SE will be securitised in one global certificate.
The shares of Hannover Rück AG are listed in the Xetra-trade as well as in all German stock exchanges. The shares of Hannover Rück AG are traded in the USA via American Depositary Receipts (ADRs).
The change of corporate form will have no effects on the listing of the shares of Hannover Rück AG on the stock exchange or their trading on stock exchanges. The shareholders of Hannover Rück AG may trade their Hannover Rück SE-shares in any stock exchange where the shares are currently listed, no changes will occur after the conversion of Hannover Rück AG into an SE. A new stock listing of the shares of Hannover Rück SE will not be required, because the Company will neither be wound-up nor newly established by the change of corporate form (cf. Article 37(2) SE- Reg.).
The Company will notify the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) [Federal Authority for Financial Services Supervision] and relevant registration authorities as per Section 30c WpHG of the changes going along with the change of corporate form, particularly the amendments to the Statute.
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Hannover, this 20 March 2012 Hannover Rückversicherung AG
The Management Board
Ulrich Wallin André Arrago Claude Chèvre
Jürgen Gräber Dr. Klaus Miller Dr. Michael Pickel
Roland Vogel
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