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Munich Re Report of the Board of Management
Investments, including deposits retained on
assumed reinsurance, in DM million
36,140
48,116
39,093
52,551
Reinsurers
Direct insurers
45,197
57,228
48,398
62,610
52,937
67,342
1992 1993 1994 1995 1996
Investments
The Munich Re’s outstanding financial strength, in addition to its
underwriting expertise, is a major contributory factor to the Group’s
success in both the reinsurance and the direct insurance business. Special
importance is therefore attached to ensuring that our investments are
managed both profitably and with a high degree of security.
For the Munich Re – which in its core business, reinsurance, seeks a
global balance of risks – the free international movement of capital and a
stable world currency system are particularly important if it is to be able to
meet its obligations everywhere and at all times.
In this connection we are following with close attention the current
endeavours to create a European single currency and are doing what we
can to promote these efforts. If this project is to meet with lasting success,
however, it is essential that the countries concerned should agree upon a
strict policy of economic stability which they are prepared to implement
consistently.
In the past business year the international capital markets were again
characterized by strong fluctuations in both interest rates and share prices,
as well as in currency exchange rates. The Deutschmark again increased
substantially in value against the other most important world currencies.
The changes in exchange rates had the effect of reducing the value of
the investment portfolios of both the Munich Re and its reinsurance
subsidiaries. Nevertheless, the Group’s investments rose by 8.4 % in
all to DM 120 billion.
We continue to attach particular importance to matching our underwriting
liabilities in foreign currencies with investments in the same or similar
currencies. We minimize our currency risks by balancing the currencies of
our assets and our liabilities to the greatest possible extent.
The quality of our investments remains as important as ever for us.
We continue to make limited use of derivatives, solely for hedging
purposes in respect of parts of the portfolio and for implementing planned
purchases and sales. In so doing, we observe strict rules as regards the
limitation of risks in terms of volume and the choice of top-quality business
partners. Adherence to these rules is continually monitored. The use of
derivative products had no appreciable effect on our investment result.
The most important capital markets for our business – besides Germany,
where owing to the large investment volume of the life insurers, more
than three quarters of the Group’s funds are invested – are the USA, the
UK and Canada, which together account for a total of 12 % of our
investments.
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