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