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Munich Re Report of the Board of Management
Prospects
The business year 1996/97 will be strongly marked by two important
additions to the Munich Re Group: the increase in our participation in DKV
Deutsche Krankenversicherung AG as the result of the exchange of certain
insurance shareholdings with Allianz AG Holding, and the acquisition of the
American Re Corporation.
As part of a share exchange with Allianz, resolved at the end of July 1996,
Munich Re is acquiring Allianz’s 51 % interest in DKV, so that together with
Hamburg-Mannheimer Versicherungs-AG it now holds 100 % of the shares.
In return Allianz is receiving, among other participations, our 50.3 %
holding in Hermes Kreditversicherungs-AG. This share exchange serves to
focus the activities of our direct insurance group even more strongly on
personal lines business. Including the premium income from DKV and
excluding that from Hermes, our direct insurers’ gross premiums will be
increased by approximately DM 4 billion; the exchange will have a positive
influence on the Group result.
Moreover, in mid-August 1996 agreement was reached with the Board of
Directors of the American Re and their chief shareholder, the investment
firm of Kohlberg Kravis Roberts & Co., on the acquisition of the American
Re by Munich Re. The total purchase price will be approximately
US$ 3.3 billion. Since this acquisition still has to be approved by the
Annual General Meeting of the American Re and by the competent
authorities, the agreements are not expected to be completed until the
end of this year. The American Re, whose estimated gross premium
income for 1996 totals approximately US$ 2.6 billion, recorded a profit for
the first half-year of US$ 97.5 million and, as things stand at present, is
expecting to achieve a very good result for the business year 1996 as a
whole.
In the reinsurance business of the Munich Reinsurance Company, we
again anticipate only a small rise in premium income in original currencies
for 1996. The growth, such as it is, will be attributable mainly to life and fire
business. If we also take into account the effects of changes in exchange
rates, the picture is likely to be rather more favourable, since – on the basis
of the current position – these would have the effect of increasing our
premium income this year, in contrast to last year.
As regards the reinsurance underwriting result, the experience of the first
nine months of 1996 shows the following trends:
Claims costs for natural catastrophes have so far again been relatively
small. Claims expenditure for other major loss events, however, is higher
than it was at the same time last year.
Our largest individual loss to date occurred in the space insurance sector.
On 14th February 1996 the launch of a Chinese Long March rocket
carrying the communications satellite Intelsat 708 failed, destroying the
insured satellite. Our share of this loss amounted to DM 60 million.
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