Munich Re Group Changing Gear gg
Munich Re Group Changing Gear gg
Munich Re Group Changing Gear gg
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<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
<strong>Changing</strong> g g <strong>Gear</strong><br />
October 2008
Successful business model<br />
A leading global insurer<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – Premium breakdown by segment (consolidated)<br />
€bn<br />
<strong>Re</strong>insurance<br />
Property-casualty<br />
13.4<br />
Total 2007<br />
€37.3bn<br />
<strong>Re</strong>insurance<br />
Life and health<br />
6.6<br />
1 Flaspöhler-Survey Europe 2008.<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Primary insurance<br />
Property-casualty<br />
56 5.6<br />
Primary insurance<br />
Life and health<br />
11.7<br />
<strong>Re</strong>insurance Primary insurance<br />
Leading expertise in non-life and life<br />
Germany-based with growing importance in<br />
reinsurance worldwide for 128 years<br />
selected European markets<br />
Full range of products: from traditional<br />
Multi-brand – single back office approach<br />
reinsurance to alternative risk financing<br />
Diversification as key success factor<br />
Best reinsurer overall by cedant vote<br />
Focused on personal lines business<br />
1<br />
<strong>Munich</strong> <strong>Re</strong> positioning<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> as only specialised health risk carrier with global scope<br />
Flexible combination of business model and products as unique selling proposition<br />
<strong>Group</strong> earnings and capital repatriation<br />
Building a track record<br />
EPS<br />
€<br />
8.01<br />
11.74<br />
15.06<br />
Integrated Health approach<br />
17.90<br />
2004 2005 2006 2007<br />
2010 TARGET<br />
>€18 on normalised basis<br />
1<br />
Payout ratio 2<br />
1 Adjusted pursuant to IAS 8. 2 Dividend and share buy-back divided by consolidated result excl. minorities.<br />
3 €1bn buy-back programme concluded in February 2007. 4 €2bn buy-back programme concluded in January 2008.<br />
%<br />
25<br />
26<br />
58<br />
29<br />
29<br />
3<br />
Dividend<br />
Share buy-back<br />
81<br />
29<br />
52<br />
2004 2005 2006 2007<br />
CAPITAL REPATRIATION 2007–2010<br />
<strong>Re</strong>turning >€8bn to shareholders<br />
4<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
2<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
3
Sustainable profitability<br />
Significant reduction of asset exposure<br />
Equity gearing 1<br />
178<br />
Extended view 2<br />
% as at end of period % as at end of period<br />
110<br />
87<br />
72<br />
71<br />
51<br />
36<br />
2002 2003 2004 2005 2006 2007 Q1–2<br />
2008<br />
114<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
1 Equity exposure (after hedges, net of tax and policyholder participation) divided by shareholders' capital (incl. net off-balance-sheet reserves, excl. goodwill).<br />
2 Incl. exposure in real estate, structured products and corporate bonds rated below AA. 3 After taking equity derivatives into account.<br />
Visible impact of derisking<br />
Cost of capital substantially reduced<br />
Investment risks<br />
Lowered equity gearing<br />
<strong>Re</strong>duced concentration risks<br />
Very moderate credit risk<br />
Asset-liability management<br />
State-of-the-art ALM<br />
Strong risk management<br />
Insurance risks<br />
Active cycle management<br />
High diversification<br />
Strong <strong>Group</strong> reserves<br />
Beta factor <strong>Munich</strong> <strong>Re</strong> and industry<br />
2.2<br />
20 2.0<br />
Source: Bloomberg raw beta to DJ Stoxx 600, total return, daily basis, 1-year. Status 31 July 2008.<br />
1.8<br />
1.6<br />
1.4<br />
1.2<br />
1.0<br />
0.8<br />
0.6<br />
90<br />
90<br />
2006 2007 Q1–2 2008<br />
Significantly<br />
reduced to<br />
below 0.8 for<br />
<strong>Munich</strong> <strong>Re</strong><br />
2004 2005 2006 2007 2008<br />
<strong>Munich</strong> <strong>Re</strong> DJ EuroStoxx Insurance<br />
Derisking reflected in significant<br />
reduction of cost of capital<br />
<strong>Munich</strong> <strong>Re</strong><br />
now well<br />
bbelow l industry<br />
i d t<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
4<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
5
Ambitious targets<br />
<strong>Changing</strong> <strong>Gear</strong> – Basis for profitable growth<br />
<strong>Changing</strong> <strong>Gear</strong> programme 2007–2010<br />
<strong>Munich</strong> <strong>Re</strong> targets 2010<br />
Most profitable among<br />
top 5 global reinsurers<br />
PROPERTY-CASUALTY RE<br />
Growth initiatives<br />
contribute >€250m net profit<br />
LIFE RE<br />
15% VANB<br />
average growth p.a.<br />
Ambitious growth target<br />
Best in class<br />
Capital efficiency<br />
Expansion in<br />
primary insurance<br />
Sustainable<br />
RoE 12–15%<br />
Ambitious targets<br />
<strong>Re</strong>alisation of untapped profit pools in p-c reinsurance<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Market leadership in<br />
International Health<br />
Average premium<br />
and profit growth<br />
>20% p.a.<br />
Net profit reinsurance property-casualty1 Underwriting result<br />
€bn €m <strong>Changing</strong> <strong>Gear</strong> growth initiatives<br />
Current reinsurance portfolio<br />
3<br />
2.6<br />
CAGR >10% ~665 665<br />
1.2<br />
0.4<br />
2.1<br />
2<br />
2004 2005 2006 2007<br />
1 Segmental view (not consolidated).<br />
2 Adjusted due to first-time application of IAS 19 (rev. 2004). <strong>Re</strong>sult impacted by –€1.5bn due to Atlantic windstorms KRW.<br />
3 Underwriting result: Net premiums written less losses, management expenses and deductions (e.g. commissions, fees).<br />
482<br />
~225<br />
~440<br />
2007 2010e<br />
<strong>Changing</strong> <strong>Gear</strong> growth initiatives<br />
>€250m net profit contribution in 2010<br />
2010 underwriting result estimation based on<br />
97% combined ratio<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
6<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
7
Ambitious targets<br />
<strong>Re</strong>alisation of untapped profit pools in life reinsurance<br />
Strong top-line growth<br />
Sustainable earnings …<br />
<strong>Re</strong>insurance life – Gross premiums written EV earnings (as % of EV BoY)<br />
€bn<br />
2.7<br />
Key considerations<br />
CAGR 9.4%<br />
6.0<br />
1998 2007<br />
Focus on mortality risk<br />
Geographically well diversified<br />
Target of 15% VANB-growth on average until<br />
2011<br />
Ambitious targets<br />
Primary insurance ERGO<br />
Ambitious targets to sustain excellent profitability<br />
PREMIUMS 2012<br />
>€23bn<br />
NET PROFIT 2012<br />
>€900m<br />
TEV MCEV<br />
15.6<br />
16 16.2 2 16 16.6 6<br />
14.7<br />
13.3 13.5<br />
11.3<br />
9.0<br />
9.8<br />
8.9<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
14.4<br />
11.8<br />
2002 2003 2004 2005 2006 2007<br />
Operating EV earnings Total EV earnings<br />
… and in hindsight conservative assumptions<br />
Experience variances/operating assumption changes<br />
€m<br />
TEV MCEV<br />
121<br />
Strengthen sales organisation<br />
<strong>Re</strong>align strategy in life<br />
Increase share of international business<br />
Optimise capital structure<br />
69<br />
124<br />
2002 2003 2004 2005 2006 2007<br />
RoE 2010<br />
66<br />
~13.5%<br />
RoE 2012<br />
~15%<br />
11<br />
88<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
8<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
9
Ambitious targets<br />
International Health – Leveraging our combined health experience<br />
€bn<br />
GWP 2006–2015e<br />
€bn<br />
1.7<br />
1.8<br />
CAGR +20%<br />
2.4<br />
7.0<br />
9.3<br />
2006 2007 2008e 2013e 2015e<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Our strengths<br />
Flexible combination of business model and<br />
products as a unique selling proposition<br />
Outstanding knowledge and experience in<br />
health insurance and reinsurance<br />
2007 and 2008 achievements provide<br />
solid basis for sustainable growth<br />
Going forward,<br />
we will focus our efforts on<br />
successfully implementing ongoing initiatives,<br />
above all the integration of Sterling<br />
identifying additional growth opportunities<br />
Average premium and profit growth >20% p.a. until 2015<br />
Capital management - Milestones<br />
Focus on efficient capitalisation<br />
Derisking<br />
initiative<br />
started<br />
Change to<br />
flexible<br />
dividend<br />
policy 1<br />
Introduction<br />
of RoRaCtarget<br />
(15%)<br />
First buyback<br />
programme<br />
€1bn<br />
CHANGING GEAR<br />
<strong>Re</strong>turning more<br />
than €8bn to<br />
shareholders until<br />
20102 Subordinated bond issue<br />
€1.5bn<br />
First part (€2bn) of current<br />
buy-back programme finalised<br />
Second part (€1bn until AGM<br />
2009) in execution<br />
1 At least 25% of net profit.<br />
2 At least €1bn dividend per year plus share buy-back programme >€5bn. Commitment to €5.50 minimum dividend per share for financial year 2008.<br />
Ongoing capital management to ensure high profitability<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
10<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
11
Summary<br />
Mid-term<br />
targets<br />
Backup<br />
Value-adding integrated business model<br />
covers full value chain of risks<br />
Diversification and sophisticated asset asset-liability liability management<br />
are cornerstones of our strategy<br />
Excellent financial strength<br />
allows participation in market opportunities<br />
Capital management and cycle management<br />
are key to our future success<br />
Current market developments provide<br />
unique q opportunity pp y<br />
Aim to achieve<br />
>€18 EPS in 2010<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Clear commitment to RoRaC target<br />
at least 15% over the cycle<br />
<strong>Group</strong> 14<br />
<strong>Re</strong>insurance 28<br />
Primary insurance 40<br />
International health 45<br />
Financial reporting Q1–2 2008 46<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
12<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
13
Backup: <strong>Group</strong><br />
Key figures of <strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Updated guidance for consolidated result in 2008<br />
Guidance for 2008<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Consolidated result well above €2.0bn (RoRaC well above 10%), below previously envisaged range of<br />
€3.0–3.4bn<br />
Gross premiums written expected to be unchanged in the range of €36.0–37.5bn<br />
(given stable currency environment)<br />
Combined ratio in reinsurance of 98%, thereof NatCat 6.5% (achievable only if major claims below<br />
expectations)<br />
Combined ratio primary insurance below 95%<br />
RoI target: 4.5% on a sustainable basis; in 2008 €18 by 2010 confirmed<br />
RoRaC of at least 15% over the cycle<br />
Backup: <strong>Group</strong><br />
Key figures of <strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Significant improvement in profitability<br />
RoE<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Mid-term perspective to stand<br />
% %<br />
9.5<br />
12.5<br />
14.1<br />
15.3<br />
RoE<br />
ERGO<br />
Dividend<br />
1 2004 2005 2006 2007 1<br />
2004 2005 2006 2007<br />
1 Adjusted owing to IAS 8.<br />
TARGET<br />
~12% RoE as side consideration<br />
7.4<br />
21.0<br />
TARGET<br />
21.4<br />
Sustainable RoE 12-15%<br />
16.3<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
14<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
15
Backup: <strong>Group</strong><br />
Key figures of <strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> and our shares<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> 2007 20061 20051 2004 2003<br />
Gross premiums written €bn 37.3 37.4 38.2 38.1 40.4<br />
<strong>Re</strong>sult before amortisation of goodwill €m 5,078 5,477 4,143 3,025 1,284<br />
Taxes on income €m 808 1,648 1,014 712 1,752<br />
Consolidated result €m 3,937 3,519 2,751 1,887 –468<br />
Thereof attributable to minority interests €m 83 94 72 54 –34<br />
Investments €bn 176.2 176.9 177.2 178.1 171.9<br />
<strong>Re</strong>turn on equity % 15.3 14.1 12.5 9.5 –3.0<br />
Equity €bn 25.5 26.3 24.3 20.5 19.3<br />
Off-balance-sheet reserves2 €bn 0.6 1.9 2.6 3.2 1.8<br />
Net technical provisions €bn 152.4 153.9 154.0 154.3 147.5<br />
Staff at 31 December 38,634 37,210 37,953 40,962 41,431<br />
Our shares 2007 2006 2005 2004 2003<br />
Earnings per share € 17.90 15.051 11.70 8.01 –2.25<br />
Dividend per share € 5.50 4.50 3.10 2.00 1.25<br />
Amount distributed €m 1,124 988 707 457 286<br />
Share price at 31 December € 132.94 130.42 114.38 90.45 96.12<br />
Market capitalisation at 31 December €bn 29.0 29.9 26.3 20.8 22.1<br />
No. of shares at year-end (ex own shares) m 207.8 225.6 228.0 228.5 229.1<br />
1 Adjusted pursuant to IAS 8.<br />
2 Including amounts attributable to minority interests and policyholders.<br />
Backup: <strong>Group</strong><br />
Dividend<br />
Sustainable growth for half a century<br />
0.368<br />
Main intention: Dividend continuity Dividends linked to earnings<br />
CAGR: 15.4% 1<br />
Sustainable dividend growth for half a century<br />
1969 was the only year with decreased dividend<br />
All other 50 years with stable or increased dividend<br />
0.8 1.9 3.4 5.1 9.6<br />
18<br />
30<br />
34<br />
72<br />
286<br />
221<br />
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2008<br />
Year of dividend payment 2<br />
1 Excl. realised €1bn share buy-back.<br />
2 1998 <strong>Munich</strong> <strong>Re</strong> aligned business year to calendar year.<br />
457<br />
988<br />
707<br />
1,124<br />
From flexible<br />
dividend policy<br />
towards holistic<br />
capital management<br />
philosophy<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
16<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
17
Backup: <strong>Group</strong><br />
Market growth expectations<br />
Primary insurance and reinsurance will outperform GDP growth<br />
Expected annual compound growth rates for global markets 2006–2015<br />
~5.5%<br />
~6%<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
~7%<br />
GDP <strong>Re</strong>insurance (GWP) Primary insurance (GWP)<br />
<strong>Munich</strong> <strong>Re</strong> benefits from growing markets in primary insurance and reinsurance<br />
Source: <strong>Munich</strong> <strong>Re</strong> economic research.<br />
Backup: <strong>Group</strong><br />
Growth strategy<br />
Multiple approach in each segment<br />
Organic<br />
growth<br />
<strong>Re</strong>insurance International Health Primary insurance<br />
Alternative distribution<br />
channels, e.g. Bell &<br />
Clements Clements, MSP<br />
Underwriting<br />
Niches: e.g. Midland<br />
Analyse life re portfolios<br />
Product development<br />
Growth of underlying risk<br />
values, peak risks and<br />
accumulations<br />
Emerging markets<br />
Solvency II<br />
Investment in selected<br />
markets; bridging financial<br />
protection protection, services and<br />
provision of care, e.g.<br />
Cairnstone, Sterling Life<br />
Flexible and parallel<br />
use of primary and<br />
reinsurance brands and<br />
business models<br />
Exploit significant growth<br />
potential through unique<br />
selling proposition<br />
International expansion in<br />
selected countries with<br />
high growth/high margin<br />
potential, e.g. HDFC,<br />
Daum Direct, Bank Austria<br />
Creditanstalt Versicherung,<br />
Roanoke, HERO<br />
Selected investments in<br />
distribution channels<br />
Organic growth in Germany,<br />
focus on retail P-C,<br />
corporate pension,<br />
investment-type life<br />
products and<br />
supplementary health<br />
Selected partnerships (e.g. bancassurance cooperation with UniCredit)<br />
M&A<br />
activities<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
18<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
19
Backup: <strong>Group</strong><br />
Mergers and Acquisitions 2007<br />
Selective M&A as consistent execution of strategy<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Segment Target Country Share in % Price <strong>Re</strong>marks<br />
<strong>Re</strong>insurance Bell & Clements<br />
<strong>Group</strong><br />
UK 100% €49m Managing General Agent (MGA)<br />
International<br />
Health<br />
Primary<br />
insurance<br />
The Midland<br />
Company<br />
MSP Underwriting<br />
Ltd.<br />
1<br />
USA 100% USD 1.3bn (€0.9bn) 1 US specialty insurance<br />
UK 100% of MSP,<br />
47.3% of Lloyd<br />
syndicate 318<br />
€74m Lloyd syndicate focused on<br />
international property business<br />
Allfinanz Ireland 100% €49m Leading provider of software for life<br />
insurance companies<br />
Cairnstone Inc.<br />
Sterling Life<br />
Insurance Company<br />
USA From 25% to<br />
100%<br />
€18m Industry leader in US employer stop<br />
loss insurance<br />
USA 100% USD 352m (€243m) Leading provider of health benefits to<br />
Insurance Company US senior market<br />
HDFC General<br />
Insurance Ltd.<br />
Daum Direct Auto<br />
Insurance<br />
1 MG Transport sold for US$ 113m in 2008.<br />
Backup: <strong>Group</strong><br />
India 26% INR 2.35bn (€43m) Non-life insurance joint venture<br />
South<br />
Korea<br />
Mergers and Acquisitions 2008<br />
Selective M&A as consistent execution of strategy<br />
65% €69m Second largest direct motor insurer in<br />
South Korea<br />
Segment Target Country Share in % Price <strong>Re</strong>marks<br />
Primary HERO ERGO Life India 26% INR 520m (€8.8m)<br />
insurance Insurance Company<br />
Ltd<br />
1<br />
Life insurance joint venture<br />
Ltd.<br />
The Roanoke USA 100% USD 52.5m (€34m) Managing General Agent (MGA) and<br />
Companies Inc.<br />
broker focussed on marine insurance<br />
Bank Austria<br />
Creditanstalt<br />
Versicherung<br />
Austria From 29% to<br />
90% 2<br />
Not disclosed Activities in life and non-life insurance<br />
Isviçre Turkey From 75% to<br />
100%<br />
1 Total initial-paid-up capital INR 2,000m (€34m)<br />
2 Other shareholder: Bank Austria Creditanstalt 10%<br />
Not disclosed Offers property/casualty, life and<br />
health insurance<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
20<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
21
Backup: <strong>Group</strong><br />
Risk trading<br />
Active use of capital markets<br />
Portfolio optimisation<br />
(e.g. placement of peak risks)<br />
Source of additional capacity when retro<br />
market is exhausted<br />
Diversification of capacity<br />
Capacity for new risks<br />
Risk trading solutions<br />
Managing our own risks Managing our clients’ risks<br />
Risk warehousing<br />
<strong>Re</strong>tain risks, e.g. basis, timing risk<br />
Investment in ILS (active investor in the<br />
primary and secondary market)<br />
Utilisation of free capacity<br />
"Stockpiling" of favourable capacity<br />
Backup: <strong>Group</strong><br />
Risk trading<br />
Gaining momentum<br />
For<br />
clients<br />
For<br />
<strong>Munich</strong><br />
<strong>Re</strong>’s<br />
bbook k<br />
Transaction Closing Volume Perils<br />
covered<br />
MIDORI Ltd. 10/2008 US$ 260m Earthquake<br />
Japan<br />
Muteki Ltd. 05/2008 US$ 300m<br />
Earthquake<br />
Japan<br />
Lakeside <strong>Re</strong> 12/2006 US$ 190m Earthquake<br />
California<br />
Queen Street Ltd. 03/3008 €170m Windstorm<br />
Europe<br />
Nathan Ltd. 02/2008 US$ 100m Extreme<br />
mortality<br />
Carillon Ltd. Series 2 05/2007 US$ 150m Hurricane<br />
US<br />
Carillon Ltd. Series 1 06/2006 US$ 85m<br />
H i Hurricane<br />
US<br />
Aiolos Ltd. 11/2005 €110m Windstorm<br />
Europe<br />
Consulting and project management<br />
<strong>Re</strong>structuring and selling<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Structuring and placement support<br />
Risk fronting and transformation<br />
Interim capacity provider to avoid shortfalls<br />
Pooling Solutions (offering to whole markets)<br />
Extension of "buy and hold" strategy<br />
Combine and restructure risks<br />
(e.g. via certificate)<br />
Stripping of opaque covers<br />
Sell at favourable terms and conditions<br />
Generation of risk-based<br />
and fee income<br />
<strong>Munich</strong> <strong>Re</strong> is active investor in<br />
secondary d market k t<br />
Improvement of own risk/return<br />
profile and cost efficiency<br />
Establishment of placement entity<br />
licensed in EU and Switzerland<br />
Offering one-stop shopping to<br />
clients as sponsors and ILS<br />
investors<br />
<strong>Munich</strong> <strong>Re</strong>’s Risk Trading Unit is a recognised player in the ILS market<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
22<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
23
Backup: <strong>Group</strong><br />
Economic risk capital (ERC)<br />
Breakdown as at 31 December 2007<br />
€bn 31 December 2007<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Risk category1 Primary Diversification<br />
Ri Risk k segment t<br />
<strong>Group</strong> <strong>Re</strong>insurance insurance<br />
effect<br />
Property-casualty2 7.0 6.9 0.5 –0.4<br />
Life and health 3.3 2.7 0.9 –0.3<br />
Market 7.9 6.2 3.3 –1.6<br />
Credit 1.5 1.2 0.3 0.0<br />
Operational risk 1.2 0.8 0.4 0.0<br />
Simple sum 20.9 17.8 5.4 –2.3<br />
Diversification effect3 –4.4 –3.8 –0.9 0.3<br />
Total ERC 16.5 14.0 4.5 –2.0<br />
€4.4bn diversification effect<br />
between risk segments<br />
evaluated at <strong>Group</strong> level<br />
€2.0bn diversification benefit<br />
between reinsurance and<br />
primary insurance on a<strong>gg</strong>regate level<br />
1 Risk categories broadly based on refined "Fischer II" risk categories recommended for standardised industry disclosures.<br />
2 Includes credit reinsurance.<br />
3 Measured diversification effect depends on risk categories considered and explicit modelling of fungibility constraints.<br />
Backup: <strong>Group</strong><br />
Available financial resources (AFR)<br />
<strong>Re</strong>conciliation of AFR with IFRS equity as at 31 December 2007<br />
€bn<br />
25.5 0.7 7.8 –3.9 2 –0.7 29.4 4.9 34.3<br />
IFRS<br />
equity<br />
Valuation<br />
reserves<br />
Valuation<br />
adjustments<br />
P&C and<br />
L&H 1<br />
Goodwill and<br />
other<br />
intangibles<br />
Loss carryforward<br />
component of<br />
deferred tax<br />
assets<br />
Economic<br />
equity<br />
1 Includes discount of reserves and embedded value not recognised in IFRS equity.<br />
2 Rounding of this item adjusted to arrive at available financial resources rounded off in line with standard commercial practice.<br />
Hybrid capital Available<br />
financial<br />
resources<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
24<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
25
Backup: <strong>Group</strong><br />
Capital position<br />
Summary of economic capital disclosure<br />
Capital position<br />
€bn<br />
Available<br />
financial resources<br />
34 34.3 3<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
31.12.07 31.12.06<br />
34 34.3 3 (30 (30.9) 9)<br />
Economic risk capital1 16.5<br />
16.5 (18.4)<br />
Economic capital buffer 12.9 4.9 17.8 (12.5)<br />
Economic capital buffer after<br />
finalised share buy-back y and 11.4 4.9 16.3 (10.8) ( )<br />
dividends 2<br />
1 Based on requirements of internal risk model (175% of VaR 99.5%).<br />
Strong economic capitalisation increased<br />
throughout 2007 despite share buy-back programme<br />
2 Announced share buy-back of €2.0bn in 2007/2008, thereof €0.4bn in January 2008; €1.1bn dividend paid in April 2008.<br />
Backup: <strong>Group</strong><br />
Segment<br />
overview<br />
Hybrid capital<br />
Technical provisions<br />
Net case reserves and IBNR add up to €41.3bn as at 31 December 2007<br />
<strong>Re</strong>insurance<br />
property-casualty<br />
Primary insurance<br />
life and health<br />
5%<br />
€2,177m<br />
<strong>Re</strong>insurance<br />
life and health<br />
8%<br />
€3,338m<br />
Others<br />
5%<br />
Engineering<br />
6%<br />
Marine, aviation,<br />
Space<br />
7%<br />
Accident<br />
9%<br />
Percentages do not add up to 100% due to rounding.<br />
€41.3bn<br />
€31.2bn<br />
Primary insurance<br />
property-casualty<br />
11%<br />
€4,626m<br />
<strong>Re</strong>insurance<br />
property-casualty<br />
75%<br />
€31,203m<br />
Liability<br />
33%<br />
Motor<br />
22%<br />
Fire<br />
17%<br />
75% of total<br />
<strong>Munich</strong> <strong>Re</strong><br />
<strong>Group</strong> reserves<br />
located in p-c<br />
reinsurance<br />
Historically, risk<br />
margin has been<br />
~3%–5% of<br />
carried reserves<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
26<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
27
Backup: <strong>Re</strong>insurance<br />
Key figures <strong>Re</strong>insurance<br />
Overview<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
<strong>Re</strong>insurance1 2007 2006 2005 2004 2003<br />
Gross premiums written €bn 21.5 22.2 22.3 22.4 24.8<br />
Investments €bn 81 81.9 9 85 85.0 0 87 87.0 0 81 81.2 2 80 80.4 4<br />
Net technical provisions €bn 55.4 59.6 63.4 58.2 56.7<br />
<strong>Re</strong>serve ratio property-casualty % 272.0 280.9 295.8 243.8 205.0<br />
Large and very large losses (net) €m 1,340 854 3,293 1,201 1,054<br />
Thereof natural catastrophe losses €m 673 177 2,629 713 288<br />
Combined ratio property-casualty % 96.4 92.6 111.7 98.9 96.5<br />
Thereof natural catastrophe losses %-pts. 5.0 1.3 19.4 5.0 1.8<br />
1 Before elimination of intra-<strong>Group</strong> transactions across segments.<br />
Backup: <strong>Re</strong>insurance<br />
<strong>Re</strong>insurance portfolio<br />
Portfolio gives flexibility to react to trends and developments<br />
Total reinsurance business<br />
By region<br />
<strong>Re</strong>st of World<br />
North America<br />
8%<br />
24%<br />
Asia/Australasia<br />
11%<br />
<strong>Re</strong>st of Europe<br />
21%<br />
TOTAL GROSS WRITTEN PREMIUMS 2007 1<br />
€21.5bn<br />
1 Before elimination of intra-<strong>Group</strong> transactions across segments.<br />
UK<br />
21%<br />
Germany<br />
15%<br />
Thereof property-casualty reinsurance<br />
By type of reinsurance<br />
Facultative<br />
19%<br />
Non-proportional<br />
21%<br />
By line of business<br />
Proportional<br />
60%<br />
Other classes of business<br />
Fire<br />
13%<br />
28%<br />
TOTAL GROSS WRITTEN PREMIUMS 2007<br />
29<br />
1<br />
Accident<br />
4%<br />
Engineering<br />
Motor<br />
9%<br />
18%<br />
Marine,<br />
Aviation, Space<br />
Liability<br />
12%<br />
16%<br />
€14.2bn<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
28<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008
Backup: <strong>Re</strong>insurance<br />
<strong>Re</strong>insurance property-casualty<br />
Maximising profits in cyclical business environment<br />
Cycle management with CR 97% over the cycle<br />
<strong>Munich</strong> <strong>Re</strong>'s p-c market share and the cycle<br />
14%<br />
12%<br />
10%<br />
8%<br />
6%<br />
4%<br />
2%<br />
0%<br />
0<br />
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07<br />
<strong>Munich</strong> <strong>Re</strong> p-c market share CBS Non-Marine Index (1997 = 100)<br />
Source: <strong>Munich</strong> <strong>Re</strong> Economic <strong>Re</strong>search. 2006/07 index estimated by <strong>Munich</strong> <strong>Re</strong><br />
Backup: <strong>Re</strong>insurance<br />
200<br />
180<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
OBJECTIVE<br />
RoRaC<br />
at least 15%<br />
+<br />
Combined ratio<br />
97% over the cycle<br />
STRATEGY<br />
Unbiased evaluation of risk and price<br />
Leverage competitive position<br />
Active portfolio steering<br />
Develop less cyclical segments<br />
Strong commitment to cycle and capital management supports ambitious targets<br />
<strong>Re</strong>insurance property-casualty<br />
Product maturity is driving respective business model<br />
Product life cycle – Examples<br />
Product<br />
maturity<br />
Financial institutions risks<br />
Enterprise risks<br />
Agro g<br />
Insurance-linked securities<br />
<strong>Re</strong>takaful<br />
Micro(credit)insurance<br />
"Seed" "Grow"<br />
Tailor-made solutions for<br />
emerging risks, driven by<br />
actuarial knowledge and<br />
conceptual capability<br />
Insurance concepts either<br />
cover risks in buoyant<br />
business sectors<br />
(e.g. construction) or<br />
target potentially uninsured<br />
markets (e.g. agro)<br />
Engineering<br />
"Harvest"<br />
Space<br />
Standardisation<br />
Integrated reinsurance and<br />
service capacity is<br />
provided to professional<br />
clients to optimise their<br />
capital and business<br />
efficiency<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
30<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
31
Backup: <strong>Re</strong>insurance<br />
<strong>Re</strong>insurance property-casualty<br />
New business opportunities: Examples of concrete initiatives<br />
Execution of 15 defined growth initiatives<br />
Backup: <strong>Re</strong>insurance<br />
Specialty agency<br />
business models<br />
Urban risks<br />
Distribution<br />
power<br />
Risk<br />
know-how<br />
Traditional<br />
reinsurance<br />
Risk<br />
capacity<br />
Risk trading solutions<br />
Top initiatives deliver >€250m net profit in 2010<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Special enterprise<br />
risks<br />
<strong>Re</strong>insurance property-casualty<br />
<strong>Re</strong>newals ytd: New business priced to support <strong>Group</strong> targets<br />
% 100 –15.0 85.0 3.6 11.5 100.1<br />
€m 10,405 1,562 8,843 373 1,197 10,413<br />
Total renewable<br />
from 1 July 2007<br />
Cancelled <strong>Re</strong>newed Increase on<br />
renewable<br />
Change<br />
in renewed 4.2%<br />
Thereof<br />
Pure price –2.8%<br />
EExposure 13 13.9% 9%<br />
Share –5.9%<br />
New business Estimated<br />
outcome<br />
Agro<br />
Approx. 95% of total<br />
treaty property-casualty<br />
business included<br />
PPremium i volume l<br />
remains constant with<br />
a rate decrease of<br />
–2.8%<br />
Downcycle less<br />
pronounced than some<br />
suspected<br />
Discontinuation of<br />
inadequately priced<br />
business (e.g. US XL<br />
€160m, thereof majority<br />
in long-tail US casualty<br />
business)<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
32<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
33
Backup: <strong>Re</strong>insurance<br />
<strong>Re</strong>insurance property-casualty<br />
<strong>Re</strong>newals 2008: Focus on profitable business<br />
Superior risk analysis<br />
Best-in-class claims<br />
management<br />
PPre-quotation t ti audits dit<br />
Excellent modelling skills and<br />
market estimations due to<br />
unique data basis<br />
Backup: <strong>Re</strong>insurance<br />
Active cycle management<br />
in traditional core<br />
<strong>Re</strong>putation and security<br />
Established long-term partner<br />
with clear strategy<br />
EExcellent ll t fi financial i l security it<br />
High capacity to lead large<br />
programmes<br />
Flaspöhler report 2008<br />
Excellent brand confirmed in recent cedant survey<br />
NON-LIFE<br />
Best reinsurer overall<br />
professional factors 1 operating attributes 2<br />
Ranked 1 st<br />
in 5 out of 7 criteria<br />
Preferred non-life reinsurer in respect of...<br />
Ranked 1 st<br />
in 7 out of 8 categories<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Privileged access to clients<br />
High ratio of leading shares<br />
(app. 50%)<br />
EExcellent ll t market k t proximity i it<br />
through decentralised<br />
organisational structure<br />
Solution approach and service<br />
quality<br />
Excellent reactivity to client<br />
requirements during renewal<br />
Selective growth in<br />
less cyclical segments<br />
LIFE<br />
Best reinsurer overall<br />
line of business 3<br />
Ranked 1 st<br />
in 18 out of 21 lines<br />
1 Claims handling ability, client orientation, expertise and market knowledge, financial security, financial value, timely service, underwriting capabilities.<br />
2 Best technical capability, most creative, most flexible, most integrity, most intelligent, most overall excellence, most transparent, reinsurer you respect most.<br />
3 Agriculture, aviation, bouquet, clash, credit/surety non-proportional, credit/surety proportional, energy, engineering decennial, engineering EAR, CAR, EOL liability,<br />
EOL motor, EOL property (catastrophe), EOL property (per risk), facultative casualty, facultative property, facultative special lines, marine, proportional liability,<br />
proportional motor, proportional property, structured reinsurance.<br />
Source: 2008 Flaspöhler <strong>Re</strong>ports Europe Non-Life and Life.<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
34<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
35
Backup: <strong>Re</strong>insurance<br />
<strong>Re</strong>insurance peer group<br />
<strong>Re</strong>insurers ranked by net reinsurance premiums written<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Rank Company Country Net reinsurance premiums written<br />
Combined ratio<br />
US$ m<br />
%<br />
2007 2007<br />
1 <strong>Munich</strong> <strong>Re</strong> Germany 30,293 96.5<br />
2 Swiss <strong>Re</strong> Switzerland 27,707 92.3<br />
3 Berkshire Hathaway <strong>Re</strong> U.S. 17,398 87.7<br />
4 Hannover <strong>Re</strong> Germany 10,630 100.3<br />
5 Lloyd’s1,2 U.K. 8,363 81.7<br />
6 SCOR France 7,872 99.3<br />
7 <strong>Re</strong>insurance <strong>Group</strong> of America Inc. U.S. 4,906 N.M.<br />
8 Transatlantic Holdings Inc. U.S. 3,953 95.2<br />
9 Everest <strong>Re</strong> Bermuda 3,919 91.6<br />
10 Partner <strong>Re</strong> Bermuda 3,757 80.4<br />
11 Tokio Marine <strong>Group</strong>1 Japan 2,936 N.A.<br />
12 Korean <strong>Re</strong> Korea 2,797 100.4<br />
13 XL <strong>Re</strong> Bermuda 2,781 84.0<br />
14 Transamerica <strong>Re</strong> (Aegon) U.S. 2,173 N.M.<br />
15 Odyssey <strong>Re</strong> U.S. 2,089 95.5<br />
16 General Ins. Corp. of India India 2,085 112.8<br />
17 Sompo Japan Insurance Ltd. Japan 1,837 N.A.<br />
18 Mitsui Sumitomo Insurance Co. Ltd. Japan 1,806 N.A.<br />
19 White Mountains <strong>Re</strong> <strong>Group</strong> Bermuda 1,752 97.4<br />
20 Caisse Central de Réassurance France 1,643 49.9<br />
Total Top 20 140,697<br />
1 Net premiums written and combined ratio relate to reinsurance business only.<br />
2 The data presented is based on the published pro-forma accounts for the Market, which represent an a<strong>gg</strong>regation of all syndicates participating at Lloyd´s. As such, some premium<br />
included for Lloyd´s may also be included by other groups in this list that consolidate their Lloyd´s operations.<br />
Source: Standard & Poor's Global <strong>Re</strong>insurance Highlights, 2008 Edition.<br />
Backup: <strong>Re</strong>insurance<br />
<strong>Re</strong>insurance peer group<br />
Selected reinsurers' KRW losses – Value of diversification<br />
Company Shareholders' equity1 Estimated KRW net loss KRW loss as % of shareholders' equity<br />
US$ m<br />
US$ m<br />
PXRE <strong>Group</strong> 763 856 112.2<br />
Montpelier p <strong>Re</strong> 1,463 1,203 82.2<br />
IPC Holdings 1,743 1,005 57.6<br />
Platinum <strong>Re</strong> 1,273 530 41.6<br />
Endurance 1,987 802 40.3<br />
Aspen 1,608 595 36.9<br />
AXIS 3,167 1,124 35.4<br />
Everest <strong>Re</strong> 4,082 1,359 33.2<br />
<strong>Re</strong>naissance<strong>Re</strong> 2,823 892 31.5<br />
Lloyd’s 20,709 6,406 30.9<br />
Partner<strong>Re</strong> 3,482 900 25.8<br />
Hannover <strong>Re</strong> 3,445 758 22.0<br />
Arch Capital 2,503 381 15.2<br />
<strong>Munich</strong> <strong>Re</strong> 26,608 2,605 9.7<br />
Swiss <strong>Re</strong> 17,135 1,672 9.7<br />
1 As of June 30, 2005.<br />
Source: Standard & Poor's Global <strong>Re</strong>insurance Highlights, 2007 Edition.<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
36<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
37
Backup: <strong>Re</strong>insurance<br />
<strong>Re</strong>insurance life<br />
Global strategy life reinsurance<br />
Expansion in life reinsurance<br />
1 Risk capital.<br />
Strategic ambition<br />
"To achieve quantum growth in our earnings as measured by Embedded Value earnings and<br />
IFRS <strong>Re</strong>turn on Capital1 by developing and pursuing sustainable business models"<br />
Improve<br />
core business<br />
Backup: <strong>Re</strong>insurance<br />
Grow<br />
non-traditional<br />
business<br />
Our key strategies<br />
1 2 3 4<br />
Investigate<br />
alternative<br />
distribution<br />
Additional enabling initiatives<br />
I. Put in place superior financial model<br />
II. Put in place new organisational and cultural model<br />
Leading to 15% VANB average growth p.a.<br />
<strong>Re</strong>insurance life<br />
Strong profitability underscored by MCEV<br />
Distribution of life reinsurance GPW<br />
%<br />
Germany<br />
UK<br />
USA<br />
CCanada d<br />
Other<br />
33<br />
16<br />
19<br />
12<br />
20<br />
19<br />
17<br />
21<br />
20<br />
23<br />
2002 2007<br />
Total 2007: €5,959m<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Evaluate<br />
non-organic<br />
growth opportunities<br />
Key considerations<br />
Consolidation leading to higher pricing power<br />
Room for expansion in USA and other markets<br />
Benefit from demographic developments<br />
Continue profitable organic growth by taking<br />
advantage of changes in accounting (IFRS)<br />
and regulatory requirements (Solvency II)<br />
Well-balanced portfolio with predominant<br />
mortality risk<br />
Operating EEV earnings 2007: 11.8%<br />
Net premium 2007 by type of product<br />
Longevity<br />
4%<br />
Living benefits<br />
24%<br />
Non-proportional<br />
0%<br />
Mortality<br />
72%<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
38<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
39
Backup: Primary insurance<br />
Key figures primary insurance<br />
Overview<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Primary insurance1 2007 2006 2005 2004 2003<br />
Gross premiums written €bn 17.3 16.7 17.6 17.5 17.6<br />
Investments €bn 109.3 107.4 105.9 115.0 108.3<br />
Net technical provisions €bn 97.0 94.3 2 90.8 2 96.1 91.0<br />
<strong>Re</strong>serve ratio property-casualty % 121.4 124.9 113.1 116.8 114.5<br />
Combined ratio property-casualty % 93.4 90.8 93.1 93.0 96.4<br />
ERGO – Gross premiums written 2007 by region ERGO – New business 2007 by distribution channels<br />
% %<br />
Turkey<br />
2%<br />
Poland<br />
3%<br />
Belgium<br />
4%<br />
Spain<br />
3%<br />
R<strong>Re</strong>st t of f WWorld ld<br />
7%<br />
Ti Tied d agents t<br />
47%<br />
Italy<br />
Germany Other<br />
3%<br />
78% 2%<br />
1 Before elimination of intra-<strong>Group</strong> transactions across segments.<br />
2 Adjusted pursuant to IAS 8.<br />
Backup: Primary insurance<br />
Primary insurance property-casualty<br />
Attractive business mix focusing on personal lines<br />
ERGO 2007 – Gross premiums written<br />
Other<br />
Motor<br />
6.5%<br />
21.0%<br />
Legal expenses<br />
14.6%<br />
Liability<br />
14.9%<br />
Fire<br />
Personal accident<br />
17.8%<br />
25.2%<br />
German personal accident market 2007 1<br />
Market share in %<br />
26.9<br />
12.9<br />
7.7<br />
Allianz ERGO AMB<br />
Generali<br />
8.2<br />
R+V Public<br />
insurers<br />
6.2 4.7<br />
33.4<br />
Axa Other<br />
1 Includes pure risk policies as well as policies with premium refunds;<br />
ERGO's (Allianz's) share of pure risk policies: 90.3% (36.1%).<br />
Sources: Annual reports 2007, GDV year-end statistics (status 08/2008).<br />
Di Directt<br />
10%<br />
Broker<br />
20%<br />
Banks<br />
21%<br />
German market 2007 – Gross premiums written<br />
Other<br />
Motor<br />
13.3%<br />
35.4%<br />
Legal expenses<br />
5.5%<br />
Liability<br />
13.7%<br />
Fire<br />
Personal accident<br />
21.7%<br />
10.4%<br />
Key considerations personal accident<br />
Demands active sales process<br />
Portfolio with high degree of stability<br />
Low capital requirements<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
40<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
41
Backup: Primary insurance<br />
Primary insurance property-casualty<br />
Excellent combined ratios<br />
Combined ratio ERGO vs. market (German GAAP)<br />
%<br />
Claims<br />
ratio<br />
Expense<br />
ratio<br />
%<br />
93.4 94.0 92.3<br />
90.5 91.4<br />
59.9<br />
33.5<br />
94.4<br />
68.6 57.8 66.5<br />
58.2 68.6<br />
25.4 32.7 25.8<br />
33.2 25.8<br />
ERGO Market ERGO Market ERGO Market<br />
2005 2006 2007<br />
Combined ratios primary insurance segment<br />
100<br />
95<br />
90<br />
85<br />
96.4<br />
97.2<br />
1 101.4<br />
1<br />
99.9<br />
96.4<br />
93.4<br />
1999 2000 2001 2002 2003 2004 2005 2006 2007<br />
1 Mainly due to German flood losses and acquisitions in Italy and Eastern Europe.<br />
Backup: Primary insurance<br />
ERGO Germany life<br />
One of the leading players<br />
Ranking by market share in 2007<br />
Gross premiums written 1 €m %<br />
1 Allianz 13,217 16.8<br />
2 AMB Generali 8,972 11.4<br />
3 ERGO 5,959 7.6<br />
4 Talanx 5,154 6.5<br />
5 Zurich 3,994 5.1<br />
6 AXA 3,895 4.9<br />
7 R+V 3,678 4.7<br />
8 Debeka 2,875 3.6<br />
9 Württembergische 2,235 2.8<br />
10 Nürnberger 2,031 2.6<br />
.<br />
German market 78,902 100.0<br />
1 German GAAP.<br />
93.0<br />
93.1<br />
90.8<br />
GOAL<br />
<strong>Re</strong>turn to growth path<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Trade-off: Higher<br />
expense ratios<br />
than market due<br />
to different<br />
business and<br />
sales channel mix<br />
More than<br />
compensated for<br />
by lower claims<br />
ratios<br />
NEW BUSINESS<br />
Share of innovative and investment-type products<br />
30% by 2010<br />
GERMAN LIFE BUSINESS<br />
Increase German IFRS net profit<br />
75% by 2012<br />
NEW BUSINESS MARGIN<br />
VANB/PVNBP<br />
3.0% by 2010<br />
TREASURY APPROACH<br />
Increase profitability and safeguard shareholders<br />
against risk from business in force<br />
<strong>Re</strong>turn to growth path as one of our major objectives<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
42<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
43
Backup: Primary insurance<br />
ERGO Health<br />
Strong market position<br />
%<br />
1. Debeka 15.6<br />
2. ERGO 14.2<br />
GWP: €3,417m<br />
%<br />
1. ERGO 21.6<br />
2. Allianz 10.5<br />
3. Signal Iduna 8.6<br />
4. Debeka 7.2<br />
5. CONSAL 6.9<br />
Other comp. 45.1<br />
Market volume €4.7bn<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Market shares in Germany 2007: Comprehensive Market shares in Germany 2007: Supplementary<br />
3. Allianz 10.8<br />
4. AXA 7.6<br />
5. Signal Iduna 6.6<br />
Other comp. 45.3<br />
Market volume €24.1bn<br />
GWP: €1,023m<br />
Keys to success Growth factors in marketing<br />
Strong brand DKV<br />
Multi-channel distribution<br />
Market leader in European health market<br />
Cooperation with statutory health insurers<br />
DKV again elected best health insurance company by CCooperation ti with ith ZZurich, i h GGerling, li HVB HVB, DDeutsche t h BBank k<br />
German brokers<br />
Advertising for specific target groups, direct marketing<br />
Broad product portfolio<br />
including call centre (KarstadtQuelle Versicherungen)<br />
Comprehensive and supplementary insurance<br />
coverage of all types<br />
Creation and utilisation of new cross- and up-selling<br />
potentials<br />
<strong>Re</strong>cently new designed comprehensive insurance with<br />
expected excellent competitive position<br />
Wide spectrum of health services supplemented by<br />
care components<br />
Unique selling proposition "Think healthcare!"<br />
Tapping of new marketing channels<br />
(e.g. affinity channels)<br />
International Backup: International health Health<br />
Global health market<br />
Promising expectations<br />
Global health market – Market volume Main growth drivers<br />
€bn<br />
2,300<br />
3,150<br />
CAGR: ~6.0%<br />
4,150<br />
5400 5,400<br />
2000 2005 2010 2015<br />
Source: OECD Health Statistics, Compustat, Bloomberg<br />
Demographic g p<br />
development<br />
Medical<br />
improvements<br />
Lifestyle<br />
changes<br />
Economic<br />
situation<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> as the only specialised health risk carrier with global scope<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
44<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
45
Backup: Financial reporting Q1–2 2008<br />
Key figures Q1–2 2008 – Overview<br />
Satisfactory result impacted by capital markets<br />
GROUP<br />
Gross premiums written<br />
€m<br />
Q1 Q1–2 2<br />
2007<br />
Q1–2<br />
2008<br />
18,928<br />
18,857<br />
FX-driven decline in reinsurance<br />
offset by growth from acquisitions<br />
GROUP<br />
Investment result<br />
€m<br />
Q1–2<br />
5,646<br />
2007<br />
Q1–2<br />
3,263<br />
2008<br />
Significant impairments of<br />
equities and lower realised gains<br />
1 Incl. legal expenses.<br />
Backup: Financial reporting Q1–2 2008<br />
€m<br />
<strong>Re</strong>insurance<br />
life and health<br />
REINSURANCE<br />
Combined ratio property-casualty<br />
%<br />
Q1 Q1–2 2<br />
98.4<br />
2007<br />
Q1–2<br />
99.6<br />
2008<br />
Favourable combined ratio of<br />
95.4% in Q2<br />
GROUP<br />
Operating result<br />
€m<br />
Q1–2<br />
2007<br />
2,848<br />
Q1–2<br />
2008<br />
2,174<br />
Satisfactory underwriting result<br />
%<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
PRIMARY INSURANCE<br />
Combined ratio property-casualty 1<br />
Q1 Q1–2 2<br />
2007<br />
93.3<br />
Q1–2<br />
2008<br />
91.0<br />
Clearly below target of 95%<br />
GROUP<br />
Consolidated result<br />
€m<br />
Q1–2<br />
2007<br />
Q1–2<br />
2008<br />
2,132<br />
1,406<br />
<strong>Re</strong>duction owing to declining<br />
investment result<br />
Key figures Q1–2 2008 – Operating and consolidated result<br />
Satisfactory underwriting influenced by declining investment result<br />
<strong>Re</strong>insurance<br />
property-casualty<br />
<strong>Re</strong>insurance<br />
sub total<br />
Primary insurance<br />
life and health<br />
Primary insurance<br />
property-casualty<br />
Primary insurance<br />
sub total<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> 2<br />
Q1–2 2007<br />
Q1–2 2008<br />
ERGO dividend 1<br />
Operating result<br />
204<br />
243<br />
579<br />
690<br />
406<br />
289<br />
610<br />
532<br />
1,838<br />
1,878<br />
2,417<br />
2,568<br />
2,174<br />
2,848<br />
Consolidated result<br />
99<br />
118<br />
401<br />
551<br />
311<br />
1 Q1–2 2008 incl. dividend from ERGO of €947m (before taxes), thereof RI life and health: €180m, RI property-casualty: €767m.<br />
Q1–2 2007 incl. dividend from ERGO of €114m (before taxes), thereof RI life and health: €23m, RI property-casualty: €91m.<br />
2 Operating result Q1–2 2008 including asset management (€44m, Q1–2 2007 €68m) and consolidation (–€970m, Q1–2 2007 –€247m).<br />
Consolidated result Q1–2 2008 including asset management (€34m, Q1–2 2007 €47m) and consolidation (€–970m, Q1–2 2007 –€247m).<br />
206<br />
410<br />
324<br />
1,521<br />
1,467<br />
1,406<br />
1,922<br />
2,018<br />
2,132<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
46<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
47
Backup: Financial reporting Q1–2 2008<br />
Key figures Q1–2 2008 – Major claims<br />
Both man-made and NatCat losses significantly above 5-year average<br />
Q1–2 2008<br />
€m<br />
Q1–2 Q<br />
20041 Q1–2<br />
20051 Q1–2<br />
20062 Q1–2<br />
20073,4 Q1–2<br />
20083 20083 5-year<br />
average<br />
279<br />
412<br />
418<br />
615<br />
777<br />
500<br />
71<br />
Man-made Natural catastrophes<br />
279<br />
262<br />
349<br />
150<br />
544<br />
69<br />
352 425<br />
263 237<br />
1 Major losses over €5m each; excl. run-off-profits.<br />
2 Major losses over €5m each; incl. run-off-profits.<br />
3 Major losses over €10m each; incl. run-off-profits.<br />
4 Changed compared with earlier announcement.<br />
Backup: Financial reporting Q1–2 2008<br />
Q2 2008 4<br />
€m<br />
Q2 Q<br />
20041 Q2<br />
20051 Q2<br />
20062 Q2<br />
20073 Q2<br />
20083 20083 5-year<br />
average<br />
112<br />
161<br />
144<br />
77<br />
199<br />
139<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Man-made Natural catastrophes<br />
–9<br />
112<br />
100 61<br />
153<br />
–43 120<br />
120<br />
89 50<br />
Key figures Q1–2 2008 – Investment result<br />
Significant impact of impairments and lower net gain on disposals<br />
Q2 2008<br />
€m<br />
<strong>Re</strong>gular income 2,294 5.4%<br />
Other income/expenses –181 –0.4%<br />
Gains/losses on the disposal of investments 134 0.3%<br />
Write-downs/write-ups of investments –671 –1.6%<br />
Investment result 1,576 3.7% 2<br />
Q1–2 2008<br />
€m<br />
<strong>Re</strong>gular income 4,064 4.8%<br />
Other income/expenses –513 –0.6%<br />
Gains/losses on the disposal of investments 876 1.0%<br />
Write-downs/write-ups of investments –1,164 –1.4%<br />
Investment result 3,263 3.8% 2<br />
Major driver of deterioration 2<br />
1 <strong>Re</strong>turn on quarterly weighted investments (market values) in % p.a.<br />
2 <strong>Re</strong>turn incl. change in on- and off-balance-sheet reserves: –3.0% for Q1–2 2008 and –6.7% for Q2 2008. 3 For details, see next slides.<br />
3<br />
Major driver of deterioration 13 79<br />
<strong>Re</strong>turn 1<br />
<strong>Re</strong>turn 1<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
48<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
49
Backup: Financial reporting Q1–2 2008<br />
Key figures Q1–2 2008 – Investment result: Write-downs/write-ups of investments<br />
Impairments of equities partly offset by derivatives<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
€m Q1–2 2008 Q1–2 2007 Change<br />
Afs fixed-interest –30 0 –30<br />
Afs non-fixed-interest –2,163 47 –2,210<br />
Derivatives 1,128 –407 1,535<br />
Loans 0 –1 1<br />
<strong>Re</strong>al estate –93 –75 –18<br />
Other –6 –4 –2<br />
Total net write-downs/write-ups –1,164 –440 –724<br />
Main effects in Q1 Q1–22<br />
Afs non-fixed-interest<br />
Strong impact from non-cash related impairments on listed shares, thereof:<br />
Stocks hedged by derivatives ("hedge accounting"): ~ €1.0bn<br />
Due to "once impaired always impaired": ~€0.7bn<br />
Due to 20% or 6-month rule: ~€0.5bn<br />
Derivatives<br />
Impairments partly compensated for write-ups of derivatives<br />
Backup: Financial reporting Q1–2 2008<br />
Key figures Q1–2 2008 – Investment result: Gains/losses on the disposal of investments<br />
Lower gains on disposal<br />
€m Q1–2 2008 Q1–2 2007 Change<br />
Afs fixed-interest 226 –274 500<br />
Afs non-fixed-interest 137 1,753 –1,616<br />
Derivatives 455 –23 478<br />
Loans –3 –7 4<br />
<strong>Re</strong>al estate 33 582 –549<br />
Other 28 –18 46<br />
Total net realised gains 876 2,013 –1,137<br />
Main effects in Q1 Q1–22<br />
Afs non-fixed-interest/Derivatives<br />
Lower gains on disposal from equities compared to 2007 due to careful policy and exceptionally high<br />
gains in 2007<br />
Partly offset by derivatives result<br />
<strong>Re</strong>al estate<br />
Lower gains on disposal from real estate compared to exceptionally high gain in H1 2007<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
50<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
51
Backup: Financial reporting Q1–2 2008<br />
Key figures Q1–2 2008 – Investments<br />
Well-balanced portfolio mix<br />
Investment structure by asset classes (market values)<br />
€m %<br />
31.12.20042 181 5.9<br />
31.12.2005 3,4 180<br />
31.12.2006 179<br />
31.12.2007 176<br />
3132008 31.3.2008 171<br />
30.6.2008 166<br />
4.0<br />
3.6<br />
2.8<br />
28 2.8<br />
2.9<br />
Land and<br />
buildings<br />
11.7<br />
14.3<br />
16.4<br />
19.4<br />
21 21.4 4<br />
Loans Fixed-interest<br />
securities<br />
57.0<br />
56.0<br />
54.9<br />
54.2<br />
54 54.1 1<br />
Shares, equity funds and<br />
participating interests<br />
1 Deposits retained on assumed reinsurance, investments for unit-linked life, deposits with banks, investment funds (bond, property).<br />
2 After reclassification of owner-occupied properties of <strong>Munich</strong> <strong>Re</strong>insurance Company to other assets.<br />
3 After reclassification of owner-occupied properties of <strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> to other assets.<br />
4 Decrease of €13.2bn in assets (market values) due to sale of Karlsruher in Q4 2005.<br />
5 After taking equity derivatives into account: 6.8%.<br />
Backup: Financial reporting Q1–2 2008<br />
22.1<br />
Decrease due to strong euro and write-downs of equities<br />
Key figures Q1–2 2008 – Fixed-interest investments<br />
Careful expansion into products with good quality<br />
Fixed-interest portfolio 1<br />
Structured products2 5% (4)<br />
Loans to policyholders<br />
4% (4)<br />
Corporates<br />
8% (7)<br />
Banks<br />
13% (13)<br />
Thereof 25%<br />
cash positions (= 3% of total)<br />
TOTAL<br />
€131bn<br />
55.2<br />
1 Incl. loans, parts of other securities and cash positions. Economic view – not fully comparable with IFRS figures.<br />
2 Thereof subprime exposure: ~€240m.<br />
Figures in brackets 31.12.2007<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
13.9<br />
14.0<br />
14.6<br />
13.8<br />
11 11.6 6<br />
Miscellaneous 1<br />
5<br />
11.4<br />
11.5<br />
11.7<br />
10.5<br />
9.8<br />
10 10.1 1<br />
8.4<br />
Government/<br />
Semi-government<br />
42% (47)<br />
Thereof 12%<br />
inflation-linked bonds<br />
(= 5% of total)<br />
Pfandbriefs/<br />
Covered bonds<br />
28% (25)<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
52<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
53
Backup: Financial reporting Q1–2 2008<br />
Key figures Q1–2 2008 – Structured investments<br />
Structured products split by ratings and region 1<br />
Structured product portfolio (ABS/MBS/CDO ..)<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
€m AAA AA A BBB
Backup: Financial reporting Q1–2 2008<br />
Key figures Q1–2 2008 – Shares in circulation<br />
Decreased due to buy-back programme<br />
Development of shares in circulation<br />
m shares 31.12.2007<br />
Acquisition of own<br />
shares in Q1–2 2008<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
<strong>Re</strong>tirement of own<br />
shares in Q1–2 2008 30.06.2008<br />
Shares in circulation 207 207.8 8 –66.6 6 – 201 201.2 2<br />
Own shares held 10.1 6.6 –11.5 5.2<br />
Total 217.9 206.4<br />
Weighted average number of shares<br />
Appendix<br />
Mission<br />
219.9 204.1<br />
227.6 215.3<br />
Q1–2 2007 Q1–2 2008 Q1–4 2006 Q1–4 2007<br />
Financial calendar<br />
CContacts t t<br />
Disclaimer<br />
Further 1.4 million own shares were acquired in July 2008<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
56<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
57
Appendix<br />
Investor & Rating Agency <strong>Re</strong>lations’ Mission<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
Investor & Rating Agency <strong>Re</strong>lations is a central function responsible for <strong>Munich</strong> <strong>Re</strong>'s communication<br />
with the capital market. Its main objective is an active communication to support a fair capital-market<br />
valuation of <strong>Munich</strong> <strong>Re</strong> shares and outstanding bonds.<br />
External communication... Internal communication...<br />
... should increase the transparency of <strong>Munich</strong><br />
<strong>Re</strong>'s recent financial performance, strategy<br />
and its expectations about future<br />
perspectives, while complying with the<br />
principles of a credible, accurate, complete<br />
and timely provision of relevant information.<br />
... has the goal of achieving a fair valuation and<br />
optimising p gthe cost of capital p by y increasing g<br />
information efficiency between <strong>Munich</strong> <strong>Re</strong><br />
and the financial community and developing<br />
a relationship of trust with our investor base.<br />
... entails the transmission of investors' and<br />
creditors' demands, and the capital markets'<br />
perception of <strong>Munich</strong> <strong>Re</strong>, to management<br />
and staff.<br />
... aims to support management in the setting<br />
of ambitious targets as well as in the<br />
execution of a value-based and shareholderoriented<br />
strategy. gy<br />
Investor & Rating Agency <strong>Re</strong>lations facilitates targeted, systematic and ongoing communication between<br />
current and potential investors, financial analysts and rating agencies on the one hand, and <strong>Munich</strong> <strong>Re</strong>'s<br />
senior management on the other, with the aim of enhancing <strong>Munich</strong> <strong>Re</strong>'s visibility and attractiveness in the<br />
international financial community.<br />
Appendix<br />
Financial calendar<br />
7 October 2008 Investors' Day on life reinsurance, London<br />
7 November 2008 Interim report as at 30 September 2008<br />
3 March 2009<br />
Balance sheet press conference for 2008 financial statements (preliminary figures)<br />
Analysts' conference, <strong>Munich</strong><br />
22 April 2009 Annual General Meeting<br />
23 April 2009 Dividend payment<br />
6 May 2009 Interim report as at 31 March 2009<br />
4 August 2009 Interim report as at 30 June 2009; Half-year Half year press conference<br />
5 November 2009 Interim report as at 30 September 2009<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
58<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
59
Appendix<br />
Contacts<br />
Service for private investors Service for professionals<br />
If you have general questions about<br />
<strong>Munich</strong> <strong>Re</strong> shares, please call our<br />
shareholder hotline<br />
Tel.: +49 (1802) 22 62 10<br />
(6 cents per call from a German fixed network,<br />
with varying prices from German mobile phone networks)<br />
Tel.: +49 (89) 38 91-22 55<br />
Or send an e-mail to:<br />
shareholder@munichre.com<br />
Münchener Rückversicherungs-Gesellschaft<br />
Königinstr. 107, 80802 München, Germany<br />
Fax: +49 (89) 38 91-45 15<br />
E-mail: shareholder@munichre.com<br />
Internet: www.munichre.com<br />
Appendix<br />
Disclaimer<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong><br />
If you are an institutional investor or analyst,<br />
please mail or call our investor relations team<br />
Sascha Bibert<br />
Head of Investor & Rating Agency <strong>Re</strong>lations<br />
Tel.: +49 (89) 38 91-39 10<br />
E-mail: sbibert@munichre.com<br />
Ralf Kleinschroth<br />
Tel.: +49 (89) 38 91-45 59<br />
E-mail: rkleinschroth@munichre.com<br />
Dr. Thomas Dittmar<br />
Tel.: +49 (89) 38 91-64 27<br />
E-mail: tdittmar@munichre.com<br />
Christine Franziszi<br />
Tel.: +49 (89) 38 91-38 75<br />
E-mail: cfranziszi@munichre.com<br />
Andreas Silberhorn<br />
Tel.: +49 (89) 38 91-33 66<br />
E-mail: asilberhorn@munichre.com<br />
Martin Unterstrasser<br />
Tel.: +49 (89) 38 91-52 15<br />
E-mail: munterstrasser@munichre.com<br />
Münchener Rückversicherungs-Gesellschaft<br />
Königinstr. 107, 80802 München, Germany<br />
Fax: +49 (89) 38 91-98 88<br />
E-mail: IR@munichre.com<br />
Internet: www.munichre.com<br />
This presentation contains forward-looking statements that are based on current assumptions<br />
and forecasts of the management of <strong>Munich</strong> <strong>Re</strong>. Known and unknown risks, uncertainties and<br />
other factors could lead to material differences between the forward-looking g statements <strong>gg</strong>iven<br />
here and the actual development, in particular the results, financial situation and performance<br />
of our Company. The Company assumes no liability to update these forward-looking<br />
statements or to conform them to future events or developments.<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
60<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Group</strong> – October 2008<br />
61
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