Thereof: Reinsurance – Life and Health €m 706 729 596 515 Thereof: Reinsurance – Property-casualty €m 1,562 1,135 –476 2,025 2,915
On our journey to make Munich Re more profitable, more lean and more digital, we took great steps forwards last year. I would like to thank you personally for your support – along with our 39,000 staff members around the world.
In the 2019 financial year, the Supervisory Board fulfilled all the tasks and duties incumbent upon it by law and under the Articles of Association and the rules of procedure. All members of the Supervisory Board and of the committees took part in over half of the respective meetings. In fact, the overall attendance for all members of the Supervisory Board was 100% in the reporting year. (For an overview on attendance of Supervisory Board Members at meetings of the Supervisory Board and at committee meetings, please refer to page 15 and www.munichre.com/supervisory-board.)
On the basis of this comprehensive examination, the Supervisory Board raised no objections concerning the outcome of the external audit. It approved the Company and Group financial statements on 17 March 2020. The financial statements were thus adopted. Having carefully weighed all relevant aspects, the Supervisory Board followed the proposal of the Board of Management for appropriation of the net retained profits.
The list of criteria also includes other personal qualities of Supervisory Board members, such as entrepreneurial and international experience, having sufficient availability to devote to the role, a strong commitment to corporate governance, commitment to the sustainable, long-term value-creating orientation of the Company and its business policy for shareholders, a solution-oriented approach, strategic expertise and the competence to effect change.
Ina Hosenfelder2 – – Employee of ERGO Group AG Member from 30 April 2014 to 30 April 2019
In our estimation, the talent and performance of our staff are the keystones to Munich Re’s long-term success. Our international and diversity-focused human resources work sets great store by a corporate and leadership culture which promotes motivation and innovation in our highly qualified staff members.
Occupational pension Board members appointed for the first time before 1 April 2012 are entitled to an occupational pension on retiring from active service with the Company after reaching the age of 60. Board members appointed for the first time as from 1 April 2012 are entitled to an occupational pension on retiring from active service with the Company after reaching the age of 62. All members of the Board of Management must retire from active service no later than at the end of the calendar year in which they turn 67.
Benefit: − In the case of defined contribution plans: Annuity based on the policy reserve or payment of the policy reserve as a lump sum.
Thereof for Munich Reinsurance Company 25.50 33,351 –9 216,750 2018 25.19 70,802 1,207,23310 781,375 Thereof for Munich Reinsurance Company 25.50 27,380 –9 325,125 1 In the case of Board members transferred from the old system to the new, the amount corresponds to the value of the annual vested pension at 31 December 2008. 2 Expenses for defined benefit plan, including provision for continued payment of salary for surviving dependants. 3 Entitled to occupational pension in the event of termination of employment owing to incapacity to work. 4 Entitled to a reduced occupational pension on early retirement in the event of premature or regular termination of employment. 5 Nicholas Gartside does not receive an employer-financed pension. By way of compensation for this, a conditional one-off payment will be made at the end of his appointment. In the event of his death or disability prior to the end of his term of office, this payment will be made pro rata temporis for the period until then. 6 Entitled to a reduced occupational pension on early retirement in the event of premature termination of employment, and to an occupational pension in the event of regular termination of employment. 7 Entitled to vested benefits under the Company Pension Act in the event of premature or regular termination of employment. 8 Entitled to vested benefits under the Company Pension Act in the event of premature termination as of 16 September 2020, or regular termination of employment. 9 Defined contribution plan within the meaning of IAS 19: Employee Benefits, so no present value shown. 10 Munich Reinsurance Company: see footnote 9; ERGO Group AG: no Defined Contribution Plan within the meaning of IAS 19, so present value shown.
Other Total 3,138,286 1,588,286 4,688,286 3,137,021 2,630,041 1,330,041 3,930,041 – Pension expenses 854,034 854,034 854,034 829,982 663,000 663,000 663,000 – Total remuneration 3,992,320 2,442,320 5,542,320 3,967,003 3,293,041 1,993,041 4,593,041 –
Board member thereof for Munich Reinsurance Company € 2019 2019 (min.) 2019 (max.) 2018 2019 2019 (min.) 2019 (max.) 2018 Basic remuneration 2,675,000 2,675,000 2,675,000 2,462,500 425,000 425,000 425,000 637,500 Remuneration in kind/fringe benefits 119,459 119,459 119,459 120,626 23,888 23,888 23,888 47,250 Total 2,794,459 2,794,459 2,794,459 2,583,126 448,888 448,888 448,888 684,750 One-year variable remuneration
Other Total 2,490,623 2,179,733 Pension expenses 554,553 542,425 Total remuneration 3,045,176 2,722,158 1 In the 2018 Annual Report, the amounts to be paid for the 2018 annual performance and multi-year performance 2016–2018 were recognised on the basis of the reserves, as no Supervisory Board resolution had yet been passed on the actual bonus amounts to be paid. The Annual Report for 2019 shows the actual amounts set by the Supervisory Board and to be paid out for 2018.
The global growth rate in property-casualty primary insurance was down somewhat in 2019. China’s premium growth slowed significantly compared with the previous year, growth in Italy stagnated and premium income in Brazil declined after adjustment for inflation. By contrast, there was robust growth in the USA, Japan, Australia and Germany, which supported global premium development in property-casualty reinsurance. The renewals for propertycasualty reinsurance treaties in January 2019 saw average prices remain largely unchanged, owing to persistently high capacity in the market. The renewals in April and July 2019 saw prices rise in regions affected by natural catastrophes. The price level stabilised and trended slightly upwards in third-party liability markets.
In the 2018 Group Annual Report, we forecast a consolidated result of around €2.5bn for the year under review; after the first nine months of 2019, we increased our forecast to above €2.5bn. We have exceeded our target by posting a very satisfying consolidated result of €2,707m. Due in particular to a good investment result, the operating result in property-casualty reinsurance rose to €1,562m (1,135m). However, the combined ratio increased to 101.0% (99.4%) of net earned premiums – largely due to the high losses from natural catastrophes in Q4. Life and health reinsurance contributed €706m (729m) to the consolidated result. The technical result – including the result from business not recognised in the technical result owing to non-significant risk transfer – amounted to €456m (584m), which was slightly below our target of €500m. This is primarily attributable to claims burdens from Australian disability business. The ERGO field of business generated a result of €440m (412m), which surpassed the result of around €400m originally forecast. Compared with the previous year, the good result for the year is due not only to significantly improved operational performance in the ERGO Propertycasualty Germany segment but also to very good operational development in the ERGO International segment. Burdens from the international portfolio optimisation were thus more than offset.
Reinsurance property-casualty % 101.0 99.4 ERGO Property-casualty Germany % 92.3 96.0 ERGO International % 94.3 94.6
Deposits retained on assumed reinsurance 7,938 7,241 0 0 7,938 7,241 Other investments 5,144 4,518 0 0 5,144 4,518 Total 228,764 216,852 33,085 21,975 247,310 231,876 1 Including on- and off-balance-sheet unrealised gains and losses.
Gross premium in the USA increased slightly to €2.9bn (2.8bn). We therefore continue to be one of the most important reinsurers in this market, which is the largest worldwide. The technical result exceeded our expectations again, mainly thanks to favourable claims experience overall, and positive reserving effects from health reinsurance business in the process of being run off. We continue to be very satisfied with the development of our new business, both in terms of volume and profitability.
At €2.8bn, premium income in Europe was roughly at the same level as in the previous year (€2.7bn), with €1.8bn (1.7bn) deriving from the United Kingdom and Ireland, and a further €597m (676m) from Germany. Claims experience was favourable overall, which resulted in a very satisfying technical result.
Key figures 2019 Prev. year Change €m €m % Gross premiums written 765 1,066 –28.2 Technical result 67 90 –25.3 Operating result 41 59 –30.0
Gross premiums written were down owing to the merger of ERGO Direkt Lebensversicherung AG (formerly part of Digital Ventures) with ERGO Vorsorge Lebensversicherung AG (Life Germany). Without this effect, gross premiums written would have been up on the previous year, chiefly thanks to growth of 6.9% in health insurance from our supplementary dental insurance plans. Gross premiums written in property-casualty business were also up, by 12.6%. Our digital insurer nexible was the main driver of this development.
− Under Article 4(2) of the Articles of Association, the Board of Management is authorised, with the consent of the Supervisory Board, to increase the Company’s share capital at any time up to 22 April 2020 by an amount of up to €10m by issuing new shares against cash contribution (Authorised Capital 2015). The subscription right of shareholders is excluded insofar as this is necessary to allow the new shares to be issued to employees of Munich Reinsurance Company and its affiliated companies.
We differentiate between large losses involving a cost exceeding €10m in one field of business, losses affecting more than one risk or more than one line of business (accumulation losses), and all other losses (basic losses). For basic losses, we calculate the risk of subsequent reserving being required for existing risks within a year (reserve risk) and the risk of under-rating (premium risk). To achieve this, we use actuarial methods that are based on standard reserving procedures, but take into account the one-year time horizon. The calibration for these methodologies is based on our own historical loss and runoff data. Appropriate homogeneous segments of our property-casualty portfolio are used for the calculation of the reserve and premium risks. To aggregate the risk to whole-portfolio level, we apply correlations that take account of our own historical loss experience.
Our internal model considers the resulting accumulationrisk scenarios to be independent events. Munich Re’s greatest natural hazard exposure lies in the scenarios “Atlantic Hurricane” and “Earthquake North America”. Our estimates of exposure for the coming year to the peak scenarios for a return period of 200 years are €6.3bn (5.0bn) for Atlantic Hurricane and €5.9bn (4.9bn) for “Earthquake North America” (before tax, retained).
Life primary insurance products in particular, and a large part of our health primary insurance business, are long term in nature, and the results they produce are spread over the entire duration of the policies. This can mean that negative developments in risk drivers with long-term effects sustainably reduce the value of the insurance portfolio (trend risks). The risk drivers mortality and disability are dominated by the reinsurance field of business, particularly by exposure in North America and the Asia-Pacific region. The longevity risk driver can be found in the products marketed by ERGO in Germany, together with typical risks related to policyholder behaviour, such as the lapse risk, but above all we also underwrite longevity risk in the reinsurance field of business, especially in the United Kingdom. To a lesser extent, risks connected with the increase in treatment costs arise in the ERGO field of business in particular.
We assume that economic growth will remain solid, even though some financial indicators were less robust in the year under review. If the important macroeconomic parameters that are especially relevant to us improve even more strongly, then additional business opportunities will open up for us. Stronger economic growth tends to have a positive impact on the demand for insurance cover, and triggers higher premium volume in most classes of insurance.
At the beginning of the financial year, we had forecast gross premiums written of around €17.5bn for the ERGO field of business. We slightly exceeded the forecast at €17.7bn. Our forecast at the start of the year for the combined ratio of the ERGO Property-casualty Germany segment had been around 93% – provided major losses remained within normal bounds. Declining major-loss expenditure from natural catastrophes and positive claims experience in the core business meant that, at the end of 2019, we exceeded our expectations at 92.3%.
In the 2019 financial year, Munich Reinsurance Company’s gross premium income totalled €22,814m (20,503m). The year-on-year increase of 11.3% was mainly due to the conclusion of new business and the expansion of in-force business. Changes in the value of the euro as against other currencies also played a role in the increase in premium income.
Premium income in health reinsurance increased slightly in the reporting year thanks to new business and business expansion, in particular in Asia and Canada. By contrast, the result saw a modest decrease year on year due to an increase in the expense ratio.
The business performance of Munich Reinsurance Company is largely subject to the same risks and opportunities as the performance of the reinsurance field of business presented in the consolidated financial statements. Munich Reinsurance Company generally participates in the risks of its shareholdings and subsidiaries in accordance with its respective percentage interest held. Munich Reinsurance Company is integrated in the Group-wide risk management system and internal control system of the Group. Further information is provided in the risk report on pages 73 ff. and in the opportunities report on pages 83 f.
Unless otherwise stated, all standards or amendments to standards that have not yet entered into force will be applied by Munich Re for the first time as from the mandatory effective date for entities with their registered office in the European Union. The relevant dates for mandatory firsttime application are shown in the following list of new standards.
Deposits retained on assumed reinsurance 0 0 0 869 869 Investments for unit-linked life insurance contracts 0 7,145 0 0 7,145 Ceded share of technical provisions 0 0 0 98 98 Assets held for sale 1 10 0 0 11 Total assets 4,338 7,155 3,251 1,349 16,094 Technical provisions 0 0 0 0 0 Other liabilities 0 0 0 3 3 Total equity and liabilities 0 0 0 3 3 Size of structured entity 4,338 7,155 65,456 8,054 85,004
Life and health Property-casualty €m 31.12.2019 Prev. year 31.12.2019 Prev. year A. Intangible assets 319 330 2,316 2,304 B. Investments I. Land and buildings, including buildings on third-party land 190 433 2,369 2,150 II. Investments in affiliated companies, associates and joint ventures 48 44 1,827 1,433 Thereof: Associates and joint ventures accounted for using the equity method 27 28 1,761 1,371 III. Loans 471 178 536 701 IV. Other securities 1. Available for sale 22,661 19,689 50,533 49,116 2. At fair value through profit or loss 83 122 897 634 22,744 19,812 51,431 49,750 V. Deposits retained on assumed reinsurance 4,791 4,890 3,082 2,286 VI. Other investments 722 688 2,858 2,400 28,967 26,044 62,103 58,718 C. Insurance-related investments 1,070 745 290 97 D. Ceded share of technical provisions 1,529 858 2,732 2,709 E. Assets held for sale 10 0 157 414 F. Other segment assets 14,826 13,006 13,852 11,126 Total segment assets 46,721 40,984 81,449 75,369
Germany International 31.12.2019 Prev. year 31.12.2019 Prev. year 31.12.2019 Prev. year 31.12.2019 Prev. year 199 204 1,170 1,044 175 182 4,180 4,064
The additions include two residential buildings in Hamburg and Stuttgart, and one commercial building in Munich.
Callable bonds Theoretical price Money-market/swap interest-rate curve Issuer-specific spreads Volatility matrix
Breakdown of other receivables €m 31.12.2019 Prev. year Amounts receivable on primary insurance business
The other reserves of Group equity include an amount of €1.9m for disposal groups mainly attributable to unrealised gains on fixed-interest securities, and €2.7m in unrealised losses on the currency translation reserve.
Acquisitions 284 239 Disposals –66 –116 Transfer to Level 3 0 0 Transfer out of Level 3 0 0 Change in the fair value of derivatives 6 –1 Carrying amount at 31 Dec. financial year
Munich Reinsurance Company, Munich, 6.00% until 2021, thereafter floating, €1,000m, Bonds 2011/2041
Gross provision for future policy benefits according to type of insurance cover €m 31.12.2019 Prev. year Life and health 111,650 110,469 Reinsurance 12,607 12,107 ERGO 99,042 98,362
Total payments –14,735 642 –14,094 –14,613 624 –13,990 Balance at 31 Dec. financial year 57,809 –2,700 55,109 53,937 –2,776 51,161 1 Comprises the segments property-casualty reinsurance, ERGO Property-casualty Germany and the property-casualty section of the ERGO International segment.
Development of provision for premium refunds based on national regulations €m 2019 Prev. year Status at 31 Dec. previous year 8,549 8,642 Changes in consolidated group 175 2 Allocation/Withdrawal 588 –96 Status at 31 Dec. financial year 9,312 8,549
Other –1 –2 Status at 31 Dec. financial year 7,067 5,921
Munich Re Group Annual Report 2019 26 Bonds and notes issued
Other operating result €m 2019 Prev. year Other operating income 1,093 827
Munich Re Group Annual Report 2019 37 Other non-operating result, currency result and net finance costs
Liquidity risk For Munich Re, there could be a liquidity risk if the cash outflow for insurance claims payments and the costs related to the business were to exceed the cash inflow from premiums and investments. For our mainly long-term business, we therefore analyse the expected future balance from cash inflows due to premium payments and outflows for payment of insurance claims and benefits plus costs.
Smart Thinking Consulting (Beijing) Co. Ltd., Beijing 100.0000 Solarfonds Göttelborn 2 GmbH & Co. KG, Düsseldorf4 34.4234 Sopockie Towarzystwo Doradcze Sp.z.o.o., Sopot 100.0000 Stichting Aandelen Beheer D.A.S. Holding, Amsterdam 100.0000 Sustainable Finance Risk Consulting GmbH, Munich 100.0000 Sydney Euro-Center Pty Ltd, Sydney 100.0000 TAS Touristik Assekuranz-Service GmbH, Frankfurt am Main 100.0000 TIERdirekt GmbH, Munich 75.0000 Tillobesta 180018 S.L., Valencia 100.0000 Triple IP B.V., Culemborg 100.0000 US PROPERTIES VA Verwaltungs-GmbH, Düsseldorf 100.0000 Verwaltungsgesellschaft “PORT ELISABETH” mbH, Bramstedt 100.0000 Verwaltungsgesellschaft “PORT LOUIS” mbH, Bramstedt 100.0000 Verwaltungsgesellschaft “PORT MOUTON” mbH, Bramstedt 100.0000 Verwaltungsgesellschaft “PORT RUSSEL” mbH, Bramstedt 100.0000 Verwaltungsgesellschaft “PORT STEWART” mbH, Bramstedt 100.0000 VICTORIA Immobilien Management GmbH i.L., Munich 100.0000 VICTORIA Immobilien-Fonds GmbH, Düsseldorf 100.0000 VICTORIA US Property Zwei GmbH i. L., Munich 100.0000 Victoria Vierter Bauabschnitt Management GmbH, Düsseldorf 100.0000 Viwis GmbH, Munich 100.0000 VV-Consulting Gesellschaft für Risikoanalyse, Vorsorgeberatung und Versicherungsvermittlung GmbH, Vienna 100.0000 welivit New Energy GmbH, Düsseldorf 100.0000 welivit Solar España GmbH, Düsseldorf 100.0000 welivit Solar Italia s.r.l., Bolzano 100.0000 Windpark Langengrassau Infrastruktur GbR, Bremen1 83.3300 WNE Solarfonds Süddeutschland 2 GmbH & Co. KG, Düsseldorf 100.0000 Wohnungsgesellschaft Brela mbH, Hamburg 100.0000 WP Kladrum/Dargelütz GbR, Bremen1 55.0000 Zacobu 110011 S.L., Valencia 100.0000 Zacuba 6006 S.L., Valencia 100.0000 Zacubacon 150015 S.L., Valencia 100.0000 Zafacesbe 120012 S.L., Valencia 100.0000 Zapacubi 8008 S.L., Valencia 100.0000 Zarzucolumbu 100010 S.L., Valencia 100.0000 Zetaza 4004 S.L., Valencia 100.0000 Zicobucar 140014 S.L., Valencia 100.0000 Zucaelo 130013 S.L., Valencia 100.0000 Zucampobi 3003 S.L., Valencia 100.0000 Zucarrobiso 2002 S.L., Valencia 100.0000 Zucobaco 7007 S.L., Valencia 100.0000 Zulazor 3003 S.L., Valencia 100.0000 Zumbicobi 5005 S.L., Valencia 100.0000 Zumcasba 1001 S.L., Valencia 100.0000 Zuncabu 4004 S.L., Valencia 100.0000 Zuncolubo 9009 S.L., Valencia 100.0000
Key audit matters in the audit of the consolidated financial statements Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.
For information on the accounting and valuation policies used, please see the notes to the consolidated financial statements, on pages 120, and details about the estimates and assumptions used, on 107. Further information about
If, based on the work we have performed, we come to the conclusion that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Munich Re Group Annual Report 2019 requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our opinions on the consolidated financial statements and on the combined management report.