A. M. Best, Fitch, Moody’s and Standard & Poor’s have each awarded the Munich Re Group their top rating.
The claims burdens for the Munich Re Group from the terrorist attack of 11th September 2001 amounted to the biggest single loss in Munich Re’s 122-year history. As the atrocity also led to price slumps on the capital markets, we were severely tested in the investment sector as well. On the day in question, Munich Re shares lost almost one third of their value, although after the announcement of our first loss estimate they quickly recovered to their former level. This reflects the confidence that you, ladies and gentlemen, showed in Munich Re, which we greatly appreciate.
My colleagues and I had set ourselves ambitious objectives for the past year, and we are naturally disappointed with the poor result. This was certainly not due to a lack of dedication on the part of our staff: in this year of major change and quite exceptional challenges, their efforts on behalf of your company merit special recognition. In the future, too, with their commitment and their skills, they will do their part to make sure that you as shareholders continue to get the best out of your Munich Re shares.
The Annual General Meeting on 18th July 2001 adopted a number of amendments to the Articles of Association. In preparation for this, the Supervisory Board discussed in particular the authorization to increase the company’s share capital in order to issue employee shares and the authorization to buy back shares.
At our last AGM the attendance rate amounted to 65.6% of the share capital, a figure which clearly reflects the interest of the public and the quality of the event. This attendance substantially exceeded the average attendance rate of DAX companies as a whole.
– The exchangeable bonds were issued in May 2000 with an annual coupon payment of 1% on the face value. Investors are entitled to convert each of their exchangeable bonds into Allianz shares, so that the investment represents a combination of bond and call option. The bonds’ volume totals €1.15bn or around 1% of Allianz’s share capital. At the end of the year they stood at 98.32%. Their term ends on 8th June 2005 with a redemption rate of approximately 108.6%.
In this difficult economic environment the stock markets experienced the severest bear market since 1974. Only in the phases of massive interest rate cuts by the Federal Reserve at the beginning of 2001 and during the April-May period were stocks able to resist the negative impact of repeated profit warnings. Rattled investor confidence, coupled with the terrorist attack in the US, led to a final shakeout on 21st September. The subsequent year-end rally was impressive, but could only make up for around half of the preceding slide.
There was a time, and not so very long ago, when business between insurers and reinsurers was largely determined by personal relationships: contacts in the industry were cultivated at the dinner table or the opera, over a round of golf, or by sending handwritten letters and congratulations on personal achievements. Tempi passati. It is true that personal relationships are still an important factor today in reinsurance. But hard-headed consideration of the commercial benefits increasingly plays the central role. The better each party’s requirements are met, the better the partnership.
Helpful in this respect was the smooth and rapid implementation – backed by full and prompt communication, which kept everyone informed and prevented uncertainties arising.
“baptism of fire” which we had not anticipated, but even in this crisis situation it proved its effectiveness.
In property-casualty business our premium income grew by 19.6% (17.2%); the combined ratio totalled 135.1% (115.3%). Losses from natural catastrophes accounted for 1.5 (2.0) percentage points, and the terrorist attack of 11th September for 15.4 percentage points.
In the year under review we increased our premium income from this area by 10.1%, achieving most of the growth in Japan and Australia.
The consolidation process in the insurance industry is continuing in both countries. Although there was another fall in the number of potential reinsurance clients in Australia and New Zealand, MRA was able to again considerably expand its premium volume. By contrast, the result was below expectations, owing to an increased number of large losses.
AAlllliissoonn rraaggeess.. Tropical storm Allison gives rise to record insured flood losses of US$ 3.5bn in the US. Over 100,000 vehicles and thousands of buildings are affected. The overall loss totals US$ 6bn. 55tthh JJuunnee 22000011
Impacted by the weak stock markets, ERGO’s investments grew by only 0.5% (4.4%) to €89.3bn (88.8bn). The profit on investments decreased by 29.7% (+36.8%) to €5.1bn (7.2bn) – a consequence of the difficult situation on the capital markets, which led to fewer capital gains being realized in the course of the year than originally planned.
Investments €bn 12.2 12.2 * Consolidated financial statements in accordance with IAS.
Altogether, MEAG has a total of €136bn under management, the bulk of which are investments for the Munich Re Group. But MEAG also offers mutual funds and segregated managed funds for third parties. With a volume of €2.4bn invested for third parties in 2001, MEAG was able to expand this segment by a good 4%: a satisfactory result in a bad year on the capital markets.
The liquidity risks of companies in the Munich Re Group are controlled on a decentralized basis by the individual insurers and reinsurers. For major loss scenarios, detailed liquidity planning ensures that Munich Re and its Group companies are able to make the necessary payments at all times. This planning concept, which has been in place for many years, has proved its worth after large natural catastrophes, and most recently in connection with the WTC loss as well.
In order to manage these risks better and to restrict them as far as possible, we have made information security a centrally controlled function in both our insurance and reinsurance business. An internationally operating unit – supported by a centre of competence – draws up security regulations and also monitors compliance with these rules. The conception and implementation of the protective measures are based on risk analyses conducted by our experts. We place emphasis not only on the protection of our own data; of equal importance to us is the security of the information entrusted to us by our clients. Thanks to the precautions we had taken, we were barely affected by the global and sometimes spectacular computer virus attacks that occurred in 2001, some of which assumed threatening dimensions. Isolated “infections” were unable to inflict any significant damage on our global networks.
Of particular significance in this respect are strategic risks, which result chiefly from management decisions on the further development of the Group and its business units. In order to help ensure the effectiveness of our activities, we have set out our corporate objectives in so-called balanced scorecards. In the context of value-based management, this step enables us to better implement the concrete measures required by strategic decisions, to monitor their implementation and to take countermeasures at an early stage in the event of any deviations from the intended goals.
The decoded genome. A milestone in the key technology for the future.
Growing expectations on the part of policyholders and shareholders, combined with a globally low yield level and increasingly volatile capital markets, provide big challenges for the asset management of insurance companies. Of great importance for the long-term success of a company’s investment strategy is strategic asset allocation, i. e. the appropriate allocation of investments between individual asset classes. It follows that the optimization of this process should have a high priority for insurers.
Change from the acquisition, sale and maturities of other investments –9,998 –2,542
We generally consolidate subsidiaries as soon as the Group holds the majority of the voting shares or has the factual ability to exercise control. In order to determine the equity capital at the time of acquisition, we include the assets and liabilities of the subsidiary according to uniform Group accounting and valuation methods. The equity capital apportionable to the Group is netted against the acquisition costs of the shares (purchase accounting). Any residual amount is capitalized as goodwill and amortized on a straight-line basis.
Securities available for sale are stated at market value. Unrealized gains or losses are not included in the income statement; rather, after deduction of deferred taxes and the amounts apportionable to policyholders by the life and health insurers on realization, they are reflected in shareholders’ equity. This item also includes registered bonds and promissory notes.
Land and buildings used by Group companies for their own activities are valued at €1,955m (1,808m).
An overview of our most important shareholdings can be found in Section 08 (pages 162–164).
Change resulting from valuation at equity – – 425 –1,879 – –1,454
Unrealized gains and losses on other investments – – – –3,208 – –3,208
The expenses booked in the year under review are made up as follows: All figures in €m 2001 Prev. year
The Munich Re Group assumes and cedes reinsurance and retrocessions from and to the Allianz Group under a large number of reinsurance and retrocession agreements. The following table shows Munich Re’s premiums assumed from and ceded to Allianz as at 31st December: All figures in €m 2001 Prev. year
The earnings per share figure is calculated by dividing the consolidated net income for the year by the weighted average number of shares.
Valuation reserves not recognized in balance sheet, including those apportionable to minority interests
Dr. jur. Dr.-Ing. E. h. Bayer AG Siemens AG Austria, Vienna* Heinrich v. Pierer Hochtief AG (Chairman)
Dr. rer. pol. Alfons Titzrath Allianz AG – Celanese AG Deutsche Lufthansa AG Dresdner Bank AG RWE AG
Facultative reinsurance The reinsurer assumes a share of selected individual risks. The primary insurer can offer an individual risk in reinsurance, which the reinsurer for its part can either accept or decline.