The following is a translation of the auditor’s opinion in respect of the original German consolidated financial statements and Group management report: We have audited the consolidated financial statements, consisting of the balance sheet, the income statement and the statements of changes in shareholders’ equity and cash flows as well as the notes to the financial statements, prepared by the Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich, for the business year from 1 January 2004 to 31 December 2004. The preparation and the content of the consolidated financial statements in accordance with the International Financial Reporting Standards (ifrs) are the responsibility of the Company’s Board of Management. Our responsibility is to express an opinion on the financial statements based on our audit.
We conducted our audit of the consolidated annual financial statements in accordance with German auditing regulations and generally accepted standards for the audit of financial statements promulgated by the German Institute of Certified Accountants (idw) as well as in accordance with the International Standards on Auditing (isa). Those standards require that we plan and perform the audit such that it can be assessed with reasonable assurance whether the consolidated financial statements are free of material misstatements. Knowledge of the business activities and the economic and legal environment of the Group and evaluations of possible misstatements are taken into account in the determination of audit procedures. The evidence supporting the amounts and disclosures in the consolidated financial statements is examined on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Our audit, which also extends to the group management report for the business year from 1 January 2004 to 31 December 2004, has not led to any reservations. In our opinion, altogether the group management report provides a suitable understanding of the Group’s position and suitably presents the risks of future development. In addition, we confirm that the consolidated financial statements and group management report for the business year from 1 January 2004 to 31 December 2004 satisfy the conditions required for the Company’s exemption from its duty to prepare consolidated financial statements and group management report in accordance with German accounting law.
Munich Re Group Annual Report 2004 06_Financial report Seats held on other boards * Own group company within the meaning of Section 18 of the German Stock Companies Act.
Prof. Dr. rer. nat. Hubert Markl Bayerische Motoren Werke ag Sanofi-Aventis s. a., Paris Royal Dutch Petroleum Company/Shell, The Hague
Wolfgang Mayrhuber Bayerische Motoren Werke ag Heico Corporation, Miami Eurowings Luftverkehrs ag Thomas Cook ag lsg Lufthansa Service Holding ag*
Prof. Karel Van Miert rwe ag Agfa-Gevaert nv, Mortsel Anglo American plc, London De Persgroep, Asse Royal Philips Electronics nv, Amsterdam Solvay s. a., Brussels Vivendi Universal s. a., Paris Wolters Kluwer nv, Amsterdam
Dr. jur. Dr.-Ing. E. h. Bayer ag Siemens ag Austria, Vienna* (Chairman) Heinrich v. Pierer Hochtief ag
Board of Management Seats held on supervisory Membership of comparable boards of other German bodies of German and foreign companies business enterprises
Dr. jur. Nikolaus von Bomhard ergo Versicherungsgruppe ag* (Chairman) – Chairman
Dr. jur. Heiner Hasford Commerzbank ag American Re Corporation, Wilmington, Delaware*
Dr. phil. Detlef Schneidawind dkv Deutsche Krankenversicherung ag* Munich American Reassurance Company, Atlanta*
Karl Wittmann – Jordan Ins. Co. p. l.c., Amman Saudi National Insurance Company e. c., Jeddah
Glossary p. 203 Index of key items p. 209 Important adresses p. 210
Alternative risk financing Utilising the capacity of the capital markets to cover insurance risks. An example is the securitisation of natural catastrophes risks that can no longer be borne in full by the insurance and reinsurance industry.
Asset allocation The distribution of investments between various asset classes, e.g. equities, participating interests, fixed-interest, real estate and money market. The investments are subsequently distributed between various regions and currencies as appropriate. A distinction is generally made between strategic (medium- to long-term) and tactical (short-term) allocation.
Assistance Range of services going beyond the traditional scope of insurance and cost reimbursement. The idea of assistance services is to help claimants quickly and unbureaucratically in the event of a loss occurrence, taking care of the necessary arrangements to remedy the situation.
At amortised cost Under this accounting principle the difference between the acquisition cost and redemption value (of an investment) is added to or subtracted from the original cost figure over the period until maturity and credited or charged to income over the same period. Writedowns are made for impairment or uncollectibility.
Balanced scorecard Strategy-implementation tool in which strategic objectives and initiatives (financial and non-financial) are set out in a table and linked with one another. Short-term milestones help in monitoring the achievement of objectives.
Captive A captive is an insurance company established as a subsidiary of one or more industrial/trading companies or groups mainly for the purpose of insuring the risks of these companies and their affiliates.
Combined ratio Ratio, in per cent, of the sum of net claims expenses plus net operating expenses to net earned premiums. The sum of the loss ratio and the expense ratio.
Deferred acquisition costs Costs incurred for the acquisition or the renewal of insurance policies (e.g. commission, cost of processing applications) which are capitalised and amortised over the term of the contracts.
Deposits retained on assumed reinsurance and ceded business Deposits retained on assumed reinsurance are claims which reinsurers have on their cedants for cash deposits that have been retained by the cedants as a security to cover future reinsurance claims. The cedants show the retained funds as deposits withheld on ceded business.
Embedded value The concept of embedded value is used in valuing life and health insurance business. Embedded value mainly comprises the present value of earnings from business in force, calculated according to actuarial principles, plus the value of equity capital, including valuation reserves, and less capital commitment costs.
Event limit An event limit restricts the maximum indemnity for a certain type of event that typically results in large numbers of individual losses, e.g. earthquake.
Exchangeable bonds Exchangeable bonds are a special form of corporate bond which, besides entitling holders to repayment of the face amount and regular interest, give them the option to convert the bond into shares. The conversion right is for shares in a company which is not the bond issuer.
Fair value The amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s-length transaction. Where there is an active market, the fair value of an asset is its current � market value. Alternatively, the fair value may be determined on the basis of recognised valuation methods.
Financial Accounting Standards (fas) us accounting regulations that give detailed rulings on individual accounting questions and which must be complied with by listed companies that prepare accounts in accordance with us gaap.
Finite risk reinsurance Form of reinsurance in which the risk transfer from insurer to reinsurer is combined with a risk financing function. The focus here is on business-management and accounting aspects. The desired objectives are achieved by, among other things, the assumption of a limited amount of risk by the reinsurer, result-sharing with the insurer, multi-year contracts and the consideration of the time value of money.
Forwards Contracts to trade at a specified price on a specified future date. In contrast to � futures, forwards tend to be individually designed derivative financial instruments.
Futures Standardised contracts to trade a financial instrument on a money market, capital market, precious-metals market or currency market at a specific price and on a specific future date. Frequently, rather than actually delivering the underlying financial instrument on that date, the difference between closing market value and the exercise price is settled in cash.
ias 32/39 Accounting standards on financial instruments published by the � International Accounting Standards Board (iasb). ias 32 governs disclosure whilst ias 39 is concerned with recognition and measurement of financial instruments.
Integrated risk management (irm) Holistic management of insurance risks in life and non-life business and of investment risks. IRM essentially rests on four pillars � assetliability management, active capital management, � accumulation control and operational risks..
Investments for the benefit of life insurance policyholders who bear the investment risk
Net asset value Measurement of the � fair value of companies. The starting point is the proportional equity capital of the company to be valued, plus the valuation reserves.
Non-proportional reinsurance Here the reinsurer assumes payment of the primary insurer’s losses above a defined amount. The calculation of the reinsurance premium is based on claims experience with the type of business concerned.
Other securities held for trading Securities held for trading comprise temporarily held investments purchased with the intention of obtaining the highest possible return from short-term fluctuations in the market price. They are accounted for at their fair value at the balance sheet date. Changes in value are recognised in the income statement.
Premium The amount that has to be paid for the insurance cover provided by an insurer. It may be paid as a regular or single premium. In the case of products that are largely of an investment nature (e.g. financing treaties and unit-linked life insurance) it only includes – under ias – the amount serving to cover the risk and the costs. In ias financial statements there are no “premiums from the provision for premium refunds” either. Premiums written means all premium income that has become payable in the business year. The portion of this premium income that constitutes payment for insurance cover in the business year is referred to as earned premiums.
Primary insurers Insurance companies that assume risks in return for an insurance premium and have a direct contractual relationship with the holder of the insurance policy (private individual, firm or organisation).
Registered share Share registered in the owner’s name. Registered shares are entered in the company’s share register with the shareholder’s personal data and the number of shares held.
Renewable energy Renewable energies (also referred to as regenerative or alternative energies) are sources of energy that continually renew or replenish themselves or are inexhaustible by human standards, i.e. are available in unlimited amounts. The most important renewable energies are: solar, wind, water/hydro, biomass and geothermal energy.
Retrocessionaire Reinsurer that provides retrocession cover for other reinsurers (a reinsurer of reinsurers). Retrocession enables the reinsurer to lay off part of its risk to other insurance companies.
Risk capital Risk capital is the amount of capital hypothetically assigned for the conducting of insurance of reinsurance business to ensure that the probability of default in respect of the portion of the business exposed to risk is kept to a minimum. The capital required for this purpose is calculated using mathematical risk and financing models.
Statutory Surplus Surplus recorded in the balance sheet of us insurance companies on the basis of the statutory accounting regulations used by us state supervisory authorities and rating agencies.
Subordinated bonds In the event of liquidation, dissolution or insolvency of the loan debtor or in the event of debt composition proceedings or other processes to avoid insolvency being taken against the loan debtor, the claims of holders of subordinated bonds are satisfied after the claims of all other non-subordinated creditors. In other words, payments on subordinated bonds are not made until claims of third parties against the bond debtor arising from non-subordinated liabilities have been fully satisfied.
Sustainable development A type of development that satisfies the needs of the present without jeopardising the needs of future generations.
Voting right Every shareholder has a legal right to vote at the Annual General Meeting. The number of votes that a shareholder has depends on the number of shares with voting rights held. Shareholders can arrange for their voting rights to be exercised by a third party, e.g. a bank or a shareholders’ association (proxy).
Munich Re Group Annual Report 2004 07_General information Index of key terms
Eastern Europe 64 f. Environmental management 89 ergo Trust 59, 126 Europäische Reiseversicherung 30, 57 f., 124
Shares ic*, 34 ff. Special and Financial Risks 56, 115 ff.
Canada Munich Reinsurance Company of Canada (MRoC) Munich Re Centre 390 Bay Street, 22nd Floor Toronto, Ont., M5H 2Y2
USA Munich American Reassurance Company 56 Perimeter Center East, N. E.
E-mail: KSC@hamburg-mannheimer.de www.hamburg-mannheimer.de dkv Deutsche Krankenversicherung ag Aachener Strasse 300 50594 Köln
E-mail: service@dkv.com www.dkv.com d.a.s. Deutscher Automobil Schutz Allgemeine Rechtsschutzversicherungs-ag d.a.s. Deutscher Automobil Schutz Versicherungs-ag d.a.s. International Rückversicherungs- und Beteiligungs-ag Thomas-Dehler-Strasse 2 81728 München
E-mail: presseservice@neckermann-versicherungen.de www.neckermann-versicherungen.de ergo People & Pensions GmbH Immermannstrasse 23 40198 Düsseldorf
Profit for the year 1,833 –434 288 250 1,750 **Adjusted after reallocation of “other tax” to “other expenses”.
Important dates 2005/2006 28 April 2005 Annual General Meeting 29 April 2005 Dividend payment 9 May 2005 Interim report on 1st quarter 2005 4 August 2005 Interim report on 2nd quarter 2005 4 August 2005 Half-year press conference 7 November 2005 Interim report on 3rd quarter 2005 14 March 2006 Balance sheet press conference for 2005 financial statements 14 March 2006 Analysts’ conference for 2005 financial statements 19 April 2006 Annual General Meeting 20 April 2006 Dividend payment 9 May 2006 Interim report on 1st quarter 2006 3 August 2006 Interim report on 2nd quarter 2006 7 November 2006 Interim report on 3rd quarter 2006 125 years Advancing innovation