A new view of the whole picture: of an increasingly networked, ever-smaller world, in which bigger and bigger challenges are awaiting innovative solutions.
A good 90% of the portfolio of Alte Leipziger Rück is assumed by Munich Re.
Munich Re and Allianz announce their intention to reduce their reciprocal shareholdings of 25% to around 20% by the end of 2003. In addition, shareholdings in various jointly held companies are to be restructured.
At its balance sheet conference and its analysts’ conference, Munich Re informs the public about the results of the business year 1999.
Asset management: MEAG, established in 1999, offers its investment products and its services to institutional investors – primarily other insurance companies – and to private clients. We intend to develop MEAG into one of the top asset management companies.
ERGO acquires a 70% stake in the Italian life insurer Bayerische Vita; it also acquires ownership of the property insurer Bayerische Assicurazioni.
MEAG and Activest set up FondsServiceBank to collaborate in the management of investment deposits.
The World Map of Natural Hazards is now available as an interactive CD-ROM.
ERGO signs an exclusive cooperation agreement with Powszechny Bank Kredytowy, the second-largest bank in Poland.
Rating agency A.M. Best confirms Munich Re’s outstanding financial strength and reaffirms its top rating of A++ (Superior).
Munich Re’s market capitalization at 31st December bn 67.2 44.5 51.0
Munich Re Group Report for the 121st year of business 1st January 2000 to 31st December 2000
The business year 2000 marked the end of a decade in which we made striking advances: with the acquisition of American Re, we strengthened our leading global position in reinsurance; with the formation and expansion of the ERGO Insurance Group, we underpinned our interests in primary insurance; and with the development of MEAG, we reinforced our claim to being one of the best operators in the field of asset management as well.
The figures provide proof of our success: in the past ten years our Group premium income rose from €7.3bn to €31bn and the Group profit from €46m to €1.75bn. Munich Re’s market capitalization, and thus shareholders’ assets, grew over this period from €8bn to €67bn. The dividend has been raised eight times since 1990. We are proposing to increase the dividend payment for the business year 2000 from €0.95 to €1.25. This will raise the total amount distributed to €221m, as compared with €34m at the beginning of the nineties.
We have set ourselves five ambitious objectives: – In reinsurance we plan to extend our market position worldwide as leading reinsurer and to be number one, or at least number two, in all important markets. We moved another step closer to this goal in the year under review. The acquisition of CNA Financial Corporation’s life reinsurance portfolio by our subsidiary Munich American Reassurance Company shows our determination to exploit growth potentials in attractive markets.
– In primary insurance we are aiming, through ERGO, to become one of the most important groups in personal lines business in Europe. Through the acquisition of Alte Leipziger Europa, which is active primarily in Central and Eastern Europe, and the Italian life insurer, Bayerische Vita, we succeeded in substantially expanding ERGO’s foreign business in strongly growing markets last year.
– MEAG, our asset management company, successfully commenced operations in April 2000. It now offers a range of 14 retail mutual funds, which includes the recent addition of three umbrella funds. Total assets under management have a market value of more than €143bn. Our objective is to have €200bn under management by 2005.
– Munich Re’s share price rose by 51% last year, whilst the DAX fell by around 7.5%. Our target of Munich Re shares outperforming the index was thus clearly surpassed in the year under review.
Our view of the future is optimistic. The global market for risk protection will continue to expand: – In primary insurance we will see appreciable growth particularly in life and health insurance, given that more and more people will have to make greater private provision for old age and health care. Our primary insurers are very well prepared for the additional demand that will be triggered by planned government reforms.
– We expect demand for investment fund products to carry on rising over the next few years, especially as a result of the German pension reform. Through the close cooperation of MEAG with the powerful sales force of the ERGO Group, we will profit from this growth market and expand our business with private clients and institutional investors.
– The emergence of deregulated markets, whose benefits are not to be had without risks
Risks are growing, as are the demands on risk management. We take these very seriously. This year we have considerably expanded our risk report and inform you much more extensively about the individual risks of our business and the precautions we have taken to control them. We have also concerned ourselves intensely with corporate governance and taken further concrete measures in this connection.
The professional handling of risks also offers opportunities, however: everything points to Munich Re’s products and services continuing to be in urgent and constant demand. We are prepared to keep offering our clients large amounts of reinsurance capacity – provided the conditions are right. During the renewals of reinsurance treaties for the current business year, we were able to achieve distinctly better prices and conditions in many markets.
Our primary insurance group is also well equipped for the future.
Much is in a state of flux. Thus at the end of March Munich Re and Allianz agreed to continue the restructuring of their shareholdings. Munich Re’s minority stakes in Allianz Lebensversicherungs -AG and Dresdner Bank and – in accordance with the agreement of 2000 – its minority interests in Bayerische Versicherungsbank and Frankfurter Versicherungs-AG will be sold to Allianz. Besides this, Munich Re will make available shares of 4% in Allianz for Allianz’s offer to Dresdner Bank shareholders. This will reduce our stake in Allianz to 21%.
We will use the substantial funds that accrue to us from these transactions in the year 2002 to increase our holding in the ERGO Insurance Group to up to 95% and to raise our interest in HypoVereinsbank to 25.7%. Both moves will decisively improve the Munich Re Group’s strategic position: they will lead to better utilization of the existing shareholders’ equity and will open up additional avenues, especially owing to the permanent strengthening of the cooperation between the Munich Re Group and the HVB Group.
Corporate Underwriting/ Global Clients together with Dr. jur. Wolf Otto Bauer
Europe 1 together with Dr. jur. Hans-Wilmar von Stockhausen Corporate Communications
We were informed in detail by the Board of Management about the strategic planning for the business year 2001. In this context we closely considered the existing tools for performance measurement and the possibilities for refining the planning and controlling processes within Munich Re. We were given additional reports about specific features of marine insurance and about the consequences for the Munich Re Group resulting from the German government’s pension reform plans.
Fundamental questions of corporate governance and risk management for Munich Re featured several times on the agenda of Supervisory Board meetings. We are convinced that Munich Re meets all the main requirements of modern, transparent monitoring of corporate activities. In addition, Munich Re is in a position to promptly identify, evaluate and control risks that could have a significant adverse effect on the assets, liabilities, financial position or results of the Munich Re Group.
KPMG Bayerische Treuhandgesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft audited the following documents and gave them an unqualified auditor’s opinion: the Munich Reinsurance Company’s bookkeeping, its company financial statements and the consolidated financial statements as at 31st December 2000, as well as the management reports for the company and the Group. The auditor’s reports were promptly given to all the members of the Supervisory Board. After a detailed discussion between the Chairman of the Supervisory Board and the auditor, there was also extensive consideration of the company financial statements and the consolidated financial statements, the management reports and the auditor’s reports at the meeting of the Supervisory Board on 28th May 2001, at which the auditor was present.
The Supervisory Board has examined the company financial statements, the consolidated financial statements, the management reports and the proposal of the Board of Management for appropriation of the balance sheet profit. No objections resulted from the examination.
At the balance sheet meeting of the Supervisory Board, the annual financial statements drawn up by the Board of Management were approved and adopted. We agree to the Board of Management’s proposal for the appropriation of the balance sheet profit, which provides for a dividend of €1.25 per share.
With effect from 30th June 2000, Mr. Dieter Göbel ceased to be a member of the Board of Management, having reached retirement age. At the same date Dr. Claus Helbig retired prematurely from the Board by mutual agreement. The area of investments, which he had successfully taken care of on the Board since 1st March 1993, was transferred to MEAG MUNICH ERGO AssetManagement GmbH when it commenced operations on 1st April 2000. Both gentlemen served our company with great personal dedication. We thank them for their responsible and successful work on behalf of Munich Re.
DEPUTY CHAIRMAN Dr. jur. Henning Schulte-Noelle, Chairman of the Board of Management of Allianz AG
Rudolf Ficker Former Member of the Board of Management of the Munich Reinsurance Company
Prof. Dr. rer. nat. Henning Kagermann Co-Chairman of the Executive Board and Chief Executive Officer of SAP AG
Dr. rer. pol. Alfons Titzrath Chairman of the Supervisory Board of Dresdner Bank AG
Ludwig Wegmann Employee of the Munich Reinsurance Company 02 SUPERVISORY BOARD
Seen from a distance, our solar system looks like a gigantic, bewildering mass of lights. A puzzle. But the closer you look, the more system you discover, until finally you recognize that each part belongs to the whole. >>
The year 2000 began much as 1999 had ended: with a further upturn. But in the second quarter, the DAX already began showing the first signs of weakness: what first appeared to be consolidation, turned into a downhill slide in nearly all sectors over the remaining course of the year. The year low was reached just before Christmas with a DAX level of 6,201 points. Overall, the DAX produced a negative performance in 2000, falling by 7.5%.
The insurance sector succeeded in detaching itself from the general stock market performance in the past year. New government plans for private old age pensions and the German tax reform resulted in a sustained positive mood. The insurance sector as a whole benefited from the trend towards switching from boom stocks in the technology sector to defensive stocks.
When the downturn in the DAX and the Neuer Markt began, Munich Re shares had already begun to buck the trend. After a temporary wobble – owing to the new weighting of important share price indices on the basis of free floats – another intermediate high was reached following the passing of the tax reform bill by the Federal German Parliament in July. On publication of our half-year report, the share price began to rise again, climbing to its year high of €391.00 on 9th November.
Following more profit-taking at the beginning of the current year, our share price mainly developed sideways, before following the general downward trend in mid-March. On 11th May 2001 it stood at €315.00.
Munich Re shares are no-par-value registered shares. They are traded on all the German stock exchanges and are also included in Xetra computer trading. Their current price can be followed on our website (www.munichre.com). Besides this, of course, information can be obtained from the daily papers or from Reuters, Bloomberg and other providers of financial market data.
We will continue our consistent dividend policy this year by raising the dividend payment again, namely to €1.25 (0.95) per share. The overall amount distributed will thus total over €221m, having increased more than sixfold in the last ten years.
There is great interest in our shares, and it is continuing to grow. To take account of this, we will be staging an analysts’ conference not only in Munich on 5th June 2001 but also in London the following day. We will also be intensifying our other investor relations activities in the current year.
Munich Re shares represent an attractive investment with a well-aboveaverage return for the long-term investor. In the ten-year period from 1991 to 2000 the share price rose on average by an outstanding 25.1% annually, compared with growth of only 18.2% in the DAX. The shares continue to be among the winners within the insurance sector as well. This is shown by a comparison with the Morgan Stanley Insurance Index, whose average annual increase in the same period was 18.6%.
At the end of December 1991, with the share price at DM 2,320 (= €1,186.20), a portfolio of 100 Munich Re registered shares (par value then: DM 100 = €51.13) required a total investment of €118,620 (not including transaction costs). After the two stock splits on 18th August 1997 and 25th January 1999, this investment today amounts to a portfolio of 2,000 registered shares.
By reinvesting dividends to purchase further shares and making use of opération blanche (i.e. reinvesting the proceeds of subscription rights), a German shareholder would have been able to add a total of 467 no-parvalue shares and 16 warrants to the portfolio.
Euro STOXX 50 1.46 FTSE EURO TOP 100 1.13 MSCI 1.77
– For institutional investors we also placed two natural catastrophe bonds with a total value of US$ 300m in December 2000; their threeyear term began on 1st January 2001.
The year 2000 was a good one for the world economy. At 4.8%, global economic growth was significantly higher than the average for the last 30 years, and was once again well up on the previous year’s figure (3.5%). The effects of the emerging markets crisis, which spread from Asia via Russia to Brazil, have now been overcome. Despite higher oil prices, inflation in the industrialized countries remained low. For the emerging markets, too, a growing trend towards monetary stability became evident.
Towards the end of 2000, however, growth in the world economy slowed down markedly. This applied above all to the US, which nevertheless continued to be the engine of the world economy again in 2000 (+5.0% real GDP). Owing to declining investment, economic momentum in the third and fourth quarters showed a noticeable downward trend here.
At the EU summit in Nice, the heads of state and government took important steps to pave the way for the European Union’s expansion into Central and Eastern Europe.
– just 1.7%. The decoupling of the Japanese economy from growth in Europe and the US thus continued.
Central and Eastern Europe profited from increasing exports. Slovenia and Hungary showed particularly dynamic development (albeit with high dependency on Euroland), with real economic growth of 4.9% and 5.3% respectively. Russia proved to be the biggest positive surprise, with growth of around 7.5%. The Asian tiger economies maintained their recovery, helped by a sharp increase in their exports (up by 6%), but necessary structural reforms were left untackled in some countries.
Over the year the euro repeatedly fell to new lows against the dollar. The main reason for this was the unexpectedly strong US economic data at the start of the year, which led to a capital outflow from Euroland. At the turn of the year, the euro was again nearing parity, being quoted at US$ 0.95. Capital outflow from Euroland and the dollar-euro exchange rate have developed largely in parallel.
The global slowdown in growth which began at the end of the year was reflected on the international stock exchanges more clearly than in the real economy, with broad-based stock market indices falling considerably compared with their levels at the start of the year. The German DAX fell by 7.5% and the Euro STOXX 50 by 2.7%, while the Dow Jones in the US also dropped by more than 6%.
Once again, these therefore proved to be a good early indicator of the real economic trend. The losses were even more extreme in the growth stock markets NASDAQ (–39%) and Neuer Markt (–42%), where some exaggeratedly high prices were corrected.
Yield trend in Germany, the UK and the US in 2000
We report on the individual insurance markets in detail in Section 05 (Management Report).
10-year German government bonds (benchmark) 10-year US government bonds (benchmark) 10-year UK government bonds (benchmark) Source: DATASTREAM
Global economic growth is likely to decelerate in 2001 and fall slightly below the average for the last 30 years. The slowdown will be greatest in the US (mirrored by Canada) but here, too, initial indicators point to growth stabilizing in the course of the year. The US Federal Reserve is taking determined action to counter recessionary trends – since January it has reduced interest rates by a total of 200 basis points, and further interest rate cuts are expected.
In Euroland, growth will slow down somewhat in 2001 as well, though private consumption will continue to have a positive impact in the first half-year. Tax incentives in some countries (including tax cuts), higher employment and falling energy prices will not be able to completely offset the decline in export activity. On 10th May the ECB lowered its key interest rates by 25 basis points.
In Japan there is still a latent risk of the country sliding into a new recession. In addition, Japan’s soaring public debt is increasingly becoming a risk factor.
The emerging markets are suffering particularly badly from the slowdown in the US economy. Apart from the Asian tiger economies (owing to falling US demand for IT goods, which account for up to 60% of total exports), it is mainly the countries of Latin America which are affected; the impact on Central and Eastern Europe, and also on India and China, has only been slight.
Risks to further development are to be found above all in the US. A prolonged weakening of the economy would have negative repercussions for other regions (especially Southeast Asia and Latin America) and the US dollar. Moreover, a renewed “flight to quality” by investors could lead to distortions induced by the financial markets, particularly in the emerging markets. Currency crises like the devaluation of the Turkish lira in February of this year harbour the risk of contagion effects.
Assuming the general economic situation stabilizes, we expect the relatively quiet trend on the bond markets to continue in 2001. By the end of the year, long-term yields should lie above the level at the beginning of 2001, while short-term yields should be lower. If the economic situation deteriorates into a “hard landing”, interest rates will fall further. At present, though, we do not think that this is very likely.
By and large, provided inflation and interest rates remain low, companies’ profits will gain in importance as the drivers of share prices. Nevertheless, even when productivity improvements achieved through the increased use of new technologies are taken into account, the general earnings performance of companies will still not show any extreme variation from the long-term average of around 7% p. a. Stock yields in the coming years should therefore settle down at their normal historical mean of high single figures.
On the foreign exchange markets, the euro is expected to make slight gains against the US dollar during the course of the year, essentially for two reasons: the relatively better economic situation in Euroland, and investors’ uncertainty about how the US economy will perform.
We expect development in the insurance industry to be essentially the same as in the economy as a whole. The trend towards further disproportionate growth in insurances of the person in the industrialized countries will continue.
>>_______The history of Munich Re is also a story of visions and growth. When Carl Thieme founded the company in 1880, scarcely anyone could have foreseen that this start-up would one day develop into a global risk carrier and provider of financial services. But this is precisely what happened.
Premium growth in both reinsurance and primary insurance was stronger than initially expected in the business year 2000. Altogether, we managed to increase our gross premium by 13.5% to €31.1bn (27.4bn). Around €1.4bn (0.3bn) of this is due to changes in exchange rates. New subsidiaries contributed €470m (32m). Adjusted to eliminate these factors, premium growth totalled €1.9bn (1.6bn) or 6.7% (6.1%).
Growth in PRIMARY INSURANCE was also pleasing: we wrote premiums of €14.4bn (13.5bn), or 6.8% (6.5%) more than in the previous year. A particularly satisfying aspect is that our primary insurers continue to grow more quickly than the German market as a whole.
AMORTIZATION OF GOODWILL increased to €145m (120m), owing to the acquisition of Alte Leipziger Europa, Bayerische Vita and other insurance companies.
VICTORIA Lebensversicherung Aktiengesellschaft AAA Aa2 VICTORIA Versicherung Aktiengesellschaft AAA Hamburg-Mannheimer VersicherungsAktien -Gesellschaft AAA Aa2 Hamburg-Mannheimer Sachversicherungs-AG AAA DKV Deutsche Krankenversicherung Aktiengesellschaft AAA
ERGO Versicherungsgruppe AG has been graded as AA+ (counterparty credit risk); this is the best rating that can normally be achieved by a non-operative insurance holding company under Standard & Poor’s rules.
December 1999: a series of severe windstorms sweeps across Western Europe. Their effects are also felt in Munich, where Munich Re’s climate researchers monitor and analyse natural catastrophes throughout the world. Much of what is perceived as a disaster by humans has a healing effect on nature. Forest fires or windstorms can help rejuvenate woods; many young trees only find room to grow after old or diseased trees have been uprooted. >>
>>_______1999, a year of major losses, had a very similar effect on reinsurance business: quite a few inadequately capitalized providers disappeared from the market. In the course of 2000 the prices for natural hazard covers rose, in some cases very appreciably. Our reinsurers were able to increase their gross premium in the past business year by 19.2% to €18.3bn
Over the past year the Munich Re Group managed to increase its gross reinsurance premiums by 19.2% (8.6%) to €18.3bn (€15.4bn). Admittedly, more than 7.7 (2.8) percentage points of this were attributable to changes in exchange rates; without these changes, our premium income would have risen by 11.5% (5.8%). This growth also reflects price rises in individual insurance and reinsurance markets.
Gross premiums €bn 18.3 15.4 Loss ratio non-life % 85.0 88.2 Expense ratio non-life % 30.3 30.7 Operating result before amortization of goodwill €m 1,525 1,208 Investments €bn 64.9 59.6 Net underwriting provisions €bn 43.9 40.4
In the year under review we were able to increase our premium in life and health business by 25.6% (24.3%); the result here was very satisfactory.
In property-casualty business our premium income grew by 17.2% (4.4%); the combined ratio totalled 115.3% (118.9%). Losses from natural catastrophes accounted for only 2.0 (10.7) percentage points, even including subsequent claims from the gales in 1999.
Our aim in non-life reinsurance continues to be a combined ratio of less than 105% on average over the years.
In order to further strengthen our position in other countries, we increased the number of staff at our units in Southern Europe, Asia, and Central and Latin America over the past year and augmented the range of services we offer. These units benefit from the expertise of the specialists we deploy worldwide.
In LIABILITY business, premium income grew by 17.2% (8.1%). We succeeded in maintaining our leading position in industrial and professional liability business, even extending it in certain markets.
Our result in this class of business, though significantly better in 2000 than in 1999, was still very negative.
For 2001 we expect premiums to stagnate or be slightly down once again, but we anticipate a pleasing result.
During the treaty renewals for 2001 we shed loss-making business, especially in Germany. The resultant fall in premium income will be compensated for by growth in new foreign business, however. If the favourable trends in the primary insurance sector continue and our own remedial measures take effect, we should succeed in improving the result situation.
The gales in December 1999 had no effect on either the reinsurance prices agreed for 2000 or the reinsurance capacity offered, having occurred too late in the year to have any impact. We therefore geared our underwriting policy for 2001 all the more to returning to risk-commensurate prices and conditions. As a consequence we withdrew from business that neither met our price expectations nor indicated that our return targets might be achieved in the foreseeable future. For the current business year, we therefore expect reductions in premium income as a result of the remedial measures taken, though these ought to be offset by growth from appropriately rated business (new and existing). At the end of the day, however, our premium income in fire insurance is likely to stagnate. The result should nevertheless show a clear change for the better. We expect an underwriting profit, provided natural catastrophes and other major losses do not intervene.
In view of the underwriting losses which have mounted up in recent years, insurers and reinsurers are intensifying their efforts to improve their business – original rates are rising in a number of markets that are important for us. This should have a positive effect on the result.
In OTHER CLASSES OF BUSINESS our premium income was up by 6.8% (6.1%). Falls in premium in Germany were more than compensated for by growth in other countries.
In 2000 our premium income from Europe rose by 15.2% (3.1%) to €10.4bn (9.1bn). We rank among the leading reinsurers in all the main markets. In the year under review, despite stiff competition, we were once more able to expand our market shares in some areas, e.g. in the UK, the Netherlands and the Nordic countries. Our underwriting result improved, owing to the fact that our claims costs from natural catastrophes were much lower than in the previous year, when the three winter gales Anatol, Lothar and Martin cost us more than €500m. However, our other claims costs remained high.
Germany is our largest market, contributing 28.2% (32.7%) of our total reinsurance premium income.
Premiums in the German primary insurance market rose by approximately 2.2% (5.5%) in 2000. Private health insurance did particularly well, with growth of 4.1% (3.1%). By contrast, in life insurance new business was considerably down on the previous year, which had admittedly benefited from special influences (the debate in Germany surrounding the threatened taxation of profits from life insurance policies). In property-casualty insurance the trend of falling premium income was stopped. We are seeing the first signs of remedial measures in motor business; still very unsatisfactory, on the other hand, is the situation in industrial fire insurance. Altogether, the German market recorded another large deficit in property-casualty insurance – quite contrary to the results in insurances of the person.
In 1999 our reinsurance underwriting result had been negative for the first time in years. This was mainly due to the massive losses suffered by German primary insurers in motor business and the windstorm events in December 1999. In the year under review we recorded another deficit, owing especially to losses in fire insurance.
In the current business year we are proceeding on the assumption that our premium will show a slight fall. The result should improve further, provided we are not hit by major losses from natural catastrophes and primary insurers’ remedial measures in motor business bear fruit.
In the year under review we wrote premium income of €2.2bn (€1.3bn), representing growth of 64.6% (25.9%). This notable increase derived primarily from new proportional reinsurance treaties with large premium volumes in motor and life reinsurance. Our result, however, was somewhat worse than in the previous year – not least because of pre-financing for newly concluded treaties.
Rising rates and remedial measures will enable our premium to grow further in 2001. We expect a much better result, especially from motor business, unless the spectacular loss in Selby at the beginning of the year impacts the figures. This involved an accident with a land-rover vehicle, which led to the collision of two trains.
Gross premiums £m 222 154 Net premiums £m 19 17 Loss ratio non-life % 99.1 105.9 Expense ratio non-life % 9.6 15.1 Profit for the year £m 3.0 0.3
Our subsidiary Münchener Rück Italia (MRI) was able to enlarge its premium volume by 14.7%, and thus maintain its leading market position. In October 2000 northern Italy was hit by floods that gave rise to substantial economic losses. As insurance density in the catastrophe area was relatively low, however, the insurance industry – and hence MRI – was not seriously affected.
Our growth target in this market in the year 2000 was not met. Our premium remained almost the same.
New Re’s regional focus is on Europe; financial reinsurance products account for a substantial part of its business.
Gross premiums Sfr m 974 971 Net premiums Sfr m 702 785 Loss ratio non-life % 88.5 84.1 Expense ratio non-life % 28.6 22.9 Result for the year Sfr m –17.8 –13.6 Investments Sfr m 2,433 2,319
We have responded swiftly: for 2001 we succeeded in agreeing considerable increases in reinsurance prices in some cases. However, we also terminated treaties. This means our premium will probably not grow in the current year, but the result should be more favourable again.
In the current business year we will maintain our market position. We expect the result to take a clear turn for the better. This forecast is based on two factors: substantially improved reinsurance conditions and the higher prices in clients’ original business.
In the year 2000 our premium income showed above-average growth again. Following the large deficit in the previous year – caused mainly by the earthquake of August 1999 in Turkey – our result was better in the year under review, but still slightly negative.
In the current business year we will expand our business further, not least owing to the acquisition of CNA’s life reinsurance business. If we are spared major natural catastrophes, we expect our profit to increase for two reasons. Firstly, we have improved prices and conditions in our reinsurance business. Secondly, the measures to remedy our portfolio in non-life business are having a positive effect.
Our subsidiary American Re is one of the top three reinsurers in the market in the non-life sector. Contrary to original expectations, the company recorded growth of 3.8% in gross premiums in 2000, even though it had not renewed reinsurance treaties with a volume of over US$ 500m because it regarded individual prices and conditions as inadequate. The premium growth resulted from rate increases and new business in the sectors of alternative markets and health. The loss for the year was reduced to US$ 64.4m (101m), even though the company had again substantially strengthened its provisions for losses from the years 1997 to 1999 – primarily in liability, motor, and workers’ compensation reinsurance.
Gross premiums US$ m 3,671 3,537 Net premiums US$ m 3,240 2,928 Loss ratio non-life % 86.8 90.7 Expense ratio non-life % 30.6 29.7 Result for the year US$ m –64.4 –101.0 Investments US$ m 7,894 7,440
In September 2000 we transferred our shares in American Re and MARC to a newly formed holding company, Munich-American Holding Corporation. This measure has further strengthened our position in the world’s most important insurance market.
Asia and Australasia number among the most dynamic insurance markets in the world; at the same time the region is especially exposed to natural catastrophes. This was why in 1999 we recorded our highest underwriting loss ever in the history of our operations in these markets. By contrast, in the year under review we were spared significant losses from natural events.
Mergers and numerous cooperation agreements are changing the face of the market. The outcome: our clients are shrinking in number. But the newly formed groups’ demand for reinsurance is high, and the prices for reinsurance cover have risen. The prospects for our business in terms of both premium growth and result are therefore good.
Despite the economic recovery in most countries of Southeast Asia, the demand for reinsurance capacity has not received any boost. But we are satisfied with the premium income and results of our branches in Singapore and Hong Kong. For the first time in several years, one of the most important markets in the region, Taiwan, was not affected by major losses.
In the year 2000 we were able to slightly expand our existing business, which is for the most part with state insurance companies; the result was satisfactory.
In Australia we are represented by our subsidiary Munich Reinsurance Company of Australasia (MRA); the parent company and American Re also have branches there.
For the current business year we expect slight premium growth and a satisfactory result for the Munich Re Group.
Our most important markets in this region include Israel, Saudi Arabia and Lebanon. In Israel we succeeded in expanding our motor business. Our remedial measures in health insurance started to take effect, but we had to bear high losses in fire business.
Latin America contributed €0.5bn (0.4bn) to our consolidated premium in the year under review; this was 20.3% (9.5%) more than in the previous year. The growth was mainly driven by insurances of the person, with privatization of social insurance playing a large part in certain countries, and also by agricultural insurances. The property classes of business, on the other hand, are stagnating. Our premium growth came from both existing and newly acquired business; rate increases in business exposed to natural catastrophes and changes in exchange rates also contributed.
In contrast to 1999, we were not hit by any new losses from natural catastrophes in this region in 2000. Despite the unrelenting competition among insurers and reinsurers, our result was therefore remarkably positive.
In the current business year we expect growth in our premium income to be on the moderate side, unless the Brazilian market opens up after all. The marked rate increases in insurance and reinsurance for business that includes coverage for natural hazards should enable us to achieve a good result again – presupposing, of course, that major losses from natural catastrophes do not affect us this year either.
Living is a risky business. At home, at leisure, at work, on holiday, everywhere: life is full of uncertainties. Or as Erich Kästner once put it: “Life is always life-threatening.” >>
The primary insurers in our Group write all forms of life and health insurance and nearly all lines of property-casualty insurance. By far their most important market is Germany, where they earn around 87% (90%) of their premium income. Our Group includes ERGO, Karlsruher and Europäische Reiseversicherung.
Minority interests exist mainly in the ERGO Insurance Group, in which Munich Re holds a stake of around 63%.
In health insurance the Group was able to extend its leading position in Germany and Europe. Premium income was up by 6.7% (3.1%) to €3.8bn (3.6bn), of which €0.5bn (0.4bn) came from abroad. Expenses for claims and benefits increased by 15.9% (1.0%) to €4.2bn (3.6bn).
Our primary insurers wrote 87% (90%) of their business in Germany. Their foreign premium income of €1.9bn (1.4bn) derives mainly from six countries; in order of volume these are Italy, the Netherlands, Spain, Austria, Belgium and Poland. In view of this fact, we consider it more informative to report on the individual subgroups rather than according to regions, as we do in reinsurance. Where appropriate, however, we will comment on developments in the individual markets.
ERGO Insurance Group was created in 1997 by merging VICTORIA, Hamburg-Mannheimer, DKV and D.A.S. and is the second-largest primary insurance group in the German market. The main emphasis of ERGO’s business, accounting for approximately 90% of its premium income, is on personal lines insurance, especially insurances of the person. In health insurance and legal protection insurance, ERGO is the market leader in Europe through DKV and D.A.S. respectively.
Gross premiums €bn 12.7 11.9 Net premiums €bn 11.1 10.4 Profit for the year €m 804 467 Investments €bn 88.8 85.0 * Consolidated financial statements in accordance with IAS.
ERGO’s premium income rose by 6.2% (5.3%) in the year under review. This growth, which was due partly to the successful acquisitions abroad, advanced ERGO’s position in Europe.
As in Germany, ERGO is also concentrating on insurances of the person abroad: 69% of foreign premium income came from life and health insurance, as against 20% from property-casualty business, and 11% from legal protection insurance.
For the first time ERGO Versicherungsgruppe AG was awarded a counterparty credit rating of AA+ by Standard & Poor’s. This is basically the highest rating that a non-operative holding company can achieve under Standard & Poor’s rules. ERGO’s operative companies VICTORIA Leben, VICTORIA Versicherung, Hamburg-Mannheimer Leben, HamburgMannheimer Sach and DKV Deutsche Krankenversicherung were all given the top rating of AAA for their financial strength.
ERGO is the third-largest life insurer in Germany. Its premium income in life insurance rose by 5.3% (8.9%) to €5.4bn (5.1bn), with €0.5bn (0.3bn) deriving from abroad. New business premium in Germany was down 23.1% to €949m. In 1999 it had rocketed by 45.1% to €1.2bn, fuelled by the debate surrounding the tax reform, which had caused many clients to bring forward decisions concerning private provision. In terms of annual premiums, the insured portfolio at the end of the year showed an increase to €5.3bn (4.7bn).
Premiums in health insurance climbed by 6.7% (3.1%) to €3.8bn (3.6bn). ERGO’s health insurers have made great efforts to keep premium adjustments for policyholders low. Success in doing so has enhanced their competitiveness and enabled them to strengthen their position as number one in Germany and Europe. Growth in the year under review was impaired, however, by the 10% premium loading introduced by the German government for new business (Health Reform 2000). The extra premiums are to be saved up with the aim of stabilizing premiums for insureds above the age of 65.
With growth of 3.3% in Germany, ERGO again clearly outstripped the market as a whole. Particularly worthy of mention is its combined ratio of 94.9% (93.1%), which continues to be exceptionally good. Only few insurers were able to achieve underwriting profits in this segment.
D.A.S. was able to reinforce its position as European market leader and increase its premium in legal protection insurance by 5.0% (1.7%); a third of this premium comes from abroad.
The Karlsruher Insurance Group, which consists of five companies, focuses on personal lines and insurance for small and medium-sized firms; it offers its clients products in all lines of life and property-casualty insurance. Karlsruher has a broad distribution network. The main elements of this are its main organization, which is present throughout Germany, cooperations with banks in southern Germany, and intensive collaboration with brokers.
Gross premiums €bn 1.3 1.3 Net premiums €bn 1.1 1.1 Profit for the year €m 16 15 Investments €bn 12.2 12.2 * Consolidated financial statements in accordance with IAS.
The number of staff employed by the Karlsruher Group in 2000 totalled 05 MANAGEMENT REPORT / PRIMARY INSURANCE
Growth in the tourist industry was restrained throughout Europe in the past year and did not meet forecasts; this applies particularly to expectations in connection with the millennium changeover. Especially in Germany, major events like the European Football Championships and EXPO 2000 contributed to a below-average increase in turnover in the tourist industry year on year.
According to Aristotle Onassis you shouldn’t run after money. You should go forward to meet it. Just as plants (here in the garden at our Schwabing headquarters in Munich) always strive towards the sun, investors are constantly in search of the best growing conditions for their investments. >>
Among blue chips, the picture was varied: shares in companies that were affected cyclically by a cooling down of economic activity also came under pressure; defensive stocks and companies with stable earnings, on the other hand, benefited from investors’ increasing risk aversion. Two factors in particular stood us in good stead in these difficult markets: the traditionally high proportion of our equity investments in insurance stocks and financials, and the increasing specialization of our fund managers in individual investment sectors.
The Dow Jones Euro STOXX 50, against which our European equity funds are measured, outperformed both the US and the German share markets in the business year; our diversification strategy proved to be correct. The restraint we had shown hitherto in the Asian markets was not misplaced either. We used the development of an asset management unit in Hong Kong to cautiously re-enter the markets, where prices had fallen strongly.
For almost the whole year, there was a steady upward trend in the US dollar against the euro, which only turned into a sideways movement at the beginning of the last quarter. The euro fell against most other currencies in 2000 as well, which meant that the euro capital markets became less attractive internationally.
In the past year MEAG took over the task of central cash management for most of the companies in the Munich Re Group. This is an important structural measure to optimize the short-term investment of our liquid funds.
The division of our investments between reinsurers and primary insurers, as well as their regional distribution, may be seen in the segment reporting of the consolidated financial statements (Section 07).
As from the business year 2000, our special funds – investment funds in which Group companies hold the majority of units – are being consolidated in the financial statements. In other words, the fund assets (real estate, equities or fixed-interest securities) are accounted for in the same way as direct investments: the assets are included in the appropriate items of the balance sheet, and the investment income and expenses are recognized in the relevant items of the income statement. This contrasts with our approach in the previous year, when the units in the special funds were allocated en bloc to the item “shares and investment fund certificates”, and the investment result included only the profits that had actually been distributed to the unit-holders. A good portion of the shifts between individual investment items and the markedly higher investment profit are thus due to this change in accounting. We have not adjusted the previous year’s figures.
The proportion of equities in our overall investment portfolio is relatively high compared to the industry norm. We basically continue to adhere to our investment policy oriented towards stocks and real assets, because we are convinced that this will enable us to achieve better returns in the medium term. However, owing to the consolidation of the special funds in our financial statements, developments on the capital markets will have a greater impact on the investment result than before, making it generally more volatile than in the past.
Our investments will continue to grow in the current year and will again produce an appropriate result, provided the capital markets do not undergo any dramatically negative changes.
Our assumptions regarding the performance of the equity and bond markets in the rest of the current business year are presented in Section 04.
For the current business year, at unchanged currency parities, we expect Group premium income of €33bn (31bn) and a consolidated profit that follows on from the very good result of last year.
In PRIMARY INSURANCE premium income will also show a marked rise, owing to the first full consolidation of Bayerische Vita. Independent of this, we also expect premium growth in German property-casualty insurance to be above the market average. Thanks to the favourable composition of our primary insurers’ portfolio – 90% of the business is personal lines insurance, and 80% insurances of the person – we hope for another good underwriting result.
Remarks on expected experience in the individual fields of business can be found in the preceding sections of the management report; information on our assumptions regarding overall economic development can be obtained from Section 04 (Economic Parameters).
We anticipate that we will be able to pay our shareholders a DIVIDEND of €1.25 per share again for the year 2001.
At the beginning of May 2000, Munich Re and Allianz AG announced their intention to reduce their reciprocal stakes of 25% to around 20% each. This reduction is to take place in several steps, with due consideration for the capital markets, and is scheduled to be completed by the end of 2003.
At the beginning of April 2001 Munich Re and Allianz AG announced a further restructuring of their shareholdings in jointly held subsidiaries and participating interests. Allianz will acquire from the Munich Re Group all its shares in Dresdner Bank and its 40.6% interest in Allianz Lebensversicherungs -AG. Besides this, Munich Re will make available shares of 4% in Allianz for the offer to Dresdner Bank shareholders. This will reduce Munich Re’s stake in Allianz to 21%.
          
For us, as leading risk carrier and provider of financial services, one of the main purposes of our business is to take on risks in a conscious and controlled way, to make them manageable, and ultimately to master them. This presupposes a professional risk management approach on our part.
Risk management in the Munich Re Group is organized both centrally and on a decentralized basis.
Risks may basically arise in all operational areas, functions and processes. We record all risks systematically and completely by means of a risk inventory. This provides us with important indicators of risk connections and interdependencies.
We continually monitor the effectiveness of our risk policy measures in reducing the hazard potential, and implement additional measures where necessary.
In each unit, therefore, there is an accountable risk manager, who is usually the head of that unit.
This person regularly checks the risk situation, including the status of relevant measures, and reports to central risk management any significant deviations from the planned risk positions. Independent of this, the central risk coordinator is informed immediately if certain thresholds are exceeded. Reporting is done on a uniform basis and is incorporated in the ongoing reporting system.
– in PRIMARY INSURANCE, from defaults on amounts receivable from reinsurers, policyholders and insurance agents; – and in REINSURANCE, from defaults on amounts receivable from cedants, brokers and retrocessionaires.
Operational risks manifest themselves in operational systems or processes, above all
Our risk management system enables us to use our knowledge gained from many years’ experience to make the above risks controllable for us.
Regionally and in terms of classes of business, our portfolio is very well balanced on both a gross and a net basis.
Covering losses from natural catastrophes is part of the core business of reinsurance. Particularly in property lines, we assume very large liabilities for earthquake, windstorm and flood losses. Owing to the accumulation character of this business, a single loss event can have a substantial impact on the result situation of individual units or even the whole Group.
Provisions for unknown liabilities arising from our commitments are carefully calculated for life and health insurance and for property-casualty business, using actuarial methods. The run-off of these provisions is continually monitored for all units.
The following table shows the PROVISIONS FOR OUTSTANDING CLAIMS in property-casualty business for the main primary insurers and reinsurers in the years 1995 to 2000 and the run-off of these provisions; this covers over 90% of the total claims provisions of the Group. What the table considers is not the run-off of the provisions for individual accident years, but the run-off of the provision posted at each balance sheet date, which contains the provisions for the respective current accident year and for all previous accident years. The figures for the years 1995 to 1997 were determined on the basis of the relevant national accounting regulations; the figures for the years 1998 to the present have been based on International Accounting Standards.
The table illustrates how the estimate of the respective balance sheet provision has changed in the course of time – owing partly to payments made and partly to the re-estimate of the remaining provisions. The net run-off result reflects the difference between the current and original estimate at the balance sheet date. It is materially affected by changes in exchange rates. The rise in the value of important foreign currencies for us (mainly the US dollar and the pound sterling) against the D-mark and the euro led to a significant increase in the provisions. This contrasts with corresponding rises in the value of investments as a consequence of our currency matching policy.
Three years later 7,548 8,203 9,107 Four years later 8,826 9,884 Five years later 10,071
Three years later 15,398 16,953 17,721 Four years later 15,776 16,869 Five years later 15,512
Net run-off result of the claims provision 489 216 1,130 –1,694 –1,811 –
In the investment sector, we consistently follow a number of principles: we only make investments from which we can expect an appropriate return, and we always ensure that they offer a high degree of security. Also important for us is sufficient liquidity at all times and a targeted mix and spread in terms of region and type of investment.
All insurance and reinsurance companies in the Munich Re Group issue the asset management companies with mandates for investments. These detailed investment guidelines specify precise criteria for limiting and controlling the risks. Investment committees monitor adherence to these mandates and report directly to top management.
In the asset management units of the Munich Re Group, in line with requirements of banking supervision, we pursue a policy – right up to top management level – of clear functional separation between portfolio management, trading, and risk controlling.
At the balance sheet date the scenarios described give rise to the following changes in market value: Change in share price Change in market value of investments sensitive to share prices
Increase of 20% +€15.932bn Increase of 10% + €7.964bn Fall of 10% – €7.974bn Fall of 20% –€15.941bn
As a matter of principle, derivative financial instruments such as swaps and futures are used only in isolated cases to hedge against currency and interest-rate risks. Our Group companies act as end-users of derivatives; there is no trading in these instruments with a view to profit-making.
All in all, our asset portfolio is well diversified and is profitably and safely invested. Opportunities and risks are balanced.
Markets, products, structures and operations are subject to processes of change at ever shorter intervals. This means continual changes in risks. Thus, in addition to monitoring known risks, we must attach equal importance to identifying new ones. It must be taken into account that new risks may also result from opportunities not being recognized and therefore not exploited.
The term “corporate governance” is commonly used to refer to guidelines for the responsible, value-oriented management and supervision of companies. The concept comes from the Anglo-American legal sphere and describes in essence a regulatory framework for directing and controlling business corporations. These rules include requirements that go beyond existing statutory provisions. Given that underlying situations differ from country to country, there can be no universally valid model for good corporate governance, especially as there may also be a need for differentiation to take account of special corporate or sector-related features. The most striking differences between systems are to be found in the allocation of supervisory and management board functions: under Anglo-American law the functions of company management and control are combined in a single body – the board of directors; in Germany these functions are split between two boards.
In Germany the debate on corporate governance has been substantially influenced by the Frankfurt Panel on Corporate Governance, which published its first Code of Best Practice in January 2000. Besides this, a Berlin Initiative Group has published a set of recommendations entitled “German Code of Corporate Governance”. Lastly the Federal Government is also addressing this issue and has set up a special Government Committee for the purpose.
Munich Re has closely followed the corporate governance debate right from the beginning. We already fulfil the main requirements of the current codes. It has always been our aim to pursue a long-term corporate policy geared to value creation in the interests of our clients, shareholders and staff, as well as of our company.
Corporate governance requirements for transparency are traditionally also met by our annual reports, which contain additional information on our Group and its business development, besides the legally required financial statements. This annual report, for instance, includes a detailed financial calendar with the most important business year dates of interest to our shareholders. A further example is information on Munich Re’s shareholdings of over 5%, which – unless they are of subordinate importance – may be obtained either from the annual report or from the list of participating interests available to shareholders.
Up-to-date and comprehensive information is also provided by Munich Re’s website ( It features, for example the invitation to the AGM, the agenda for the AGM, motions and voting proposals from shareholders, and responses from the management. This is then followed by the results of votes at the AGM. All relevant publications are also available in English.
We also promote the long-term increase of corporate value through a remuneration system that provides not only a fixed salary but also variable, performance-related compensation components. Another compensation component for the Board and top executives is linked to the long-term above-average price performance of Munich Re shares. Members of the Supervisory Board receive a remuneration based on the amount of the dividend. The relevant figures, including those for the above-mentioned Board of Management components, may be found on page 125 of this annual report. The report also gives details on the shares held by members of the Board of Management and the Supervisory Board at the end of the business year.
It is surely one of the most fascinating topics in biology: evolution, the development and adaptation of organisms. Why does nature keep on bringing forth new forms of life? How do organisms adjust to their particular environment? How do they respond to continually changing external conditions? Even if many questions of this central topic of biology are still unanswered, one thing is certain: there is no survival without evolution. >>
>>_______For successful companies, evolution is not enough: they also need innovation to achieve a leading position in the market. We are actively developing our Group in the light of new opportunities and challenges, but not abandoning principles that have proved their worth.
To meet these expectations, we make increasing corporate value a central benchmark for all our decisions. This is why we have expanded our range of existing performance-measurement tools, so that we can identify even better which fields of business create added value for the Group. The value-based management approach we have chosen takes account of these requirements. It enables us to measure earnings performance in reinsurance, in primary insurance and in asset management using the same yardsticks.
Following the switch to International Accounting Standards in our external reporting, we are thus now doing the same in our internal reporting, so that we can calculate the value added by each individual field of business. To define this value added, we need to make a few adjustments: on the assets side, we apply a normalized interest rate so as to avoid distortions resulting from fluctuations in market value. On the liabilities side, we use the present value of claims provisions, so that we can compare life and non-life and short and long-tail business better.
Added value is created wherever the adjusted IAS result that is achieved on the necessary operating capital is higher than the cost of capital for our shareholders, i.e. the opportunity cost. We derive the cost-of-equity rate from standard models and verify it on the basis of available benchmarks.
We have, however, not only refined our financial performance measures but also linked them more closely to non-financial parameters. With value-based management, we will achieve an even stronger networking of strategic planning and operative planning. To this end, we have implemented the balanced scorecard throughout the Group. The balanced scorecard puts us in a better position to identify interrelationships between strategic objectives, related initiatives and operative measures. It shows which objectives and activities we intend to concentrate on in order to create the greatest added value. We believe that this will enable us to align our organization even more strongly to Munich Re’s overall strategy.
– Europe 2 and Latin America – Asia, Australasia, Africa – North America
The other three divisions have supraregional functions: – Corporate Underwriting/Global Clients – Special and Financial Risks – Life and Health
The continuing dynamic development of the insurance markets again strongly influenced our human resources work in the year under review. Competition for especially talented and qualified staff is keener than ever.
In the primary insurance sector, ERGO saw the addition of more than 1,500 staff as a result of the acquisition of Alte Leipziger Europa Beteiligungsgesellschaft and Bayerische Vita. Besides this, our asset management company MEAG is now fully operational and meanwhile employs 475 staff. And last but not least, the development of business made it necessary to recruit new staff.
Good staff with the requisite qualifications are especially important for achieving our business objectives. It is therefore our aim to win and keep them Group-wide through attractive employment conditions and promising career prospects.
In order to fill the gaps left by state old-age pension systems, the companies throughout the Group provide supplementary company pension schemes. Furthermore, we encourage our staff to take personal responsibility by enabling them to defer compensation, with beneficial tax effects, as part of their private provision for retirement. The ERGO Group has bundled its company pension arrangements in a newly established company, which will also make its expertise available to third parties in future.
In order to raise our profile on the job market, we are making increasing use of the Internet: the career pages on our website have been completely redesigned. We are now getting around 12,000 hits – and rising – per month.
As part of our recruiting programme for qualified staff, we have considerably stepped up our marketing for graduates and our appearances at trade fairs.
Demographic change in Germany is threatening to undermine the financial security of future pensioners: they can no longer expect to receive an adequate retirement income from the pay-as-you-go state pension insurance system. The burden for employees would simply be too great. It has therefore become imperative to reform Germany’s pension system – with a twofold objective: future pensioners must have sufficient income, whilst contribution rates to state pension insurance must be kept at a reasonable level.
The state will subsidize premiums for this funded pension subject to the following main criteria: – Regular premium payments during the savings phase – Lifelong payments during the benefits phase – Guarantee from the provider that at the beginning of the benefits phase at least the paid-in premiums will be available
Germany has already undertaken a state disability pension reform, which came into force on 1st January 2001. Disability pensions are now granted in the form of a two-tier pension for reduction in earning capacity. Only insureds with a remaining earning capacity of under three hours per day are entitled to the full pension. Insureds with a remaining capacity of three to six hours receive only half the amount. However, these people can obtain the full pension if they are unable to earn any income because of unemployment. Insureds born after 1st January 1961 are no longer able to claim a pension for occupational disability. Older insureds can claim half the pension for reduction in earning capacity in the case of occupational disability.
Life insurers have accumulated decades of know-how in all these areas. This applies especially to the two central criteria for subsidization: “payment as an annuity” and “guarantee”. A large portion of the additional demand will therefore be concentrated on life insurance companies. The life insurers in our Group – namely Hamburg-Mannheimer, VICTORIA and Karlsruher – are extremely well prepared to participate in the expected boom.
Our advice and support as reinsurers will also be required in this context, whether it is in designing suitable products or providing tailor-made reinsurance solutions to cover risks such as longevity or disability. We are currently working with MEAG to devise models to underwrite the legally envisaged premium guarantee, especially with unit-linked pension insurances.
The new business growth envisaged by our primary insurance clients has to be financed. We expect the demand for so-called financing treaties in reinsurance to grow as a consequence. This should have a further positive effect on our premium income.
In order to manage the products for funded supplementary pensions, flexible IT systems are essential and an important competitive factor. The primary insurers in our Group are already well positioned in this respect.
Advances in information technology are continuing apace. The reason is obvious: processes of change are increasingly being driven by IT. This accelerates product development, makes new value-added chains possible, and creates new competitive structures.
Although reinsurance and financial business offer much better opportunities for exercising influence, we have not lost sight of the direct impacts of our administrative operations on the environment. As far as the office buildings at our Munich headquarters are concerned, a comprehensive environmental review has been prepared for the first time – as the basis and yardstick for further measures designed to ensure that our operations become even more resource-saving and energy-efficient.
We have combined the activities for our Munich head office in a tailormade environmental management system and have had this reviewed by an external environmental auditor. At the end of the process, which benefited especially from the acceptance and commitment of staff, we received our environmental audit certificate.
This is a significant milestone for us, but it is still only a first step. In an extensive action programme, we have set ourselves further goals for the next few years; one of these is to prepare an environmental protection concept for the many properties that we lease to third parties. In addition, we want to extend our activities to our international organization.
Cell division: From one make two. From two make four. And so on. >>
F. Cash with banks, cheques and cash in hand 2,273 487
Profit for the year, including minority interests in earnings 2,071 1,318
Changes in deposits retained and accounts receivable and payable 517 –1,313
Life and health Property-casualty 31.12.2000 Prev. year 31.12.2000 Prev. year 31.12.2000 Prev. year 31.12.2000 Prev. year 31.12.2000 Prev. year €m €m €m €m €m €m €m €m €m €m
B. Gross underwriting provisions for life insurance policies where the investment risk is borne by the policyholders – – – –
Total equity and liabilities 193,567 179,880 * Group shareholders’ equity and minority interests.
Life and health Property-casualty 2000 Prev. year 2000 Prev. year €m €m €m €m
Thereof: – From insurance transactions with other segments 820 735 806 713 – From insurance transactions with external third parties 3,881 3,007 12,818 10,913
Thereof: – Income from associated enterprises 404 318 515 405 5. Net expenses for claims and benefits 3,643 3,009 10,069 8,964 8. Result before amortization of goodwill 904 669 621 539
INVESTMENTS Reinsurers Primary insurers Asset management Total 31.12.2000 Prev. year 31.12.2000 Prev. year 31.12.2000 Prev. year 31.12.2000 Prev. year €m €m €m €m €m €m €m €m
2000 Prev. year 2000 Prev. year 2000 Prev. year €m €m €m €m €m €m
Munich Re’s consolidated financial statements have been prepared in accordance with the standards of the International Accounting Standards Board (IASB).
The consolidated financial statements have been prepared in accordance with International Accounting Standards adopted up to and including 31st December 2000 whose application was obligatory for the business year. In addition, we have observed the following Standards whose application was not compulsory for the business year: IAS 19 (revised) Employee Benefits IAS 39 Financial Instruments: Recognition and
For the year under review, we have for the first time consolidated 96 investment funds in which Group companies hold the majority of the units (special funds), in accordance with SIC 12. The previous year’s figures have not been adjusted.
The profits earned by the subsidiaries after their first consolidation are included in the Group’s revenue reserves unless they are apportionable to minority interests.
In addition, OTHER INTANGIBLE ASSETS include the fair values of acquired life insurance portfolios. These are amortized systematically in accordance with the expected result development.
INVESTMENTS IN ASSOCIATED ENTERPRISES are valued by the equity method at the Group’s proportionate share of their net assets; as a rule, the most recent individual or consolidated financial statements of the associated enterprise are used for this. The earnings of an associated enterprise apportionable to the Group are included in the investment result. Investments in associated enterprises that are determined as being not material for assessing the Group’s financial position are valued at acquisition cost.
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.
SECURITIES HELD FOR TRADING comprise all fixed-interest and nonfixed -interest securities that we have acquired for trading purposes to earn short-term profits from price changes and differences; in addition, they include all derivative financial instruments that we have not acquired for hedging purposes. Securities held for trading are stated at the market value at the balance sheet date; all unrealized gains or losses from this valuation are included in the investment result.
Receivables on primary insurance business, accounts receivable on reinsurance and other receivables are stated at face value; adjustments of value are made where necessary.
Other assets are stated at cost less any writedowns that are required.
The underwriting provisions are shown gross in our balance sheet, i.e. without deduction of the share apportionable to business ceded by us; cf. the explanatory remarks on the relevant asset item. The ceded share is calculated and accounted for on the basis of the individual reinsurance agreements.
The PROVISION FOR FUTURE POLICY BENEFITS covers the anticipated future benefits payable to policyholders in life, health and personal accident insurance and also the ageing reserves in health insurance.
If policyholders participate in aggregate divisible surplus in the same proportion as their policies are considered to have contributed to this surplus (“contribution principle”), the provision for future policy benefits is calculated with reference to the contractually agreed calculation bases (FAS 120); as these are prudent assumptions, surpluses regularly accrue, which are for the most part distributed to policyholders. The acquisition costs are capitalized and amortized over the terms of the policies (on the basis of the estimated surpluses).
If policyholders can vary their premium payments within certain contractually specified limits (universal life), the amount included in the provision for future policy benefits corresponds to the premiums paid plus the interest credited thereon (FAS 97).
The PROVISION FOR OUTSTANDING CLAIMS covers payment obligations arising from insurance and reinsurance contracts where the size of the claim or the date of the payment is still uncertain. Such provisions are posted for claims that have been reported, for claims incurred but not yet reported, and for internal and external claims adjustment expenses. Provisions for outstanding claims are based on estimates; the actual payments may be higher or lower.
In the year under review we fundamentally revised our procedure for determining provisions for earthquake risks and extended it to other natural hazards such as windstorm and hail. The new system takes account of our considerably improved data basis and the latest knowledge of our experts. This new calculation does not have any significant effect on the assets, liabilities, financial position or results of the Group.
These primarily include PROVISIONS FOR POST-EMPLOYMENT BENEFITS. In accordance with IAS 19, these are calculated using actuarial instruments (e.g. current mortality tables and disablement probabilities) and assumptions in relation to the future development of wages and salaries, as well as increases in current pensions and pension entitlements. The interest rate at which the pension provisions are discounted is based on the yields for long-term bonds of first-class issuers (e.g. government bonds).
Munich Re’s reporting currency is the euro. The balance sheets of foreign subsidiaries that do not report in euros are translated using the year-end exchange rates, and their income statements using the annual average exchange rates; any translation differences arising in the process are reflected in shareholders’ equity and excluded from earnings.
Shareholders’ equity is substantially higher under IAS than under German Commercial Code accounting because large portions of the investment portfolio are valued at market; results fluctuate more strongly than under German Commercial Code accounting, because there are no claims equalization provisions to provide a “smoothing” effect. The most important differences between IAS and the German Commercial Code as regards the Munich Re Group are as follows: – Under IAS, goodwill is amortized over a maximum period of 20 years with impact on earnings; in German Commercial Code accounting, there is the option to offset goodwill against the revenue reserves without impacting earnings.
– The group of associated enterprises valued at equity is considerably larger in the IAS financial statements, because it is no longer relevant whether a significant influence is actually exercised or not. The consolidated profit now includes a corresponding portion of the net profit of the enterprises concerned rather than only the dividend distributions.
– The provision for premium refunds is markedly higher than under the German Commercial Code because it also includes the deferred entitlements of policyholders in life and health insurance from the accumulated result differences between IAS and German Commercial Code and their share of unrealized gains and losses in the investments available for sale.
– Owing to the pro rata first-time consolidation of the special funds, transactions in the area of investments (and thus the realized gains and losses) are markedly higher but the result is also more volatile.
Carrying amount 31.12. business year 2,625 2,142 Accumulated amortization 31.12. business year 480 335
Gross amount capitalized 31.12. previous year 208 177 91 476 267
Gross amount capitalized 31.12. business year 311 695 138 1,144 476
The remaining other intangible assets include rights equivalent to real property amounting to €5m (5m).
Gross amount capitalized 31.12. previous year 7,995 7,524 Accumulated depreciation 31.12. previous year 1,094 1,012
Carrying amount 31.12. previous year 6,901 6,512 Translation differences 7 22
Carrying amount 1.1. business year 6,908 6,534 Changes in consolidated group 121 117
Carrying amount 31.12. business year 8,405 6,901 Accumulated depreciation 31.12. business year 1,178 1,094
The fair value of real estate at the balance sheet date totals €10,508m (9,220m). The fair value is generally the capitalized earnings value; new buildings and freshly purchased real estate are valued at cost.
The fair value of investments in associated enterprises, which are generally valued at equity, amounts to €33,004m (27,258m) at the balance sheet date.
An overview of our most important shareholdings can be found in Section 08.
In the business year the market values of the loans generally corresponded to the carrying amounts. The “Other loans” include loans to affiliated enterprises totalling €199m (65m) and loans to associated enterprises totalling €483m (164m).
The marked shifts between the individual items result from the first-time consolidation of the special funds.
Fixed-interest securities 23,811 Non-fixed-interest securities – Listed 15,627 – Non-listed 1,295
Up to one year 6,155 5,165 6,152 5,073 Over one year and up to 5 years 32,712 21,325 31,722 20,468 Over 5 years and up to 10 years 25,416 21,860 24,970 21,608
The securities held for trading include fixed-interest securities totalling €137m (91m) and non-fixed-interest securities totalling €122m (100m).
The market value of open positions totalled €497m (90m) at the balance sheet date, i.e. less than 1% (1%) of the balance sheet total. The market value of items used for hedging purposes amounted to €507m and the market value of other items to –€10m.
(11) Receivables and liabilities in respect of affiliated enterprises and participating interests
The exercising of Munich Re 1998/2002 warrants in the course of the business year resulted in the issue of 24,296 new registered shares at an exercise price of €163.61 each. This increased the share capital to €452,976,824.32, and the company raised a total of €3,975,068.56 from the issue of the new shares.
The share capital as at 31st December 2000 is thus divided into 176,944,072 registered shares, each fully paid up and entitled to one vote.
The contingent capital is as follows: All figures in €m 31.12.2000
Issued Capital Revenue Other Consoli- Total capital reserve reserves reserves dated sharehold-
Changes in exchange rates – – 236 –5 –27 204 Capital increases – 4 – – – 4 Allocation to revenue reserves – – 938 – –938 – Changes in the consolidated group – – 1,190 –1,152 – 38 Unrealized gains and losses resulting from valuation at equity – – – 847 – 847 Unrealized gains and losses on other
The “Other reserves” include €4,189m (3,342m) unrealized gains and losses resulting from valuation at equity, and €5,324m (3,953m) unrealized gains and losses on other investments.
The capital authorized for capital increases is thus as follows: All figures in €m 31.12.2000
Unconsolidated affiliated enterprises 26 25 Securities available for sale – Fixed-interest 154 –1,995 – Non-fixed-interest –8,028 4,860 Less: – Provision for deferred premium refunds –4,597 3,078 – Deferred taxes –4,622 –168
– Life and health 32 79 – Property-casualty 3,383 3,018 Primary insurers 1,568 1,327 – Life and health 749 699 – Property-casualty 819 628 * After elimination of intra-Group transactions across segments.
– Life and health 10,329 9,558 – Property-casualty 687 650 Primary insurers 66,605 62,199 – Life and health 66,567 62,182 – Property-casualty 38 17 * After elimination of intra-Group transactions across segments.
(20) Other underwriting provisions 31.12.2000 31.12.2000 31.12.2000 Prev. year Prev. year Prev. year
The following table shows the distribution of the net other provisions between the segments of the Group: All figures in €m* 31.12.2000 Prev. year
Provisions for post-employment benefits 1,005 949 Tax provisions 893 995 Other provisions 1,163 983
Under defined contribution plans the company pays fixed contributions to an insurer. This fully covers the company’s obligations.
Expenses for defined contribution plans in the year under review total €39m (16m).
The expenses booked in the year under review are made up as follows: All figures in €m 2000 Prev. year
Discount rate 6.5 5.9 Expected rate of return on fund assets 9.8 9.3 Future increases in entitlement/salary 4.0 3.8 Future pension increases 2.4 2.0 07 CONSOLIDATED FINANCIAL STATEMENTS 2000
American Re Corporation, Princeton 7.45%, US$ 500m Senior Notes 1996/2026 531 497 American Re Capital, Delaware
Deposits retained on ceded business 5,128 4,869 Accounts payable on primary insurance business 5,067 4,771 Accounts payable on reinsurance business 2,895 2,479 Amounts owed to banks 1,762 967 Miscellaneous liabilities 1,385 1,239 €232m (117m) is apportionable to tax liabilities, €34m (28m) to liabilities for social security, and €98m (10m) to liabilities for interest and rent.
Up to one year 14,278 12,597 Over one year and up to 5 years 1,069 943 Over 5 years and up to 10 years 265 234
– Net amount 53 29 –284 –8 –27 –113 –45 –29 –303 –121 * After elimination of intra-Group transactions across segments.
Result from: Real estate 558 551 Investments in affiliated enterprises 1 8 Investments in associated enterprises 1,056 981 Mortgage loans and other loans 385 497 Other securities held to maturity 67 103 Other securities available for sale – Fixed-interest 4,434 3,325 – Non-fixed-interest 5,571 3,624 Other securities held for trading – Fixed-interest 8 10 – Non-fixed-interest –175 34 Other investments 680 730 Expenses for the management of investments, other expenses 419 338
Management expenses, interest charges and other * After elimination of intra-Group transaction across segments.
Actual tax paid for business year 661 928 Actual tax paid for other periods 25 74 Deferred tax resulting from the occurrence or reversal of temporary differences 109 –334 Effects of changes in tax rates on deferred tax –423 –300 Other 7 –8
Change in deferred acquisition costs (gross) –190 44 –93 –83 27 –148 –14 –20 –270 –207 * After elimination of intra-Group transactions across segments.
The following table shows the relationship between the notional tax on earnings derived from the profit for the year and the tax on earnings shown. The actual German tax on earnings is based on the corporation tax rate for retained earnings applicable in Germany since 1999, the solidarity surcharge and the trade tax. The German deferred tax on earnings is determined on the basis of the corporation tax rate applicable in Germany as from 2001, the solidarity surcharge and the trade tax. The change in the tax rate is recognized in earnings.
Result before tax on earnings (after “Other tax”) 2,450 1,678 Theoretical tax rate in % 40 45
The parent company of the Munich Re Group is Münchener Rückversicherungs -Gesellschaft Aktiengesellschaft in München (Munich Reinsurance Company Joint-Stock Company in Munich). It is entered in the commercial register with the address Königinstrasse 107, 80802 München. In addition to its function as a reinsurer, the company also fulfils the function of holding company for the Group.
In the year under review, Allianz’s cessions to Munich Re amounted to 13.9% (16.9%) of our gross premiums in reinsurance or 8.2% (9.5%) of our overall consolidated premiums. Munich Re’s cessions to Allianz amounted to 42.2% (42.7%) of our ceded premiums.
The following personnel expenses are included in the operating expenses, in the expenses for claims and benefits and in the investment result: All figures in €m 2000 Prev. year
Wages and salaries 1,761 1,639 Social security contributions and employee assistance 310 289 Expenses for employees’ pensions 159 142 07 CONSOLIDATED FINANCIAL STATEMENTS 2000
As at 1st July 1999 and 1st July 2000 Munich Re launched long-term incentive plans. These plans, each with a term of seven years, provide for the members of the Board of Management and senior management in Munich and for the top executives in Munich Re’s international organization to be granted a defined number of stock appreciation rights.
Plan commencement 1.7.1999 1.7.2000 Original share price €182.60 €319.34 Number of rights on 1.1.2000 110,840
Number of rights on 31.12.2000 119,885 74,636 Exercisable at year-end – –
The total emoluments of the Board of Management of the Munich Reinsurance Company for fulfilment of its duties in respect of the parent company and the subsidiaries totalled €9.2m (8.0m). 51% (40%) of this was made up of variable compensation components. Payments to retired members of the Board of Management or their surviving dependants amounted to €2.9m (2.5m).
Taking into account the proposal for the appropriation of the profit, the emoluments of Supervisory Board totalled €1.1m (0.9m). This sum includes €0.6m (0.4m) dependent on the dividend paid to the shareholders.
A total of €33m (28m) was set aside for pension commitments towards retired members of the Board of Management or their surviving dependants.
(37) Shares held by members of the Board of Management and the
At year-end a total of 204 Munich Reinsurance Company shares were held by members of the Board of Management, and 522 by members of the Supervisory Board.
Commitments under rental, work and service contracts amounted to €635m. In addition, there were obligations from leasing arrangements amounting to €216m. Of this, €71m is due not later than one year, €129m is due later than one year and not later than five years, and €16m is due later than five years. Investment obligations total €29m. These figures represent undiscounted nominal amounts.
As members of the German Reinsurance Pharmapool, the German Nuclear Insurance Pool and the German Aviation Pool, several Group companies are committed – to the extent of their proportional shares – to assuming the payment obligations of other pool members if the latter are not able to meet these obligations.
The measures will result in a large tax-free gain on the disposal of investments in the business year 2002 and in a significant increase in the consolidated shareholders’ equity.
New shares created in the business year 2000 by the exercise of warrants are included pro rata temporis from the respective date of delivery. The weighted average number of the shares for 2000 was 176,922,611 (175,793,668). This gives an earnings per share figure of €9.89 (6.45); €1.02 of this is attributable to the first-time consolidation of the special funds and €1.81 to the effects of changes in tax rates in the business year.
For the diluted earnings per share, the number of shares is increased by the weighted average of potential shares that would have a diluting effect. Outstanding warrants are additionally included pro rata temporis up to the time they are exercised. At an average share price of €323.85 (195.44) and a warrant exercise price of €163.61, this results in a dilution of 864,445 (285,409) shares. The diluted earnings per share, the calculation of which was based on 177,787,055 (176,079,077) shares, thus amount to €9.84 (6.44).
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.
In our opinion, the consolidated financial statements give a true and fair view of the net assets, financial position, results of operations and cash flows of the Group for the business year in accordance with IAS.
Lutz Wiegand Christine Peschel Wirtschaftsprüfer Wirtschaftsprüfer (Certified public accountant) (Certified public accountant)
Just under 70 years ago the electron microscope was invented, giving mankind a whole new view of itself. Suddenly scientists were able to look right into the inside of cells and saw – outer space. Or at least what appeared to be. And the deeper biologists penetrate into nature, the more parallels they discover. >>
>>_______People who are familiar with Munich Re know that we are motivated by a very similar principle. Namely that we “live” those qualities which characterize us as global risk carriers and providers of financial services right into the smallest cells of our Group. That we also apply our high standards to the smaller segments of our business. The reason: we are convinced that the secret of success is to be found in small details as well as in grand designs. Meaning that we have to achieve excellence in both.
New Reinsurance Company Rue de l’Athénée 6–8 P.O. Box 3504 1211 Genève 3
Munich American Reassurance Company 56 Perimeter Center East, N.E., Suite 500 Atlanta, GA 30346-2290
Munich Reinsurance Company of Australasia Limited (MRA) 7th Floor, Munich Re House 143 Macquarie Street Sydney NSW 2000 P.O. Box H35, Australia Square Sydney NSW 1215
American Re Corporation, Princeton 100.0000 2,577,611 –69,655 American Re-Insurance Company, Princeton 100.0000 3,058,883 –46,729 Great Lakes Reinsurance (UK) PLC, London 100.0000 114,713 4,928 Munich American Reassurance Company, Atlanta 100.0000 775,806 6,898 Munich Reinsurance Company of Canada, Toronto 100.0000 89,609 8,576 Munich Reinsurance Company of Africa Limited, Johannesburg 100.0000 77,007 14,368 Munich Mauritius Reinsurance Company Ltd., Port Louis 100.0000 3,104 793 Munich Reinsurance Company of Australasia Limited, Sydney 100.0000 113,975 8,217 Münchener Rück Italia S. p. A., Milan 100.0000 230,178 –38,944 New Reinsurance Company, Geneva 100.0000 330,053 –11,440 Temple Insurance Company, Toronto 100.0000 89,611 5,392
Bayerische Hypo- und Vereinsbank Aktiengesellschaft, Munich IKB Deutsche Industriebank AG, Düsseldorf/Berlin Heidelberger Druckmaschinen Aktiengesellschaft, Heidelberg Österreichische Volksbanken, Vienna MAN Aktiengesellschaft, Munich
ERGO Versicherungsgruppe AG, Düsseldorf 62.9180 1,626,134 258,140 VICTORIA Lebensversicherung Aktiengesellschaft, Düsseldorf 62.6034 255,645 27,200 VICTORIA Versicherung Aktiengesellschaft, Düsseldorf 62.1192 587,365 61,500 VICTORIA Krankenversicherung Aktiengesellschaft, Düsseldorf 62.7507 62,025 7,700 VICTORIA MERIDIONAL Compañía Anónima de Seguros y Reaseguros, S. A., Madrid 60.8358 11,689 –3,747 VICTORIA-Seguros de Vida, S. A., Lisbon 62.1192 15,583 198 VICTORIA-Seguros S. A., Lisbon 62.1192 19,329 –689 VICTORIA-VOLKSBANKEN Versicherungsaktiengesellschaft, Vienna 46.3596 25,143 974 Vorsorge Lebensversicherung Aktiengesellschaft, Düsseldorf 62.6034 19,077 36 Nieuwe Hollandse Lloyd Levensverzekeringmaatschappij N. V., Woerden 62.1192 27,515 2,336 Nieuwe Hollandse Lloyd Schadeverzekeringmaatschappij N. V., Woerden 62.1192 20,838 –1,129 VICTORIA General Insurance Company S.A., Thessaloniki 62.1193 18,806 2,373 Olympic-Victoria Life Insurance Company S. A., Thessaloniki 62.1192 6,361 32 Hamburg-Mannheimer Versicherungs-Aktien-Gesellschaft, Hamburg 62.9180 434,036 73,115 Hamburg-Mannheimer Sachversicherungs-AG, Hamburg 62.9217 378,703 53,018 Hamburg-Mannheimer Rechtsschutzversicherungs-Aktien-Gesellschaft, Hamburg 62.5399 12,328 3,626 Hamburg-Mannheimer N. V., Brussels 62.9118 11,246 172 DKV Deutsche Krankenversicherung Aktiengesellschaft, Berlin/Cologne 62.9551 601,219 71,581 DKV Luxembourg S. A., Luxembourg 62.9469 8,275 190 dkv International S. A., Brussels 62.9538 19,538 1,753 DKV Seguros y Reaseguros, Sociedad Anónima Española, Saragossa 62.9551 48,511 2,289 Previasa Vida, S. A. de Seguros y Reaseguros, Saragossa 62.9551 12,808 2,173
D. A. S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich 62.1731 231,895 24,170 D. A. S. Deutscher Automobil Schutz Versicherungs-Aktiengesellschaft, Munich*** 62.1731 36,854 0 DAS Legal Expenses Insurance Company Limited, Bristol 62.1731 53,314 7,702 D. A. S. Nederlandse Rechtsbijstand Verzekeringmaatschappij N. V., Amsterdam 39.0751 33,286 3,690 D. A. S. Österreichische Allgemeine Rechtsschutz-Versicherungs-AG, Vienna 62.1731 18,115 2,389 Alte Leipziger Europa Beteiligungsgesellschaft AG, Bad Homburg 68.4199 208,538 450 BICO-Leks Baltic Insurance Company Ltd., Tallinn 67.7103 6,379 –2,024 DRAUDA Litauisch-Deutsche Versicherung AG, Vilnius 68.4130 7,495 483 RIGAS FENIKSS Versicherung AG, Riga 68.3651 5,484 368 STU ERGO HESTIA S.A., Sopot 54.7446 172,973 3,154 STUnZ ERGO HESTIA S.A., Sopot 37.9509 8,881 –9,963 BBV Italia S.p.A., Milan 62.9180 11,857 –60,045 Bayerische Vida España S.A., Barcelona 32.0882 11,213 –17 Bayerische Vita S.p.A., Milan 44.0426 92,621 9,629 Europäische Reiseversicherung Aktiengesellschaft, Munich 100.0000 93,351 4,778 Europæiske Rejseforsikring A/S, Copenhagen 100.0000 19,447 2,100 Europeiska Försäkeringsaktiebolaget, Stockholm 100.0000 16,888 604 Karlsruher Lebensversicherung Aktiengesellschaft, Karlsruhe 54.0000 151,789 17,050 Karlsruher Rechtsschutzversicherung AG, Karlsruhe 53.0485 7,238 245 Karlsruher Versicherung Aktiengesellschaft, Karlsruhe 53.0485 59,672 5,521 The Princeton Excess and Surplus Lines Insurance Company, Princeton 100.0000 27,814 1,573 Mercur Assistance Aktiengesellschaft Holding, Munich 90.0000 10,857 159
Allianz Aktiengesellschaft, Munich**** 24.9511 28,788,600 2,233,200 Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart 40.5720 1,074,344 210,000 Bayerische Versicherungsbank Aktiengesellschaft, Munich 45.0000 321,080 47,987 Frankfurter Versicherungs-Aktiengesellschaft, Frankfurt am Main 49.9830 342,591 40,994 TELA Versicherung Aktiengesellschaft, Berlin/Munich 25.0000 112,382 –5,113 Union Versicherungs-Aktiengesellschaft, Vienna 20.9706 42,414 2,469 Vereinsbank-Victoria Bauspar Aktiengesellschaft, Munich 18.7380 63,384 931
MEAG MUNICH ERGO AssetManagement GmbH, Munich 85.1672 26,463 –3,724 MEAG Securities Management GmbH, Munich 85.1672 25 0 MEAG MUNICH ERGO Kapitalanlagengesellschaft mbH, Munich 85.1672 15,396 690 MEAG MUNICH ERGO Real Estate Investment GmbH, Munich 85.1672 5,500 0 MEAG Real Estate Management GmbH, Munich 85.1672 3,707 3,537 ERGO Trust GmbH, Düsseldorf 62.9180 27,898 10,500
**** Result for the year after profit transfer. **** Results in accordance with IAS.
The complete list of shareholdings required by Article 313 para. 2 of the German Commercial Code will be filed with the commercial registry in Munich; we will be glad to send you a copy on request.
Deferred tax assets/liabilities Deferred taxes derive from temporary differences between accounting on the basis of International Accounting Standards (consolidated financial statements) and national tax law. If asset items are valued lower, or liabilities higher, than in the tax balance sheet of the Group company concerned, the resulting future tax relief must be recognized as a deferred tax asset. If the accounting differences between the consolidated financial statements will lead to future tax burdens, these must be recognized as deferred tax liabilities.
Equity method Investments in associated enterprises have to be valued in the consolidated financial statements using the equity method. The “at equity” value corresponds to the Group’s proportionate share of the shareholders’ equity of the enterprise concerned.
Expense ratio Ratio, in per cent, of operating expenses to earned premiums.
Loss ratio Ratio, in per cent, of claims expenses to earned premiums.
Minority interests in shareholders’ equity and earnings That part of the shareholders’ equity and earnings of our subsidiaries that is apportionable to shareholders outside the Group.
Operating expenses Commission, personnel costs and general expenses for the acquisition and ongoing administration of insurance contracts, less any commission reimbursed by reinsurers, including profit commission.
Rating Standardized assessment of the credit standing of debt instruments and companies by specialized independent rating agencies.
Swap Agreement between two counterparties to exchange payment flows over a specified period in order to profit from relative cost benefits that one party enjoys on a particular financial market. In the case of an interest rate swap, payment obligations in the same currency but with different interest rate conditions (e.g. fixed/variable) are exchanged. In the case of currency swaps, the payment obligations exchanged are in different currencies.
Underwriting provisions Uncertain liabilities directly connected with insurance business. These provisions are made to ensure that obligations under insurance contracts can always be met.
(US GAAP) The principles of US accounting that are stipulated as compulsory for listed companies in the US.
Capital measures 112 Cash flow statement 86 Classes of business 30 ff. Consolidated group 96 f. Contingent liabilities 125
Incentive plan 125 Income statement 85, 92 f. Index weighting 14 Information technology 77
Tax 26, 122 ff. Transition from German Commercial Code to IAS 104 f.
If you have general questions on Munich Re shares, please use our shareholder hotline: E-mail: Shareholder@munichre.com
If you are an institutional investor or analyst, please contact our investor relations team: E-mail: InvestorRelations@munichre.com