– The second factor that affected us much more strongly last year than in the long-term average was the risk of random fluctuations. Claims experience in the year under review was characterized by an exceptional accumulation of large and very large losses.
Dr. jur. Albrecht Schmidt Spokesman of the Board of Management of Bayerische Hypo- und Vereinsbank AG
11TH SEPTEMBER WAS A SHOCK. HOW PREPARED WAS MUNICH RE FOR IT?
The US, which had been the starting point of the global downturn, slipped into a recession in March 2001. After reaching 4.1% on average in the year 2000, growth in its real GDP was very restrained in 2001, amounting to only 1.2%. Business investment and industrial production in particular dropped sharply, whereas consumer spending held up relatively well, despite rising unemployment and falling stock markets. Then, in the fourth quarter, a recovery set in with unexpectedly strong growth.
We expect the US to be the key driver in the international capital markets again in 2002. High liquidity injections by the central banks and the US’s expansive fiscal policy have created a positive environment for stock markets. However, a lasting recovery in stock prices presupposes a corresponding rise in company profits, i.e. a revival in the real economy.
The division’s largest market is the UK, where premium income again grew, driven both by both new business and by rising rates. The negative result is attributable to the terrorist attack in the US and to major individual losses. We were able to strengthen our top position in property-casualty reinsurance.
Profit for the year A$ m 5.0 16.5 05 MANAGEMENT REPORT / REINSURANCE
Net underwriting provisions €bn 87.4 87.3 05 MANAGEMENT REPORT / PRIMARY INSURANCE
ERGO wrote premium income of €6.0bn (5.4bn) in life insurance, a healthy plus of 12.0% (5.3%). New business premium in Germany was up by a 15.3% (–23.1%) to €1,097m (951m), as ERGO increased its market share in this sector. ERGO is the third-largest life insurer in Germany. Its two major life insurance companies successfully launched products in the promising pension reform market: “FörderRente” in the case of VICTORIA and “Kaiser-Rente” in the case of Hamburg-Mannheimer. Their sales forces already succeeded in issuing over 300,000 such “Riester” policies in the year 2001.
Growth benefited from the foreign property-casualty subsidiaries that were acquired in the year 2000 and were consolidated in full for the first time in the year under review. In Germany, premium grew at above the average market rate to €2.6bn (2.5bn), with motor insurance developing especially well. At 98.2% (94.9%), the combined ratio of ERGO’s property-casualty business continues to be outstanding, owing mainly to two factors: the strict underwriting guidelines used and the favourable structure of the ERGO Group’s portfolio in property-casualty insurance.
Whether we achieve our target depends not only on how the capital markets perform but also, to a significant extent, on the claims costs from natural catastrophes and other major losses. Our function as a reinsurer consists primarily of mitigating random fluctuations in the results of our clients. In individual cases, we assume high liabilities, which makes our results here correspondingly volatile. The year 2001 made this amply clear.
Around three-quarters of the premium income in the German insurance market derives from personal lines business. The trend with regard to personal incomes and consumer expenditure points to a stable demand for private insurance. The increase in premium income in the German market should largely be driven by growth in life and health insurance.
FFeeaarrss.. Scarcely has the much-reported BSE crisis of the nineties subsided in Britain, than a new wave of alarm is triggered by the discovery of priondamaged brains in cattle in other European countries.
Besides the huge challenge posed by the settlement of claims in New York, the insurance industry is faced with the question of its future strategy with regard to covering terrorism risks. In particular, it has to consider what is insurable and what is not. Here we are in the middle of an opinion-forming process on the issue of whether protection against terrorism is primarily the task of the state.
From the underwriting point of view this risk can only be countered by a strict limitation of insurance cover in highly exposed lines of business. Such limitation may go as far as complete exclusion, as with the war risk. In addition, insurers must aim for even more transparency in
There have always been slumps in the development of global aviation, ensuing from political or economic crises. If looked at from the longterm perspective, however, statistics show that there has been a fairly steady upward trend. Periods with low growth or short-term setbacks have always been compensated for in the subsequent period. Thus average annual growth since 1980 – measured in terms of passenger kilometres – has amounted to around 6.25%. Everything points to the fact that the industry’s ability to emerge reinvigorated from slumps will also manifest itself in the present situation. For the coming 20 years we expect average annual growth in the order of 5%, although it should be said that this global perspective masks regional differences and some countervailing trends.
The worldwide crisis in aviation – triggered by the attacks on the WTC and the Pentagon – has accelerated the process of consolidation in the industry. Only financially strong and professionally managed companies of sufficient size, with viable business strategies and healthy cost structures, will survive the current crisis. As stated, this process has begun, though it is questionable whether it will be concluded by September 2002.
For in order to limit the increase in global temperature to a just-about tolerable 1.5 to 2°C, greenhouse gas emissions would have to be reduced by at least 50%. Compared to that, the 5% or so agreed on in Kyoto is little more than the proverbial “drop in the ocean”.
Melting polar caps send icy warnings of a not-too-distant “super” warm age.
Change from the acquisition and sale of investments for unit-linked life insurance –109 –172
The consolidated financial statements have been prepared in accordance with International Accounting Standards adopted up to and including 31st December 2001 whose application was obligatory for the business year. In addition, we have observed the standards adopted by the DRSC (German Accounting Standards Committee) up to our balance sheet date.
In accordance with SIC 16, own shares held by Munich Re at the balance sheet date have been deducted directly from shareholders’ equity.
Gross amount capitalized at 31.12. previous year 311 695 138 1,144 476
Carrying amount at 1.1. business year 114 673 73 860 270
Carrying amount at 1.1. business year 1,003 974 4,011 425 6,413 6,157
The tax-free income is made up of tax-free gains on the sales of shareholdings in joint-stock companies, tax-free dividend income and other tax-free income. The non-deductible expenses include non-deductible amortization of goodwill.
Munich Re has also completed its announced shareholding transaction in relation to the ERGO Insurance Group: it now holds 91.7% of ERGO Versicherungsgruppe AG.
The measures will result in a large tax-free gain on the disposal of investments in the business year 2002.
Herbert Loy Christine Peschel Wirtschaftsprüfer Wirtschaftsprüfer (Certified public accountant) (Certified public accountant)
Our Canadian subsidiary Temple Insurance Company was rated for the first time in the business year, being graded as A+ (Superior) by A. M. Best.
Dr. jur. Rolf-E. Breuer Bertelsmann AG Compagnie de Saint-Gobain S. A., Deutsche Börse AG (Chairman) Paris Deutsche Lufthansa AG Landwirtschaftliche Rentenbank E.ON AG Siemens AG
Associated enterprises Enterprises on whose financial and operating decisions a significant (but not a controlling) influence can be exercised, regardless of whether this influence is actually exercised or not. A significant influence is presumed if the proportion of voting rights lies between 20% and 50%.
International Accounting Standards (IAS) Standards formulated by the IASB with the intention of achieving internationally comparable preparation and presentation of financial statements.
Scorecard Instrument for strategy implementation which systematically links strategic objectives (financial and non-financial) with initiatives and action plans. Short-term milestones help in checking the achievement of the objectives.
Haven’t the international agreements on climate protection come much too late?
How is the market environment developing in primary insurance and what are the implications for Munich Re?