1. business and industrial
2. energy
3. renewable energy

Strong balance sheet – Strong returns
Munich Re equity story
December 2014
Munich Re – December 2014
1
Agenda
Equity story
3
Backup
Group
21
Reinsurance
46
Primary insurance
65
Munich Health
79
Investments
83
Munich Re – December 2014
2
Equity story
Combination of primary and reinsurance under one
roof – realising synergies and economies of scope
Segmental breakdown – Gross written premiums 2013
Reinsurance property-casualty
17,013 (33%)
€m
Primary insurance property-casualty
5,507 (11%)
Total
€51.1bn
Reinsurance life
10,829 (21%)
Primary insurance life
5,489 (11%)
Primary insurance health
5,671 (11%)
Munich Health
6,551 (13%)
Reinsurance –
Solid profitability
Primary insurance –
Delivering on plan
Munich Health –
Consolidation
P-C: Expansion of know-howintensive business, active
portfolio and cycle management
and strong reserving position
P-C: Attractive business mix
generating solid earnings
Life: Producing steady results
above market average
Health: A market leader in Germany
with stable earnings contribution
Focus on excellence,
execution and expansion to
strengthen profitability and
participate in growth of
selected health markets
Life: Proactive management of back
book and launch of new products
Munich Re – December 2014
3
Equity story
Delivering on our promise, reliable for shareholders
Delivering on promised net result …
€bn
3.2
Actual
2.0
2.4
3.0
3.3
2.5
2.4
 … in an environment of low interest
rates and competitive reinsurance
markets
0.7
20111
2012
2013
… facilitating attractive shareholder participation2
Cash yield3
Share
buy-back
11.2%
2.4
7.8%
1.5
5.4%
1.1
€bn
6.0%
 Strong capital position according
to all metrics
1.6
 Dividend increase:
from €7.00 to €7.25 per share
Dividend
2010
2011
 Expected net result: €3bn
 Technical profitability becoming
even more relevant …
Guidance
2010
Outlook 2014
2012
2013
 Continuation of share buy-back: €1bn
between AGM 2014 and AGM 2015
High level of diversification and disciplined bottom-line focus facilitating reliable
earnings generation
1
2
Assuming normal nat cat claims based on 8.5% budget, net result would have exceeded guidance.
Cash-flow view. 3 Total payout (dividend and buy-back) divided by average market capitalisation.
Munich Re – December 2014
4
Equity story
Good financial results contributing to attractive
long-term shareholder return
Return on equity
%
Average RoE: 11.1%
Attractive risk/return profile1
Total shareholder return (p.a.)
15
15.3
%
Peer 3
14.1
12.5
12.6 12.6
11.8
Peer 2
10
10.4
Index
Peer 4
5
Peer 6 Peer 5
7.0
0
Peer 1
3.3
–5
20
2005
2013
Value creation – RoE clearly exceeding cost of
capital …
30
40
50
Volatility of total shareholder return (p.a.)
… for the benefit of shareholders – attractive
return with comparatively low volatility
Balanced business portfolio paving the way for sustainably high earnings levels
with comparatively low correlation to capital markets
1 Annualised
total shareholder return defined as price performance plus dividend yield over the period from 1.1.2005 until 28.11.2014;
based on Datastream total return indices in local currency; volatility calculation with 250 trading days per year.
Peers: Allianz, Axa, Generali, Hannover Re, Swiss Re, ZIG, Stoxx 600 Insurance (“index”).
Munich Re – December 2014
5
Equity story
Stability reflected in solid financial position
Excellent economic solvency ratio
further improved
Substantial capital buffer
supporting AA rating
Economic solvency ratio
Solvency II ratio
111
2011
267
225
129
2012
HGB1
flexibility
Rating
agencies
Internal
model
194
Strengthened German GAAP
capital position
153
2013
Agency
Rating
A.M. Best
A+ (Superior)
Fitch
AA– (Very strong)
Moody’s
Aa3 (Excellent)
S&P
AA– (Very strong)
€bn
Distributable earnings
3.4
3.7
2012
2013
2.3
2011
Strong capitalisation according to all metrics facilitating financial flexibility
1
German statutory accounting standards.
Munich Re – December 2014
6
Equity story
Active capital management based on profitable growth
Strong capitalisation
enabling
facilitating
profitable business expansion
Gross written premiums
CAGR: 3.7%
capital repatriation
€bn
€
Sustainable dividend growth
CAGR: 11.2%
51.1
7.25
3.10
38.2
2005
enabling
2013
Financial solidity allowing us to seize
opportunities for focused business expansion …
2005
… and facilitating reliable shareholder
participation
2013
Munich Re – December 2014
7
Equity story
Investment portfolio
Investment portfolio1
Land and buildings
2.4 (2.5)
Fixed-interest
securities
54.1 (52.9)
Shares, equity funds and
participating interests2
4.2 (4.6)
Miscellaneous3
11.2 (11.8)
Portfolio management
%
Overall increase in market values driven
by FX and lower interest rates
Ongoing reduction of German government
bonds to further improve diversification …
… by cautiously increasing exposure in USA,
Italy, Spain, France and emerging markets
TOTAL
€237bn
Slight reduction in structured products,
covered and corporate bonds
Loans
28.1 (28.2)
Slight decrease of equity-backing ratio
to 3.8% net of hedges
Portfolio duration4
Assets Liabilities
Reinsurance
Primary insurance
Munich Re (Group)
1
5.1 (4.4)
8.1 (7.4)
7.0 (6.4)
Net DV01 (€m)
3.9 (3.1)
8.7 (8.1)
6.9 (6.2)
Fair values as at 30.9.2014 (31.12.2013). 2 Net of hedges: 3.8% (4.5%). 3 Deposits retained on assumed
reinsurance, unit-linked investments, deposits with banks, investment funds (excl. equities), derivatives
and investments in renewable energies and gold. 4 As at 30.9.2014 (31.12.2013). Net DV01: Sensitivity to
parallel upward shift of yield curve by one basis point reflecting portfolio size.
–3.0
9.6
6.6
Munich Re – December 2014
8
Equity story
Well-balanced investment management in
low-interest-rate environment
2011
4.0
3.6 3.4
2012
%
2013
3.0
2.2 2.3
Running yield
Reinvestment yield
 Assets serving insurance liabilities –
duration matching proving beneficial
throughout recent years
 Solid results and reinvestment yields
from well-balanced portfolio with limited
economic exposures
Composition of reinvestment yield 20131
Reinvestment yield (%)
Running and reinvestment yield
4
Bank bonds
3
Structured
products
2
Corporate
bonds
Government
bonds
Pfandbriefe/
covered bonds
1
Yield curve German sovereigns
0
0
5
10
Average
maturity (years)
15
Expansion
Reduction
 Corporate and emerging
market bonds
 Renewable energies
and new technologies
 Real estate
 Select developed
market bonds
 Inflation-linked bonds
No intention of substantial investment re-risking to compensate for lower
investment income
1
Bubble size reflecting reinvestment volume. Yield curve as at 31.12.2013.
Munich Re – December 2014
9
Equity story
Low interest rates – Technical profitability becoming
even more relevant
Run-off result2: Profitability in p-c reinsurance
supported by strong reserving position
Increasing earnings contribution from
underwriting1
100%
84%
75%
6%
4.7%
4%
50%
2%
25%
0%
2008 2009 2010
2011
2012 2013
0%
2008
2009
2010
2011
2012
2013
Low sensitivity to interest-rate changes – Impact on IFRS net result3
€bn
0.2
+100bps
0.1
+50bps
–50bps
–0.1
Becoming less dependent on investment income – focus remains on creating value
in core underwriting business
1 Contribution
of technical result as a percentage of operating result. 2 Run-off result in % of net earned premiums in property-casualty
reinsurance (incl. large losses). 3 Rough calculation with limited reliability assuming unchanged portfolio as at 31.12.2013.
Munich Re – December 2014
10
Equity story
Reinsurance – Competitive environment in propertycasualty following increasing supply of capacity
Structural increase of business diversification1 €bn
Munich Re well prepared
27.8
CAGR
Diversification
21.9
4.0
+16%
Reinsurance
life
1.9
5.3
10.8
 Risk Solutions – Profitable specialty business
largely detached from reinsurance market
+15%
Trad. p-c
reinsurance
14.7
13.0
 Reinsurance life – Global market leading
position stabilising overall results
2008
2013
Risk
Solutions
–2%
 Flexibility – Swiftly adjusting to client demand
(e.g. regions, perils, proportional and XL)
Property-casualty – Diversified business portfolio1
Tailormade
Traditional Facultative
TOTAL
TOTAL
€17bn
€13bn
Risk
Solutions
Proportional
Know-how and client proximity
 Structuring expertise – Providing holistic tailormade solutions beyond pure capacity
 Innovation – Creating solutions for new and
emerging risks
 Achieving differential terms and conditions
XL
Increasing share of business largely decoupled from reinsurance cycle and
competition in traditional reinsurance
1
Gross premiums written.
Munich Re – December 2014
11
Equity story
Reinsurance life – Another year of very strong
new business generation
€m
Premiums and value generation per year
Gross premiums written (GWP)
11,130 10,829
9,481
6,796
Technical result and fee income1
Fee income
Technical result
380
7,901
5,284
478
295
207
58
643
562
421
51
26
MCEV value of new business (VNB)
573
577
475
356
13
91
354
420
370
12
2008 2009 2010 2011 2012 2013
2008 2009 2010 2011 2012 2013
20082 20092 2010 2011 2012 2013
 New business value at sustainably high level with growth initiatives paying off
 FinMoRe3 business performing well; continued strong demand (21% of total VNB)
 Close to €100m VNB from Asian markets (17% of total)
 Asset protection platforms fully operational – continuing demand for relevant solutions
 Longevity book being developed carefully in line with risk appetite
 Strong production in base business, particularly in the US and Canada
 Premium decline mainly driven by FX effects
Favourable new business development – overall leading market position maintained
1
2
"Fee income": Result contribution shown as part of non-technical result (deposit accounting).
EEV figures. 3 Financially motivated reinsurance (solvency relief, financing).
Munich Re – December 2014
12
Equity story
Primary insurance property-casualty –
Overall combined ratio target ~95%
Germany – Strong performance …
Combined ratio1
100%
Market
Other
360 (11%)
ERGO
Legal
protection
411 (12%)
95%
90%
Personal accident
724 (22%)
TOTAL
€3.3bn
Liability
527 (16%)
85%
2005
2007
2009
2011
… as management measures bearing fruit3
107.8
Poland
Turkey
140
104.5
120
102.5
100
99.8
98.7
96.7
80
60
2008
1
2009
2010
2011
2012
Motor
667 (20%)
Fire/Property
620 (19%)
2013
International – Getting back to normal …
Combined ratio
€m
… based on attractive business mix2
2013
2011
2012
Net Combined ratio (local GAAP, ERGO excluding travel insurance). Sources: Annual reports 2012, GDV year-end
statistics. 2 Gross written premiums as at 31.12.2013. 3 Combined ratio of major countries.
%
Greece Poland: Continuing
organic growth path
Turkey: Good
progress after
significant reduction
of motor TPL portfolio
and improved pricing
Greece: Technically
sound despite
2013 economic crisis
Munich Re – December 2014
13
Equity story
Primary insurance life – Comprehensive management
of back book, launch of new products
Back book – Implemented measures
New business – Less interest-rate sensitive
 Interest-rate hedging programme – protection
against reinvestment risk via receiver swaptions
 Duration gap in German life noticeably reduced
to below one year for large life companies
 Comparatively low bonus rates:
3.2% vs. market average 3.4%
 Non-interest-bearing ZZR (accumulated reserve
end of 2013: €814m) reducing average
guarantee, partly financed from unrealised gains
– Expected accumulated ZZR in 2014: ~€1.3bn
 Reduction of ERC due to better capital markets
and assumption changes in risk model
 ERGO first German life insurer to present new
guarantee-type products in June 2013
 Offer restricted to third-layer private provision
and tied agent organisations to start with
 Extension to other layers (Rürup, corporate
pensions) and sales channels (brokers, banks)
to follow in 2014/15
Target: Deliver guarantee promise to
customers without additional
shareholders' equity
Yield
New product
Classic products
Security
Flexibility
ERGO well protected against "lower for longer" scenario
Munich Re – December 2014
14
Equity story
Primary insurance health – ERGO continues to be
market leader in supplementary insurance
€bn
Comprehensive insurance1
ERGO
13.1%
4.6
3.8
2.7
2.3 2.2
1.8
MARKET
VOLUME
1.5 1.3
ERGO business mix2
%
€4.7bn
€5.2bn
74.1
71.1
25.9
28.9
2009
2013
€29bn
Comprehensive
Supplementary
ERGO
€bn
Supplementary insurance1
ERGO
22.2%
1.5
0.6 0.6 0.6
0.4 0.4 0.3
0.3
MARKET
VOLUME
€7bn
Comprehensive insurance
ERGO number 2 in German market – stable
results and stable political environment
Supplementary insurance
ERGO clear market leader – expansion in
long-term care and direct insurance
ERGO
Goal: Stabilise comprehensive insurance, strengthen supplementary insurance
1
2
Gross premiums written as at 31.12.2012. Source: PKV Verband.
Gross premiums written .
Munich Re – December 2014
15
Equity story
Munich Health – Strong earnings 2013 after fixing
problems in the US primary business
Recent key findings
Management measures
Excellence
Strengthen
core
capabilities
Reinsurance
 Underwriting results too volatile
 Portfolio highly concentrated
 Strengthen underwriting and client management
capabilities in Europe and the US
 Foster international know-how exchange and
intensify use of primary insurance capabilities
for reinsurance
Execution
Manage
downsides,
improve
effectiveness
 Missing scale in US primary
insurance business
 High steering complexity
 Sale of Windsor Health Group and revised US
strategy focused on reinsurance
 Streamline organisational structure
Expansion
Realise
prioritised
growth
opportunities
 Reinsurance: Limited growth
 Primary insurance: Limited
attention on growth due to
focus on turnaround challenges
 Reinsurance: Focus on capital relief transactions
 Primary insurance: Expansion through leveraging
existing platforms in emerging markets
Focus on excellence, execution and expansion to strengthen profitability and
participate in growth of selected health markets
Munich Re – December 2014
16
Equity story
Full-year net earnings guidance
raised to slightly above €3bn
Munich Re (Group) – Q3 2014 (Q1–3 2014)
NET RESULT
SHAREHOLDERS' EQUITY
INVESTMENT RESULT
€738m (€2,442m)
€29.3bn (+5.8% vs. 30.6.)
RoI of 3.0% (3.8%)
Q3 with good underwriting results
across almost all segments – net
earnings impacted by significant
countervailing one-off effects
Strong capitalisation according
to all metrics provides financial
flexibility – ongoing share
buybacks
Solid return given low interest rates,
investment result differing by
segment – primary insurance 3.8%,
reinsurance 1.7%
Reinsurance
Primary insurance
Munich Health
NET RESULT
NET RESULT
NET RESULT
€533m (€1,928m)
496
€155m (€413m)
31
71
€53m (€95m)
37
53
53
P-C
LIFE
P-C
REINSURANCE
Combined ratio
91.3% (93.2%)
Large loss ratio
6.4% (7.5%)
Technical result
affected by
recaptures –
Annual guidance
of €400m still
achievable
Combined ratio 95.8% (Germany:
93.2%, international: 100.0%)
Combined ratio 99.7%
LIFE
HEALTH
PRIMARY INSURANCE
Pleasing
operating result
Solid, stable
performance
Combined ratio 81.1%
Munich Re – December 2014
17
Equity story
Outlook 2014
Munich Re (Group)
GROSS PREMIUMS WRITTEN1
~€48bn
RETURN ON INVESTMENT
~3.5%
NET RESULT
slightly above €3bn
(prev. €3bn)
Focus on bottom line prevails
Solid return given ongoing lowinterest-rate environment
Q1–3 earnings above
expectations
Reinsurance
Primary insurance
Munich Health
COMBINED RATIO
COMBINED RATIO
COMBINED RATIO
~94%
(prev. ~95%)
NET RESULT
1
2
~95%
NET RESULT2
~99%
NET RESULT
>€2.5bn
–
>€100m
(prev. €2.3–2.5bn)
(prev. €400–500m)
(prev. ~€100m)
By segment: Reinsurance slightly above €26bn, primary insurance slightly above €16.5bn,
Munich Health slightly below €5.5bn.
Well on track to exceeding initial target. However, the introduction of a new segmentation at year-end
may trigger write-downs of intangible assets in excess of possible tax benefits in Q4.
Munich Re – December 2014
18
Equity story
Strong balance sheet – Strong returns
Good track
record
Successfully dealing with challenging economic conditions – We remain a strong partner
for clients and reliable for shareholders, delivering on our promises
Business
strategy
Focus on insurance risks safeguarding sustainable value creation –
Complementary business profiles limiting correlation to capital market development
Rigorous risk
management
Based on a high level of diversification, actively managing the low-yield environment and
strictly budgeting all our insurance risks
Strong capital
position
Continuously built up over years – Continuing the long-term track record of attractive
capital repatriation while keeping the flexibility to seize opportunities for profitable growth
Munich Re – December 2014
19
Backup
Munich Re – December 2014
20
Backup: Group – Key financials
Key financials – Our aim is sustained profitable growth
Munich Re1,2
Gross written premiums
Operating result
Taxes on income
Consolidated result
Thereof attributable to minority interests
Investments
Return on equity
Equity
Off-balance-sheet reserves3
Net technical provisions
Staff at 31 December
Our shares
Earnings per share
Dividend per share
Amount distributed
Share price at 31 December
Market capitalisation at 31 December4
No. of shares at year-end (ex own shares)
1
2
3
€bn
€m
€m
€m
€m
€bn
%
€bn
€bn
€bn
€
€
€m
€
€bn
m
2013
51.1
4,409
108
3,342
29
209.5
12.5
26.2
8.7
187.7
44,665
2012
52.0
5,349
878
3,204
16
213.8
12.5
27.4
11.0
186.1
45,437
2011
49.5
1,180
–552
712
10
201.7
3.3
23.3
5.7
181.2
47,206
2010
45.5
3,978
692
2,430
8
193.1
10.4
23.0
3.6
171.1
46,915
2009
41.4
4,721
1,264
2,564
43
182.2
11.8
22.3
3.2
163.9
47,249
2013
18.50
7.25
1,266
160.15
28.7
179.3
2012
17.94
7.00
1,255
136.00
24.4
179.3
2011
3.94
6.25
1,110
94.78
17.0
177.6
2010
13.06
6.25
1,110
113.45
21.4
180.4
2009
12.95
5.75
1,072
108.67
21.5
191.9
Previous years’ figures adjusted owing to IAS 8; see “Changes in accounting policies and other adjustments”.
In 2012, our segment reporting was modified and no longer has a consolidation column. The figures for the previous year have been
adjusted accordingly. Comparability with the years 2009 and 2010 is thus limited.
Munich Re – December 2014
Including amounts attributable to minority interests and policyholders. 4 This includes own shares earmarked for retirement.
21
Backup: Group – Key financials
IFRS capital position
€m
Equity
Equity 31.12.2013
Consolidated result
Changes
Dividend
Unrealised gains/losses
Exchange rates
Share buy-backs
Other
Equity 30.9.2014
26,188
2,442
Change Q3
–1,254
1,978
1,111
–1,122
–84
29,259
0
250
951
–288
–35
1,616
738
UNREALISED GAINS/LOSSES
Fixed-interest securities
Q1–3: €1,883m
Q3:
€268m
Non-fixed-interest securities
Q1–3:
€88m
Q3:
–€22m
EXCHANGE RATES
Positive FX contribution
mainly driven by US$
€bn
Capitalisation
0.5
4.7
0.3
5.5
0.3
4.4
0.3
4.4
0.3
4.4
0.3
4.4
Senior and other debt1
Subordinated debt
Equity
18.3%
1
2
17.5%
15.3%
14.6%
14.6%
14.0%
23.3
27.4
26.2
27.4
27.6
29.3
2011
2012
2013
Q1 2014
Q2 2014
Q3 2014
Other debt includes bank borrowings of Munich Re and other strategic debt.
Strategic debt (senior, subordinated and other debt) divided by total capital (strategic debt + equity).
Debt leverage2 (%)
Munich Re – December 2014
22
Backup: Group – Key financials
Distributable earnings of parent company very solid
even after strengthening of equalisation reserves
HGB earnings financing capital repatriation
3.4
–1.3
1.6
0.3
€bn
3.7
€bn
Reconciliation IFRS to HGB result in 2013
3.3
–0.7
–0.2
–0.3
2.4
0.3
–1.1
1.6
Distributable
earnings
31.12.2012
Dividend
Share buyback
HGB result
2013
Others 1
Distributable
earnings
31.12.2013
Average 2009–2013
–1.1
–0.5
IFRS result Difference
Other
HGB result
31.12.2013 between
accounting
before
IFRS results differences equaliof subsidiaries
sation
and their
reserves
dividend
payments to
Munich Re AG
Tax
Change of HGB result
reducing equalisation
2013
effect2 of
reserves
equalisation
reserves
Average 2009–2013
1.8
2.5
–1.0
0.2
1.7
0.0
0.1
1.8
Solid cash at Group level – Increasing distributable earnings protected by strong
equalisation reserves
1
2
Disposal of own shares as well as changes in restrictions on distribution.
Assuming a tax rate of 33% for Munich Re AG.
Munich Re – December 2014
23
Backup: Group – Rating
Insurance financial strength ratings1 providing for strong
competitive position
A.M. Best
A++
Berkshire2
Berkshire/Gen Re
A+
Allianz
Everest Re
Hannover Re
Partner Re
Renaissance Re
Swiss Re
Zurich
A
AIG
Generali neg
Lloyd‘s
SCOR
Transatlantic Re
XL Re
A–
B++
neg Outlook negative or watch negative
1
Fitch
Moody's
Standard & Poor's
AAA
Aaa
AAA
AA+
Berkshire/Gen Re
Aa1
Berkshire/Gen Re
AA+
Berkshire/Gen Re
AA
Allianz
Aa2
Allianz Germany
Berkshire2
AA
Allianz
Berkshire2
AA–
Aa3
Allianz2
Axa
Berkshire2
Everest Re
Hannover Re3
Lloyd‘s
Partner Re
Allianz SE
Axa
Swiss Re
Zurich
A1
Everest Re
Partner Re
Renaissance Re
SCOR
Transatlantic
XL Re
A+
SCOR pos
Swiss Re3 pos
Renaissance Re
XL Re
A
AIG
A2
A–
Generali
A3
BBB+
AA–
Baa1
Hannover Re
Renaissance Re
Swiss Re
Zurich
A+
Axa
AIG
Everest Re
Lloyd‘s pos
Partner Re
SCOR pos
Transatlantic Re
XL Re
A
Generali
A–
AIG2
Generali neg
pos Outlook positive or watch positive
As at 2 September 2014. 2 Issuer rating of holding.3 Based on public information.
Munich Re – December 2014
24
Backup: Group – Outstanding bonds
Munich Re Group bonds
Subordinated bonds1
Nominal
volume
Coupon rate
p. a.
Emission/
Issue
Maturity First possible
redemption date
€900m
Until 2022 6.25%, thereafter variable
2012
2042
26 May 2022
£450m
Until 2022 6.625%, thereafter variable
2012
2042
26 May 2022
€1,000m
Until 2021 6.00%, thereafter variable
2011
2041
26 May 2021
€1,349m
Until 2017 5.767%, thereafter variable
2007
undated
12 June 2017
£300m
Until 2018 7.625%, thereafter variable
2003
2028
21 June 2018
Maturity pattern of Munich Re Group bonds
€m
Currency pattern of Munich Re Group bonds
USD
7
Maturity in years
%
EUR
72
1,478 1,374
1,000
271
0-5
1
5-10
TOTAL
€4.6bn
445
10-15 15-20 20-25 25-30 30-35 undated
GBP
21
Bonds with a nominal value below €100m not considered. All specified bonds issued by Münchener Rückversicherungsgesellschaft
AG, Munich. In addition, Munich Re has placed some natural catastrophe bonds. As at 30 September 2014.
Munich Re – December 2014
25
Backup: Group – Risk management
Munich Re’s enterprise risk management (ERM)
safeguards investors’ interests and clients’ protection
Clear limits defining framework for operational actions
Risk identification, early warning
Risk modelling
Risk steering
Comprehensive overview with
special focus on main issues
Right balance between flexibility
and stability
System of triggers, limits and
measures in conjunction with
responsible management actions
Objectives
Implementation
 Protect and generate
sustainable shareholder value
 Risk steering
 Ensure high degree of
confidence in meeting claims
 Liability-driven investment
strategy
 Protect Munich Re’s
reputation
 Performance measurement
and management
compensation
 Pricing/underwriting
Well-structured business
and investment portfolio
meeting all defined risk
criteria
Risk management is a key part of our corporate management
Munich Re – December 2014
26
Backup: Group – Risk management
Set-up of Munich Re's risk strategy
Category
Risk criteria
Measure
Criteria's objective
Whole
portfolio
criteria
Financial strength
 ERC
 Rating
 Solvency
Safeguarding sufficient
excess capital and
limiting frequency of
negative economic
results of Munich Re's
entire risk portfolio
Supplementary
criteria
Other
criteria
Avoiding financial distress
Probability of
breaching financial
strength criterion
 Accumulation risks
 Individual nat cat perils
 Financial sector limit
 Terrorism
 Pandemic
 Longevity
 ALM limits
 Liquidity
VaR limits
 in % of AFR or
 Maximum
exposure limit




Individual risk limits
Counterparty-credit risk
Single risks
Alternative investments
Non-investment-grade
investments
 …
Stress testing
Limiting losses from
individual risks or
accumulation
exposure and
liquidity risks that
could endanger
Munich Re's survival
capability
Limiting risks that
could sustainably
damage the trust
of stakeholders in
Munich Re
ERM objective
Maintaining
Munich Re's
financial strength,
thereby ensuring
that all liabilities to
our clients can be
met
Protecting and
increasing
shareholders'
value
Safeguarding
Munich Re's
reputation, thus
perpetuating future
business potential
Munich Re – December 2014
27
Backup: Group – Risk management
Economic capital requirements significantly reduced
Economic risk capital – Breakdown by risk category
Risk category
Prop.-casualty1
Life and health
Market
Credit2
Operational risk
Simple sum
Diversification
Total ERC
Group
2012 2013
9.7
9.0
7.2
5.8
14.0 11.6
6.7
6.3
1.4
1.4
RI
2013
8.9
4.4
6.6
4.3
1.1
PI
2013
0.6
2.1
7.1
2.1
0.5
MH
2013
0.0
0.5
0.0
0.0
0.1
Div.
2013
–0.5
–1.2
–2.1
–0.1
–0.3
39.0 34.1
–11.7 –10.4
25.3
–8.5
12.4
–2.8
0.6
–0.1
–4.2
–
16.8
9.6
0.5
–3.2
27.3
23.7
Methodology
Probability
ERC = 175% • VaR 99.5%
ERC
31.12.2012
Propertycasualty risk
Life and
health risk
Market
risk
Credit
risk
Operational
risk
Diversification
ERC
31.12.2013
Between different risk
categories
Between business segments,
especially primary (PI) and
reinsurance (RI)
(re)insurance included . 2 Default and migration risk. 3 After diversification.
€bn
Development of Group ERC 20133
Diversification benefits
VaR 99.5%
Loss
1 Credit
€bn
27.3
–0.7
–1.4
–2.4
–0.4
0.0
1.3
23.7
Risk management
Limiting losses from individual
risks or accumulation exposure
and liquidity risk that could
endanger survival capability
Munich Re – December 2014
28
Backup: Group – Risk management
Summary of economic capital disclosure
€bn
Position as at 31 December 2013
Capital with Solvency II
calibration
Additional
75% buffer
Available financial
resources (AFR)
Economic risk capital1
13.5
10.2
Economic capital buffer
Capital buffer
under Solvency II calibration
Economic capital buffer
after share buy-back and dividends2
Capital buffer after share buy-back and
dividends2 under Solvency II calibration
31.12.
2013
31.12.
2012
38.2
36.5
23.7
27.3
14.5
9.2
24.7
20.9
12.5
7.9
22.7
19.6
Strong capitalisation: Economic capital buffer of €12.5bn2 according to internal
model and €22.7bn2 applying Solvency II risk tolerance
1
Solvency II capital based on VaR 99.5%, Munich Re internal risk model based on 175% of Solvency II capital. 2 After announced
dividend payout of ~€1.3bn for 2013 to be paid in April 2014 and outstanding share buy-backs of ~€0.7bn.
Munich Re – December 2014
29
Backup: Group – Risk management
Property-casualty risks: Natural catastrophe exposure
Munich Re Group's nat cat exposures (net of retrocession)1
AggVaR (return period 200 years)
AggVaR (return period 200 years)
(pre-tax)
(pre-tax)
€bn
ERC property-casualty €bn
9.7
4
9.0
Atlantic Hurricane
Storm Europe
3
Cyclone Australia
2
2012
2013
Atlantic Hurricane
Depreciation of US$;
increase of retrocession
1
Cyclone Australia
0
2013 2014 2013 2014 2013 2014
Atlantic
Hurricane
Storm
Europe
Cyclone
Australia
Top nat cat exposures
Depreciation of AUD and
US$; increase of
retrocession
Munich Re benefits from strong diversification between natural catastrophe risks
1
Exposures relate to the full year, e.g. 2014 relates to the period from 1.1.2014 to 31.12.2014.
Munich Re – December 2014
30
Backup: Group – Risk management
Available financial resources (AFR)
Change and relation to economic earnings
€bn
AFR development in 2013
36.5
–2.5
+4.2
Probability distribution of economic earnings
38.2
10
5
Economic earnings
(+7.2)
(–0.5)
Previous year
€bn
Expected economic earnings 2014
0
–5
–10
Munich Re ERC
2014 (€23.7bn)
–15
–20
–25
1
AFR
Capital mgmt. Economic
31.12.2012
and other 1
earnings2
10
100
1,000
Return period (years)
10,000
AFR
31.12.2013
Economic earnings in 2013, adjusted to eliminate special factors, are in line with
expectations for a "normal" year
1
2
Mainly dividends (–€1.3bn) , share buy-back (–€0.3bn) and change in hybrid capital (–€1.1bn).
Includes MCEV model changes.
Munich Re – December 2014
31
Backup: Group – Risk management
Strong capitalisation allowing us for attractive capital
repatriation
Munich Re actions1
ESR1 – Sensitivity
Munich Re solvency ratio (ESR)
%
%
>120%
Excellent capitalisation
MRCM
Solvency ratio adjusted
for capital repatriation
 Capital repatriation
 Increased risk-taking
 Holding excess capital to
meet external constraints
100%–120%
Comfortable capitalisation
80%–100%
Adequate capitalisation
 Tolerate and monitor
 (Partial) suspension of
capital repatriation
Solvency II
Actual
1
2
3
153
Interest rate
+100bps
120% solvency ratio
210%
100%
175%
80%
140%
100%
<80%
Below target capitalisation
 Risk transfer
 Scaling down of activities
 Raising of (hybrid) capital
Ratio as at
31.12.13
MCR3
2008 2009 2010 2011 2012 2013
Based on Munich Re capital model (MRCM): 175% of VaR 99.5%.
Based on 200-year event.
MCR = minimum capital requirement, typically between 25% and 45%; for groups, called "Group SCR floor".
170
Interest rate
–100bps
132
Spread
+100bps
133
Equity
markets +30%
Equity
markets –30%
FX –10%
Atlantic
Hurricane2
159
147
151
145
Munich Re – December 2014
32
Backup: Group – Risk management
Strong increase in AFR over the last seven years despite
capital repatriation and difficult economic environment
AFR development 2007–2013
30.9
+4.2
–14.5
+17.6
€bn
€bn
Economic earnings
38.2
Confidence2
4.2
–6.3
6.0
3.6
–1.2
7.1
4.2
~30
%
~99
%
~10
%
~50
%
~90
%
~10
%
~40
%
2007
2008
2009
2010
2011
2012
2013
€bn
Munich Re market capitalisation
AFR
31.12.
2006
AFR
Capital Economic
restate- mgmt. and earnings
ments
other1
AFR
31.12.
2013
29.9
–13.8
+12.6
28.7
Market cap.
31.12.2006
Capital
management3
Share price
variation
Market cap.
31.12.2013
Strong performance despite highly adverse environment, but economic earnings not
yet matched by share performance
1
2
Dividends, share buy-back, hybrid capital replacement and other.
Probability of achieving at least the corresponding economic earnings.
3
Dividends, share buy-back.
Munich Re – December 2014
33
Backup: Group – Solvency II
Solvency II motivates the insurance industry to fully
adopt stringent risk-based economic steering
Changes compared to Solvency I
3 pillars of Solvency II
1 Quantitative
2 Qualitative
3 Transparency
Solvency
requirements
Supervisory
process
Market
transparency
Standard
approach or
internal model
Efficient risk
management
and control
Disclosure
requirements
to strengthen
market discipline
Enterprise risk management to replace the traditional
accounting-based focus facilitating a stringent economic
and holistic approach to manage risks
 Principle-based (in contrast to
Solvency I rules)
 Economic and market-consistent
valuation of all material risks
 Reinsurance and other risk
mitigation instruments fully
applicable under Solvency II
(no more 50% cap on non-life
reinsurance)
 Some issues remain, especially with
regard to non-proportional
reinsurance
 Consideration of diversification
effects
 Investment risks are
comprehensively taken into account
In the past success was measured by combined ratio and investment income –
In the future the focus will be on return on risk capital
Munich Re – December 2014
34
Backup: Group – Solvency II
Solvency II – Impact on the European insurance industry
and Munich Re’s reinsurance business
Paradigm shift
Reinsurance benefits
 Increased transparency on the economic value
of reinsurance
 Enables clients to
 More volatile solvency ratios leading to higher
attention from board and management
 Removal of artificial caps on recognition of
reinsurance as a risk mitigation instrument
 Beyond pure risk transfer, reinsurance reduces
the solvency capital requirement rapidly
 Reinsurance as a capital management solution
can be purchased quickly …
 free up solvency capital
 actively manage the economic balance sheet
 Accumulate solvency relief over time as more
and more risk arising from technical provisions
is mitigated
 Quickly and widely accessible – also for small
companies and mutuals with limited access to
capital markets
 Less detailed information to be published
 … while guaranteeing more confidentiality than
traditional capital market solutions or the use of
long-term-guarantee measures
Increasing range of tailor-made reinsurance solutions that are both competitive in
price and Solvency II-efficient
Munich Re – December 2014
35
Backup: Group – Reserves
Actual versus expected comparison – Loss monitoring
yields consistent picture across years
Reinsurance group – Comparison of incremental expected losses with actual reported losses1
By exposure year
By line of business
10,000
10,000
Actual reported
loss
€m
Actual reported
loss
2012
2011
1,000
2010
1,000
Fire
2003 & prior
2008
Risks other property
2009
100
Credit
2007
2004
2005
2006
10
10
Legend:
100
Motor
General liability
Expected reported
loss
1,000
Green Actuals below expectation
Red
Actuals above expectation
10,000
Marine
Engineering
Personal accident
Aviation
100
100
1,000
Expected reported
loss
10,000
Solid line Actuals equal expectation
Dotted line Actuals are 50% above/below expectations
Actual losses consistently below actuarial expectations –
Very strong reserve position
1
Reinsurance group losses as at Q4 2013, not including parts of Risk Solutions, special liabilities and major losses
(i.e. events over €10m or US$ 15m for Munich Re's share).
Munich Re – December 2014
36
Backup: Group – Reserves
Positive run-off result without weakening our ability to
absorb potential future volatility
€m
Ultimate losses (adjusted to exchange rates as at 31.12.2013)
Accident year
Date
≤2003
31.12.2003
40,967
31.12.2004
41,420 11,096
31.12.2005
41,817 11,218 12,129
31.12.2006
41,903 11,247 12,180 10,648
31.12.2007
42,304 11,021 12,321 10,453 11,614
31.12.2008
42,567 10,698 11,920 10,338 11,802 12,649
31.12.2009
42,467 10,424 11,885 10,164 11,721 12,869 12,480
31.12.2010
42,899 10,154 11,498 9,906 11,649 12,862 12,451 12,921
31.12.2011
42,888 10,154 11,333 9,819 11,610 12,601 12,056 13,124 16,684
31.12.2012
42,841 10,077 11,146 9,673 11,266 12,498 11,982 13,017 16,727 13,684
31.12.2013
42,834 9,999 11,072 9,705 11,069 12,314 11,990 13,099 16,452 13,517 13,772
CY 2013 runoff change
CY 2013 runoff change (%)
1
2
7
0.0
2004
78
0.8
2005
74
0.7
2006
2007
2008
2009
2010
2011
2012
2013
Total
Ultimate reduction
Reinsurance basic losses:
€845m – Main drivers
Property
Releases spread across lines,
with some caution exercised
on long-tail project business
–32
–0.3
197
1.8
184
1.5
Specialty2
Reserve releases primarily in
marine and aviation, following
the benign loss emergence
–8
–0.1
–82
–0.6
275
1.7
167
1.2
–
–
Casualty
Moderate releases in most
segments, partly offset by
some strengthening for legacy
liabilities and unwinding of
discount in workers'
compensation (–€54m)
860
0.6
Thereof €845m basic losses (including planned unwinding of discount in workers' compensation) and –€86m large losses.
Aviation, credit and marine.
Ultimate reduction
Reinsurance1
Primary insurance
€759m
€101m
Munich Re – December 2014
37
Backup: Group – Risk trading
Our ILS market platform complements our core
business with alternative capacity and earnings potential
Strategic scope of our ILS market activity
Munich Re's view on ILS market benefits




Multi-year price stability
Diversification of capacity channels
Collateralised capacity
Complement of product range as regards
earnings potential
 Profitable investment opportunities in insurance
risks which fits Munich Re’s portfolio
Munich Re's ILS related competencies
 Dedicated ILS team covering the whole ILS value
chain from analytics to structuring and placement
 Deployment of our actuarial and geoscientific
expertise to offer ILS structuring and advisory
services – we act as neutral advisors
 Ability for opportunistic allocation of reinsurance
capacity to ILS investments
Integrated ILS approach
1 Management of our own risks
 Portfolio optimisation and balance
sheet protection (e.g. selling of peak
risk overhangs)
 Management of P&L-volatility
through cat bonds (cycle
management)
 Diversification of capacity
2 Management of our clients’ risks
 Complement to traditional
reinsurance
3 Propriety ILS investment portfolio
 Growing investor in the ILS primary
and secondary market
 ILS consulting and project
management
 "Buy and hold"-strategy
 Structuring and placement support
 Risk fronting and transformation
 Opportunistic allocation of
reinsurance capacity to profitable
ILS investment opportunities
Munich Re – December 2014
38
Backup: Group – Risk trading
Outstanding cat bonds
For
clients
For
Munich
Re’s
book
Transaction
Closing Maturity Volume
Perils covered
Lion I Re
04/2014
04/2017
€ 190m
VenTerra Re Ltd.
01/2014
01/2017
US$ 250m Tropical Cyclones Australia & Earthquake USA
Bosphorus 1 Re Ltd.
04/2013
05/2016
US$ 400m Earthquake Turkey
Tar Heel Re Ltd.
04/2013
05/2016
US$ 500m Named storms (Tropical Cyclones)
Lakeside Re III Ltd.
12/2012
01/2016
US$ 270m Earthquake North America
Queen Street X Re Ltd.
02/2014
06/2017
US$ 100m Hurricane US & Cyclone Australia
Queen Street IX Re Ltd.
02/2014
06/2017
US$ 100m Hurricane US & Cyclone Australia
Queen City Re Ltd.
12/2013
12/2016
US$ 75m
US named storms
Queen Street VIII Re Ltd.
06/2013
06/2016
US$ 75m
Hurricane US & Cyclone Australia
Queen Street VII Re Ltd.
10/2012
03/2016
US$ 75m
Hurricane US & Windstorm Europe
Queen Street VI Re Ltd.
07/2012
04/2015
US$ 100m Hurricane US & Windstorm Europe
Queen Street V Re Ltd.
02/2012
04/2015
US$ 75m
Queen Street IV Capital Ltd. 10/2011
04/2015
US$ 100m Hurricane US & Windstorm Europe
Queen Street III Capital Ltd. 07/2011
07/2014
US$ 150m Windstorm Europe
 Generation of fee
income
Windstorm Europe
 Active investor in
the primary and
secondary market
 Improvement of
own risk/return
profile and cost
efficiency
 Utilisation of
unexhausted risk
budgets
 Offering one-stop
shopping to
clients as
sponsors
Hurricane US & Windstorm Europe
Munich Re's Risk Trading Unit is a recognised player in the ILS market
Munich Re – December 2014
39
Backup: Group – Risk trading
Munich Re's maximum in-force nat cat protection
€m
Munich Re's maximum in-force nat cat protection
1,400
Cat bonds
Risk swaps
ILW/Derivative
Indemnity retro
2014 protection (total)
1,200
1,000
800
600
400
200
0
US windstorm
northeast
US windstorm
southeast
Expansion of indemnity retro
placement to €500m
US earthquake
EU windstorm
Broadening of territorial
scope of retro protection
1
EU other perils
Japan
earthquake
Australia
Cyclone
Australia cyclone protected in
most recently issued Queen
Street cat bond
Purchase of nat cat protection for 2014 increased opportunistically
As at January 2014. Protection before reinstatement premiums.
1 Earthquake Europe, including Turkey.
Munich Re – December 2014
40
Backup: Group – Corporate responsibility
Five action fields in one group-wide corporate
responsibility programme
Core activities
Enabling framework
1
Strategy and
governance
 Corporate
responsibility
strategy
 Corporate
responsibility
governance
 Compliance to
UN Global
Compact1
1
2
3
2
Corporate
responsibility in
business
 Integration of
corporate
responsibility
issues into
 (re-)insurance
business
(PSI2)
3
Environmental
management
system (EMS)
 Global CO2
neutrality
 Global EMS
policy and
management
 asset
management
(PRI3)
UNGC = United Nations Global Compact (adopted by Munich Re in 2007).
PSI = UN Principles for Sustainable Insurance (signed by Munich Re in 2012).
PRI = UN Principles for Responsible Investment (signed by Munich Re in 2006).
Enabling framework
4
Corporate
citizenship (CC)
 Donations
 Corporate
volunteering
 Foundations
 Impact
assessment
5
Reporting and
communication
 Annual update
of corporate
responsibility
portal
 Global corporate
responsibility
reporting
 Position in major
SRI ratings
Munich Re – December 2014
41
Backup: Group – Corporate responsibility
Broad external recognition for Munich Re’s
corporate responsibility performance
Permanently listed since 2001
Permanently listed since 2001
The STOXX® Global ESG Leaders Index represents leading
companies from an ESG point of view
Rated "Prime" in Corporate Responsibility Rating 2013;
Munich Re counts to the best-in-class insurers
Munich Re has been included in the Silver Class
of the best and most sustainable companies by Robeco SAM
Munich Re is represented in the ESI Excellence Europe and ESI
Excellence Global, which are based on ratings results from Vigeo
Rating 2013: Range 4 of insurance sector
Munich Re – December 2014
42
Backup: Group – Corporate responsibility
Munich Re’s international cooperation –
A strong commitment towards corporate responsibility
Examples
UNEP FI
Munich Re has signed the climate declaration of the UNEP FI and is active
member of the UNEP FI Climate Change Working Group.
since 1999
Principles for Responsible Investment (PRI)
Munich Re has actively developed and signed the UN Principles for Responsible
Investment (PRI) as first German company in April 2006.
since 2006
UN Global Compact
since 2007
Munich Re is member of the UN Global Compact since August 2007. The ten
principles of Global Compact are a guidance for action in our business and set the
basis for our Corporate Responsibility activities.
Principles for Sustainable Insurance (PSI)
since 2012
Involvement since 2007, first holding the chair in the UNEP FI – PSI Team, now
active as member of the PSI Board, as well as founding signatory since June 2012.
Aim: to anchor ESG criteria into core business along the value chain.
Munich Re – December 2014
43
Backup: Group – Financial highlights Q3 2014
Tax gains and low nat cat claims offsetting
FX losses and lower investment result in Q3
€m
Net result
1,198
1,134
970
924
542
477
632
769
Total1
Reinsurance
Q3
Q4
Q1
Q2
2012
Q4
2013
Q1
Q2
2014
€m
Technical result
1,901
Q3
2,070
464
Q1 2014 Q2 2014
Large losses in p-c reinsurance:
1.0% in Q1 vs. 15.4% in Q2
2
€m
Investment result
3,563
1,197
1
Munich Health
Q1–2
2013
1,693
1,512
1,384
1,195
258
266
42
68
€m
Other2
4,637
1,661
H1 2013 H1 2014
Primary insurance
Q1–2
2014
H1 2013 H1 2014
2,567
Q1 2014 Q2 2014
Robust regular income and
disposal gains
Segments do not add up to total amount; difference relates to the segment "asset management".
Other non-operating result, goodwill impairments, net finance costs, taxes.
–460
–383
–376
–759
H1 2013 H1 2014
Q1 2014 Q2 2014
Low tax rate of 10.8%,
negative FX result of –€169m
Munich Re – December 2014
44
Backup: Group – Financial highlights Q3 2014
Reconciliation of operating to net result
Reconciliation of operating to net result
€m
Q1–3
Q3
3,376
910
–466
–126
0
0
Net finance costs
–170
–56
Taxes
–298
10
Net result
2,442
738
Operating result
Other non-operating result
Goodwill impairments
€m
Other non-operating result
Foreign exchange
Restructuring charges
Other
Q1–3
Q3
–292
–73
–19
–3
–155
–50
Tax rates
%
Q1–3
Q3
10.9
–1.4
6.0
–8.8
Primary insurance
24.5
12.9
Munich Health
10.4
–8.2
Group
Reinsurance
Munich Re – December 2014
45
Backup: Reinsurance
Munich Re – The leading global reinsurer
Rank
Company
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Munich Re
Swiss Re
Hannover Re
Berkshire Hathaway Re
SCOR SE
Lloyd’s
Reinsurance Group of America
China Re
Partner Re
Everest Re
MS&AD Holdings
Korean Re
Transatlantic Holdings Inc.
NKSJ Holdings
Mapfre Re
Tokio Marine
General Ins. Corp. of India
Allied World
Axis
Maiden Re
Germany
Switzerland
Germany
USA
France
UK
USA
China
Bermuda
Bermuda
Japan
Korea
USA
Japan
Spain
Japan
India
Bermuda
Bermuda
Bermuda
Total top 40
Source: Standard & Poor's Global Reinsurance Highlights, 2014 Edition, page 76.
Net reinsurance premiums written 2013 (US$ m)
36,758
30,478
17,101
14,368
12,571
11,329
8,254
7,196
5,397
5,005
3,656
3,575
3,248
3,037
2,958
2,758
2,211
2,121
2,115
2,096
201,874
Munich Re – December 2014
46
Backup: Reinsurance
Overview
Reinsurance1
2013
2012
2011
2010
2009
Gross written premiums
€bn
27.8
28.2
26.0
23.6
21.8
Investments
€bn
78.5
83.8
79.5
83.7
76.8
Net technical provisions
€bn
60.5
61.1
62.7
56.6
53.4
Large and very large losses (net)
€m
1,689
1,799
5,048
2,228
1,157
€m
764
1,284
4,538
1,564
196
Thereof natural catastrophe losses
%
Combined ratio
Combined ratio
Basic losses
Rest of World
8
113.8
99.4
95.3
100.5
91.0
2008
1
57.5
2009
53.6
2010
North
America
46
92.1
Rest of
Europe
12
56.1
%
Premium split by region
50.7
50.2
51.3
2011
2012
2013
TOTAL
€27.8bn
Asia/
Australasia
16
Germany
4
Previous years’ figures adjusted owing to IAS 8; see “Changes in accounting policies and other adjustments”. In 2012, our
segment reporting was modified and no longer has a consolidation column. The figures for the previous year have been
adjusted accordingly. Comparability with the years 2009 and 2010 is thus limited.
UK
14
Munich Re – December 2014
47
Backup: Reinsurance property-casualty
Reinsurance property-casualty – Key figures
€m
Net result
1,645
1,488
896
655
619
647
527
306
Q4
Q1
2012
Q2
Q3
Q1–3 2013
1
Q1
2013
496
Q2
Q3
2014
€m
Technical result
1,728
Q4
502
€m
Investment result
Q1–3
Q1–3
2013
2014
€m
Other1
1,717
Q1–3 2014
1,269
1,295
–539
–416
Q1–3 2013
Q1–3 2014
Q1–3 2013
Q1–3 2014
Other non-operating result, goodwill impairments, net finance costs, taxes.
Munich Re – December 2014
48
Backup: Reinsurance property-casualty
Combined ratio
Combined ratio
%
Basic losses
Nat cat losses
2013
92.1
51.3
Q1–3 2013
93.1
52.5
Q1–3 2014
93.2
55.3
Q3 2014
91.3
55.3
101.4
99.3
94.3
89.3
91.3
83.2
1
Q1
30.4
5.3 5.5
29.8
3.5 4.0
30.4
2.5 3.9
29.6
%
Large losses 2014
Total
Nat cat
Man-made
Q1–3 2014
7.5
3.5
4.0
Q3 2014
6.4
2.5
3.9
~12.0
~8.5
~3.5
Avg. annual
expectation
86.9
85.7
Q4
2012
Expense ratio
4.7 5.7
%
Combined ratio
Man-made losses
€m
%
Q1–3 2014
~485
~4.0
Q3 2014
~160
~4.0
Reserve releases basic losses1
Q2
Q3
2013
Q4
Q1
Q2
2014
Q3
Balance of increases (e.g. agriculture) and releases (e.g. fire, motor, marine and liability).
Munich Re – December 2014
49
Backup: Reinsurance property-casualty
Normalised combined ratio
%
Normalised combined ratio
Changes
Modelled
sliding- assumption Normalised
scale on reserve combined
provisions
releases
ratio
Reported
combined
ratio
Reported
major
losses
Expected
major
losses1
Reported
reserve
releases2
Q1 2013
85.7
–2.6
+12.0
+2.5
–
–4.0
93.6
Q2 2013
99.3
–15.2
+12.0
+4.0
–
–4.0
96.1
Q3 2013
94.3
–14.8
+12.0
+6.0
–0.7
–4.0
92.8
Q4 2013
89.3
–9.2
+12.0
+9.0
–2.3
–4.0
94.8
FY 2013
92.1
–10.4
+12.0
+5.2
–0.8
–4.0
94.1
Q1 2014
86.9
–1.0
+12.0
+3.5
+0.2
–4.0
97.6
Q2 2014
101.4
–15.4
+12.0
+4.5
–
–4.0
98.5
Q3 2014
91.3
–6.4
+12.0
+4.0
–
–4.0
96.9
Q1–3 2014
93.2
–7.5
+12.0
+4.0
+0.1
–4.0
97.8
1
2
Simplified assumption of evenly distributed major losses over every quarter.
Basic losses.
Munich Re – December 2014
50
Backup: Reinsurance property-casualty
Competitive landscape in reinsurance
Cyclical challenges
Availability of alternative capital1
US$ bn
Low
interest rates
+
50
22
Low inflation
+
2009
2010
2011
2012
2013
Largely driven
by scarcity of
investment
opportunities in
the low-interestrate environment
Benign claims
experience
Direct impact
Indirect impact
Abundant excess capital
in primary and reinsurance
for quite some years now
Most notable in US nat cat
XL business
Higher retentions, also driven
by global players centralising
their buying programmes
 External models are
available – know-how
without infrastructure
Accelerator for price competition
among some traditional reinsurers
 Fight for market share
 Softening terms and conditions
 Spill-over effects as less diversified
players expand business to other
areas and perils
 Short tail – predictable
capital deployment
July renewals revealed continuing margin compressions due to abundant supply,
especially in the nat cat area
1 Source:
AonBenfield.
Munich Re – December 2014
51
Backup: Reinsurance property-casualty
Munich Re set-up supports earnings strength
%
Challenges requiring the right mix of skills to stand out
1 Traditional
business
 Excellent client access – strategic partnerships
 Rising demand for tailor-made solutions
 Access to profitable business across all lines
2 Risk
Solutions
 Continued business expansion …
 … with strong bottom-line contribution
3 Alternative  Taking advantage of dynamic market …
risk transfer  … for clients and our own book/retrocession
Risk
Solutions
24
Tailor-made
solutions
18
TOTAL1
€17bn
Other
traditional
business 58
Nat cat XL
12
Casualty
40
TOTAL
4 Product
innovation
€13bn
 Growing business solutions portfolio
 Leverage of strong know-how base
Other
property 28
Specialty2
20
Munich Re continuously increasing its share of business largely decoupled from
competition in traditional reinsurance while taking advantage of ART
1
2
Gross written premiums property-casualty reinsurance as at 31.12.2013.
Aviation, agriculture, marine and credit.
Munich Re – December 2014
52
Backup: Reinsurance property-casualty
Disciplined management of traditional business while
continuously expanding know-how-driven business
1 Growing share of structured complex deals1
Traditional
business
Tailor-made
transactions
83
74
17
26
2013
2014
%
Differential terms and
private placements
accounting for more
than 40% of the
renewed business
3 Taking advantage of alternative risk transfer
 Strong track record of ILS structuring –
in 2013 transactions for third parties amounting
to €1.2bn (17% market share)
 Opportunistic use of favourable market terms –
significant extension of retrocession
 Special purpose vehicles providing additional
capacity, e.g. sidecar "Eden Re"
2 Risk Solutions – Premiums, combined ratio
3.4
3.8
4.0
€bn
%
94.1
87.9
83.8
2011
2012 2013
2011
2012
2013
4 Product innovation – Premiums
247
245
2012
2013
167
2011
€m
Strategic advantage
 Innovative business
development platform
 First mover in different
market segments
 Cross-linked expertise
creating new solutions
Munich Re with distinct value proposition based on solutions beyond capacity
1
Share of total renewed business.
Munich Re – December 2014
53
Backup: Reinsurance property-casualty
July renewals – Regional focus on USA, Australia
and Latin America
Total property-casualty book1
Remaining
business
32
%
Business up for
January renewal
51
Regional allocation of July renewals
Rest2
7
Europe
6
Australia
10
%
North
America
38
TOTAL
€2.0bn
Latin America
13
Worldwide
25
TOTAL
€17bn
Nat cat shares of renewable portfolio
Nat cat
Other perils
January
12
88
April
Business up for
July renewal
12
1
2
Business up for
April renewal
5
Gross premiums written. Economic view – not fully comparable with IFRS figures.
Asia, Pacific and Africa.
July
Total
%
46
25
15
54
75
85
Munich Re – December 2014
54
Backup: Reinsurance property-casualty
Portfolio profitability continues to meet our return
targets
July renewals 2014
%
100
–18.3
81.7
–3.6
14.7
92.8
Portfolio changes
€m
2,029
–371
1,657
–74
299
1,882
 Slight shift from property
to casualty
Change in premium
Thereof price movement1
Thereof change in exposure for our share
–7.2%
~ –3.6%
–3.6%
Total
Cancelled Renewed Decrease
New
renewable
on
business
from 1 July
renewable
Estimated
outcome
 Proportional:
Benefiting from continued
positive pricing trend in
primary insurance (US
casualty) and adequate
margins (Latin America,
Australia)
 XL:
Reduction driven by lower
nat cat premiums
Strict cycle management and pricing discipline the order of the day
1
Price movement is risk-adjusted, i.e. includes claims inflation/loss trend and is adjusted for portfolio mix effects.
Furthermore, price movement is calculated on a wing-to-wing basis (including cancelled and new business).
Munich Re – December 2014
55
Backup: Reinsurance property-casualty
2014 renewals – Disciplined underwriting prevails
Year-to-date price change 2010–2014
Nominal
%
Adjusted for interest-rate changes
2.4
1.4
1.0
0.3
0.5
0.2
0.0
–0.1
–1.7
–2.4
2010
2011
2012
2013
2014
Portfolio profitability continues to meet our return targets
Munich Re – December 2014
56
Backup: Reinsurance life
Strong market shares in all regions add up to global
leading position
Global life market share1
Swiss Re
15%
13%
RGA
Berkshire
SCOR
1
2
Munich Re's regional footprint1
%
27%
21%
2011
2007
16%
23%
Munich Re
Hannover Re
%
12%
9%
10%
6%
8%
6%
Global
market
share
Europe
Americas
APAC
2
 Historically strong position of Munich Re in
European markets
 North America underweight due to selective
approach in competitive US market
 Very strong position in Canada in terms of
in-force and new business
 Market leader with differentiated approach in
growing Asian markets
 Among BRIC markets, particular focus on
China, Brazil and India
Source: Munich Re Economic Research. Estimates based on net earned premiums as reported in company reports.
Asia, Australia, New Zealand.
Munich Re – December 2014
57
Backup: Reinsurance life
Reinsurance life – Key figures
€m
Net result
283
215
189
177
121
106
125
54
Q4
Q1
2012
37
–16
Q3
Q2
Q4
Q1
2013
€m
Investment result
619
273
Q3
2014
€m
Technical result
Q2
278
Q1–3
Q1–3
2013
2014
€m
Other1
587
–105
–141
Q1–3 2013
1
Q1–3 2014
Q1–3 2013
Other non-operating result, goodwill impairments, net finance costs, taxes.
Q1–3 2014
Q1–3 2013
Q1–3 2014
Munich Re – December 2014
58
Backup: Reinsurance life
Bulk of top and bottom line from North America –
Largest growth rates in Asian markets
Portfolio split by region 2013 (2008) – Gross premiums written vs. technical result vs. VNB
GWP
Other
19 (34)
Technical result
North America
59 (41)
Other
28 (41)
North America
58 (29)
APAC1
14 (8)
UK
13 (19)
APAC1
1 (11)
UK
8 (17)
Changes in regional premium
split driven by FinMoRe and
Asian growth
1
VNB
Asia, Australia, New Zealand.
APAC result dampened by
adverse performance of
Australian disability business
Other
15 (16)
UK
8 (9)
North America
58 (66)
APAC1
19 (9)
North America continues to be
the main new business
contributor – UK growing in
FinMoRe segment
Munich Re – December 2014
59
Backup: Reinsurance life
Favourable financial performance overall –
despite two slips
€m
Premiums and value generation by product
Gross premiums written (GWP)
2013 5,992
2012 6,030
Technical result1
VNB
4,517
4,555
320
545
10,829
11,130
378
410
–12
40
4
–30
370
420
42%
3%
100%
102%
–3%
1%
100%
404
404
124
129
22%
49
40
577
573
8%
100%
70%
55%
Mortality Morbidity
Other
Total
Mortality Morbidity Other
Total
Mortality Morbidity Other
Total
Favourable biometric experience in most segments with two exceptions
 Morbidity – Result impacted by Australian disability issues (group and individual)
 Mortality – Worse than expected for older issue age business in the USA
1
Additional non-technical result contribution ("fee income"): €58m in 2012; €51m in 2013.
Munich Re – December 2014
60
Backup: Reinsurance life
Financially Motivated Reinsurance remains a key
strategic pillar
€m
Financially Motivated Reinsurance
Technical result and fee income1
Gross premiums written
% of total
119
Fee income
4,536
4,109
92
% of total
75
25
1,998
38
38
2010
35
50
38
25
2011
2012
2013
% of total
Technical result
3,638
41
VNB
2010
49
185
49
119
29
70
20
19
28
9
2011
2012
2013
2010
21
14
45
43
82
2011
2012
2013
Portfolio development
Expectations going forward
 Several deals concluded in Europe
(e.g. Iberian peninsula), Asia and North America
 Sustained high demand, especially in Europe
and Asia
 Successful renewal of some existing deals
 Number, size and type of transactions difficult to
project
 Business performing well as expected
1
Result from FinMoRe business partly shown as non-technical result (deposit accounting – "fee income").
Munich Re – December 2014
61
Backup: Reinsurance life
Asia – Sustained growth across all major markets
Reinsurance life Asia – Business development
Gross premiums written
% of total
957
€m
Technical result
VNB
Fee income
1,178
959
Technical result
81
70
% of total
872
97
% of total
55
1
12
54
58
59
56
35
12
2010
10
2011
32
11
8
2012
2013
29
2010
9
12
2011
2012
13
9
2010
2011
14
17
2012
2013
17
2013
Portfolio development
Expectations going forward
 Sustained growth path
 Ongoing need for solvency-relief and financing
solutions
 Premium reduction from planned solvency-relief
treaty terminations
 Growth supported by our state-of-the-art
underwriting automation solutions (MRAS1)
1
Munich Re Automation Solutions Ltd., Dublin.
 In some developing markets, demand gradually
shifting from service to risk transfer
Munich Re – December 2014
62
Backup: Reinsurance life
Very satisfactory new business profitability
on a pure economic and a regulatory basis
RoRaC spread1
%
IRR spread1
%
Payback period2
20%
20%
10
19%
15%
8
18%
10%
6
17%
5%
4
16%
0%
2010
2011
2012
2013
 Very good new business
profitability relative to economic
risk capital (RoRaC spread)
 Large-volume deals written
since 2009 support economic
profitability of overall portfolio
1
2
years
2
2010
2011
2012
2013
 Equally satisfactory new
business profitability relative to
total investment in new
business (IRR spread)
2010
2011
2012
2013
 Large share of generally
shorter-duration FinMoRe
business keeps payback
period at low level
Spread in addition to reference rate (weighted-average swap yield curves).
Number of years it takes to amortise the total investment in new business through future (undiscounted) shareholder cash flows.
Munich Re – December 2014
63
Backup: Reinsurance life
MCEV – Reinsurance life
€m
MCEV – Reinsurance life 2013
MCEV 31.12.2012
Adjusted MCEV 31.12.2012
Expected
return
10,352
Operating MCEV earnings
369
4 Experience
–168
2 Economic variances
Other non-operating variance
variances
–54
4 Assumption
changes
147
MCEV before closing adjustments 10,499
1 Closing adjustments
MCEV 31.12.2013
577
new business
–265
1 Opening adjustments
Total MCEV earnings
3 Value of
10,616
–1,117
9,382
317
–113
–301
Other operating
variance
–111
Operating
MCEV earnings
369
Main drivers
1 FX impact: –€917m
Dividends: –€465m
2 Impact from rising
interest rates
3 Second-highest
value of new
business ever
4 Impact from Australian
disability and US
mortality
Munich Re – December 2014
64
Backup: Primary insurance
Overview
Primary insurance1, 2
2013
2012
2011
2010
2009
Gross written premiums
€bn
16.7
17.1
17.4
17.5
16.6
Investments
€bn
126.1
124.9
117.0
121.8
118.4
Net technical provisions
€bn
125.1
122.8
116.1
111.2
107.7
Combined ratio property-casualty
%
97.2
98.7
99.1
96.8
93.2
Premium split by region
%
Rest of World
7
Turkey
2
Italy
2
Belgium
3
1
2
Germany
77
TOTAL
€16.7bn
Distribution channels – New business 2013
Banks/other
7
Poland
6
Direct
15
Austria
3
Broker
20
Previous years’ figures adjusted owing to IAS 8; see “Changes in accounting policies and other adjustments”.
In 2012, our segment reporting was modified and no longer has a consolidation column. The figures for the previous year
have been adjusted accordingly. Comparability with the years 2009 and 2010 is thus limited.
%
Tied agents
58
Munich Re – December 2014
65
Backup: Primary insurance life
Primary insurance life – Key figures
€m
Net result
153
23
92
71
41
28
42
44
38
Q2
Q3
Q4
Q1
Q2
–17
Q4
Q1
2012
2013
2014
€m
Technical result
Q3
€m
Investment result
3,139
Q1–3
Q1–3
2013
2014
€m
Other1
50
2,405
–46
–40
–94
Q1–3 2013
1
Q1–3 2014
Q1–3 2013
Other non-operating result, goodwill impairments, net finance costs, taxes.
Q1–3 2014
Q1–3 2013
Q1–3 2014
Munich Re – December 2014
66
Backup: Primary insurance life
Primary insurance life –
New business (statutory premiums)
Total
premiums
Regular
premiums
Single
premiums
APE1
Life total
Q1–3 2013
1,361
294
1,067
401
Q1–3 2014
1,665
302
1,363
438
▲
22.3%
2.7%
27.7%
9.2%
Germany
Q1–3 2013
825
178
647
243
Q1–3 2014
790
161
629
224
–4.2%
–9.6%
–2.8%
–7.8%
Q1–3 2013
536
116
420
158
Q1–3 2014
875
141
734
214
21.6%
74.8%
▲
International
▲
1
2
63.2%
Annual premium equivalent (APE = regular premiums +10% single premiums).
APE, only third-layer private provision and tied-agent organisations.
35.4%
Munich Re – December 2014
67
Backup: Primary insurance life
Comprehensive management of back book
Implemented measures
Interest-rate hedging programme – protection against reinvestment risk via receiver swaptions
Duration gap in German life noticeably reduced to below one year for large life companies
Comparatively low bonus rates: 3.2% vs. market average 3.4%
Non-interest-bearing ZZR (accumulated reserve end of 2013: €814m) reducing average guarantee, partly
financed from unrealised gains – Expected accumulated ZZR in 2014: ~€1.3bn
 Reduction of ERC due to better capital markets and assumption changes in risk model




Target: Deliver guarantee promise to customers
without additional shareholders' equity
Buffers and key figures1 (German business)
Free Terminal bonus
RfB
fund
Unrealised
gains
Average
coupon
Reinvestment
rate
Average
guarantee
2013
€0.8bn
€1.9bn
€5.6bn
~3.7%
~2.7%
~3.2%
2012
€0.9bn
€2.0bn
€8.1bn
~3.8%
~3.1%
~3.2%
ERGO well protected against "lower for longer" scenario
1
German GAAP figures for ERGO Leben, Victoria Leben and ERGO Direkt Leben.
Munich Re – December 2014
68
Backup: Primary insurance life
Launch of less interest-rate-prone new products –
Concept for Germany well advanced
In an environment of political discussion …
Share of new products – 2nd half 2013 (3rd layer only)1
 "We need changes in the products"
(Gabriel Bernardino, EIOPA, 21 Nov. 2013)
 "Insurers must develop a more differentiated
product portfolio and partly re-invent the life
insurance product"
(Elke König, BaFin president, 18 Jan. 2014)
 "More recent attempts by leading life insurers
to offer products that are less interest-rate
sensitive, with lower or no guarantees,
underline the industry’s attempts to innovate"
(Standard & Poor's, 26 Nov. 2013)
ERGO Annuity
Guarantee
(36%)
... ERGO holds frontrunner position
 ERGO first German life insurer to present new
guarantee-type products in June 2013
 Offer restricted to third-layer private provision
and tied agent organisations to start with
 Extension to other layers (Rürup, corporate
pensions) and sales channels (brokers, banks)
to follow in 2014/15
1
2
Classic annuities
("with profits")
(40%)
ERGO Annuity
Opportunity
(24%)
Share of target portfolio2 – Plan 2016+ (all products)1
Target portfolio
(>80%)
Thereof: old
products (~35%)
Classic products
("with profits")
(<20%)
Thereof: new
products
(~45%)
New business APE excl. ERGO Direkt.
Unit-linked insurance (with/without profits), term insurance, occupational disability insurance and death benefit.
Munich Re – December 2014
69
Backup: Primary insurance
Primary insurance – MCEV
€m
MCEV – Primary insurance
MCEV 31.12.2012
2,728
–247
Opening adjustments
Adjusted MCEV 31.12.2012
2,482
Operating MCEV earnings
2,175
Economic variances
1,132
Other non-operating variance
0
Total MCEV earnings
3,308
MCEV before closing adjustments
Closing adjustments
MCEV 31.12.2013
5,789
160
5,949
Value of
new business
213
Expected
return
95
Experience
variances
200
Assumption
changes
1,963
Other operating
variance
–295
Operating
MCEV earnings
2,175
Main drivers
Positive effect due
to tightened credit spreads
and higher interest rates
Review of assumptions led to positive
operating MCEV earnings, mainly driven by
changes in dynamic policyholder behaviour
Increased value of
new business in life
business
Munich Re – December 2014
70
Backup: Primary insurance health
Primary insurance health – Key figures
€m
Net result
132
113
25
11
Q4
Q1
2012
50
38
33
17
Q2
Q3
Q4
Q1
2013
Q2
Q3
€m
Investment result
1,001
302
53
2014
€m
Technical result
46
Q1–3
Q1–3
2013
2014
€m
Other1
1,063
293
–77
–108
Q1–3 2013
1
Q1–3 2014
Q1–3 2013
Other non-operating result, goodwill impairments, net finance costs, taxes.
Q1–3 2014
Q1–3 2013
Q1–3 2014
Munich Re – December 2014
71
Backup: Primary insurance property-casualty
Primary insurance property-casualty – Key figures
€m
Net result
155
69
–83
Q4
Q1
2012
77
70
Q2
16
14
Q3
Q4
Q1
2013
297
31
Q2
Q3
€m
Investment result
Q1–3
Q1–3
2013
2014
€m
Other1
300
245
1
20
2014
€m
Technical result
Q1–3 2013
128
238
Q1–3 2014
Q1–3 2013
Other non-operating result, goodwill impairments, net finance costs, taxes.
Q1–3 2014
–180
–194
Q1–3 2013
Q1–3 2014
Munich Re – December 2014
72
Backup: Primary insurance property-casualty
Combined ratio
%
Combined ratio
104.0
100.3
98.0
%
96.3
95.1
95.1
Q1
2014
Q2
2014
93.2
99.2
97.5
95.3
95.1
Germany
95.9 96.1
95.8
95.0 96.0
2012
2013
Q3
2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Expense ratio
Loss ratio
98.7
International
97.2
95.6
34.0
34.7
34.4
64.7
62.5
61.2
2012
2013
Q1–3
2014
99.8
%
98.7
94.9
2012
2013
Q1
2014
97.5
Q2
2014
100.0
Q3
2014
Munich Re – December 2014
73
Backup: Primary insurance property-casualty
Property-casualty – Attractive business mix focusing
on personal lines
ERGO 2013 – Gross premiums p-c Germany
Other
10.9
Legal
protection
12.4
Personal accident
21.9
TOTAL
Motor
20.2
€3.3bn
Liability
15.9
Fire/Property
18.7
ERGO 2013 – Combined ratio p-c Germany
Loss ratio
Personal accident
Motor
Fire/Property
Liability
Legal protection
Other
Total
%
37.5
Cost ratio
72.5
60.6
66.4
63.5
34.9
Motor
36.3
Legal protection
5.7
Personal accident
10.1
Liability
13.4
Fire/Property
23.0
German personal accident – Market share 20131
107.4
85.6
39.0
99.6
33.7 100.1
32.8 96.3
33.3
Generali
R+V
11.5
8.4
6.2
Signal/Iduna
5.0
Axa
4.3
Other
%
23.3
ERGO
24.1 106.7
82.6
%
Other
11.5
Allianz
80.8
43.3
52.3
%
German market 2013 – GWP
41.3
1
Includes pure risk policies as well as policies with premium refunds.
Sources: Annual reports 2011/2012, GDV year-end statistics.
Munich Re – December 2014
74
Backup: Primary insurance property-casualty
German business affected by nat cats
%
Normalised combined ratio 2013
Severe nat cat events in 2013
Combined ratio 2013
96.3
 Flood in June most expensive catastrophe in terms of economic losses
Nat cat adjustment1
–3.3
 Hailstorms that hit some regions in
Germany most expensive event for
insurance industry
Normalised combined ratio
Motor
93.0
Homeowners
130.1
101.2
0.3
7.5
106.7
Household
–21.8
79.9
1.2
2012
2013
2012
2013
Technical aspects 2013
Nat cat
adjustment1
131.0
–3.6
%
2012
 Motor
Deterioration in addition to nat cat
demands discipline
 Homeowners insurance
80.2
Change older policies to latest terms
–3.8
and conditions
 Household contents insurance
Profitable line for ERGO and market
 Large man-made claims lower vs. 2012
2013
Target: Improve combined ratio Germany to ~93%
1
Relative to budget/long-term average.
Munich Re – December 2014
75
Backup: Primary insurance property-casualty
International business
International: Gross premiums written
Other
317
€m
International: Combined ratio
Poland
873
Cost ratio
Loss ratio
96.0
Legal
protection
651
€2.2bn
Greece
133
107.8
25.9
TOTAL
Turkey
224
81.3
107.9
98.7
37.9
62.1
60.8
Poland Turkey Greece Legal Other
protection
Total
29.7
45.6
81.9
Strong/solid performance
 Poland: Continuing organic
growth path with combined
ratio <96%
 Greece: Technically sound
despite economic crisis
 Legal protection: Distinct
profile as LPI specialist
97.9
45.8
32.8
63.2
1
%
51.6
52.3
Turnaround
 India1: Successful JV HDFC ERGO
(26% stake) since 2008 – among the
best combined ratios in the market
(2012: 91.6%)
 Baltics: Economic crisis dampening
top- and bottom-line growth; Lithuania
with good performance
India: GWP on 100% shareholding basis. Non-calendar FY from April to March.
 Turkey: Good progress
after significant reduction
of motor TPL portfolio and
improved pricing
Target combined ratio
<100% by 2015/16
Munich Re – December 2014
76
Backup: ERGO International
Geographic focus on CEE and Asia – Regions with the
highest expected primary insurance premium growth
Strategic focus regions – Why CEE and Asia?
CEE
Asia
 Underdeveloped
insurance markets and
high growth expectations
 Hub in Singapore for
further expansion in
South East Asia
 General focus on non-life
 Markets with high growth
path and low insurance
penetration
 Strong base with entities in
Poland and Baltic States,
footprints in SEE through
hub in Austria
Market presence
Market position among top 5 in either life or non-life
Non-life: Real CAGR 2013 – 20201
Emerging Asia
CEE
Latin America
MENA
Mature Asia/Pacific
North America
Western Europe
1
%
10.2
6.3
5.7
4.7
2.8
2.6
1.3
Expectation. Source: Munich Re Economic Research.
Life: Real CAGR 2013 – 20201
Emerging Asia
Latin America
CEE
MENA
Mature Asia/Pacific
North America
Western Europe
%
13.9
11.9
8.6
7.5
2.2
2.0
1.8
Munich Re – December 2014
77
Backup: ERGO International life
International life – affected by low-yield environment
but still solid economic financials
€m
Total premiums
€m
MCEV
CAGR 5.4%
1,832
1,326
323
281
297
440
531
Others
Italy
1,483
€m
VNB
85
1,551
1,365
1,229
51
Belgium
58
63
59
761
Austria
279
326
2008
571
2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
 Acquisition of Bank Austria
Insurance in 2009 fostering
growth, currently tax benefit
related challenges in Austria
 Improved MCEV due to benign
capital markets (narrowing
credit spreads and rising
interest rates)
 VNB on a constantly high
level and leading to high new
business margin1 of 6.9% in
2013
 Belgium with strong growth as a
niche player
 Positive impact due to profit
sharing mechanism
 Development of new products
with focus on reduced capital
market risk
 Life business in China and India
in build-up phase
1
New business margin = VNB / present value of new business premiums.
Munich Re – December 2014
78
Backup: Munich Health
Munich Health – Overview
Munich Health1, 2
2013
2012
2011
Gross written premiums
€bn
6.6
6.7
6.0
Investments
€bn
3.6
4.2
4.6
Net technical provisions
€bn
2.2
2.2
2.4
%
98.3
100.2
99.5
Combined ratio3
Regional premium breakdown4
Other
8 (7)
Southern Europe,
Latin America
12 (11)
Northern/
Eastern/
Central Europe
15 (16)
1
2
3
4
%
North America
65 (66)
TOTAL
€6.6bn
€m
Segmental premium breakdown4
Primary insurance
1,933 (30%)
(▲ –4.4%)
Reinsurance
4,618 (70%)
(▲ –1.4%)
TOTAL
€6.6bn
Previous years’ figures adjusted owing to IAS 8; see “Changes in accounting policies and other adjustments”.
In 2012, our segment reporting was modified and no longer has a consolidation column. The figures for the previous year have
been adjusted accordingly. Comparability with the years 2009 and 2010 is thus limited.
Excluding health insurance conducted like life insurance.
Gross written premiums as at 31.12.2013 (31.12.2012).
Munich Re – December 2014
79
Backup: Munich Health
Munich Health – Key figures
€m
Net result
56
37
31
26
Q1
Q2
Q3
94
95
Q1–3
Q1–3
2013
2014
53
20
22
Q1
Q2
–155
Q4
2012
Q4
2013
2014
€m
Technical result
Q3
€m
Investment result
€m
Other1
–16
–39
117
88
Q1–3 2013
1
Q1–3 2014
67
58
Q1–3 2013
Q1–3 2014
Other non-operating result, goodwill impairments, net finance costs, taxes.
Q1–3 2013
Q1–3 2014
Munich Re – December 2014
80
Backup: Munich Health
Private health insurance growing worldwide above
GDP
Private health insurance volume per region – Gross written premiums
€bn
Market dominated by
North America
+3%
+1%
+1%
732
849
957
108
Health specialist
insurers
Middle East
Europe
+4%
+3%
129
+10%
+10%
152
4
7
Multi-line insurers
10
Growth (CAGR, 06-15)
2006
2011 2015e
2006
2011 2015e
2006
2011 2015e
Private health
insurance GWP1
Nominal GDP1
Latin America
+10%
+7%
+15%
+11% 86
48
25
2006
1
9
2011 2015e
Euro-based. Source: WHO, Global Insight
APAC
Africa
2006
15
+13%
+11%
117
22
2011 2015e
39
2006
69
2011 2015e
Munich Re – December 2014
81
Backup: Munich Health
Munich Health has a global presence and can leverage
the health know-how of over 3,000 health experts
Presence of Munich Health – Over 3,000 health experts at 26 international locations
Worldwide health
reinsurance business
Specialized private health
insurer for additional
health coverage
Additional health
coverage and BestCare,
Joint Venture
Hälsa
International player for
expat health business
Belgium
Specialized private health
insurer & regional public
health delivery system
Seguros
Reinsurance
offered by four
regional hubs in
100 countries,
nine primary
insurance
companies1
and five
MedNets (TPA)
1
TPA / MSO service
company for primary
insurance clients, e.g.
UAE, Jordan
As shown in map plus DKV Luxembourg, Daman Qatar, Saudi Enaya
Specialized health insurer
together with Abu Dhabi
government
Specialized private health insurer in
cooperation with local hospital
group
Munich Re – December 2014
82
Backup: Investments
Investment result
€m
Investment result
Return1
Q3 2014
Return1
Q2 2014
Return1
3.4%
1,793
3.1%
1,924
3.4%
–541 –0.3%
–223
–0.4%
156
0.2%
0.4%
261
0.4%
441
0.8%
–76
–0.1%
46
0.1%
1,755
3.0%
2,567
4.5%
Q1–3 2014 Return1 Q1–3 2013
Regular income
5,429
Write-ups/write-downs
–194 –0.1%
Disposal gains/losses
1,214
0.7%
–57
0.0%
–212 –0.1%
6,392
3.8%
5,662
Other income/expenses2
Investment result
Total return3
3.2%
5,686
729
3.4%
–0.4%
10.4%
Q1–3
2014
Q3
2014
Q1–3
2014
Q3
2014
Fixed-income
808
194
Equities
836
254
–475
–217
45
30
Regular income
Write-ups/write-downs
Further decline of
interest rates in Q3 –
Average reinvestment
yield dropping to
~2.2% vs. ~2.7% in
Q2 2014
Equities
–74
–37
Derivatives
–83
–130
264
109
Derivatives
–37
–56
Other
1
2
3
thereof interest-rate
hedging programme
Other
12.1%
8.6%
Disposal gains/losses
Annualised return on quarterly weighted investments (market values) in % p.a.
Including impact from unit-linked business. Q1–3 2014: €404m (0.2%-points). Q3 2014: €79m (0.1%-points).
Including unrealised gains and losses.
Munich Re – December 2014
83
Backup: Investments
Return on investment by asset class and segment
%1
Regular income
Write-ups/downs
Disposal result
Other inc./exp.
RoI
ᴓ Market value3
Afs fixed-interest
3.0
–
0.7
–
3.7
120,311
Afs non-fixed-interest
4.0
–0.8
9.3
–
12.5
12,022
Derivatives
6.3
–5.3
–30.3
–4.2
–33.5
2,087
Loans
3.4
–
0.4
–
3.8
63,962
Real estate
6.3
–1.0
0.5
–
5.8
5,515
Other2
2.2
–
0.2
–
2.4
23,053
Total
3.2
–0.1
0.7
–
3.8
226,950
Reinsurance
3.1
–0.8
1.1
–0.4
3.0
82,335
Primary insurance
3.3
0.3
0.4
0.2
4.2
139,796
Munich Health
2.0
–0.2
0.5
–0.2
2.1
3,714
%
Return on investment
Average 3.7%
4.5%
4.3%
4.0%
3.9%
3.8%
3.6%
3.8%
3.7%
3.4%
3.8%
3.0%
2.8%
Q4
2011
1
3
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Annualised. 2 Including management expenses and impact from unit-linked business.
In €m. Segments do not add up to total amount; difference relates to the segment "asset management".
Q4
Q1
Q2
2014
Q3
Munich Re – December 2014
84
Backup: Investments
Investment portfolio
Fixed-interest securities and miscellaneous
Investment portfolio
Miscellaneous
11.2 (11.8)
%
Fixed-interest securities
54.1 (52.9)
Fixed-interest securities1
%
Structured products
5 (6)
Governments/
Semi-government
57 (53)
Corporates
15 (16)
TOTAL
Banks
4 (4)
€237bn
Miscellaneous
%
Deposits on
reinsurance
35 (38)
Other
9 (9)
Derivatives
6 (5)
Bank deposits
14 (12)
1
€128bn
Pfandbriefe/
Covered bonds
19 (21)
Loans
28.1 (28.2)
Investment
funds
8 (10)
TOTAL
Loans1
Loans to policyholders/
Mortgage loans
9 (9)
Corporates
1 (1)
TOTAL
€27bn
Unit-linked
28 (26)
%
Banks
5 (6)
Approximation – not fully comparable with IFRS figures. Fair values as at 30.9.2014 (31.12.2013).
Governments/
Semi-government
38 (38)
TOTAL
€67bn
Pfandbriefe/
Covered bonds
47 (46)
Munich Re – December 2014
85
Backup: Investments
Fixed-income portfolio
Total
Rating structure
<BB and NR
6 (6)
BB
2 (2)
BBB
12 (12)
%
Regional breakdown
AAA
41 (42)
Without
TOTAL
€202.7bn
A
13 (12)
AA
26 (26)
Maturity structure
%
n.a.
2 (2)
0–1 years
9 (9)
1–3 years
14 (16)
>10 years
34 (31)
AVERAGE
MATURITY
8.9 years
7–10 years
14 (14)
3–5 years
14 (15)
5–7 years
13 (13)
%
With
Total
policyholder
participation
30.9.
2014
31.12.
2013
5.0
12.7
2.6
3.6
1.8
24.9
1.1
5.6
2.8
2.8
29.9
13.8
8.2
6.4
4.6
32.2
13.7
7.9
6.4
4.8
0.9
2.7
3.6
3.3
3.4
0.1
3.5
3.5
Spain
1.6
1.9
3.5
2.8
Italy
Ireland
Austria
Australia
Sweden
Norway
Belgium
Other
1.2
0.8
0.5
1.5
0.4
0.5
0.5
7.1
2.1
1.7
2.0
0.4
1.4
1.3
1.1
4.0
3.3
2.5
2.5
1.9
1.8
1.8
1.6
11.1
2.7
2.7
2.7
1.9
2.0
1.9
1.5
10.0
44.1
55.9
100.0
100.0
Germany
US
France
UK
Netherlands
Supranationals
Canada
Total
Approximation – not fully comparable with IFRS figures. Fair values as at 30.9.2014 (31.12.2013).
Munich Re – December 2014
86
Backup: Investments
Fixed-income portfolio
Government/Semi-government
Rating structure
BB
1 (1)
BBB
11 (10)
A
7 (6)
%
Regional breakdown
AAA
47 (47)
Without
€99.3bn
AA
34 (36)
Maturity structure
%
0–1 years
9 (9)
>10 years
42 (39)
1–3 years
13 (17)
AVERAGE
MATURITY
10.6 years
7–10 years
12 (10)
3–5 years
13 (13)
5–7 years
11 (12)
With
Total
policyholder
participation
30.9.
2014
31.12.
2013
4.8
14.9
24.0
0.5
28.8
15.4
33.0
13.9
1.9
5.4
7.3
7.2
5.3
0.1
5.4
5.9
UK
4.6
0.2
4.8
4.5
Italy
France
Austria
Spain
Belgium
Australia
Netherlands
Finland
Ireland
Portugal
Other
1.2
2.4
0.8
1.5
0.9
2.5
1.6
0.5
0.2
0.1
9.0
3.2
2.0
2.6
1.5
2.0
0.0
0.7
1.5
1.4
0.0
2.7
4.4
4.4
3.4
3.0
2.9
2.5
2.3
2.0
1.6
0.1
11.7
3.7
3.6
3.9
1.9
3.0
2.4
2.3
2.1
1.7
0.0
10.9
52.2
47.8
100.0
100.0
Germany
US
Supranationals
Canada
TOTAL
%
Total
Approximation – not fully comparable with IFRS figures. Fair values as at 30.9.2014 (31.12.2013).
Munich Re – December 2014
87
Backup: Investments
Fixed-income portfolio
Corporate bonds (excluding bank bonds)
Rating structure
%
<BB and NR
2 (1)
AAA
1 (1)
AA
6 (7)
BB
10 (9)
TOTAL
€19.9bn
A
34 (34)
BBB
47 (48)
Maturity structure
%
>10 years
16 (13)
0–1 years
6 (7)
7–10 years
17 (18)
1–3 years
19 (19)
AVERAGE
MATURITY
7.4 years
5–7 years
19 (17)
3–5 years
23 (26)
Sector breakdown
%
30.9.
2014
31.12.
2013
Utilities
22.3
19.7
Oil and gas
12.9
12.2
Industrial goods and services
12.2
13.2
Telecommunications
10.1
10.0
Healthcare
5.6
6.2
Food and beverages
5.1
5.3
Financial services
5.0
4.4
Media
4.5
4.4
Basic resources
3.7
3.2
Retail
3.2
3.4
Technology
3.1
4.7
Personal and household goods
2.6
2.7
Automobiles
2.5
2.8
Other
7.2
7.8
Approximation – not fully comparable with IFRS figures. Fair values as at 30.9.2014 (31.12.2013).
Munich Re – December 2014
88
Backup: Investments
Fixed-income portfolio
Bank bonds
Rating structure
%
<BB and NR
5 (4)
AA
8 (8)
TOTAL
€7.3bn
A
57 (50)
BBB
25 (34)
Maturity structure
%
>10 years
5 (4)
AVERAGE
MATURITY
Total
30.9.
31.12.
2014
2013
30.0
29.6
28.6
34.7
11.5
10.2
5.0
5.4
3.3
3.6
2.9
3.5
2.8
1.7
2.7
1.9
2.0
2.7
11.2
6.7
Investment category of bank bonds
%
US
Germany
UK
Ireland
Canada
Australia
Netherlands
France
Austria
Other
0–1 years
7 (5)
Loss-bearing1
5 (5)
1–3 years
24 (16)
Subordinated2
14 (11)
4.8 years
5–7 years
21 (24)
%
Lossbearing
0.3
3.3
0.0
0.0
0.1
0.0
0.0
0.4
0.2
0.5
AAA
0 (1)
BB
5 (3)
7–10 years
12 (16)
Regional breakdown
Senior
Subbonds ordinated
24.9
4.8
21.8
3.5
9.3
2.2
5.0
0.0
2.4
0.8
2.9
0.0
2.6
0.2
1.6
0.7
1.4
0.4
9.2
1.5
Senior
81 (84)
TOTAL
€7.3bn
3–5 years
31 (35)
1 Classified
as Tier 1 and upper Tier 2 capital for solvency purposes. 2 Classified as lower Tier 2 and
Tier 3 capital for solvency purposes. Approximation – not fully comparable with IFRS figures.
Fair values as at 30.9.2014 (31.12.2013).
Munich Re – December 2014
89
Backup: Investments
Fixed-income portfolio
Structured products
€m
Structured products portfolio (at market values): Split by rating and region
Rating
ABS
CDO/
CLN
Total
Marketto-par
537
910
101%
–
421
421
100%
–
5
–
5
100%
–
–
–
–
–
0%
27
–
33
290
917
1,207
97%
–
–
–
–
1,414
–
1,414
104%
169
216
66
4
–
32
810
842
101%
135
76
21
25
1
–
20
238
258
100%
626
29
298
97
54
3
589
518
1,107
101%
3,444
1,192
1,120
308
64
36
2,723
3,441
6,164
100%
56%
19%
18%
5%
1%
1%
44%
56%
100%
3,875
1,353
1,293
382
159
63
3,145
3,980
7,125
AAA
AA
A
BBB
<BBB
NR
USA +
RoW
Consumer-related ABS1
418
308
166
18
–
–
373
Corporate-related ABS2
68
101
174
73
5
–
Subprime HEL
–
2
1
2
–
Subprime-related
–
–
–
–
476
427
244
1,334
80
Non-agency prime
387
Non-agency other
(not subprime)
Commercial MBS
Non-subprime-related
MBS
Region
Agency
Total 30.9.2014
In %
Total 31.12.2013
Europe
99%
1
Consumer loans, auto, credit cards, student loans.
Asset-backed CPs, business and corporate loans, commercial equipment.
Approximation – not fully comparable with IFRS figures. Fair values as at 30.9.2014.
2
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Backup: Investments
On- and off-balance-sheet reserves (gross)
€m
31.12.
2012
31.12.
2013
31.3.
2014
31.6.
2014
30.9.
2014
224,537
217,738
223,463
229,336
237,263
22,478
15,192
18,931
23,208
26,476
Fixed-interest securities
9,980
4,661
6,568
8,719
10,097
Non-fixed-interest securities
1,503
1,975
2,032
2,118
2,072
291
292
306
309
312
11,774
6,928
8,906
11,146
12,481
Real estate2
1,519
1,763
1,772
1,800
1,823
Loans and investments (held to maturity)
8,831
6,071
7,887
9,880
11,801
354
430
366
382
371
10,704
8,264
10,025
12,062
13,995
10.0%
7.0%
8.5%
10.1%
11.2%
Market value of investments
Total reserves
On-balance-sheet reserves
Other on-balance-sheet reserves1
Subtotal
Off-balance-sheet reserves
Associates
Subtotal
Reserve ratio (%)
1
2
Unrealised gains/losses from unconsolidated affiliated companies, valuation at equity and cash-flow hedging.
Excluding reserves from owner-occupied property.
Munich Re – December 2014
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Backup: Investments
Sensitivities to interest rates, spreads and
equity markets
Sensitivity to risk-free interest rates – Basis points
–50
–25
+50
+100
Change in gross market value (€bn)
Change in on-balance-sheet reserves, net (€bn)1
Change in off-balance-sheet reserves, net (€bn)1
P&L impact (€bn)1
+7.9
+1.8
+0.4
–0.0
+3.8
+0.9
+0.2
–0.0
–7.1
–1.7
–0.4
+0.0
–13.3
–3.3
–0.7
+0.1
Sensitivity to spreads2 (change in basis points)
+50
+100
Change in gross market value (€bn)
Change in on-balance-sheet reserves, net (€bn)1
Change in off-balance-sheet reserves, net (€bn)1
P&L impact (€bn)1
–5.0
–1.1
–0.3
+0.1
–9.3
–2.1
–0.5
+0.1
+10%
3,549
+1.2
+0.7
+0.2
+0.1
+30%
4,194
+3.7
+2.1
+0.6
+0.3
Sensitivity to equity and commodity markets3
EURO STOXX 50 (3,226 as at 30.9.2014)
Change in gross market value (€bn)
Change in on-balance-sheet reserves, net (€bn)1
Change in off-balance-sheet reserves, net (€bn)1
P&L impact (€bn)1
1
2
3
–30%
2,258
–3.6
–1.0
–0.6
–1.4
Rough calculation with limited reliability assuming unchanged portfolio as at 30.9.2014. After rough estimation of
policyholder participation and deferred tax; linearity of relations cannot be assumed. Approximation – not fully
comparable with IFRS figures.
Sensitivities to changes of spreads are calculated for every category of fixed-interest securities,
except government securities with AAA ratings.
Worst-case scenario assumed including commodities: impairment as soon as market value is below
acquisition cost. Approximation – not fully comparable with IFRS figures.
–10%
2,903
–1.2
–0.4
–0.2
–0.4
Munich Re – December 2014
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Backup: Additional information
Sensitivities of MCEV
€m
Reinsurance
MCEV
Change
in €m
Primary insurance
Change
in %
MCEV
Change
in €m
Change
in %
Base case
9,382
Interest rates –100bp
9,817
435
4.6
4,223
–1,727
–29.0
Interest rates +100bp
8,961
–421
–4.5
7,178
1,229
20.7
Equity/property values –10%
9,374
–8
–0.1
5,745
–205
–3.4
Equity/property-implied volatilities +25%
9,371
–12
–0.1
5,881
–68
–1.1
Swaption-implied volatilities +25%
9,374
-8
–0.1
6,160
210
3.5
Illiquidity premium 10bp
9,421
39
0.4
6,275
326
5.5
Maintenance expenses –10%
9,487
104
1.1
6,010
60
1.0
Lapse rates –10%
9,675
292
3.1
5,909
–40
–0.7
Lapse rates +10%
9,130
–252
–2.7
5,987
37
0.6
11,130
1,748
18.6
6,019
70
1.2
Mortality (annuity business) –5%
9,302
–80
–0.9
5,856
–93
–1.6
No mortality improvements (life business)
5,251
–4,131
–44.0
5,900
–50
–0.8
Solvency II yield curve
9,428
45
0.5
6,842
893
15.0
Mortality/morbidity (life business) –5%
5,949
Munich Re – December 2014
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Backup: Additional information
Mission of Investor & Rating Agency Relations
Responsibility
Main objective
Munich Re’s communication with the capital
market / financial community
Active communication to support a fair capitalmarket valuation of Munich Re shares and
outstanding bonds
External communication
Internal communication
Increase transparency
on financial performance, strategy and
expectations about future perspectives within the
principles of a credible, accurate, complete and
timely provision of relevant information
Transmission
of investors’ and creditors’ demands, and the
capital markets’ perception of Munich Re, to
management and staff
Target
Achieving a fair valuation and optimising the cost
of capital by increasing information efficiency
between Munich Re and the financial community
while developing a relationship of trust with our
investor base
Target
Support management in the setting of ambitious
targets as well as in the execution of a valuebased and shareholder-oriented strategy
We aim to enhancing Munich Re’s visibility and attractiveness in the international
financial community
Munich Re – December 2014
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Backup: Additional information
Financial calendar
2015
5 February
Preliminary key figures 2014 and renewals
11 March
Balance sheet press conference for 2014 financial statements
Analysts' conference with videocast
23 April
Annual General Meeting, ICM – International Congress Centre Munich
24 April
Dividend payment – Ex-dividend date
7 May
Interim report as at 31 March 2015
30 June
Investor Day, London
6 August
Interim report as at 30 June 2015
5 November
Interim report as at 30 September 2015
Munich Re – December 2014
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Backup: Additional information
For information, please contact
Investor Relations team
Christian Becker-Hussong
Thorsten Dzuba
Christine Franziszi
Head of Investor & Rating Agency Relations
Tel.: +49 (89) 3891-3910
E-mail: [email protected]
Tel.: +49 (89) 3891-8030
E-mail: [email protected]
Tel.: +49 (89) 3891-3875
E-mail: [email protected]
Britta Hamberger
Ralf Kleinschroth
Andreas Silberhorn
Tel.: +49 (89) 3891-3504
E-mail: [email protected]
Tel.: +49 (89) 3891-4559
E-mail: [email protected]
Tel.: +49 (89) 3891-3366
E-mail: [email protected]
Angelika Rings
Andreas Hoffmann
Ingrid Grunwald
Tel.: +49 (211) 4937-7483
E-mail: [email protected]
Tel.: +49 (211) 4937-1573
E-mail: [email protected]
Tel.: +49 (89) 3891-3517
E-mail: [email protected]
Münchener Rückversicherungs-Gesellschaft | Investor & Rating Agency Relations | Königinstraße 107 | 80802 München, Germany
Fax: +49 (89) 3891-9888 | E-mail: [email protected] | Internet: www.munichre.com
Feedback – Anything missing?
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Munich Re – December 2014
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Backup: Additional information
Disclaimer
This presentation contains forward-looking statements that are based on current assumptions
and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and
other factors could lead to material differences between the forward-looking statements given
here and the actual development, in particular the results, financial situation and performance
of our Company. The Company assumes no liability to update these forward-looking
statements or to conform them to future events or developments.
Figures up to 2010 are shown on a partly consolidated basis. "Partly consolidated" means
before elimination of intra-Group transactions across segments.
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