Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006
Company, the Supervisory Board is empowered to make
amendments to the Articles of Association which affect the
wording only.
The authorities of the members of the Board of Management
are defined in Sections 71 and 76 to 94 of the
German Stock Companies Act. Furthermore, the Annual
General Meeting of 19 April 2006 empowered the Company
pursuant to Section 71 paragraph 1 item 8 of the
German Stock Companies Act to buy back its own shares
up to a total amount of 10% of the current share capital
until 18 October 2007; the Board of Management is authorised
pursuant to Section 71 paragraph 1 item 8 sentence 5 of
the Act to acquire the shares without requiring further
approval at an Annual General Meeting. The Annual General
Meeting of 28 April 2005 empowered the Board of Management
to issue with the consent of the Supervisory Board
convertible bonds or bonds with warrants on one or more
occasions up to 27 April 2010 for a maximum nominal
amount of €3bn with an unlimited maturity period and
to grant the holders of such bonds conversion or option
rights in respect of new shares issued by the Company up
to a maximum amount of €100m of the share capital, in
accordance with the respective bond or warrant conditions;
as a precautionary measure, capital of €100m was
conditionally authorised under Article 4 of the Articles of
Association. The Annual General Meeting of 11 June 2003
also empowered the Board of Management in the event of
a capital increase at any time up to 11 June 2008 from the
capital authorised for this purpose, with the consent of the
Supervisory Board, to attach one bearer warrant to each of
the new shares to which the shareholders have a subscription
right when the capital authorised for this purpose is
issued. These warrants would entitle the bearer, on the
basis of the warrant conditions then stipulated, to acquire
registered Munich Re shares. Warrants may be issued for
registered shares totalling up to €35m of the share capital;
as a precautionary measure, capital of €35m was conditionally
authorised under Article 4 paragraph 3 of the Articles
of Association. Furthermore, the Board of Management
is authorised, with the consent of the Supervisory
Board, to increase the share capital pursuant to Article 4
paragraph 1, of the Articles of Association by up to €280m
until 25 May 2009 through the issue of new shares subscribed
in cash or in kind (Authorised Capital Increase
2004), and pursuant to Article 4 paragraph 2 of the Articles
of Association by up to €5m until 18 April 2011 through the
100
Management report_Financial situation
issue of new shares subscribed in cash (Authorised Capital
Increase 2006).
Strategic debt
We define as strategic debt all financial instruments with
the character of outside financing that do not have a direct
link with our operative business. It supplements our equity
and is essentially designed to reduce the cost of capital
and ensure that we have sufficient liquidity at all times.
With a view to making our capital structure transparent, we
detail below the calculation of our debt leverage, which is
defined as the ratio of strategic debt to the sum of Group
equity and strategic debt expressed as a percentage.
Strategic debt
All figures in €m
Subordinated bonds issued by
31.12.2006 Prev. year
Munich Re Finance B.V., Amsterdam
Exchangeable bonds of ERGO International AG,
3,419 3,408
Düsseldorf
Senior notes of Munich Re America
– 674
Corporation, Princeton * 378 423
Bank borrowing of ERGO AG, Düsseldorf
Bank borrowing of Munich Re America
– 504
*
Corporation, Princeton 190 212
Other 72 56
Total 4,059 5,277
* Formely American Re Corporation.
In 2003, the Munich Re Group strengthened its capitalisation
with the subordinated bonds issued by Munich Re
Finance B.V., which are recognised in part as own funds
by the German Federal Financial Supervisory Authority
(BaFin). They were placed in two tranches with nominal
values of €3,000m and £300m each and will mature in 2023
(euro tranche) and 2028 (pound sterling tranche). The first
possible redemption dates are 21 June 2013 (euro tranche)
and 21 June 2018 (pound sterling tranche).
The exchangeable bonds issued by ERGO International
AG backed by E.ON AG and Sanofi-Aventis S.A. shares
matured in 2006. The exchangeable bond backed by E.ON
shares was redeemed almost entirely through delivery of
E.ON shares, as the vast majority of the bond investors
made use of their right to exchange, whilst the bonds