Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006
In practice, this means that we still have to be prepared to give up business that is no
longer profitable. As I see it, there is no alternative. In the renewals of the majority of our
reinsurance treaties at 1 January 2007, we therefore consciously accepted some reductions
in business volume necessitated by the current state of the market cycle – in contrast
to some competitors. I consider this approach to be absolutely right: it is acting in the
interests of profitability and thus in your interests as Munich Re’s shareholders.
But we intend to achieve growth in other areas to compensate – indeed, more than
compensate – for business we have given up in segments that are no longer profitable.
This is our aim, for example, with our overarching integrated health market strategy, from
which I expect a great deal in the long term. The synergy potentials here between primary
insurance and reinsurance are undeniable. As part of this strategy, we are also diversifying
into areas of activity that complement our core insurance and reinsurance business. In
primary insurance, we find opportunities for profitable growth in Germany, of course, but
especially in selected markets abroad. And we develop reinsurance business in all areas
where there is attractive potential, as we did last year in US agricultural insurance. In
saying this, I wish to emphasise that reinsurance is also a promising field for “intelligent
growth” in the medium and long term, but it requires staying power, since this business
cannot be grown steadily across the board from year to year – experience indicates that
expansion will take place in stages.
What about external opportunities for growth through the acquisition of companies,
parts of companies or individual portfolios? We are basically very open to such options
but will not be rushed into making rash decisions. There is certainly no lack of offers: on
the contrary, we regularly consider a great many. However, in our opinion, the prices
demanded are currently not acceptable in relation to our return requirements. As in our
underwriting, we remain disciplined and will not compromise our position.
Ladies and gentlemen, we have frequently highlighted the Munich Re Group’s guiding
principles for a sustained profitable future: our mission statement headed “Turning risk
into value”, our three “cardinal virtues” – the professional handling of risk, integrated
management as a means of optimum diversification, and the objective of excellence in
management and operational processes. Lastly, there is the principle of “profit before
growth”. We want to preserve the values we have developed over many years in our Group
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