Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 Management report_Overview and key figures
Consolidated result
All figures in €m 2006 2005 * 2004 2003 2002
Result before amortisation and impairment losses of goodwill 5,498 4,150 3,369 1,971 –20
Operating result 5,494 4,143 3,025 1,284 –391
Consolidated result 3,536 2,751 1,887 –468 214
* Adjusted owing to first-time application of IAS 19 (rev. 2004).
Primary insurance again contributed substantially to the
Munich Re Group’s success as well, achieving an aboveplan
consolidated result of €1,062m.
The share of the investment result in the Group’s performance
amounted to €8.9bn (10.8bn). Our operating
result rose by 32.6% to €5.5bn (4.1bn), but it should be
remembered that the previous year’s figure included large
profits from the sale of the Karlsruher Insurance Group and
HypoVereinsbank shares.
The operating result was influenced in particular by the
following factors:
– In reinsurance, we were largely spared large claims burdens
from natural catastrophes. Only 1.3 (19.4) percentage
points of the property-casualty combined ratio were
attributable to natural catastrophe losses.
– Provisions for prior-year losses from our US reinsurance
business, in particular for claims for asbestos-related
diseases, were further increased using appropriate
reserves for which general provision had previously
been made at Group level.
– In primary insurance, the pleasingly low claims expenditure
and appreciably lower administration costs were
significant factors in the successful result. The combined
ratio, including legal expenses insurance, was 90.8%
(93.1%), yet another year-on-year improvement.
– Strong regular income and realised capital gains (especially
from the sale of non-fixed-interest securities)
increased the investment result in both reinsurance and
primary insurance. At 5.0%, the return on investment
(based on the average investment portfolio at market
values) outperformed our target of 4.5%.
The tax expenditure totalling €1,648m (equivalent to 32%
of the pre-tax profit) was influenced by two countervailing
one-off factors:
– Under new legislation on German corporate tax which
entered into force in December 2006, corporate tax cred-
its from the former imputation system will be paid out in
equal annual amounts over a ten-year period, commencing
in 2008. This gives rise to total tax income of €379m
(see page 199).
– Deferred tax assets from loss carry-forwards at our subsidiary
Munich Re America were written off in our
accounts for 2006, producing deferred tax expenses
totalling €770m.
Premium
Approximately 55% of our Group premium income was
earned from reinsurance and 45% from primary insurance.
Whereas in reinsurance we operate on a global basis, in
primary insurance 78% of our premium comes from the
German market; but in both fields of business, the share of
premium from outside Germany is increasing appreciably.
In reinsurance, we continue to adhere to our strictly
profit-oriented underwriting policy. The realisation that
risk-commensurate terms and conditions are absolutely
essential is becoming more and more prevalent in the reinsurance
markets. Although capacities increased, we were
able to obtain attractive terms and conditions for both new
business and renewals. Premium income was stable at
€22.2bn compared with the previous year (22.3bn).
In primary insurance, gross premiums were down on
the previous year, falling by 4.7% owing exclusively to
changes in the consolidated group, above all to the sale of
the Karlsruher Insurance Group and NHL (Nieuwe Hollandse
Lloyd Verzekeringsgroep). Adjusted to eliminate the
effect of these changes, premium rose by 0.5%. Growth
was again driven by health insurance in 2006, where the
notable expansion in premium volume was attributable to
premium increases and additional sales of supplementary
insurance policies. The property-casualty business of our
ERGO companies in Poland and the Baltic States developed
pleasingly, achieving double-digit growth rates.
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