Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 Management report_Reinsurance
Reinsurance
Exceptionally favourable claims experience in property-casualty
Good business development in life and health
2006 2005 2004 2003 2002
Gross premiums written
– Life and health €m 7,665 7,811 7,540 6,876 6,561
– Property-casualty €m 14,551 14,547 14,857 17,919 18,884
Loss ratio health % 68.5 62.3 65.6 65.7 74.7
Loss ratio property-casualty % 64.7 83.5 71.2 69.6 97.2
Thereof natural catastrophes Percentage points 1.3 19.4 5.0 1.8 3.4
Expense ratio health % 27.8 30.7 30.9 30.5 28.1
Expense ratio property-casualty % 27.9 28.2 27.7 26.9 26.5
Combined ratio health % 96.3 93.0 96.5 96.2 102.8
Combined ratio property-casualty % 92.6 111.7 98.9 96.5 123.7
Consolidated result life and health €m 561 977 * 432 262 1,548
Consolidated result property-casualty €m 2,134 420 * 1,234 1,370 788
* Adjusted owing to first-time application of IAS 19 (rev. 2004).
The Munich Re Group operates in virtually all classes of
reinsurance. We offer a full range of products – from
traditional reinsurance to innovative solutions for risk
assumption.
Until 31 December 2006, our reinsurance business was
divided between seven divisions (see page 48 f.): Life and
Health; Europe 1; Europe 2 and Latin America; Asia, Australasia,
Africa; North America; Corporate Underwriting/
Global Clients; and Special and Financial Risks.
Marketing
As reinsurers, we write our business predominantly in
direct collaboration with the primary insurers, but also via
brokers. This includes business offered to us by industrial
clients through their captives or risk retention groups
(alternative market business), which we accept via Munich-
American RiskPartners (MARP).
Overview and key figures
Our reinsurance business performed most satisfactorily
again in the past year. On the one hand, we benefited from
the high quality of our basic business, whose current profitability
is the outcome of the consistent steps we have
taken in recent years. On the other hand, unlike in the previous
year, we were largely spared severe natural catastrophe
losses. This is reflected particularly in the share of
natural catastrophes in our combined ratio. Whereas in
the previous year, especially as a result of the devastating
Atlantic hurricanes, this share totalled 19.4 percentage
points, in the past business year it amounted to only 1.3
percentage points. For the above-mentioned reasons, we
recorded a significantly improved combined ratio – an
excellent 92.6% (111.7%). This enabled us to clearly surpass
the ambitious targets we had set ourselves for the
past year. The positive development was underpinned by a
good business performance in life and health and a solid
investment result.
A comparison of the major-loss burden from natural
catastrophes with that of the last two financial years
(€177m in 2006 and €2,629m in 2005) indicates the extent
to which insurance business – and particularly reinsurance
business – is subject to random fluctuations in certain
segments. A better understanding essentially requires a
longer-term view of our business. We see the situation as
endorsing our strategy of systematically optimising our
risk management in the Group and refining the models
with which we evaluate loss potentials. With this range of
tools, we can determine risk-adequate prices, terms and
conditions, despite the volatilities in our business. The
Munich Re Group has maintained its overall liability for
natural catastrophe covers at a virtually unchanged level,
reflecting our firm conviction that this insurance segment
is still very attractive in the long term.
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