Munich Re Group Annual Report 2006 (PDF, 1.8

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Munich Re Group Annual Report 2006 implications for private health insurance are not yet fully clear. The division of the German health insurance market into statutory health insurance and private health insurance is to remain in principle, thus preserving comprehensive health cover as a field of business for private health insurers. One of the main advantages of private health insurance is the presence of ageing reserves to absorb demographically related cost increases. It is envisaged that ageing reserves will to some extent have to be transferred between private health insurance companies. We assume that this will have only a small impact on reinsurance. Increasing expenditure for healthcare is to be expected in both statutory and private health insurance. In this environment, we continue to see a strong demand for reinsurance solutions for individual high-cost cases. Owing to the reduction in premium from a high-volume treaty, premium income fell somewhat to €243m (258m). In China, premiums increased to €6m (3m) in 2006, thus more than doubling compared with 2005, albeit at a still moderate level. Given the economic boom and the rise in private incomes, we expect health insurance to grow dynamically. In other words, China remains one of our priority target markets – one that is increasingly opening up and becoming more differentiated. We were able to establish relations with the new specialist health insurers formed in 2005, supporting these treaty partners in nearly all sections of the value chain. Given the distribution possibilities of the individual insurance groups, we expect business to develop dynamically in the coming years. We are working very closely with the supervisory authorities to help achieve suitable regulatory parameters. An example of our good cooperation can be seen in the health insurance regulations that have applied since 2006 and which we had a hand in designing. Also in other Asian countries, the health insurance market offers many companies growth opportunities. However, these insurers often do not have the specialist know-how to actively manage health risks. Here we have positioned ourselves as a partner and risk carrier with our new business model Consultative Reinsurance (CRI) and support our clients holistically in their business development. Premium income in these countries totalled €91m in 2006. The Gulf states are another growth region for health insurance. Munich Re has been active in this market for several years now, with managed care service companies that assist our clients in risk management and the accept- 74 Management report_Reinsurance ance of insurance risks. In 2005, we won a commission from the Emirate of Abu Dhabi to set up a specialist health primary insurer (DAMAN Health Insurance). The basis of this was a consultancy agreement, in which we were able to draw on all our competence in managed care. DAMAN started operating in mid-2006 and had a total of over 250,000 policyholders as at 31 December 2006. We are the exclusive reinsurer and reckon with very positive development. What is more, we expect other countries in the region to privatise their healthcare markets as well, which will give a further boost to our growth in the health reinsurance sector. In 2006, we were already able to increase our premium in the Gulf states to €49m, growth of 60% compared with 2005, which brought this region’s share of our health insurance segment’s premium volume to 3.7% (2.3%). Other markets such as the Netherlands and Italy also contributed to the health segment’s good performance in 2006. Since premium volume and result are fed by many regions, the political and economic risks of our business are adequately spread. Property-casualty Profit-oriented underwriting policy continued Exceptionally low burden from natural catastrophes Outstanding combined ratio of 92.6% Record result of €2.1bn In the year under review, we benefited from exceptionally favourable claims experience, especially in lines of insurance with natural catastrophe exposure, as well as from the improvements in our basic business that we had achieved in the last few years’ renewals. This led to an excellent result in our property-casualty reinsurance segment. Result In the previous year’s figures, the improvements in our basic business had been masked by the unusually high number of severe natural catastrophes. In 2006, we incurred no comparable burdens in property-casualty business. With the support of a solid investment result, we thus achieved an outstanding operating result of €3,486m (1,284m) and a consolidated result of €2,134m (420m). Expenditure for taxes on income in the financial year rose to €1,191m (652m). The exceptionally positive result is also reflected in
Munich Re Group Annual Report 2006 Management report_Reinsurance the significantly lower combined ratio of 92.6% (111.7%). Adjusted to eliminate the effects of major losses, the combined ratio of 86.4% (87.4%) again impressively underscores the improvement in the quality of our business over several years. Natural catastrophe losses affected our result with an amount of only €177m (2,629m), representing 1.3 (19.4) percentage points of our combined ratio. The only really significant loss in this category was Cyclone Larry, which in the first quarter of 2006 wreaked severe damage in Australia, costing us some €39m. Natural catastrophe losses of smaller dimensions were caused by heavy monsoon rains in India and Typhoon Shanshan in Japan. These loss events had an impact on the results of our Asia, Australasia, Africa Division. At €677m (664m), man-made losses were above the long-term average, with high loss amounts – together totalling some €128m – resulting from three industrial fires. Premium The renewal negotiations in 2006 showed the reinsurance markets to be stable. The enormous losses of the previous years – especially in lines exposed to natural hazards – have sharpened the risk awareness of market players and led to loss potentials being assessed more realistically. We were therefore largely able to realise our pricing expectations and treaty conditions and to stabilise the premium levels achieved in the previous years. As in the past, we systematically refrained from writing business that did not meet our requirements. Gross premiums by class of business Our premium development also reflects the fact that various cedants are seeking higher retentions – especially for claims-free business – as a consequence of their improved capital position, which is partly linked to consolidation trends in the insurance markets. One of the consequences of our consistently profit-oriented underwriting policy was that, as part of our portfolio management, reinsurance treaties in certain market segments and for specific clients were converted to non-proportional covers, which reduced premium volume. In fire and marine business, we achieved further appreciable price increases, especially for property and offshore energy risks with natural catastrophe exposure (particularly oil rigs) in the USA and Latin America. By contrast, premiums came under pressure for claimsfree treaties in property business. In liability reinsurance, the pricing structure remained largely stable at a good level. In credit and aviation reinsurance, the good results of the previous few years, in which extreme loss events had been lacking, put prices under pressure and also led to cedants raising their retentions. On balance, these trends caused our premium income to remain stable at €14.5bn (14.5bn). Currency translation had a negative impact on our premium income in 2006. Adjusted to eliminate effects from changes in exchange rates, it rose by 0.7%. All figures in €m 2006 2005 2004 2003 2002 Liability 2,394 2,561 2,606 3,444 3,514 Accident 713 1,052 1,080 1,293 1,302 Motor 2,913 2,671 2,890 3,186 3,337 Marine, aviation, space 1,751 1,654 1,609 1,742 1,896 Fire 3,763 3,701 3,775 4,874 5,294 Engineering 1,239 1,299 1,281 1,393 1,443 Other classes of business 1,778 1,609 1,616 1,987 2,098 Total 14,551 14,547 14,857 17,919 18,884 75
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Munich Re Group Annual Report 2006
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The Munich Re Group Our operations
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Munich Re Group in 2006 Tireless an
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Quarterly figures Balance sheet 31.
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© 2007 Münchener Rückversicherun
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