Munich Re Group Annual Report 2006 (PDF, 1.8

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Munich Re Group Annual Report 2006 Gross premiums by property-casualty division 2006 (previous year) Special and Financial Risks 13% (14%) Corporate Underwriting/Global Clients 25% (23%) North America 18% (19%) Europe 1 Decrease of 9.0% in premium Market dynamics exploited in acceding EU countries Responsible for Premium income in our division Europe 1 fell somewhat to €1.5bn, primarily due to developments in the German market. There were several underlying causes, not least the continued application of our rigorously profit-oriented underwriting policy. We achieved the greatest premium growth in the Czech Republic, Romania and Russia. Currency translation barely affected the premium income. Costs for major losses were down in property business, but up in liability, accident and motor business. The combined ratio deteriorated overall to 97.1% (94.2%). With premium income of around €1.0bn (1.1bn) or about 65% of gross premiums written, Germany is easily the division’s most important market. The renewed decrease in premium here was due to the following causes: a further reduction in quota share treaties and higher retentions among our clients, mergers among primary insurers, and a decline in original rates. In isolated cases, we also had to withdraw from business because of inadequate margins. The result was therefore down, despite the satisfactory claims experience in 2006. 76 Management report_Reinsurance Europe 1 10% (12%) Europe 2 and Latin America 21% (19%) Asia, Australasia, Africa 13% (13%) Germany, Austria, Switzerland, eastern Europe, Greece, Turkey 2006 2005 2004 2003 2002 Gross premiums written €m 1,518 1,669 1,666 2,056 2,161 Combined ratio % 97.1 94.2 89.1 96.5 117.7 Unlike in 2005, we sustained no market-wide losses from natural catastrophes, but some cedants were substantially hit by extreme regional events, such as the hailstorms in Leipzig and Villingen-Schwenningen. Expenses for major losses not caused by natural catastrophes were around the same level as in the previous year. The largest industrial fire and business interruption loss in the German market came from a fire at a steelworks on 22 July 2006. The loss was settled by insurers at €285m, of which our share is a low two-digit million amount. In motor insurance, the class of business with the largest premium volume, pressure on rates persisted on a wide scale. This reduced premium volume market-wide and had a negative influence on margins. We consequently further decreased our proportional business for 2007, placing central emphasis on the profitability of renewed business.
Munich Re Group Annual Report 2006 Management report_Reinsurance In facultative business, pressure on original rates is reflected in all lines of business. Given our traditionally high market penetration, opportunities for new shares in business are limited. We therefore anticipate that premium income will inevitably be lower in 2007, a decrease which we will only be able to partially offset with new growth. We see the prospect of medium-term business opportunities from innovative solutions (e.g. capital market securitisation or transactions resulting from the implementation of Solvency II). Austria, which accounts for 9% of overall business, is the division’s second-largest market. Apart from a one-off effect, premiums remained generally stable. The major Austrian primary insurance groups were very active and successful in central and eastern Europe, and we benefited from this business as reinsurers. Although heavy winter snows in 2005/2006 gave rise to substantial claims costs for snow-pressure damage, the result of our Austrian business was satisfactory overall. Our premium volume in Switzerland reduced to €86m (96m) because market consolidation continued and primary insurers raised their retentions. Owing to the absence of major losses, our result was clearly positive and well above the previous year’s figure, which had been burdened by natural catastrophes. More than 85% of natural hazards business in Switzerland is handled in insurance pools. Given the very high Europe 2 and Latin America Premium growth of 8.5% Good result achieved Responsible for loss expenditure in 2005, we were able to considerably increase our prices for catastrophe covers. In the acceding EU member states, insurance penetration increased further in 2006, and we were able to profit from the markets’ growth. Our business experience in the individual countries and regions of eastern Europe varied. Especially in the countries joining the EU, there was an upward trend in mergers among primary insurers, consequently reducing reinsurance cessions. By contrast, our business developed positively in the Russian Federation, where insurance penetration is steadily increasing, infrastructure measures are being intensified and industrial firms are being expanded and overhauled. We again recorded the highest premium income in the Czech Republic, a total of €43m (34m), followed by Russia with €33m (24m) and Poland with €19m (22m). We continue to see good growth opportunities in eastern Europe, but also growing competition, which we expect to exert increasing pressure on margins in reinsurance as well. In Greece and Turkey, after several years of higher growth, we recorded a moderate fall in premium to €106m (131m), with another positive result. Prices in property business fell in individual cases. Northern, western and southern Europe; Latin America 2006 2005 2004 2003 2002 Gross premiums written €m 3,003 2,769 2,873 3,193 2,952 Combined ratio % 97.2 100.1 98.5 96.6 96.4 In the year under review, our premium income was up by 8.5% to €3.0bn. This pleasing growth was partly due to an appreciable increase in rate levels in those markets that had been hit by natural catastrophes in the previous year. Prices in the other markets remained generally stable. In some segments, we were able to acquire promising new business. Changes in exchange rates had only a small effect on our business result. The combined ratio improved to 97.2%, as our basic business performed positively overall thanks to our profit-based underwriting approach, and natural catastrophes affected us to a below-average extent. 77
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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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