Munich Re Group Annual Report 2006 (PDF, 1.8

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.
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