Munich Re Group Annual Report 2006 (PDF, 1.8

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Munich Re Group Annual Report 2006 The situation in other countries was particularly satisfactory. The ERGO companies in Poland and the Baltic States developed especially well, with growth clearly into double figures. Personal accident business in Germany also grew satisfactorily (+1.6%), as did German commercial property business (+2.8%), even though we remained committed to our profit-based underwriting policy. By contrast, motor insurance had a curbing effect on growth, since fierce competition and an increased number of policyholders reassigned to higher no-claims bonus classes caused premium income to fall. We also took a very selective underwriting approach towards motor fleet business. Gross premiums in legal expenses insurance were up by 0.8% to €870m (863m), with a rise in foreign business and a marginal decline in German business. We registered growth in Spain, Belgium and the Netherlands. Europäische Reiseversicherungsgruppe recorded an improvement in premium volume to €359m (343m), the share of foreign business in premium increasing to 47% (46%). In 2006, the Watkins Syndicate posted a rise of 30.2% in premium income to £323m (248m). At 90.8% (93.1%), the combined ratio for propertycasualty business including legal expenses insurance was excellent – even better than the previous year’s figure – not only because of the favourable claims situation in the year under review but also because of further cost improvements. The loss ratio was further reduced to an outstanding 55.8% (58.4%). Legal expenses insurance performed especially well, with the loss ratio falling from 60.7% to 55.7%. In property-casualty insurance (without legal expenses insurance), the decrease in the loss ratio (57.8% to 55.8%) was somewhat smaller but began from an already low level. Administrative expenses, which play a pivotal role in our cost management, were reduced appreciably. The fact that this reduction did not result in better expense ratios is mainly attributable to acquisition costs and the altered portfolio mix. Motor insurance shows particularly favourable expense ratios but is exposed to fierce competition, which had a negative influence on profitability. Premium income in Germany was down, reflecting adherence to our strictly profit-oriented approach. There was growth in personal accident business, but this is a class involving small sums insured and higher expense ratios. This development, which is very desirable for business policy reasons, raised the expense ratio but lowered the combined ratio, thus enhancing the profitability of the overall portfolio. 90 Management report_Primary insurance At €685m (853m), the investment result remained at a high level, with regular income improving here too. However, the balance of realised gains on disposal, write-ups, losses on disposal and write-downs declined considerably. Our other primary insurance subsidiaries – Europäische Reiseversicherungsgruppe and the Watkins Syndicate – also made positive contributions to the result. Expansion of international activities In July 2006, ERGO signed an agreement with the Balci family of Turkey for the acquisition of a majority stake in the I . sviçre Insurance Group effective 1 October 2006. ERGO now holds a 75% stake in the I . sviçre Group, whilst the Balci family has retained 25%. The group includes Turkey’s fifth-largest propertycasualty insurer (I . sviçre Sigorta), which focuses on personal lines business, but it also operates in the strongly growing segments of life and health. Thus we are now very well positioned to tap the great opportunities offered by the Turkish market in the years ahead. In November 2006, a new D.A.S. company commenced operations in Estonia. This is the 16th European country in which we are active in legal expenses insurance – and we are the market leader in 11 of them. We made headway in our efforts to enter the Indian market. DKV International founded a joint venture with the Apollo Group – Asia’s largest chain of hospitals. In the areas of life and property-casualty, ERGO is holding discussions with potential joint-venture partners as well.
Munich Re Group Annual Report 2006 Management report_Asset management Asset management Group investment result at a high level Pleasing stock market performance brings price gains MEAG acquires stake in Chinese asset manager PAMC Total assets under management 2006 Prev. year * Group’s own investments €bn 172.4 168.6 Third-party investments €bn 11.2 10.5 Group asset management result €m 53 31 * * Adjusted owing to first-time application of IAS 19 (rev. 2004). In the following, we report on the performance of the Group’s own investments, which derive almost entirely from our core business fields of reinsurance and insurance. In addition, we provide information on third-party business, where we manage the assets of non-Group institutional investors and private investors. Overview and key figures We have consolidated the investment management of the Munich Re Group in MEAG MUNICH ERGO AssetManagement GmbH, a wholly owned subsidiary of Munich Re and ERGO, in order to exploit the efficiency gains that can be made with central, overarching asset management. MEAG manages the Group’s assets, which totalled €172.4bn (168.6bn) as at 31 December 2006. The other Group investments are mostly deposits retained on assumed reinsurance business, and are handled by the insurance companies of the Munich Re Group themselves. MEAG also offers its expertise in asset management to private and institutional clients outside the Group, thus tapping additional sources of earnings. As at 31 December 2006, MEAG had investments of €11.2bn (10.5bn) under management for investors not belonging to the Group. MEAG New York, MEAG Hong Kong and ERGO Trust, a former ERGO asset management company, have been united under the MEAG umbrella since 2005. Through the merger of ERGO Trust into MEAG, the latter is taking greater advantage of the opportunities offered by the international real estate markets, as well as expanding institutional third-party business systematically to real estate assets. In July 2006, MEAG acquired a 19% stake in PICC Asset Management Company Ltd. (PAMC), Shanghai, the asset manager of the PICC Group and one of the largest insurance groups in China. MEAG thus participates directly in the development of PAMC’s business. Due to its immense growth potential, China is set to become an economic superpower. There is substantial demand for the investment of Chinese assets, and old-age provision will also increase in importance in future. China therefore offers rich opportunities for asset management companies with insurance-related know-how. For MEAG, this is the first participation in an insurance asset manager outside Germany. In asset management, we recorded a profit of €53m (31m) in the year under review. Investments of the Munich Re Group Investment principles Security, liquidity, mix and spread of investments are the main principles of our investment strategy. We invest only in assets from which we expect an appropriate return, our asset managers paying strict attention to the risk tolerance of each company. In reinsurance in particular, we limit currency risks by matching our expected liabilities with assets in correlated currencies. We also take care that the maturities of our fixed-interest securities are aligned with those of our liabilities. Besides this, the Munich Re Group keeps sufficient liquid funds available to be able to meet its payment obligations at all times. The methods we use to control investment risks are described in detail in the risk report on page 124 ff. 91
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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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