Munich Re Group Annual Report 2006 (PDF, 1.8

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.
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