Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006
In 2002, we determined that our investments in shares and
corporate bonds should meet sustainability requirements.
One of our goals is to ensure that 80% of our equities and
corporate bonds are included in recognised sustainability
indices or satisfy the sustainability criteria of renowned
sustainability rating agencies. We have already surpassed
this target. In the case of government bonds, we have
achieved a rate of around 95% compliance in terms of the
aforementioned criteria.
Munich Re also considers sustainability factors in its
long-term investments. We use an appropriate set of criteria
when acquiring participations and take sustainability
aspects into account when performing regular analyses
of our shareholdings.
In April 2006, Munich Re became the first German
company to sign the UN Principles for Responsible Investment
(PRI), which it had played a prominent role in helping
establish. The PRI offer institutional investors with guidelines
for incorporating social and ecological criteria in their
investments. This includes observing such criteria in
investment decisions, promoting sustainable investment
approaches in the financial sector, and reporting regularly
on the implementation of the criteria.
Development and structure of investments
As at 31 December 2006, the Group’s own investments
totalled €176.9bn (177.2bn). In the year under review, our
assets decreased by €0.3bn or 0.2%. Our portfolio predominantly
consists of interest-bearing investments.
We invested the inflows from our excellent underwriting
business and from sale proceeds realised in the year
under review largely in fixed-interest investments. The
amount of interest-sensitive items “fixed-interest securities”
and “loans” rose by €2.1bn to €127.5bn in the
course of the year and made up 72.1% of our total investments
at the end of the year.
Our portfolio of equities and shareholdings grew by
€0.9bn in the course of the year, primarily owing to increases
in the market value of our non-fixed-interest securities
available for sale. Investments and shareholdings
in affiliated companies and associates totalled €25.8bn
(24.9bn) at the end of the year and constituted 14.6% of
our investments at carrying value.
In the final quarter of the year, we commenced the disposal
of a German real estate package, reducing our real
estate portfolio through sales and changes in the segregated
fund portfolio by €983m overall in 2006. At the balance
sheet date, the carrying amount for land and build-
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Management report_Asset management
ings was €4.7bn (5.8bn). Our ratio of real estate investments
to total investments at carrying amounts sank to
2.7%, compared with 3.3% at the start of the year.
We use derivatives (see notes to the consolidated
financial statements on page 171 ff.) to hedge our share
portfolios against possible price losses. In addition, the life
insurers in the ERGO Insurance Group use interest-rate
derivatives to cover their guaranteed interest-rate liabilities,
thus hedging their reinvestment risk against falling
interest rates in the long term.