Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 Management report_Asset management
Valuation reserves
Our off-balance-sheet valuation reserves, i.e. the difference
between the fair value of our investments not accounted
for at fair value and their carrying amount, totalled €1.9bn
(2.6bn) as at 31 December 2006. Although valuation reserves
for land and buildings and for associates grew,
the interest-rate trend meant these reserves showed a
negative development for our portfolio of loans (in spite
of its overall increase in size). Detailed information on the
valuation reserves recognised in the balance sheet is
provided on page 180 of the notes to the financial statements.
The development of the capital markets is described in
detail in the section “Economic parameters” on page 61 f.
Result
In the financial year 2006, we posted an excellent investment
result of €8.9bn, albeit 18.0% below that of the previous
year (10.8bn).
The Karlsruher Insurance Group, which was deconsolidated
with effect from 1 October 2005, contributed more
than €400m to the Munich Re Group’s investment result in
2005. Adjusted to eliminate this effect, the year-on-year
reduction was 14.5%.
At 5.0%, the return on investment (based on the average
investment portfolio at market values) again outperformed
our target of 4.5% in 2006.
Valuation reserves not recognised in the balance sheet
Valuation Fair value Carrying Valuation Fair value Carrying
reserves amount reserves amount
All figures in €m 31.12.2006 31.12.2006 31.12.2006 Prev. year Prev. year Prev. year
Land and buildings * 1,822 9,077 7,255 1,528 10,006 8,478
Associates 302 1,408 1,106 225 1,353 1,128
Loans –216 29,312 29,528 871 25,666 24,795
Other securities 5 257 252 19 464 445
Total 1,913 40,054 38,141 2,643 37,489 34,846
* Including owner-occupied property.
Investment result
All figures in €m 2006 2005 2004 2003 2002
Regular income 7,834 7,649 7,498 7,328 7,778
Write-ups/write-downs –865 –748 –775 –1,177 –6,004
Net realised capital gains 2,559 4,511 2,339 2,484 5,853
Other income/expenses –652 –594 –1,021 –1,504 –2692
Total 8,876 10,818 8,041 7,131 4,935
Write-downs increased in the year under review, particularly
because of a downward adjustment of €1,049m in the
value of our derivative financial instruments due to the rise
in interest rates in the first six months.
The disposal of non-fixed-interest securities led to an
excellent result contribution of €2,716m. As the previous
year’s high profits from the sale of non-fixed-interest securities
were partly due to non-recurring effects – such as
the exchange of HVB shares into UniCredit stock – the
result from the disposal of securities was lower overall in
2006.
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