Quarterly Report 3/2008 (PDF, 308 KB) - Munich Re

Prospects
Interim management report Prospects
– Projected premium income of around €37.5bn
– Hardening market conditions in reinsurance; price increases to be expected
– Consolidated result likely to fall short of €2bn in view of the share price
losses on the world’s stock markets; robust new forecast precluded by
sustained volatility of the markets
– Earnings target of at least €18 per share by 2010 confirmed
There are various reasons why the quarterly results of insurance companies,
including Munich Re, are not a suitable indicator for the results of the financial
year as a whole. Losses from natural catastrophes and other major losses
have a disproportionate impact on the result of the reporting period in which
they randomly and unforeseeably occur. Late-reported claims for major loss
events can also lead to substantial fluctuations in individual quarterly results.
And finally, gains and losses on the disposal of investments and write-downs
of investments do not follow a regular pattern. Consequently, our quarterly
figures do not provide more than pointers to the result for the year that may
be expected.
Reinsurance In recent months, capital market events have led to losses in investments and
thus in the entire insurance industry’s capital base. As a result, we have been
witnessing a greater need for security on the part of clients at the same time
as worldwide insurance capacity has been shrinking. This increase in demand
and shortage of supply is likely to lead to a significant stabilisation of prices,
terms and conditions in insurance and reinsurance – despite the appreciable
weakening of the overall economy. The hardening of market conditions will
benefit our business segments to varying degrees. In this context, the ex -
ceptionally high security of the Munich Re Group companies is a perceptible
competitive advantage, and our financial solidity will provide us with special
market opportunities in what is actually a difficult economic environment.
In the coming years, there will thus be good growth opportunities for life reinsurance,
which our clients use to a particular degree as a capital substitute.
Munich Re is renowned for its outstanding risk expertise, specialist knowledge
of the markets, good client relations and financial strength. As an important
pillar of diversification and due to its low volatility, life reinsurance is being
strengthened as a core element of the Group’s strategy. By writing attractive
new business and developing existing business according to plan, we intend
to achieve European Embedded Value (EEV) earnings of 8–9% in relation to
the value of the business in force at the beginning of the year. Moreover,
we have the ambitious aim of realising quantum growth in EEV earnings by
doubling the value added by new business between 2006 and 2011.
A variety of growth opportunities also present themselves in the field of
healthcare, where the Munich Re Group covers the whole value chain, from
risk assessment in insurance and reinsurance to risk management and
ser vices in the health sector. Our services here involve much more than just
the assumption of risks. With our expertise, we are thus closer to the markets
and can provide long-term solutions tailored to the needs of our clients. In the
second quarter of 2009, we plan to merge our International Health operations
from currently separate divisions at DKV and Munich Re into a fully integrated
organisational unit, which will enable us to leverage the many synergies even
better.
In property-casualty reinsurance, Munich Re will maintain its clear, profit-
oriented underwriting policy and accept risks only at commensurate prices,
terms and conditions, intensifying its endeavours to achieve differential
pricing. This means our proven financial solidity, acknowledged risk expertise,
service and client-centric focus are rewarded by our clients in the form of
better prices and conditions than those granted to the rest of the market.
Munich Re Group Quarterly Report 3/2008
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