Investors' Day on Life Reinsurance (PDF, 912 KB - Munich Re
Investors' Day on Life Reinsurance (PDF, 912 KB - Munich Re
Investors' Day on Life Reinsurance (PDF, 912 KB - Munich Re
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<strong>Munich</strong> <strong>Re</strong> Group<br />
<str<strong>on</strong>g>Investors'</str<strong>on</strong>g> <str<strong>on</strong>g>Day</str<strong>on</strong>g><br />
<strong>on</strong> <strong>Life</strong> <strong><strong>Re</strong>insurance</strong><br />
7 October 2008
Agenda<br />
9.00<br />
<strong>Life</strong> reinsurance – Essential segment<br />
for sustainable Group profits<br />
Ensuring sustainable profitability<br />
and growth<br />
Q&A<br />
10.15 Break 15 min.<br />
10.30<br />
Excellence in core business:<br />
North American best practice<br />
Growth opportunities in Asia:<br />
Positi<strong>on</strong>ed for leadership<br />
Superior value-based<br />
management<br />
Torsten Jeworrek 2<br />
Wolfgang Strassl 13<br />
Mary Forrest – Michael DeK<strong>on</strong>ing 28<br />
Rudolf Lenhard – Daniel Cossette 39<br />
Hermann Pohlchristoph – Erwin Schnauder 51<br />
C<strong>on</strong>clusi<strong>on</strong> Wolfgang Strassl 63<br />
12.30 Informal get-together<br />
2
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
<str<strong>on</strong>g>Investors'</str<strong>on</strong>g> <str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> life reinsurance<br />
Third event to present <strong>Munich</strong> <strong>Re</strong> strategy in business segments<br />
Gross premiums written 2007, before c<strong>on</strong>solidati<strong>on</strong><br />
Internati<strong>on</strong>al Health<br />
€2.1bn 1<br />
Primary insurance<br />
€16.5bn 2<br />
1 Incl. €0.3bn health reinsurance not allocated to internati<strong>on</strong>al health.<br />
2 Excl. internati<strong>on</strong> health.<br />
3 C<strong>on</strong>solidati<strong>on</strong>: €1.5bn.<br />
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
<strong>Life</strong> reinsurance<br />
<strong>Munich</strong> <strong>Re</strong> Group<br />
Today<br />
<strong>Life</strong> reinsurance<br />
€6.0bn<br />
<br />
P-C reinsurance<br />
€14.2bn<br />
Total €38.8bn 3<br />
Core segment for sustainable Group profits<br />
Key takeaways<br />
<strong>Munich</strong> <strong>Re</strong> is sec<strong>on</strong>d-largest player in global life reinsurance<br />
<strong>Munich</strong> <strong>Re</strong> successfully combines life and n<strong>on</strong>-life reinsurance<br />
to increase value for shareholders<br />
<strong>Life</strong> reinsurance target<br />
by 2011 c<strong>on</strong>firmed<br />
15% VANB average growth<br />
p.a. to >€440m<br />
<strong>Life</strong> reinsurance is a c<strong>on</strong>sistently profitable and low volatile<br />
core element that c<strong>on</strong>tributes to <strong>Munich</strong> <strong>Re</strong> Group's target:<br />
Most profitable am<strong>on</strong>g the top 5 reinsurers<br />
Mid-term<br />
expectati<strong>on</strong> by 2015<br />
VANB >€600m<br />
After c<strong>on</strong>solidati<strong>on</strong>: €37.3bn 3<br />
Steer life reinsurance<br />
operati<strong>on</strong>s in line with<br />
Group profitability target<br />
At least 15% RoRaC<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
3<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
4
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
Estimated market volume development<br />
<strong>Life</strong> reinsurance market with solid growth prospects<br />
Global reinsurance market 1<br />
€b €bn<br />
160<br />
30<br />
130<br />
CAGR 5.6%<br />
193<br />
37<br />
156<br />
260<br />
50<br />
210<br />
2006 2010e 2015e<br />
1 Updated in 06/2008.<br />
<strong>Life</strong><br />
P-C<br />
Gross premiums written. Source: <strong>Munich</strong> <strong>Re</strong> Ec<strong>on</strong>omic <strong>Re</strong>search.<br />
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
<strong>Life</strong> reinsurance<br />
Thereof life reinsurance<br />
€bn<br />
30<br />
CAGR 5.8%<br />
37<br />
50<br />
2006 2010e 2015e<br />
<strong>Re</strong>gi<strong>on</strong>al split 2006 2015 ∆ €bn CAGR<br />
Europe 11 16 5 ~5% 5%<br />
North America 14 21 7 ~4%<br />
Asia, Australasia 4 11 7 ~9%<br />
Latin America 0.5 1 0.5 ~11%<br />
Af Africa, i Near/Middle N /Middl EEast t 05 0.5 1 05 0.5 ~11% 11%<br />
Total 30 50 20 5.8%<br />
<strong>Munich</strong> <strong>Re</strong> life reinsurance – Essential pillar with increased importance<br />
Gross premiums written life reinsurance <strong>Munich</strong> <strong>Re</strong> segmental split reinsurance 2<br />
€bn<br />
2.7<br />
19.4<br />
%<br />
CAGR 5.1%<br />
30.4<br />
100 100<br />
25 25.0 0<br />
CAGR 9.1%<br />
4.8<br />
27.1<br />
61 6.1 60 6.0<br />
1998 2001 2004 2007<br />
<strong>Munich</strong> <strong>Re</strong><br />
1<br />
Global market<br />
80<br />
20<br />
70<br />
30<br />
1998 2007<br />
P-C<br />
91%life 9.1% life reinsurance CAGR CAGR,<br />
<strong>Life</strong> reinsurance share<br />
mainly based <strong>on</strong> organic growth<br />
increased by 50%<br />
1 Source: <strong>Munich</strong> <strong>Re</strong> ec<strong>on</strong>omic research. 2007: Estimate.<br />
2 Share in reinsurance gross premiums written.<br />
<strong>Life</strong><br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
5<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
6
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
Split of <strong>Munich</strong> <strong>Re</strong> c<strong>on</strong>solidated result in reinsurance<br />
Str<strong>on</strong>g and sustainable c<strong>on</strong>tributi<strong>on</strong> by life and health business<br />
Segmental split in reinsurance 1<br />
%<br />
100 100 100 100<br />
74<br />
26<br />
30<br />
70<br />
2<br />
79 78<br />
21 22<br />
2004 2005 2006 2007<br />
P-C<br />
L&H<br />
1 Before c<strong>on</strong>solidati<strong>on</strong>. Health business includes <strong>on</strong>ly medical reinsurance; little impact.<br />
2 P-C negatively influenced by high NatCat claims (Katrina, Rita, Wilma).<br />
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
<strong>Life</strong> reinsurance supplements cycle management<br />
<strong>Life</strong> reinsurance<br />
c<strong>on</strong>tributi<strong>on</strong> to overall<br />
reinsurance result<br />
sustainably<br />
exceeds 20%<br />
Stable development of life result due to low correlati<strong>on</strong> with PP-C C reinsurance<br />
<strong>Life</strong> low volatile business compared to P-C …<br />
<strong>Re</strong>lative change in result 1<br />
%<br />
800<br />
600<br />
400<br />
200<br />
0<br />
-200<br />
-400<br />
-600<br />
1999 2000 2001 2002 2003 2004 2005 2006 2007<br />
1 Based <strong>on</strong> result before impairment losses of goodwill, finance costs and taxes <strong>on</strong> income.<br />
2 Health business includes <strong>on</strong>ly medical reinsurance; little impact.<br />
P-C<br />
L&H 2<br />
L&H<br />
… evolves from unique characteristics<br />
L<strong>on</strong>g-term business<br />
Profits locked in by business in force<br />
persist <strong>on</strong> average in excess of<br />
10 years<br />
High independencies of risks within<br />
homogeneous portfolios<br />
Correlati<strong>on</strong> to P-C P C reinsurance <strong>on</strong>ly in<br />
very limited number of event<br />
scenarios<br />
Excellent data availability and<br />
statistics increase statistical certainty<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
7<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
8
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
Risk capital requirements<br />
Diversificati<strong>on</strong> effects significantly reduce capital requirements<br />
Ec<strong>on</strong>omic risk capital (ERC) in reinsurance segment 1<br />
%<br />
100<br />
12<br />
88<br />
100<br />
21<br />
79<br />
Excl. life Incl. life<br />
1 Before diversificati<strong>on</strong> with primary insurance.<br />
Impact of Solvency II<br />
Diversificati<strong>on</strong> effect<br />
Diversified ERC<br />
Sum of<br />
standal<strong>on</strong>e<br />
ERC<br />
Increased diversificati<strong>on</strong> mainly<br />
driven by mortality, morbidity<br />
and l<strong>on</strong>gevity risks<br />
Those are largely<br />
uncorrelated to market<br />
and P-C risk<br />
Increased importance due to<br />
acknowledgement of diversificati<strong>on</strong><br />
effects also in external models models, ee.g. g QIS4<br />
model (Solvency II) and rating models<br />
Inclusi<strong>on</strong> of life reinsurance almost doubles diversificati<strong>on</strong> effect<br />
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
<strong>Munich</strong> <strong>Re</strong> in optimal positi<strong>on</strong> to cover new business opportunities<br />
Possible impact of Solvency II <strong>on</strong> life insurance <strong>Munich</strong> <strong>Re</strong>'s solvency c<strong>on</strong>sulting unit<br />
Increased capital requirements<br />
L<strong>on</strong>g-term products<br />
C<strong>on</strong>siderati<strong>on</strong> of guarantees and opti<strong>on</strong>s<br />
C<strong>on</strong>sulting<br />
Hi Higher h risk i k capital it l requirements i t ffor aggressive i<br />
asset allocati<strong>on</strong><br />
Available financial resources may rise, but with Interacti<strong>on</strong><br />
increased volatility<br />
Quantitative modelling of overall risk situati<strong>on</strong><br />
and increased transparency<br />
Product adaptati<strong>on</strong>s due to risk capital intensity Modelling<br />
Final standard risk model not yet decided<br />
But: Insurers expect p ggeneral<br />
advice <strong>on</strong><br />
Solvency II from reinsurers right now<br />
Investigate impact of current<br />
developments with clients<br />
Act as sparring partner<br />
Interactive Solvency II seminars<br />
Illustrate quantitative impacts of<br />
reinsurance to clients<br />
Stochastic modelling approach for<br />
biometric risks<br />
Risk capital calculati<strong>on</strong>: Standard<br />
model vs. <strong>Munich</strong> <strong>Re</strong> capital model<br />
Client view: <strong>Munich</strong> <strong>Re</strong> offers best<br />
Solvency II informati<strong>on</strong> in market1 <strong>Munich</strong> <strong>Re</strong> well positi<strong>on</strong>ed to meet clients needs and generate new business<br />
1 Source: 2008 Flaspöhler <strong>Re</strong>ports Europe N<strong>on</strong>-<strong>Life</strong> and <strong>Life</strong>.<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
9<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
10
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
Financial strength and client percepti<strong>on</strong><br />
<strong>Munich</strong> <strong>Re</strong> best positi<strong>on</strong>ed to benefit under current market developments<br />
<strong>Re</strong>cent market developments <strong>Munich</strong> <strong>Re</strong>'s commitment<br />
Significant capital market stress red reduces ces<br />
capital base in financial services industry<br />
Insurance industry faces restricted refinancing<br />
opti<strong>on</strong>s in capital market<br />
Increased uncertainty likely to result in lower<br />
tolerance to risk and weak security<br />
Rising demand for highly rated reinsurance<br />
capacity<br />
EExcellent cellent risk management – Pro Providing iding<br />
maximum capacity with superior security<br />
Focus <strong>on</strong> client and underwriting excellence<br />
QQuality lit reinsurer i – BBesides id capacity it and d<br />
security providing service, expertise and<br />
innovative soluti<strong>on</strong>s<br />
<strong>Munich</strong> <strong>Re</strong>'s positi<strong>on</strong> and competitive edge c<strong>on</strong>firmed by independent instituti<strong>on</strong>s<br />
S&P1 Flaspöhler survey 2008<br />
"Risk-based capital adequacy as measured by<br />
S&P’s model showed a redundancy at the AAA<br />
l l t d 2007"<br />
2<br />
"Best reinsurer overall n<strong>on</strong>-life and life"<br />
"Preferred reinsurer" in<br />
level at year-end 2007"<br />
5 out t of f 7 professi<strong>on</strong>al f i l ffactors t<br />
"We c<strong>on</strong>sider <strong>Munich</strong> <strong>Re</strong>'s str<strong>on</strong>g balance sheet to 7 out of 8 operating attributes<br />
be a competitive advantage"<br />
18 out of 21 lines of business<br />
Unique combinati<strong>on</strong> of capacity, security, quality and brand<br />
1 Rating report <strong>on</strong> <strong>Munich</strong> <strong>Re</strong>, published <strong>on</strong> 8 September 2008.<br />
2 2008 Flaspöhler <strong>Re</strong>ports Europe N<strong>on</strong>-<strong>Life</strong> and <strong>Life</strong>.<br />
<strong>Life</strong> reinsurance – Essential segment for sustainable Group profits<br />
Outlook<br />
Expansi<strong>on</strong> of life reinsurance is in line with Changing Gear programme<br />
Leverage str<strong>on</strong>g market positi<strong>on</strong> in core segment and growth in adjacent segments<br />
Forward integrati<strong>on</strong> <strong>on</strong><br />
value chain<br />
Asset<br />
protecti<strong>on</strong><br />
Distributi<strong>on</strong><br />
power<br />
Traditi<strong>on</strong>al<br />
reinsurance<br />
Leverage the<br />
core business<br />
Risk<br />
capacity<br />
Risk<br />
know-how<br />
Financially motivated life reinsurance<br />
Biometric<br />
risks<br />
<strong>Life</strong> reinsurance market provides<br />
room for further profitable growth<br />
Str<strong>on</strong>g market positi<strong>on</strong> in traditi<strong>on</strong>al<br />
life reinsurance core business<br />
<strong>Munich</strong> <strong>Re</strong> life reinsurance business<br />
model enables further expansi<strong>on</strong><br />
Low-volatile profitability<br />
supplements n<strong>on</strong>-life business<br />
Global <strong>Life</strong> Strategy facilitates expansi<strong>on</strong> of life reinsurance<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
11<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
12
Agenda<br />
<strong>Life</strong> reinsurance – Essential segment for<br />
sustainable Group profits<br />
Ensuring sustainable profitability<br />
and growth<br />
Excellence in core business:<br />
North American best practice<br />
Growth opportunities in Asia:<br />
Positi<strong>on</strong>ed for leadership<br />
Torsten Jeworrek<br />
Wolfgang Strassl<br />
MMary Forrest F t – Mi Michael h l DDeK<strong>on</strong>ing K i<br />
Rudolf Lenhard – Daniel Cossette<br />
Superior value-based management Hermann Pohlchristoph – Erwin Schnauder<br />
C<strong>on</strong>clusi<strong>on</strong> Wolfgang Strassl<br />
Ensuring sustainable profitability and growth<br />
Competitive positi<strong>on</strong><br />
<strong>Munich</strong> <strong>Re</strong> – One of the two leading global life reinsurers<br />
Global market share 1<br />
%<br />
Swiss <strong>Re</strong><br />
<strong>Munich</strong> <strong>Re</strong><br />
RGA<br />
Hannover <strong>Re</strong><br />
SCOR<br />
Gen<strong>Re</strong><br />
Transamerica<br />
Scottish <strong>Re</strong><br />
XL <strong>Re</strong><br />
Partner <strong>Re</strong><br />
Other<br />
1<br />
2<br />
4<br />
5<br />
5<br />
7<br />
8<br />
Top 2 players dominate the global<br />
life reinsurance market<br />
1 Source: <strong>Munich</strong> <strong>Re</strong> Ec<strong>on</strong>omic <strong>Re</strong>search. Based <strong>on</strong> net earned premiums 2007.<br />
2 Source: 2008 Flaspöhler <strong>Re</strong>ports Europe N<strong>on</strong>-<strong>Life</strong> and <strong>Life</strong>.<br />
11<br />
13<br />
21<br />
23<br />
Principles<br />
Focus <strong>on</strong> organic growth<br />
Strict profit orientati<strong>on</strong><br />
Focus <strong>on</strong> underwriting profits instead of<br />
relying <strong>on</strong> capital market gains<br />
Client view<br />
Prudent actuarial assumpti<strong>on</strong>s<br />
Superior risk capabilities c<strong>on</strong>firmed by<br />
independent Flaspöhler client survey:<br />
Best overall life reinsurer2 <strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
13<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
14
Ensuring sustainable profitability and growth<br />
Premium growth and profitability<br />
Solid success story founded <strong>on</strong> organic growth<br />
Gross premiums written EV earnings (as % of EV beginning of year)<br />
€bn<br />
54 5.4<br />
6.1<br />
6.5 6.4<br />
CAGR basic book ~5%<br />
6.0<br />
4.5 4.8 5.2 5.3 5.4<br />
%<br />
TEV MCEV<br />
13.3<br />
9.0<br />
13.5<br />
16.2<br />
11.3<br />
16.6<br />
9.8<br />
8.9<br />
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007<br />
Operating EV earnings Total EV earnings<br />
Business with planned recaptures<br />
Basic book of business<br />
1<br />
EV = Embedded value<br />
TEV = Traditi<strong>on</strong>al embedded value<br />
MCEV = Market-c<strong>on</strong>sistent embedded value<br />
Basic book of business with stable growth and c<strong>on</strong>sistent profitability<br />
1 Planned recaptures of three large-volume accounts in Canada and Germany. All other treaties allocated to basic book of business.<br />
2 According to <strong>Munich</strong> <strong>Re</strong>'s current MCEV methodology. Based <strong>on</strong> 2004 published CFO Forum EEV principles.<br />
Ensuring sustainable profitability and growth<br />
Markets<br />
Leading positi<strong>on</strong> in most regi<strong>on</strong>s<br />
Distributi<strong>on</strong> of gross premiums written Market share<br />
Excellent geographic diversificati<strong>on</strong> Significant market shares, but …<br />
%<br />
%<br />
Global market<br />
Germany Canada<br />
53<br />
UK<br />
USA<br />
Canada<br />
Other<br />
TOTAL 2007<br />
€6.0bn<br />
Germanyy<br />
UK<br />
Asia<br />
<strong>Re</strong>st of Europe<br />
USA<br />
9<br />
10<br />
14<br />
21<br />
28<br />
… room for further expansi<strong>on</strong><br />
in some markets<br />
11.8<br />
14 14.4 4<br />
50<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
15<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
16
Ensuring sustainable profitability and growth<br />
<strong>Munich</strong> <strong>Re</strong> market split<br />
North America with significant c<strong>on</strong>tributi<strong>on</strong><br />
C<strong>on</strong>tributi<strong>on</strong> to VANB by regi<strong>on</strong><br />
C<strong>on</strong>tinental Europe, Asia 1<br />
19%<br />
UK, Australia, Africa<br />
20%<br />
1 Incl. rest of world.<br />
Ensuring sustainable profitability and growth<br />
Risk portfolio<br />
TOTAL 2007<br />
€277m<br />
Emphasis <strong>on</strong> mortality and morbidity risks<br />
Inherent<br />
risks<br />
Bio-<br />
metric<br />
risks<br />
Ordinary<br />
life 1<br />
Group<br />
life 1<br />
Products<br />
Living<br />
benefits 2<br />
Annuity<br />
Biometric risk<br />
portfolio 3<br />
Mortality 72%<br />
Morbidity 24%<br />
L<strong>on</strong>gevity 4%<br />
Canada<br />
34%<br />
USA<br />
27%<br />
<strong>Munich</strong> <strong>Re</strong> risk appetite<br />
Focus <strong>on</strong> mortality<br />
and morbidity<br />
L<strong>on</strong>gevity<br />
under d review i<br />
Lapse<br />
risk<br />
SSelective l ti approachh<br />
to lapse and<br />
Invest-<br />
investment risk<br />
ment<br />
risks<br />
1 Ordinary life and group life include all types of mortality covers such as term life and permanent life.<br />
2 Living benefits business comprises critical illness, disability income and l<strong>on</strong>g term care.<br />
3 Share of net premium 2007.<br />
Full cover<br />
Selective cover<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
17<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
18
Ensuring sustainable profitability and growth<br />
Sustainable profitability<br />
Prudent risk management pays off<br />
C<strong>on</strong>sistently positive experience variances and operating assumpti<strong>on</strong> changes<br />
€m<br />
TEV 124 MCEV 1<br />
69<br />
66<br />
2003 2004 2005 2006 2007<br />
11<br />
Focus <strong>on</strong> risks<br />
we understand<br />
88 Applicati<strong>on</strong> of prudent actuarial<br />
assumpti<strong>on</strong>s in pricing<br />
Solid risk management and underwriting<br />
1 According to <strong>Munich</strong> <strong>Re</strong>'s current MCEV methodology. Based <strong>on</strong> 2004 published CFO Forum EEV principles.<br />
Ensuring sustainable profitability and growth<br />
Strategic ambiti<strong>on</strong><br />
Extensi<strong>on</strong> of profitable growth<br />
€m<br />
Strategic ambiti<strong>on</strong><br />
Quantum growth in EV earnings by doubling our VANB until 2011<br />
228<br />
CAGR 15%<br />
VANB development<br />
>440<br />
CAGR >8%<br />
>600<br />
2006 2011 2015<br />
In accordance with<br />
<strong>Munich</strong> <strong>Re</strong> Group RoRaC-target of 15%<br />
Adequate<br />
assumpti<strong>on</strong>s for valuati<strong>on</strong><br />
C<strong>on</strong>tinuous<br />
optimisati<strong>on</strong> of in-force business<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
19<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
20
Ensuring sustainable profitability and growth<br />
Global <strong>Life</strong> Strategy<br />
Achieve ambiti<strong>on</strong> through key strategies and enabling initiative<br />
Strategic ambiti<strong>on</strong><br />
Quantum growth in EV earnings by doubling our VANB until 2011<br />
VANB 2006 €228m<br />
Our key strategies<br />
1 2 3 plus<br />
C<strong>on</strong>tinuously<br />
improve core<br />
business<br />
Grow n<strong>on</strong>traditi<strong>on</strong>al<br />
business<br />
Expand<br />
business<br />
model<br />
Additi<strong>on</strong>al VANB by 2011<br />
€120m €40m €25m<br />
Additi<strong>on</strong>al VANB by 2015<br />
Evaluate n<strong>on</strong>organic<br />
growth<br />
opportunities<br />
Enabling<br />
initiative<br />
Put in place<br />
superior<br />
financial model<br />
€35m<br />
Total<br />
c<strong>on</strong>tributi<strong>on</strong><br />
€220m<br />
VANB 2011 > €440m<br />
€ €95m € €65m € €5m € €10m<br />
€ €175m<br />
VANB 2015 >€600m<br />
Ensuring sustainable profitability and growth<br />
Strategy 1: C<strong>on</strong>tinuously improve core business<br />
Best Best-in-class in class capabilities in biometric analysis and underwriting<br />
Excellence in biometric analysis C<strong>on</strong>tinuous improvements in price differentiati<strong>on</strong><br />
Share best-in-class actuarial<br />
and biometric know-how<br />
Leverage large market-specific data base<br />
C<strong>on</strong>tinuous enhancement of<br />
risk segmentati<strong>on</strong> and modelling<br />
Price<br />
High<br />
Underwriting g expertise Low High level of segmentati<strong>on</strong><br />
Cutting edge clinical expertise in<br />
medical underwriting<br />
State-of-the-art underwriting<br />
manual and analysis tools<br />
Efficient c<strong>on</strong>trol systems y for<br />
internal and client reviews<br />
High<br />
Risk<br />
Avoid adverse selecti<strong>on</strong><br />
CCompetitive titi pricing i i ffor good d risks<br />
i k<br />
Illustrative<br />
Low level of<br />
segmentati<strong>on</strong><br />
Low<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
21<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
22
Ensuring sustainable profitability and growth<br />
Strategy 2: Grow n<strong>on</strong>-traditi<strong>on</strong>al business<br />
Asset protecti<strong>on</strong> for variable annuity business<br />
Demand for financial soluti<strong>on</strong>s <strong>Munich</strong> <strong>Re</strong>'s approach to asset protecti<strong>on</strong><br />
Shift in lines and policy<br />
Variable annuities and unit-<br />
IInternal t l steering t i of f " "assett protecti<strong>on</strong>" t ti "<br />
linked policies growth<br />
Increased risk awareness in<br />
respect of opti<strong>on</strong>s and<br />
Product<br />
ddevelopment l t<br />
Risk<br />
ttransfer f<br />
Active risk<br />
management/ g<br />
hedging<br />
Risk<br />
c<strong>on</strong>trolling t lli<br />
guarantees<br />
Advice in Transfer of Platform for<br />
Raise demand for protecti<strong>on</strong><br />
developing investment/ effective<br />
of f life lif insurer's i ' liabilities li biliti<br />
manageable insurance management<br />
Naturally extending to variety<br />
products risks<br />
of ALM issues, where holistic<br />
cover is sought for overall<br />
balance sheet<br />
Value propositi<strong>on</strong> for client<br />
Ensuring sustainable profitability and growth<br />
Strategy 3: Expand business model<br />
<strong>Munich</strong> <strong>Re</strong> approach<br />
Close cooperati<strong>on</strong> with cedant at early stage<br />
Combined insurance and financial markets expertise to structure<br />
and price risks resulting from these products<br />
Sound platform for management of inherent complexity resulting<br />
ffrom hybrid h b id iinsurance and d fi financial i l risks i k<br />
<strong>Munich</strong> <strong>Re</strong> c<strong>on</strong>tributes to underwriting and processing<br />
<strong>Life</strong> insurance<br />
value chain<br />
Product<br />
development<br />
Provide underwriting and processing services<br />
Extend c<strong>on</strong>sulting service range<br />
Processing and admin tools combined with<br />
<strong>Munich</strong> <strong>Re</strong>'s underwriting expertise<br />
Distributi<strong>on</strong> Underwriting<br />
Support alternative channels<br />
Cooperate with banks or brokers as direct<br />
distributi<strong>on</strong> channel for insurance products<br />
Close involvement in product development<br />
Risk-taking support through reinsurance<br />
Processing/<br />
Admin<br />
Benefits for <strong>Munich</strong> <strong>Re</strong><br />
Become indispensable partner for<br />
clients<br />
Improved underwriting quality and<br />
efficiency ff<br />
Claims<br />
handling<br />
Risk<br />
taking<br />
Benefits for <strong>Munich</strong> <strong>Re</strong><br />
Create reinsurance opportunities in<br />
mature and emerging markets<br />
Substitute fully integrated primary<br />
insurer in parts of value chain<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
23<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
24
Ensuring sustainable profitability and growth<br />
Outlook<br />
VANB growth ambiti<strong>on</strong> achievable<br />
<strong>Munich</strong> <strong>Re</strong> VANB development<br />
€m<br />
228<br />
2006<br />
actual<br />
277<br />
2007<br />
actual<br />
CAGR 15%<br />
286<br />
2008<br />
forecast<br />
348<br />
2009<br />
plan<br />
399<br />
2010<br />
plan<br />
444<br />
2011<br />
target<br />
VANB growth ambiti<strong>on</strong>: Well <strong>on</strong> track<br />
According to <strong>Munich</strong> <strong>Re</strong>'s current MCEV methodology. Based <strong>on</strong> 2004 published CFO Forum EEV principles.<br />
Ensuring sustainable profitability and growth<br />
Global <strong>Life</strong> Strategy<br />
Following presentati<strong>on</strong>s will provide more detail<br />
C<strong>on</strong>tinuously<br />
iimprove<br />
core<br />
business<br />
Strategic ambiti<strong>on</strong><br />
CAGR >8%<br />
Quantum growth in EV earnings by doubling our VANB until 2011<br />
Grow n<strong>on</strong>ttraditi<strong>on</strong>al<br />
diti l<br />
business<br />
Key strategies<br />
1 2 3 plus<br />
Expand<br />
bbusiness i<br />
model<br />
Evaluate n<strong>on</strong>-<br />
organic i growth th<br />
opportunities<br />
>600<br />
... 2015<br />
expectati<strong>on</strong><br />
Enabling initiative<br />
Put in place<br />
superior financial<br />
model<br />
Presentati<strong>on</strong>s detail initiatives in exemplary markets and introduce steering methodology<br />
Excellence in core business: Growth opportunities pp in Asia: Superior p value-based<br />
North American best practice Positi<strong>on</strong>ed for leadership<br />
management<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
25<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
26
Ensuring sustainable profitability and growth<br />
Key takeaways<br />
Ensuring sustainable profitability<br />
Str<strong>on</strong>g track record in life reinsurance is based<br />
up<strong>on</strong> superior risk management and excellent underwriting<br />
Ambiti<strong>on</strong>: Significantly extend profitability growth achieving >€440m VANB in 2011.<br />
Expected VANB 2015: >€600m<br />
Leverage our<br />
excellence in<br />
biometric analysis y<br />
and underwriting<br />
Agenda<br />
Clear strategy to strengthen the core and expand business model<br />
Grow our<br />
proporti<strong>on</strong> in n<strong>on</strong>ttraditi<strong>on</strong>al<br />
diti l bbusiness i<br />
<strong>Life</strong> reinsurance – essential segment for<br />
sustainable Group profits<br />
Ensuring sustainable profitability<br />
and growth<br />
Excellence in core business:<br />
North American best practice<br />
Growth opportunities in Asia:<br />
Positi<strong>on</strong>ed for leadership<br />
Torsten Jeworrek<br />
Wolfgang Strassl<br />
Extend our<br />
positi<strong>on</strong>ing <strong>on</strong> the<br />
lif life risk i k value l chain h i<br />
MMary FForrest t – Mi Michael h l DDeK<strong>on</strong>ing K i<br />
Rudolf Lenhard – Daniel Cossette<br />
Superior value-based management Hermann Pohlchristoph – Erwin Schnauder<br />
C<strong>on</strong>clusi<strong>on</strong> Wolfgang Strassl<br />
Opportunistically<br />
evaluate n<strong>on</strong>organic<br />
g ggrowth<br />
opportunities<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
27<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
28
Excellence in core business: North American best practice<br />
North America<br />
The largest and most developed markets<br />
Global life reinsurance market<br />
Distributi<strong>on</strong> of life gross premiums written<br />
%<br />
Other<br />
Canada<br />
27% 7%<br />
UK<br />
10%<br />
Germany<br />
6%<br />
Source: <strong>Munich</strong> <strong>Re</strong> Ec<strong>on</strong>omic <strong>Re</strong>search<br />
USA<br />
50%<br />
<strong>Munich</strong> <strong>Re</strong> portfolio<br />
VANB by regi<strong>on</strong><br />
%<br />
UK, Australia,<br />
Africa<br />
20%<br />
C<strong>on</strong>tinental<br />
Europe, Asia 1<br />
19%<br />
1 Incl. rest of world.<br />
Growth opportunity in price competitive and sophisticated market place<br />
Excellence in core business: North American best practice<br />
North American business philosophy<br />
Translate core principles into entrepreneurial approach<br />
Business model Client model<br />
Operati<strong>on</strong>s model<br />
Large case capacity with<br />
unsurpassed financial strength<br />
Profit-maximising Profit maximising and<br />
risk-management mindset<br />
Allocate resources and capital<br />
to opportunities with greatest<br />
profit potential<br />
Client focus<br />
Superior knowledge of<br />
customer<br />
Nimble and opportunistic approach to the market<br />
<strong>Re</strong>trench from markets where<br />
risk-reward balance is not<br />
appropriate<br />
Canada<br />
34%<br />
Availability and ability to utilise<br />
data better than competitors<br />
Employ industry leaders in all<br />
key roles<br />
USA<br />
27%<br />
Strive to anticipate client needs<br />
Superior local capital<br />
management<br />
<strong>Re</strong>gulatory development<br />
knowledge<br />
Deal structuring skills<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
29<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
30
Excellence in core business: North American best practice<br />
<strong>Munich</strong> <strong>Re</strong> Canada: Market share and premium development<br />
<strong>Munich</strong> <strong>Re</strong> has become the unrivalled market leader in Canada<br />
<strong>Munich</strong> <strong>Re</strong> Canada market share<br />
%ofgrosspremi % of gross premiums ms written ritten<br />
44 47 48<br />
55<br />
63 63 61<br />
2000 2001 2002 2003 2004 2005 2006 2007<br />
<strong>Munich</strong> <strong>Re</strong> Canada premium development<br />
CAN$ m<br />
2,330<br />
2,453 2,371<br />
1,664<br />
11,295 295<br />
1,306 1,156 ,<br />
1,947<br />
645<br />
763<br />
19<br />
744<br />
906<br />
134<br />
772<br />
1,073<br />
140<br />
933<br />
733<br />
931 1,035 1,147 1,215 1,302<br />
2000 2001 2002 2003 2004 2005 2006 2007<br />
Excellence in core business: North American best practice<br />
New business<br />
<strong>Munich</strong> <strong>Re</strong> No. No 5 with upside potential<br />
2007 US recurring new business assumed<br />
US$ bbn MMarket k share h<br />
RGA 161 23.6%<br />
Transamerica 144 21.1%<br />
Swiss <strong>Re</strong> 126 18.6%<br />
Generali USA 73 10.8%<br />
<strong>Munich</strong> <strong>Re</strong> 60 8.8%<br />
Canada <strong>Life</strong> 26 3.8%<br />
SCOR 24 36% 3.6%<br />
Scottish <strong>Re</strong> 22 3.3%<br />
General <strong>Re</strong> 14 2.1%<br />
Wilt<strong>on</strong> <strong>Re</strong> 7 1.1%<br />
Optimum <strong>Re</strong> 7 1.0%<br />
Hannover <strong>Re</strong> 6 0.8%<br />
Ace-Tempest 5 0.7%<br />
XL <strong>Re</strong> 4 0.6% %<br />
Total 683 100.0%<br />
High potential for future development<br />
Source: <strong>Munich</strong> <strong>Re</strong> reinsurance survey c<strong>on</strong>ducted <strong>on</strong> behalf of the Society of Actuaries.<br />
53<br />
Decline in<br />
premium and<br />
market share<br />
driven by<br />
scheduled<br />
terminati<strong>on</strong> of <strong>on</strong>e<br />
short-term n<strong>on</strong>traditi<strong>on</strong>al<br />
business treaty<br />
N<strong>on</strong>-traditi<strong>on</strong>al<br />
Traditi<strong>on</strong>al<br />
Top 5<br />
c<strong>on</strong>trol 85%<br />
of market<br />
Large gap<br />
between<br />
<strong>Munich</strong> <strong>Re</strong> and<br />
next competitor<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
31<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
32
Excellence in core business: North American best practice<br />
Market development and market share<br />
Stable market share due to underwriting discipline<br />
42%<br />
6% 6%<br />
51% 52%<br />
9%<br />
Peak of US competitive cycle<br />
62% 62%<br />
59% 60%<br />
56%<br />
12% 11%<br />
7%<br />
47%<br />
Cessi<strong>on</strong> rate<br />
10% 13% 12% 11%<br />
<strong>Munich</strong> <strong>Re</strong> market<br />
share<br />
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007<br />
Excellence in core business: North American best practice<br />
Changed market c<strong>on</strong>diti<strong>on</strong>s and scope of business<br />
40%<br />
37%<br />
High cessi<strong>on</strong> rates in<br />
peak primarily<br />
related l t d tto irrati<strong>on</strong>al i ti l<br />
pricing by reinsurers<br />
9%<br />
<strong>Munich</strong> <strong>Re</strong> with stable positi<strong>on</strong> over years –<br />
In a market that has seen rising and falling stars<br />
<strong>Munich</strong> <strong>Re</strong> market<br />
share remains within<br />
10% range<br />
Significant improvements support <strong>Munich</strong> <strong>Re</strong> to benefit from market changes<br />
High competiti<strong>on</strong> in pricing results in market acti<strong>on</strong> and changed market c<strong>on</strong>diti<strong>on</strong>s<br />
Scottish <strong>Re</strong><br />
ING even paid for US<br />
life re business transfer<br />
due to underpricing<br />
Swiss <strong>Re</strong><br />
Improved pricing for<br />
traditi<strong>on</strong>al life business<br />
in the US<br />
RoE<br />
Market profitability<br />
increased from mid<br />
single to double digit<br />
<strong>Munich</strong> <strong>Re</strong> well prepared for future challenges<br />
<strong>Re</strong>-priced p every y treaty y in 2005/06<br />
Enhanced management informati<strong>on</strong> systems and mortality analysis capabilities<br />
Cessi<strong>on</strong> rates<br />
Declined due<br />
to more<br />
rati<strong>on</strong>al pricing<br />
<strong>Re</strong>structured sales and pricing functi<strong>on</strong>s resulting in greater pricing discipline and risk management<br />
Profit margin improved by 50% since 2000<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
33<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
34
Excellence in core business: North American best practice<br />
Large case programme<br />
Ability to provide large capacity differentiates <strong>Munich</strong> <strong>Re</strong> from competitors<br />
Superpool programme: Innovati<strong>on</strong> example for North America<br />
Purpose Detail<br />
Maximise benefits of <strong>Munich</strong> <strong>Re</strong>'s increased<br />
per life capacity<br />
Create sustainable competitive advantage for<br />
selected clients<br />
C<strong>on</strong>trol access to larger retenti<strong>on</strong> for<br />
retenti<strong>on</strong> management purposes<br />
Excellence in core business: North American best practice<br />
Best practice North America<br />
Clients get access to increasing levels<br />
of <strong>Munich</strong> <strong>Re</strong>'s US$50m capacity per life<br />
Capacity<br />
Tiered based <strong>on</strong> volume ceded<br />
Unencumbered by retrocessi<strong>on</strong> c<strong>on</strong>straints<br />
Programme well <strong>on</strong> track in Canada and US<br />
Large case programme supports growth and profit ambiti<strong>on</strong>s<br />
Leveraging strengths across North America<br />
Early example – <strong>Life</strong> underwriting<br />
Moved to a<br />
Introducti<strong>on</strong> of <strong>on</strong>e<br />
Usage of <strong>on</strong>e Implemented a North<br />
US$50m per life uniform improved uniform improved American underwriting<br />
retenti<strong>on</strong> underwriting manual underwriting system best practices leader<br />
More opportunities to be looked at in next 6–9 m<strong>on</strong>ths<br />
Administrati<strong>on</strong> and claims processes and tools<br />
Operati<strong>on</strong>al and financial informati<strong>on</strong> systems<br />
Human resources<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
35<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
36
Excellence in core business: North American best practice<br />
Scope of business<br />
Leveraging best practices in all lines of business<br />
L<strong>on</strong>g term care (LTC)<br />
incl. <strong>Life</strong>Plans<br />
Not a "<strong>on</strong>e-trick p<strong>on</strong>y"<br />
Individual<br />
life<br />
Critical illness<br />
Individual disability income Group life and Group LTC<br />
Diversificati<strong>on</strong><br />
of VANB<br />
Excellence in core business: North American best practice<br />
Key takeaways<br />
Individual life is core, but leading positi<strong>on</strong>s in all lines of business<br />
Opti<strong>on</strong>s for<br />
future growth<br />
Extremely str<strong>on</strong>g franchise in Canada Canada,<br />
with significant potential for profitable growth in the US<br />
Enhanced soluti<strong>on</strong>-orientati<strong>on</strong><br />
through cross-line offerings<br />
We will leverage resources and best practices across North America<br />
Growth will <strong>on</strong>ly come with strict adherence<br />
to disciplined pricing g and underwriting g<br />
Our goal: to be nimble, entrepreneurial and<br />
business-minded with unparalleled customer focus<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
37<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
38
Agenda<br />
<strong>Life</strong> reinsurance – Essential segment for<br />
sustainable Group profits<br />
Ensuring sustainable profitability<br />
and growth<br />
Excellence in core business:<br />
North American best practice<br />
Growth opportunities in Asia:<br />
Positi<strong>on</strong>ed for leadership<br />
Torsten Jeworrek<br />
Wolfgang Strassl<br />
MMary Forrest F t – Mi Michael h l DDeK<strong>on</strong>ing K i<br />
Rudolf Lenhard – Daniel Cossette<br />
Superior value-based management Hermann Pohlchristoph – Erwin Schnauder<br />
C<strong>on</strong>clusi<strong>on</strong> Wolfgang Strassl<br />
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
<strong>Life</strong> reinsurance markets in Asia<br />
Str<strong>on</strong>g growth prospects in Asian markets<br />
Status quo – China and Korea dominate<br />
NNew ceded d d premiums i 2008 US$ m<br />
SEA Japan<br />
IIndia di<br />
Greater China South Korea<br />
<strong>Re</strong>lative attractiveness of Asian markets<br />
Growth<br />
rates<br />
Total US$454m <strong><strong>Re</strong>insurance</strong> volume<br />
SEA = South-East Asia<br />
Source: NMG <strong>Life</strong> and Health <strong><strong>Re</strong>insurance</strong> Programme 2008<br />
SEA = South-East Asia<br />
By far largest<br />
populati<strong>on</strong> l ti with ith str<strong>on</strong>g t<br />
ec<strong>on</strong>omic growth<br />
Significant growth<br />
iin underlying d l i<br />
insurance market<br />
Drivers for future growth<br />
India<br />
SEA<br />
High demand for<br />
reinsurers' i ' service, i<br />
capital and expertise<br />
EXPECTED TOTAL NEW CESSION MARKET GROWTH<br />
10–15% p.a.<br />
Greater<br />
China<br />
South<br />
Korea<br />
Japan<br />
Increasing g weight g<br />
of Takaful model<br />
gekürzt<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
39<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
40
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Future growth prospects<br />
<strong>Munich</strong> <strong>Re</strong> initiatives support above-market above market growth expectati<strong>on</strong><br />
Ambitious growth expectati<strong>on</strong>s<br />
Gross premiums written, €m<br />
144<br />
151<br />
CAGR 19%<br />
180<br />
223<br />
256<br />
2006 2007 2008e 2009e 2010e<br />
Global <strong>Life</strong> Strategy<br />
<strong>Munich</strong> <strong>Re</strong> in Asia<br />
Clear focus <strong>on</strong> profitability<br />
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Str<strong>on</strong>g presence basis for significant share in future growth<br />
Local presence in every important market<br />
Mumbai<br />
●<br />
Beijing<br />
●<br />
Seoul<br />
●<br />
●<br />
●<br />
●<br />
Shanghai<br />
Taipei<br />
H<strong>on</strong>g K<strong>on</strong>g<br />
Kuala Lumpur<br />
●Singapore<br />
■<br />
●<br />
Tokyo<br />
<strong>Re</strong>gi<strong>on</strong>al head office in Singapore<br />
established t bli h d iin 2007 – MMultiple lti l llocati<strong>on</strong>s ti provide id<br />
flexibility and advanced marketability<br />
Asia excludes Australia, New Zealand, Middle East and Pakistan.<br />
MID-TERM GROWTH<br />
EXPECTATION<br />
>15% p.a. p<br />
Additi<strong>on</strong>al growth from health and<br />
n<strong>on</strong>-traditi<strong>on</strong>al business expected<br />
Str<strong>on</strong>g and increasing market share<br />
% of estimated total new reinsurance premiums in 2008<br />
Multinati<strong>on</strong>al reinsurer (70%)<br />
RGA<br />
<strong>Munich</strong> <strong>Re</strong><br />
Swiss <strong>Re</strong><br />
Gen <strong>Re</strong><br />
Hannover<br />
<strong>Re</strong><br />
Scor<br />
Transamerica<br />
Other<br />
2%<br />
3%<br />
DDomesticreinsurer i i (30%)<br />
Korea <strong>Re</strong><br />
China <strong>Re</strong><br />
Other<br />
5%<br />
7%<br />
7%<br />
8%<br />
8%<br />
12%<br />
Source: NMG <strong>Life</strong> and Health <strong><strong>Re</strong>insurance</strong> Programme - 2008<br />
14%<br />
15%<br />
19%<br />
Market dominated by top 3 global life<br />
reinsurers; i ddomestic ti reinsurers i fface<br />
more<br />
intensified competiti<strong>on</strong><br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
41<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
42
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Business, relati<strong>on</strong>ship and operati<strong>on</strong>al management quality index<br />
Leading percepti<strong>on</strong> in business quality and operati<strong>on</strong>al management<br />
Market penetrati<strong>on</strong><br />
1.0<br />
0.9<br />
0.8<br />
07 0.7<br />
0.6<br />
0.5<br />
0.4<br />
0.3<br />
0.2<br />
0.1<br />
<strong>Munich</strong> <strong>Re</strong><br />
0<br />
550 600 650 700 750<br />
Business quality index – All resp<strong>on</strong>dents<br />
Operati<strong>on</strong>al management quality index (diff. from avg.)<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
-20 20<br />
-40<br />
-60<br />
-80<br />
-100<br />
<strong>Munich</strong> <strong>Re</strong><br />
-100 -80 -60 -40 -20 0 20 40 60 80 100<br />
<strong>Re</strong>lati<strong>on</strong>ship management quality index (diff. from avg.) –<br />
All resp<strong>on</strong>dents<br />
Source: NMG <strong>Life</strong> and Health <strong><strong>Re</strong>insurance</strong> Programme 2008 Source: NMG <strong>Life</strong> and Health <strong><strong>Re</strong>insurance</strong> Programme 2008<br />
Favourable terms of trade based <strong>on</strong><br />
superior business quality index<br />
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Key growth initiatives<br />
Participate in Asian growth ensured by selected initiatives<br />
<strong>Munich</strong> <strong>Re</strong>'s <strong>Re</strong> s key growth initiatives<br />
Superior retenti<strong>on</strong> supported by<br />
high level of customer satisfacti<strong>on</strong><br />
Financially motivated<br />
Product development Process c<strong>on</strong>sulting<br />
Takaful<br />
reinsurance<br />
Infrastructure Infrastructure, processes and data management system improved c<strong>on</strong>tinuously<br />
Significant demand for c<strong>on</strong>sulting service across Asia<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
43<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
44
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Product development<br />
<strong>Re</strong>mains key business strategy<br />
Client needs <strong>Munich</strong> <strong>Re</strong> benefits<br />
Example: Living benefits Leveraging exclusive partners<br />
Fast-growing segment<br />
Underwriting, claims, actuarial and product<br />
design expertise needed<br />
Mostly l<strong>on</strong>g term care (LTC), disability<br />
income and critical illness (sec<strong>on</strong>d<br />
generati<strong>on</strong>) ti )<br />
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Financially motivated reinsurance<br />
Large potential for future growth<br />
Envir<strong>on</strong>mental factors<br />
Joint venture partners with limited capital<br />
New business growth is capital intensive<br />
New solvency regime<br />
<strong>Life</strong>Plans – LTC expertise<br />
Best Doctors – Exclusive joint venture<br />
agreement across Asia<br />
Leveraging global network<br />
Expertise in Germany – Direct and<br />
reinsurance level<br />
Expertise from advanced Anglo-Sax<strong>on</strong><br />
markets<br />
Subprime and credit crisis<br />
High volatility in equity market<br />
Unfavourable envir<strong>on</strong>ment to raise equity or debt<br />
capital<br />
Key success factors <strong>Munich</strong> <strong>Re</strong>'s positi<strong>on</strong><br />
Ability to structure and leverage local<br />
Structuring expertise in Germany and<br />
knowledge g<br />
Singapore g p regi<strong>on</strong>al g head office<br />
Availability of capital and collateral<br />
Str<strong>on</strong>g local knowledge with offices in all key<br />
Financial strength<br />
markets<br />
Availability of collateral<br />
Excellent balance sheet as leading global<br />
reinsurer<br />
Strict focus <strong>on</strong> genuine risk transfer transacti<strong>on</strong>s<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
45<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
46
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Process c<strong>on</strong>sulting<br />
Allfinanz brings internati<strong>on</strong>al best practice to Asia<br />
Combining the strength of two leading companies in their respective area of expertise<br />
SOFTWARE<br />
SOLUTIONS<br />
AUTOMATED<br />
UNDERWRITING<br />
We expect Asia to follow trend of UK and Australia<br />
More compelling proposal for distributi<strong>on</strong> and customers<br />
UNDERWRITING<br />
RULES<br />
Clear advantages: Superior data management, lower costs, UW c<strong>on</strong>sistency and improved profitability<br />
Allfinanz will be significant c<strong>on</strong>tributor to <strong>Munich</strong> <strong>Re</strong>'s l<strong>on</strong>g-term success in Asia<br />
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
<strong>Munich</strong> <strong>Re</strong> <strong>Re</strong>takaful<br />
Participating in significant Takaful growth<br />
Islamic markets with low insurance penetrati<strong>on</strong><br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
World<br />
UKK<br />
Malaysia<br />
Thailandd<br />
Ind<strong>on</strong>esi a<br />
Pakistaan<br />
UAE<br />
Omaan<br />
Qataar<br />
Kuwaait<br />
Saudi Arabia<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
<strong>Munich</strong> <strong>Re</strong>´s Internati<strong>on</strong>al <strong>Re</strong>takaful Hub<br />
Composite <strong>Re</strong>takaful license by Central Bank of<br />
Malaysia in 2007<br />
First foreign <strong>Re</strong>takaful operator in Malaysia<br />
Highest rated <strong>Re</strong>takaful operator worldwide under<br />
Wakala model<br />
Internati<strong>on</strong>al Shari´a Advisor Board to ensure<br />
worldwide compliance<br />
<strong>Life</strong> insurance penetrati<strong>on</strong> GDP per capita (US$)<br />
<strong>Munich</strong> <strong>Re</strong>´s unique value propositi<strong>on</strong><br />
Genuine <strong>Re</strong>takaful model, high rating and full service<br />
capabilities<br />
Str<strong>on</strong>g growth potential in countries with low life<br />
insurance penetrati<strong>on</strong>, high GDP per capita and<br />
large and young Muslim populati<strong>on</strong>s<br />
Already placed treaties in Malaysia, Ind<strong>on</strong>esia,<br />
Pakistan and Middle East<br />
Trend towards c<strong>on</strong>versi<strong>on</strong> from c<strong>on</strong>venti<strong>on</strong>al<br />
Increasing acceptance of Takaful, Islamic Banking and<br />
reinsurance to <strong>Re</strong>takaful<br />
"Bancatakaful"<br />
Expect higher reinsurance penetrati<strong>on</strong> rate under<br />
Takaful model<br />
<strong>Munich</strong> <strong>Re</strong> aims to be the dominant player in the worldwide <strong>Re</strong>takaful market<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
47<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
48
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Need for service, capacity and capital<br />
<strong>Munich</strong> <strong>Re</strong> competitive advantages<br />
Motivati<strong>on</strong><br />
<strong>Munich</strong> <strong>Re</strong><br />
positi<strong>on</strong><br />
Key takeaways<br />
C<strong>on</strong>sulting service Capacity Capital management<br />
Access to reinsurers´<br />
know-how<br />
Risk transfer Improve balance sheet or<br />
finance growth<br />
Good understanding of Structuring expertise in<br />
risk: <strong>Re</strong>search and<br />
<strong>Munich</strong> and Singapore<br />
experience studies Easy access to collateral<br />
High g internal retenti<strong>on</strong>s Large and solid balance<br />
Str<strong>on</strong>g rating: S&P AA- sheet<br />
Intellectual capital Good understanding of Structuring expertise in<br />
capabilities due to<br />
unique positi<strong>on</strong>ing as<br />
direct insurance and<br />
reinsurance player in all<br />
lines of business<br />
Str<strong>on</strong>g local knowledge<br />
and presence<br />
Exclusive partners –<br />
Allfinanz and <strong>Life</strong>Plans<br />
Growth opportunities in Asia: Positi<strong>on</strong>ed for leadership<br />
Significant competitive advantage and high barrier to entry<br />
due to str<strong>on</strong>g local presence and intellectual capital<br />
Aggressive service strategy to ensure solid growth<br />
Growth will come together with strict underwriting discipline geared to profitability<br />
Combinati<strong>on</strong> of str<strong>on</strong>g capital management expertise and capacity provides<br />
incommensurable reliability in volatile envir<strong>on</strong>ment<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
49<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
50
Agenda<br />
<strong>Life</strong> reinsurance – Essential segment for<br />
sustainable Group profits<br />
Ensuring sustainable profitability<br />
and growth<br />
Excellence in core business:<br />
North American best practice<br />
Growth opportunities in Asia:<br />
Positi<strong>on</strong>ed for leadership<br />
Torsten Jeworrek<br />
Wolfgang Strassl<br />
MMary Forrest F t – Mi Michael h l DDeK<strong>on</strong>ing K i<br />
Rudolf Lenhard – Daniel Cossette<br />
Superior value-based management Hermann Pohlchristoph – Erwin Schnauder<br />
C<strong>on</strong>clusi<strong>on</strong> Wolfgang Strassl<br />
Superior value-based management<br />
Gross premiums written<br />
Steady growth of base business despite more difficult market envir<strong>on</strong>ment<br />
<strong>Life</strong><br />
Top-line development<br />
Drivers<br />
IFRS gross premiums written Decrease from 2005 <strong>on</strong>wards result of planned<br />
€bn<br />
5.4<br />
6.1 65 6.5 64 6.4<br />
6.0<br />
recaptures of three large-volume accounts in<br />
Canada and Germany<br />
Portfolio excluding those treaties shows steady<br />
growth …<br />
CAGR basic book ~5%<br />
… partially offset by trend of treaties being<br />
4.5 4.8<br />
5.2 5.3 5.4<br />
transformed from coinsurance to pure risk<br />
premium reinsurance<br />
2003 2004 2005 2006 2007<br />
Business with planned recaptures<br />
Basic book of business<br />
<strong>Re</strong>cent impacts: strengthening of euro and<br />
slight reducti<strong>on</strong> of cessi<strong>on</strong> rates in North<br />
America and Europe<br />
Steady capitalisati<strong>on</strong> <strong>on</strong> profitable growth opportunities<br />
al<strong>on</strong>g with strict adherence to profitability targets<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
51<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
52
Superior value-based management<br />
Underwriting result<br />
IFRS underwriting result reveals c<strong>on</strong>tributi<strong>on</strong> of operati<strong>on</strong>s to overall success<br />
<strong>Life</strong> and health<br />
Transiti<strong>on</strong> from IFRS underwriting result to reported IFRS c<strong>on</strong>solidated result 2007<br />
1. Underwriting result 2. C<strong>on</strong>solidated result<br />
€m €m<br />
7,024<br />
827<br />
–5,433<br />
705 –189<br />
–1,958<br />
460<br />
460 30<br />
Health<br />
430<br />
<strong>Life</strong><br />
Net earned Income from Expenses for Operating Underwriting Underwriting Other<br />
premiums technical<br />
1<br />
interests<br />
claims and<br />
benefits<br />
expenses result<br />
result investment<br />
2<br />
result<br />
1 Investment result from assets backing technical provisi<strong>on</strong>s.<br />
2 Investment result of reinsurance L&H less investment result from assets backing technical provisi<strong>on</strong>s.<br />
Superior value-based management<br />
Underwriting result<br />
–251<br />
725<br />
Other Income C<strong>on</strong>solidated<br />
result taxes result<br />
Value orientati<strong>on</strong> at <strong>Munich</strong> <strong>Re</strong> is already reflected in improved IFRS result<br />
<strong>Life</strong><br />
<strong>Re</strong>sult c<strong>on</strong>tributi<strong>on</strong> of life reinsurance …<br />
IFRS underwriting result separated for life<br />
€m<br />
215<br />
140<br />
329<br />
430<br />
2004 2005 2006 2007<br />
~€300m<br />
normalised<br />
llevell Expectati<strong>on</strong><br />
Slight, but<br />
steadyy<br />
increase from<br />
current<br />
normalised<br />
level<br />
… and its drivers<br />
Steady increase in IFRS results – but slight<br />
volatility unavoidable<br />
Margins flowing through from historical<br />
superior business selecti<strong>on</strong><br />
Excepti<strong>on</strong>ally good mortality and morbidity<br />
experience in 2007<br />
Development in line with portfolio growth and<br />
value orientati<strong>on</strong><br />
<strong>Munich</strong> <strong>Re</strong>'s course for profitable growth visible in IFRS figures –<br />
Str<strong>on</strong>g performance to c<strong>on</strong>tinue in the future<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
53<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
54
Superior value-based management<br />
Market-c<strong>on</strong>sistent embedded value (MCEV)<br />
The challenge is to adequately value and steer l<strong>on</strong>g l<strong>on</strong>g-term term business<br />
L<strong>on</strong>g-term life reinsurance business …<br />
Pattern of shareholder cash-flows Illustrative<br />
-<br />
+<br />
Present value of future profits<br />
available to shareholder<br />
Adjustments for risks of cash flows<br />
CCapital it l required i d f for/allocated / ll t d<br />
to the portfolio at time of valuati<strong>on</strong><br />
Superior value-based management<br />
MCEV movement analysis<br />
… but what is the shareholder value at present?<br />
Present value of future after tax regulatory profits<br />
Time value of financial opti<strong>on</strong>s and guarantees<br />
Cost of n<strong>on</strong> n<strong>on</strong>-hedgeable hedgeable risks<br />
Cost of double taxati<strong>on</strong> and cost of asset<br />
management related to assets backing<br />
required capital<br />
<strong>Re</strong>quired capital<br />
Free surplus<br />
MCEV discloses the drivers of value creati<strong>on</strong> in life reinsurance<br />
<strong>Munich</strong> <strong>Re</strong> MCEV earnings 2007 1<br />
€m<br />
5,962<br />
Opening<br />
MCEV<br />
277<br />
VANB<br />
88<br />
Operating MCEV earnings<br />
Experience<br />
variances &<br />
assumpti<strong>on</strong><br />
changes<br />
Value generati<strong>on</strong><br />
through management<br />
acti<strong>on</strong><br />
336 10<br />
Total MCEV earnings<br />
Expected<br />
return<br />
Risk-free<br />
rate of<br />
return<br />
Focus of internal steering approach<br />
Ec<strong>on</strong>omic<br />
variances<br />
1 According to <strong>Munich</strong> <strong>Re</strong>'s current MCEV methodology. Based <strong>on</strong> 2004 published CFO Forum EEV principles.<br />
148 -159<br />
Other n<strong>on</strong>operating<br />
variances<br />
Capital and<br />
currency<br />
movements<br />
Changes due to external factors<br />
MCEV<br />
6,662<br />
Closing<br />
MCEV<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
55<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
56
Superior value-based management<br />
<strong>Munich</strong> <strong>Re</strong>'s life reinsurance business<br />
Timing of the emergence of distributable earnings<br />
Distributable earnings (undiscounted)<br />
€bn, 5-year steps, as at 2007<br />
2.4<br />
2008<br />
–<br />
2012<br />
20 2.0<br />
2013<br />
–<br />
2017<br />
1.9<br />
2018<br />
–<br />
2022<br />
Superior value-based management<br />
Benefits<br />
1.6<br />
2023<br />
–<br />
2027<br />
1.4<br />
2028<br />
–<br />
2032<br />
1.2<br />
2033<br />
–<br />
2037<br />
0.9<br />
2038<br />
–<br />
2042<br />
0.8<br />
2043<br />
–<br />
2047<br />
0.7<br />
2048<br />
–<br />
2052<br />
0.5<br />
2053<br />
–<br />
2057<br />
0.4<br />
2058<br />
–<br />
2062<br />
0.3 03<br />
2063<br />
–<br />
2067<br />
02 0.2 0.1 0.1 0.0<br />
2068<br />
–<br />
2072<br />
PRESENT VALUE EQUALS EMBEDDED VALUE EXCLUDING FREE SURPLUS<br />
€5.8bn<br />
MCEV perfectly combines external requirements with internal steering<br />
Str<strong>on</strong>g theoretical foundati<strong>on</strong> through<br />
market c<strong>on</strong>sistency<br />
Standardised rules ensure high degree of<br />
transparency and c<strong>on</strong>sistency<br />
In c<strong>on</strong>formity with IASB, European<br />
regulators and the CRO Forum<br />
Allowing for optimal integrati<strong>on</strong> of ec<strong>on</strong>omic<br />
risk capital<br />
Overall methodology gy pperfectly y suits our<br />
steering and pricing philosophy<br />
2073<br />
–<br />
2077<br />
2078<br />
–<br />
2082<br />
Market value of liabilities fully compatible with finance theory<br />
2083<br />
–<br />
2087<br />
Compliance with MCEV Principles and Guidance as published in<br />
June 2008 by CFO Forum (representing 20 of the largest<br />
European life (re)insurers)<br />
Using rati<strong>on</strong>ale for determining cost of capital comparable to<br />
CFO Forum<br />
Adopting <strong>Munich</strong> <strong>Re</strong> ec<strong>on</strong>omic risk capital model enables<br />
steering of life business <strong>on</strong> overall RoRaC targets<br />
Powerful alignment g of ppricing, g valuati<strong>on</strong> and c<strong>on</strong>trolling g of<br />
business<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
57<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
58
Superior value-based management<br />
Risk capital in MCEV<br />
Risk capital requirements clearly reflected in MCEV in two ways<br />
Definiti<strong>on</strong> of required capital in ANW 1 Allowance for n<strong>on</strong>-hedgeable risks<br />
Maximum of Cost of n<strong>on</strong>-hedgeable risks<br />
I<br />
II<br />
III<br />
Minimum level of solvency capital requirements<br />
Minimum target level of capital demand by third<br />
parties<br />
<strong>Re</strong>quirements from internal risk model<br />
Allocati<strong>on</strong> of required capital<br />
fully reflects all requirements from regulators,<br />
rating agencies and internal risk models<br />
1 Asset net worth.<br />
Superior value-based management<br />
Derived VBM targets<br />
Annual charge<br />
Cost of<br />
n<strong>on</strong>-hedgeable<br />
risk<br />
Ec<strong>on</strong>omic risk capital for n<strong>on</strong>hedgeable<br />
risk<br />
X<br />
N<strong>on</strong>-hedgeable risk rate<br />
Present value of annual charge<br />
discounted at risk-free interest rate<br />
Approach to calculating cost of n<strong>on</strong>-hedgeable<br />
risk entirely in line with<br />
<strong>Munich</strong> <strong>Re</strong>'s risk capital model<br />
Internal steering at <strong>Munich</strong> <strong>Re</strong> aims for maximum value creati<strong>on</strong><br />
New<br />
business<br />
targets<br />
1 VANB ≥ Target VANB<br />
2 VANB at "target RoRaC spread" ≥ 0<br />
3 VANB at "target IRR spread" ≥ 0<br />
Absolute VANB target to ensure desired level of<br />
new business generati<strong>on</strong> in terms of size and<br />
profitability<br />
<strong>Re</strong>lative target ensuring a minimum return relative<br />
to inherent business risk c<strong>on</strong>sistent with the<br />
RoRaC steering principle of <strong>Munich</strong> <strong>Re</strong><br />
<strong>Re</strong>lative target ensuring a minimum return relative<br />
to the full capital invested to meet overall<br />
expectati<strong>on</strong>s <strong>on</strong> return <strong>on</strong> equity<br />
In-force<br />
Absolute target based <strong>on</strong> movement analysis<br />
Operating experience variances +<br />
business 4 ensuring adequate actuarial assessment and risk<br />
operating assumpti<strong>on</strong> changes ≥ 0<br />
target management<br />
All management incentive schemes are strictly based <strong>on</strong> these VBM targets<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
59<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
60
Superior value-based management<br />
C<strong>on</strong>necti<strong>on</strong> between MCEV and IFRS<br />
C<strong>on</strong>vergence between MCEV earnings earnings, IFRS result and cash flows<br />
<strong>Life</strong><br />
Development of MCEV earnings vs. IFRS result<br />
Illustrative<br />
Shareholder cash flow After tax IFRS result MCEV earnings<br />
1 2 3 4 5 6 7 8 9 10 11 Σ<br />
Superior value-based management<br />
Key takeaways<br />
Shareholder cash flows<br />
High investment in the first year mainly<br />
due to acquisiti<strong>on</strong> costs<br />
Compensated for in subsequent returns<br />
IFRS result<br />
Profits distributed evenly (as a<br />
percentage of IAS benefit reserves) over<br />
the lifetime of the business<br />
Fi First-year t profit fit usually ll close l tto<br />
zero<br />
MCEV earnings<br />
Value creati<strong>on</strong> shown at time of policy p y<br />
issue<br />
Expected return based <strong>on</strong> roll-forward of<br />
MCEV<br />
MCEV most appropriately reflects the value of life business<br />
We c<strong>on</strong>tinuously advance our steering methodology to ensure profitability<br />
MCEV reflects adequate actuarial approach to risk management<br />
Applying MCEV for internal steering with RoRaC target<br />
ensures c<strong>on</strong>sistency with overall Group targets<br />
Development and prognoses of IFRS result and VANB<br />
prove <strong>Munich</strong> <strong>Re</strong>'s ability to generate profitable business<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
61<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
62
Agenda<br />
<strong>Life</strong> reinsurance – Essential segment for<br />
sustainable Group profits<br />
Ensuring sustainable profitability<br />
and growth<br />
Excellence in core business:<br />
North American best practice<br />
Growth opportunities in Asia:<br />
Positi<strong>on</strong>ed for leadership<br />
Torsten Jeworrek<br />
Wolfgang Strassl<br />
MMary Forrest F t – Mi Michael h l DDeK<strong>on</strong>ing K i<br />
Rudolf Lenhard – Daniel Cossette<br />
Superior value-based management Hermann Pohlchristoph – Erwin Schnauder<br />
C<strong>on</strong>clusi<strong>on</strong> Wolfgang Strassl<br />
C<strong>on</strong>clusi<strong>on</strong> of the day<br />
<strong>Life</strong> reinsurance is an attractive market market,<br />
<strong>Munich</strong> <strong>Re</strong> has successfully established a global leadership positi<strong>on</strong><br />
WWe have h a clear l strategy ffor ffuture development d l – Lif <strong>Life</strong> reinsurance i iis not always l sexy,<br />
but will create value for clients and shareholders<br />
Profitability is key – dependent <strong>on</strong> market situati<strong>on</strong> we adjust market shares in<br />
different countries<br />
We are persistent in our approach –<br />
therefore we invest today into the growth markets of the future<br />
Superior steering is basis of our success – therefore we are at the forefr<strong>on</strong>t in<br />
developing state-of-the-art industry standards<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
63<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
64
Appendix<br />
Financial calendar<br />
C<strong>on</strong>tacts<br />
Disclaimer<br />
Appendix<br />
Financial calendar<br />
7 November 2008 Interim report as at 30 September 2008<br />
3 March 2009<br />
Balance sheet press c<strong>on</strong>ference for 2008 financial statements (preliminary figures)<br />
Analysts' c<strong>on</strong>ference, <strong>Munich</strong><br />
22 April 2009 Annual General Meeting<br />
23 April 2009 Dividend payment<br />
6 May 2009 Interim report as at 31 March 2009<br />
4 August 2009 Interim report as at 30 June 2009; Half Half-year year press c<strong>on</strong>ference<br />
5 November 2009 Interim report as at 30 September 2009<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
65<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
66
Appendix<br />
For informati<strong>on</strong> please c<strong>on</strong>tact<br />
Sascha Bibert Ralf Kleinschroth<br />
Head of Investor & Rating Agency <strong>Re</strong>lati<strong>on</strong>s<br />
Tel.: +49 (89) 38 91-39 10<br />
E-mail: sbibert@munichre.com<br />
Dr. Thomas Dittmar<br />
Tel.: +49 (89) 38 91-64 27<br />
E-mail: tdittmar@munichre.com<br />
Tel.: +49 (89) 38 91-45 59<br />
E-mail: rkleinschroth@munichre.com<br />
Christine Franziszi<br />
Tel.: +49 (89) 38 91-38 75<br />
E-mail: cfranziszi@munichre.com<br />
Andreas Silberhorn Martin Unterstrasser<br />
Tel.: +49 (89) 38 91-33 66<br />
E-mail: asilberhorn@munichre.com<br />
Münchener Rückversicherungs-Gesellschaft<br />
Königinstrasse 107, 80802 München, Germany<br />
Fax: +49 (89) 38 91-98 88<br />
E-mail: IR@munichre.com<br />
@<br />
Internet: www.munichre.com<br />
Appendix<br />
Disclaimer<br />
Tel.: +49 (89) 38 91-52 15<br />
E-mail: munterstrasser@munichre.com<br />
This presentati<strong>on</strong> c<strong>on</strong>tains forward-looking statements that are based <strong>on</strong> current assumpti<strong>on</strong>s<br />
and forecasts of the management of <strong>Munich</strong> <strong>Re</strong>. Known and unknown risks, uncertainties and<br />
other factors could lead to material differences between the forward-looking statements given<br />
here and the actual development, p , in p particular the results, , financial situati<strong>on</strong> and performance<br />
p<br />
of our Company. The Company assumes no liability to update these forward-looking<br />
statements or to c<strong>on</strong>form them to future events or developments.<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
67<br />
<strong>Munich</strong> <strong>Re</strong>e<br />
Group – <str<strong>on</strong>g>Investors'</str<strong>on</strong>g>'<br />
<str<strong>on</strong>g>Day</str<strong>on</strong>g> <strong>on</strong> <strong>Life</strong> <strong>Re</strong>insuurance<br />
– 7 Octoberr<br />
2008<br />
68
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