Annual Report 1997/1998 - Munich Re

Munich Re
In the emerging markets, we primarily have to make advance
investments. And the investments we propose are considerable.
Through early market entry, timely recognition of the clients that are
important for us, and the provision of advice and service for these
clients, albeit perhaps in a different form to our activities in the
developed markets, we will also achieve an outstanding position in
these markets in the medium term.
In direct insurance we have significantly improved the structuring
of our interests through the merger of the Munich Re subsidiaries
Hamburg-Mannheimer and DKV with VICTORIA and D. A. S. to create
the ERGO Insurance Group.
The legal integration of the ERGO companies has meanwhile been
successfully completed. The foundations have thus been laid for their
future cooperation in Germany’s second biggest insurance group. The
stock market has responded to our concept very positively, with the
price of former VICTORIA shares – now ERGO stock – more than
doubling within a few months.
We still regard as attractive our majority holdings in Karlsruher
Leben, which has its traditional regional focus in the southwest of
Germany, and Europäische, which is the market leader in Europe in
the specialist field of travel insurance. We see good development
prospects for both companies, albeit for different reasons, operating
on an independent basis within the Munich Re Group.
By contrast, we have sold our majority holding in Berlinische
Lebensversicherung to the British insurance group CGU. We came
to the conclusion that Berlinische could develop better in the new
partnership than if it remained in the Munich Re Group.
Earnings from investments are assuming increasing importance in the
insurance industry.
The Munich Reinsurance Company and ERGO intend to set up a joint
asset management company to further enhance the profitability of
their investments. The new company is to manage investments with a
market value of well over DM 200bn and thus be one of the largest
asset management companies in Germany.
We continue to see good opportunities for growth and earnings in
both reinsurance and direct insurance.
To enable us to take advantage of these, we carried out a capital
increase in July/August 1998. This is the first in a series of shareholderfriendly
capital measures geared among other things to considerably
simplifying our share structure. Different share prices, questions
relating to subscription rights or queries about the financial necessity
of retaining partly paid-up shares will soon become a thing of the past.
And the basis will be created for the introduction of no-par-value
shares and conversion to the euro. In particular, trading in our shares
will be made easier for foreign investors and there will be greater
transparency for all shareholders. This should have a positive effect
on the future performance of our share price.
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