Annual Report 1997/1998 - Munich Re

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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. 11
Munich Re Investor relations advert, published inter alia in the Börsen-Zeitung on 21st February 1998 On 1st May 1998 the German law on control and transparency in the corporate sector (KonTraG) came into force. It is designed to improve supervision within companies and provide more transparency for shareholders and investors, e.g. through a cash flow statement and a report on risks involved in future development. We have already taken account of these requirements in the company and consolidated accounts for 1997/98. Ladies and gentlemen, new developments are continually affecting the environment in which we operate and are influencing our business. We intend to utilize the opportunities that result from this process of change to further enhance the value of your company. 12 Yours sincerely,
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Annual Report 1997/1998 - Munich Re

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