Annual Report 1997/1998 - Munich Re

Munich Re Report of the Board of Management
Insurance markets
Europe In our European business we were able to increase our premium
income by around DM 900m to DM 14.1bn (13.2bn). We achieved a
break-even underwriting result.
Gross premiums in DM bn
13.4 13.4
12.7
13.2
1993 1994 1995 1996 1997
Gross premiums by country
France 3% (3%)
UK 13% (9%)
Italy 5% (3%)
14.1
Germany 59% (65%)
Netherlands 4% (4%)
Other countries 16% (16%)
Economic development in
Germany (in %)
12
10
8
6
4
2
0
1994 1995 1996 1997
Economic growth
Inflation rate
Unemployment rate
Growth in insurance
The development of most European economies has converged
further as they prepare for the introduction of the euro. Largely parallel
developments are also observable in the European reinsurance
markets. In direct insurance, on the other hand, the markets are still
shaped by local factors in many areas. (See page 60 for further
information on the euro.)
Germany
In Germany the economic upswing, which began early in 1996,
gradually gathered momentum in 1997. The increase of 2.2% in real
GDP was attributable partly to the favourable general monetary
conditions, such as moderate wage and price development, low
interest rates and depreciation of the D-mark, and partly to high
external demand. But unemployment again increased somewhat.
German direct insurers recorded an increase in premium income
which, at 2.4%, slightly exceeded the rate of economic growth. Life and
health insurance, with growth rates of 4.8% and 5.5% respectively,
developed very pleasingly despite the weakness of the domestic
economy. This reflected the fact that, as a result of the debate about
the future of the state’s social security systems, there is an increased
readiness among the population to make private provision in these
areas. By contrast, premium income in property-casualty insurance
declined. In particular, insurers’ premiums in motor and industrial fire
insurance were hit by the effects of unrelenting competition on prices
and conditions.
Falling earnings and flagging growth are forcing our clients to fight
harder for market share whilst at the same time exercising cost control.
This is accelerating the formation of large groups of companies, which
retain bigger portions of their risks themselves and cede less business
in reinsurance.
On top of this, the good results of the last few years in the German
reinsurance market have led to a large amount of capacity being
available at low prices and generous conditions. Competition has
increased substantially.
As by far the largest reinsurer in Germany, we are naturally affected
to a particularly great extent by these market developments. We have
reacted to them flexibly. However, owing to the high standards we
continue to apply as regards the quality of business, we were unable
to prevent a decline of just under 4% in our German premium income.
The underwriting result was positive and better than in the previous
year.
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