Annual Report 1997/1998 - Munich Re

Munich Re Report of the Board of Management
North America Our premium income from the North American market for 1997
shows a big rise to DM 7.2bn (3.3bn) owing to the first-time
consolidation of American Re. The result was better than in the
previous year. For 1998 we expect the premium income from our
North American business to remain stable. The result should improve
even further.
Gross premiums in DM bn
3.1
2.6
3.1
3.3
1993 1994 1995 1996 1997
Gross premiums by country
Canada 13% (26%)
7.2
USA 87% (74%)
Economic development in
the USA (in %)
8
6
4
2
0
1994 1995 1996 1997
Economic growth
Inflation rate
Unemployment rate
Growth in insurance
USA
The economy in the USA proved robust and again enjoyed a high
rate of growth with low inflation and falling unemployment.
The favourable general economic environment was reflected in the
development of the insurance industry. Premium income in non-life
business increased markedly. Above-average investment earnings and
the absence of very large losses enabled property-casualty insurers to
post record results.
The inclusion of American Re has had a substantial effect on our
Group premium income in the USA. Following the merger of MARC
and the US Branch into the company, American Re recorded a gross
premium income of US$ 3.1bn for 1997, thus consolidating its position
among the leading US reinsurers. A very positive aspect was that the
merger did not lead to any notable losses of business. Owing to the
effects of competition, however, premium development did remain
below expectations. Taking into account the business of MARC and the
US Branch, the premium volume stayed more or less the same. This is
a reflection of the continuing consolidation in the insurance industry
and the marked increases in retentions but also of our very careful
underwriting policy, occasioned by the current market situation.
American Re’s profit for the year amounted to US$ 221m. It was
affected by non-recurring expenditure resulting from the merger.
Altogether, however, the result is pleasing and in line with our
planning for this first year.
The life insurance market in the USA is also marked by intense
competition. The primary insurers are striving to improve their position
through mergers; many mutuals are seeking access to the capital
market through a change in their legal structure or through the formation
of holding companies. Banks and other financial institutions
are seeking to gain a footing in the life insurance market.
Our subsidiary MARC-Life, Atlanta, which specializes in life
reinsurance in the USA, increased its premium income in 1997 by
more than 15% to US$ 136m, thus satisfyingly extending its market
position. The profit for the year rose to US$ 6.1m (4.9m). In June
1998 we significantly increased MARC-Life’s shareholders’ funds by
US$ 60m in order to provide it with the financial base for the intended
further expansion of its business.
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