Annual Report 1997/1998 - Munich Re

Munich Re Report of the Board of Management
Motor In motor business we recorded a big increase in our premium
income. The deterioration in the result was smaller than expected.
Gross premiums in DM m
3,560 3,267 3,341
4,612
1994 1995 1996 1997
1995 1996 1997
Loss ratio 79.0 83.4 78.0
Expense ratio 20.8 22.2 26.6
Combined ratio 99.8 105.6 104.6
Our figures are heavily influenced by developments in the German
direct insurance market, our most important source of business. The
premium income of German motor insurers fell by around 4.5%
compared with the previous year, owing to the intense competition.
But the drastic underwriting losses that were originally feared as a
consequence did not occur, because claims frequency continued to
decrease; the results in motor own damage were even positive in 1997.
In our motor business from other markets, our acquisition efforts
produced pleasing growth in premium. This was bolstered by the
addition of American Re’s business.
For 1998 we are anticipating a decline in premium volume, as
premium losses due to bigger retentions on the part of our German
cedants will not be offset by the growth from new business and higher
shares in other markets. The result will probably be of the same order
as last year.
Marine/aviation Despite continuing falls in rates and keener competition in both
insurance and reinsurance, we managed to achieve appreciable
premium growth in our marine business. The addition of American
Re’s business enhanced this. The result was again positive, although
without the inclusion of American Re’s portfolio, the profit would have
decreased.
Gross premiums in DM m
1,027 1,008 1,056
1,544
1994 1995 1996 1997
1995 1996 1997
Loss ratio 63.8 71.2 67.6
Expense ratio 23.9 24.7 24.2
Combined ratio 87.7 95.9 91.8
Results in the world’s most important marine insurance markets
have been good in recent years. Consequently we are now witnessing
a very considerable influx of risk capital, i.e. new reinsurance capacity.
This has intensified the already keen competition. Prices are under
pressure in both proportional and non-proportional reinsurance. We do
not see any hope of a reversal of this trend in the next two years. In
spite of the unfavourable market conditions, we intend to adhere to
our plans for expanding our marine business in selected markets and
in certain business segments. If the incidence of major losses remains
normal, we expect the result for 1998 to be positive as well.
In our aviation business we recorded a satisfying increase in
premium income. The result was positive again and better than in
the previous year.
Claims experience worldwide deteriorated in comparison with the
previous years: in airline business it was one of the worst years in the
history of this class of insurance. Nevertheless, the supply of insurance
and reinsurance capacity has continued to increase; rate levels have
sunk by 25 to 30%. We therefore have little chance of achieving
premium growth in 1998, and a positive result will only be possible
if claims incidence is below average.
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