Report of the Supervisory Board

Ladies and gentlemen,

In 2007, the Supervisory Board fulfilled all the tasks and duties incumbent upon it under the law, the Articles of Association and the rules of procedure. We advised the Board of Management in its running of the Group and constantly monitored and supervised its management activities, which have become even more efficient since the introduction of the Board of Management committee structure in 2006.

The Board of Management consulted us in good time on all decisions of fundamental significance and informed us regularly and comprehensively about all important business transactions, thus satisfying its reporting obligations towards the Supervisory Board at all times. We discussed its written and oral reports thoroughly at our meetings. The Board of Management was open and cooperative in every respect as regards the Supervisory Board’s suggestions and proposals for improvement. Collaboration was constructive and characterised by a spirit of trust.

The full Supervisory Board was briefed by the Board of Management even more intensively than hitherto between meetings, with prompt information on many current business topics in the Group, such as the impact of Windstorm Kyrill, the share buy-back, various acquisitions, the subordinated bond issued in the past financial year, and the changes on ERGO’s Board of Management. Throughout the year under review, Dr. von Bomhard and I remained in close contact regarding questions of strategy, planning, the Company’s current business performance and risk management, and events of particular significance in the Group. The shareholder representatives and employee representatives had the opportunity prior to the Supervisory Board meetings to discuss important topics separately with the Chairman of the Board of Management. At no time in the year under review did we see cause to carry out inspection measures in accordance with Section 111 para. 2 sentence 1 of the German Stock Companies Act.

Focal points of the meetings of the full Supervisory Board

Four meetings of the Supervisory Board took place in 2007. Apart from one meeting, where two members were unable to attend, there was full attendance on each occasion. Once again, a representative of the German Federal Financial Supervisory Authority (BaFin) took part as a guest at two of the meetings. In addition, resolutions were twice adopted by written consent in lieu of a meeting.

Focal points at the meetings of the full Supervisory Board were the individual quarterly financial statements and the annual result for 2007. We obtained detailed reports on the Munich Re Group’s performance, also compared with its competitors. The Group’s strategic alignment and its further development were items debated several times in the financial year, and we engaged in a constructive exchange of ideas on these topics with the Board of Management. In keeping with the customary routine, the Board of Management presented the Group planning for 2008 and 2009 to us for discussion. It also reported to us regularly about the Group’s risk situation and profitability, enabling us to ascertain that integrated risk management and risk governance had been further refined. We were briefed by the Board of Management at each meeting about current topics and major losses affecting the Group.

We continued to monitor the business situation of Munich Re America very closely. Other focal points of our work were compliance and anti-fraud, where the Board of Management gave us a wide-ranging overview of the preventive measures that Munich Re has taken to date. Besides this, we received ongoing information on the Changing Gear programme and the related change in corporate culture. The Supervisory Board welcomes this initiative of the Board of Management, which involves significant measures to boost efficiency and profitable growth and to increase the share price.

In preparing for the 2007 Annual General Meeting, we concerned ourselves inter alia with share buy-backs – for the first time also by means of derivatives – and the use of the shares acquired, as well as with amendments to the Articles of Association and with a domination and profit-transfer agreement with DKV International Health Holding AG. We naturally also discussed at length the Company financial statements and the Group financial statements for the previous financial year (2006). Beyond this, we dealt at our meetings with special topics from the Group primary insurance segment, such as ERGO in the light of industrialisation in the insurance sector, and with the question of how economic value can be created in insurance companies using investments.

Work of the committees

The composition of the committees of the Supervisory Board (Standing Committee, Personnel Committee, Audit Committee, Nomination Committee and Conference Committee) is shown in the overview on page 59.

The Standing Committee met three times in 2007, devoting itself mainly to the preparation of Supervisory Board meetings, topics of corporate governance, and reports on the development of the shareholders’ register.

The Personnel Committee held four meetings in the year under review. It decided among other things on the extent to which the Board of Management’s objectives had been achieved in the previous year and on the individual Board members’ objectives for the coming year. It also considered succession planning for the Board of Management and the appointment and contracts of Board members. Other activities included reviewing and adjusting the Board of Management’s remuneration and pension entitlements, and authorising the acceptance of new seats on supervisory, advisory and similar boards by members of the Board of Management. In addition, the Personnel Committee prepared information for the full Supervisory Board: a review of the structure of the Board of Management‘s remuneration system, and the adjustment of the Board of Management’s distribution of responsibilities.

The Audit Committee also fulfilled its duties extensively, meeting six times in 2007. At two meetings with the external auditor, it discussed in detail the Company financial statements and Group financial statements, the Company management report and Group management report, the auditor’s report and the Board of Management’s proposal for the appropriation of the net retained profits for the financial year 2006. The Head of Internal Audit submitted his annual report for 2006 to the Audit Committee for discussion. The Audit Committee closely considered the 2007 quarterly reports and, for the first time, commissioned the external auditor with the review of the half-year financial report, which it later discussed at length in the presence of the auditor. Besides this, the Audit Committee reviewed and monitored the auditor’s independence and commissioned the audit for the financial year 2007, deciding on its focal points and the auditor‘s fees. The Audit Committee also took delivery of reports from the auditor on its auditing and non-audit-related services. It continually monitored the Company’s risk situation, on which it obtained reports from the Board of Management at each meeting. Above all, it critically monitored the issue of exposure in markets affected by the subprime loan crisis. It received separate reports on the stabilisation of the new core administration system in reinsurance and the development of embedded values in life reinsurance business and in life and health primary insurance business. It also concerned itself several times with compliance and fraud topics in the Group. At the suggestion of the Chairman of the Audit Committee, the Compliance Officer will in future report regularly in person to the Audit Committee on these issues. This occurred for the first time at the meeting on 24 February 2008. Another topic dealt with in depth was active capital management by the Board of Management, particularly the share buy-back programme and the raising of additional hybrid capital.

The Nomination Committee was established at the end of 2007. Its task is to propose to the Supervisory Board suitable candidates for election as shareholders’ representatives by the Annual General Meeting. The committee will begin its work in 2008.

The Conference Committee as per Section 27 para. 3 of the German Co-Determination Act did not need to be convened.

Dr. Schmidt as Chairman of the Audit Committee, and I as Chairman of the other committees, provided detailed information on the committees’ work at the meetings of the full Supervisory Board.

Corporate governance and declaration of conformity

Munich Re’s Supervisory Board concerned itself on an ongoing basis with the further development of corporate governance topics. In response to changes in the German Corporate Governance Code, we have expanded the Supervisory Board‘s rules of procedure so that the Audit Committee’s duties now include the topic of compliance, and a nomination committee has been established. In the year under review, the Standing Committee examined the efficiency of our Supervisory Board activities on the basis of an extensive questionnaire distributed to the full Supervisory Board. It subsequently considered the results, which it used to develop improvement proposals to be discussed by the full Supervisory Board. Further information on corporate governance is available in the joint corporate governance report of the Board of Management and Supervisory Board on page 119 ff.

In November 2007, the Board of Management and Supervisory Board submitted their annual declaration of conformity with the German Corporate Governance Code as per Section 161 of the German Stock Companies Act, which can be read on page 122 of this report and on the Company’s website.

Changes on the Board of Management

On 28 February 2007, Dr. Heiner Hasford retired from Munich Re’s Board of Management, of which he had been a member since 1993. On 31 December 2007, Mr. John Phelan also retired, having been a member of the Board of Management since 1 April 2002. We thank both gentlemen for their successful work and exceptional personal dedication.

On 1 October 2007, the Supervisory Board appointed Dr. Peter Röder to the Board of Management. In 17 years with the Munich Re Group, Dr. Röder had most recently served on ERGO International AG’s Board of Management. At Munich Re, he is Mr. Phelan’s successor as the Board member responsible for North America. He has also taken over the Global Clients Division from Dr. Torsten Jeworrek. The distribution of responsibilities on the Board of Management has been adjusted accordingly.

Company and Group financial statements

KPMG Bayerische Treuhandgesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft audited the following documents and gave them an unqualified auditor‘s opinion: Munich Reinsurance Company‘s financial statements and Group financial statements as at 31 December 2007, and the management reports for the Company and the Group. The auditor’s reports were sent without delay to all members of the Supervisory Board. At its meeting on 24 February 2008, the Audit Committee conferred in detail about the preliminary year-end figures as at 31 December 2007 and, on 10 March 2008, prepared the Supervisory Board‘s resolution on the adoption of the Company financial statements and the approval of the Group financial statements. In this context, it examined in advance the Company financial statements and Group financial statements, the management reports and the Board of Management‘s proposal for appropriation of the net retained profits. It discussed them closely with the auditor, who was present at the meeting, and also gave consideration to the auditor‘s reports. The Audit Committee briefed the full Supervisory Board about the outcome of its consultations at the balance sheet meeting on 11 March 2008.

Subsequent to the Audit Committee, the Supervisory Board also checked the Company financial statements, the Group financial statements, the Company management report, the Group management report and the proposal of the Board of Management for appropriation of the net retained profits. After conducting its own concluding examination, the Supervisory Board had no objections to the Company financial statements and Group financial statements, and agreed with the outcome of the external audit. On the basis of the Audit Committee‘s prior examination and the result of its own examination, the Supervisory Board approved the Company financial statements and Group financial statements at the balance sheet meeting on 11 March 2008. The Supervisory Board also agreed with the Board of Management‘s proposal for appropriation of the net retained profits.

Words of thanks to the Board of Management and employees

The Supervisory Board wishes to thank the members of the Board of Management and all staff members in the Group for their successful work and great personal commitment, which was a major factor in the excellent business performance. Also worthy of special mention in this context is the palpable willingness throughout the Group to live the corporate culture together.

Munich, 11 March 2008

For the Supervisory Board

Dr. Hans-Jürgen Schinzler
Chairman