29 November 2001
Press Release
Munich Re Group sees prospect of strong growth in premium income and net earnings
in coming year / Major upturn in reinsurance market / Group's capital strength
outstanding even after biggest loss in insurance history / Unchanged loss reserve
of €2.1bn net reduces result for first nine months to €85m, but positive
result expected for the year as a whole despite the high claims costs / Limited
liabilities imperative in coverage of large risks against terrorism
The upward trend in the global reinsurance market is continuing and, in
the Munich Re Group's view, has even been strengthened and accelerated
by the terrorist attack in the US on 11th September. In the current renewals
of reinsurance treaties, substantial price increases and fundamental improvements
in conditions are in prospect. Munich Re's competitive position has been
further enhanced. The Group's solidity and security - also according
to the assessments of rating agencies - are more sought after than ever.
As expected, the quarterly figures as at 30th September reflect the huge loss
in New York, which is still estimated and reserved at €2.1bn. The Group's
figures for the year 2001 as a whole will naturally be heavily impacted by this
loss, but as things stand at present they will still close with a profit that
will enable Munich Re to pay an unchanged dividend. Like the reinsurers, the
Group's primary insurance companies have been able to further improve their
market position overall in the year to date.
As was to be expected, the third quarter 2001 closed with a loss, which amounted
to €1.2bn after tax. This was due primarily to the effects of 11th September
but also to other large losses such as the recall of Baycol/Lipobay by Bayer
on 8th August, the probable total loss of the communications satellite PAS 7,
Typhoon Nari in Taipei (Taiwan) in mid-September, and the explosion in a chemical
plant in Toulouse on 21st September. This loss burden caused the reinsurance
combined ratio to rise to 179.6% in the third quarter; for the whole period
from 1st January to 30th September 2001 it totalled 133.9%.
"Reinsurance more important than ever"
Referring to the extreme loss event of 11th September, Dr. Hans-Jürgen
Schinzler, Chairman of Munich Re's Board of Management, said: "The
terrorism losses in the USA, as well as other major losses, demonstrate how
much primary insurers continue to need reinsurance as a risk-transfer vehicle
to guarantee their own claims-paying ability when faced with extreme financial
burdens. This also highlights the question of reinsurers' security -
their financial strength and claims-paying ability. Primary insurers will take
a very close look at their reinsurers in future to be sure they can rely on
having their claims paid even when the going gets tough."
The terrorist attack of 11th September is inevitably focusing the attention
of insurers on the problem of terrorist acts intended to inflict the maximum
possible damage. Munich Re regards the following preconditions as imperative
for the future coverage of the terrorism risk: limited liabilities, short periods
of notice for terminating terrorism cover, risk transparency, and premiums based
on the new risk situation. According to Munich Re Board member Stefan Heyd,
the wheat is gradually being separated from the chaff in the reinsurance market.
Only a few providers have had their top ratings confirmed; others have been
downgraded.
Reinsurers and primary insurers on growth course
With double-digit increases in premium income, both the reinsurers and primary
insurers in the Munich Re Group are continuing on their earnings-oriented growth
course. In reinsurance, premiums rose by 18.4% up to the end of September, reaching
€15.5bn. In primary insurance, they increased by 10.1% to €11.5bn.
The growth in reinsurance was partly due to higher prices achieved in the preceding
renewal negotiations. Major contributors to the growth in primary insurance
were the foreign subsidiaries acquired in the second half of 2000.
Compared with last year, Group premium income for the third quarter was up
by 20.1% to €8.8bn, and for the first nine months of the business year
it showed an increase of 14.7% to €25.8bn. Mainly on account of the terrorist
attack on 11th September, earnings per share amount to -€6.86 in the third
quarter and to €0.48 per share for the first nine months of the year.
Investments stable despite weak state of the stock markets
The value of the Group's investments at 30th September 2001, reported
in accordance with IAS, totalled €158.3bn - a reduction of 0.7% compared
with 31st December 2000, reflecting the fall in share price indices (DAX: -33%
in the first nine months). In the meantime share prices have recovered strongly.
The Group's investment result amounted to €2.4bn for the third quarter,
and €7.7bn for the first nine months. Thanks to its investment strategy,
Munich Re is prepared for even the biggest loss scenarios.
Positive result for the year expected
For the business year 2001 as a whole, the Munich Re Group expects the strong
growth impulses evident in the first nine months to continue. Group premium
income should top €34bn - a year-on-year increase of more than 10%.
The Group result for 2001 will show a big reduction compared with last year
but will probably still be positive. This will be mainly thanks to the special
factors explained in the quarterly report as at 31st March 2001 and at the balance
sheet press conference on 29th May 2001, namely the less deferred valuation
of Munich Re's shares in Allianz and positive effects of the German tax
reform. If the claims situation and the position on the capital markets do not
deteriorate up to the end of the year, the Munich Reinsurance Company will pay
a dividend of €1.25 per share, as last year.
For the year 2002 the Munich Re Group anticipates strong growth and a substantial
increase in earnings. With steady growth in primary insurance and asset management,
the result for 2002 should then be significantly better than the good result
achieved in 2000.
Munich Re Group in the first nine months of 2001
Key figures (IAS)
| |
|
Quarters 1-3 2001
|
Quarters 1-4 2000
|
| Gross premiums written |
bn |
25.8 |
31.1 |
| Net profit |
m |
85 |
1,750 |
Reinsurance
combined ratio
Including WTC
Excluding WTC
|
%
%
%
|
133.9
112.8
|
115.3
|
| |
|
30.9.2001
|
31.12.2000
|
| Investments |
bn |
158.3 |
159.4 |
| Shareholders' equity |
bn |
19.6 |
23.6 |
| Net underwriting provisions |
bn |
133.2 |
131.5 |
| Staff |
|
38,147 |
36,481 |
Our registered shares
| |
|
Quarters 1-3 2001
|
Quarters 1-4 2000
|
| Earnings per share |
|
0.48 € |
9.89 € |
| Share price |
|
285.00
(30.9.2001)
|
380.00
(31.12.2000)
|
| Munich Re's market capitalization |
bn |
50.4
(30.9.2001)
|
67.2
(31.12.2000)
|
A. M. Best, Standard & Poor's and Moody's have each awarded Munich
Re their top rating.