28 November 2002
Press Release
> Munich Re Group set to maintain profitable
growth in 2003 / Continued upswing in reinsurance business / Need for
even greater account to be taken of increased catastrophe potential in
the treaties in future> First nine months of 2002: Despite loss
in third quarter, high profit achieved owing to positive net balance of
realized capital gains, additional reserving for US business, and writedowns
on investments> For the year 2002 as a whole, prospect of
allocation to reserves and unchanged dividend
Demand on the international reinsurance market - already high -
has risen further. Munich Re can thus take full advantage of the global trend
towards more risk-commensurate prices and conditions and is set to further improve
its reinsurance business at the turn of the year 2002/2003. It considers additional
adjustments to be necessary in many treaties in view of the continually increasing
risks. As expected, the Munich Re Group's net income of around €3.2bn
for the first nine months has been significantly influenced by capital gains
realized in the first half of the year, by the strengthening of provisions for
its US business in the second quarter, and by writedowns on securities in the
second and third quarter. Dr. Jörg Schneider, member of the Board responsible
for accounting and controlling: "The capital market situation will affect
our result in the fourth quarter as well, but the net result for the year will
nevertheless be higher than last year. Despite the losses from the succession
of weather-related natural catastrophes since July, we are making good progress
in our underwriting business; this will be positively reflected in the results
for 2003 onwards."
Details of the Munich Re Group's figures for the first nine months:
Group premium income was up by nearly 15% from €25.8bn to €29.6bn.
This growth was attributable mainly to the dynamic performance of the Group's
reinsurance business. Consolidated net income amounted to around €3.2bn
at 30th September 2002 (compared with €85m in the comparable period of
2001, which was burdened by the terrorist attack of 11th September), and earnings
per share increased from €0.48 to €18.25, particularly as a consequence
of capital gains from the shareholding transactions with Allianz.
Marked upswing in reinsurance
Board member Stefan Heyd, whose responsibilities include corporate underwriting,
said: "The continuing distinct upswing in reinsurance marks the end of
a market phase lasting several years which produced considerable losses. Risk
management is booming everywhere. Private individuals, businesses and industry
need to make provision for future risks and are becoming increasingly receptive
to the idea that security and insurance coverage are valuable commodities that
are only to be obtained at appropriate terms and conditions."
In renewing its reinsurance treaties for the current business year, i.e. at
1st January, 1st April and 1st July 2002, Munich Re succeeded in achieving double-digit
price increases and improvements in conditions. In the third quarter of 2002
the Group's reinsurers wrote gross premium of around €6.0bn. Their
share of Group premium rose in the first nine months of the year from 55.4%
to 58.9%. For the year as a whole, Munich Re anticipates reinsurance premium
growth of approximately 13% to around €25bn. Heyd: "We rate the rise
in the quality and profitability of our portfolio even higher than the growth
in premium income. We have withdrawn from consistently poor business and have
achieved better prices and conditions for in-force and new business. Both measures
will significantly improve our reinsurance results."
The reinsurers' investment result was influenced by the income from the shareholding
transactions in the first and second quarters and by the expenses for writedowns
on securities in the second and third quarters.
The reinsurers contributed a profit of €4.7bn to the consolidated result
in the first nine months. Their combined ratio decreased to 127.3% (Q1-3/01:
133.9%). The strengthening of reserves at American Re and for the WTC loss accounted
for 21.6 percentage points of this. Excluding these influences, the combined
ratio is 105.7% (compared with 107.0% in the same period last year); 3.5 percentage
points of this are attributable to natural catastrophes, and 3.3 percentage
points alone to the floods in Europe. In the third quarter, the combined ratio
amounted to 114.1% (Q3/01: 179.6%), with losses from natural catastrophes, including
the floods, accounting for 11.3 (2.5) percentage points.
The flood damage in August is likely to affect the Group's reinsurers
with costs of around €420m net, and the Group as a whole with costs of
up to €500m. Stefan Heyd: "The amount of precipitation in certain
areas was so heavy that scientists refer to it in a historical context as an
exceptional event with a return period of several hundred years. On the other
hand, many floods have occurred in the affected region at intervals of only
a few decades - it was just that these events did not attract so much
public interest at the time. In future we will have to expect more frequent
and more costly events of this kind and we will have to take account of this
in our business."
Strong new business in primary insurance, particularly in life
The Munich Re Group's primary insurers, especially the ERGO companies,
were able to maintain their above-average growth rate. This positive development
can be attributed above all to the life insurers, which in particular achieved
robust growth in their new German business, above all in the area of private
provision for old age and company pension schemes. The reasons for this lie
not only in the good market positions of Hamburg-Mannheimer and VICTORIA but
also in the successful partnership with HypoVereinsbank: in the first nine months
of the year, for instance, the number of insurance policies sold via branches
of the bank was noticeably higher than planned.
The primary insurers recorded a premium income of €3.8bn (Q3/01: 3.7bn)
in the third quarter and €12.2bn (11.5bn) in the first nine months, representing
growth of 5.8%. For the year as a whole, Munich Re anticipates that primary
insurance premiums will grow by 6% to around €17bn. The primary insurers'
share of Group premium amounts to 41.1%.
The generally positive premium development contrasted with high writedowns
on equity portfolios, typical of the period under review. They also had a substantial
impact on the results of the primary insurers in the Munich Re Group, with these
companies contributing -€676 (72m) to the consolidated result in the first
nine months.
Return to more realistic assessments on capital markets
The weak economy and disappointing news from companies caused the stock markets
to slump further in the third quarter. The period under review was influenced
not only by realized capital gains of €4.7bn in the first half year from
the sale of shares in Allianz AG, Allianz Leben, Frankfurter Versicherung and
Bayerische Versicherungsbank. It was also marked by expenditure for writedowns
on equities to the tune of €4.3bn, of which €2.7bn was incurred in
the third quarter. The investment result therefore shows a loss of €1.6bn
for the third quarter, ultimately leading to a Group loss of €859m. For
the first nine months, the investment result was a profit of €7.4bn. Total
investments - now including the assets of Quelle Versicherungen acquired
by ERGO - remain only just below the level of 31.12.2001 at €159.8bn
and shareholders' equity amounts to €16.6bn (€19.4bn). The Munich
Re Group's capitalization is thus still at a high level.
Positive overall result expected for 2002
For the business year 2002 as a whole, with further organic growth, Munich
Re expects premium income to show an increase of 10% to €40bn, due especially
to the price improvements (some substantial) in all business sectors. The overall
result for 2002 will be largely influenced by the above-mentioned effects from
the first half year: realized capital gains of €4.7bn, expenditure for
additional reserves for US business and the WTC loss totalling US$ 2.5bn (equivalent
to €1.8bn after tax), and the writedowns on equities of €4.3bn which
had an impact of €2.0bn on the Group result for the first nine months.
The overall net result for the year will be higher than that of last year (€250m).
Barring any exceptional developments before the end of the year, the Board of
Management will propose allocating an amount to the revenue reserves and paying
a dividend of €1.25 per share, as in the two previous years.
For 2003, major imponderables continue to lie specifically in the performance
of the capital markets. However, after Munich Re's organizational restructuring
and the realignment of American Re, the Munich Re Group sees itself as even
better positioned to take advantage of the reinsurance upswing for substantial
improvements in prices and conditions. Board member Dr. Jörg Schneider
puts it as follows: "Given the general parameters, the upward trend in
our underwriting business is set to continue in 2003, especially in reinsurance.
And after the burdens of 2002, the primary insurers in our Group will also show
considerably better development again, with strong growth. In their European
markets, and especially in their home market of Germany, the need for private
provision has now become clear to all."
Note for editorial departments:
In case of enquiries, please contact
Rainer Küppers on +49 (0) 89/38 91-25 04, Anke Rosumek on +49 (0) 89/38 91-23 38, Irmgard Joas on +49 (0) 89/38 91-93 92 or Florian Wöst on +49 (0) 89/38 91-94 01.
Munich, 28th November 2002
Münchener Rückversicherungs-Gesellschaft
signed Dr. Schneider signed Küppers