13 December 2007
Press release
Munich Re Investors’ Day focuses on the Group’s primary insurance business / Munich Re demonstrates success of integrated business model with primary insurance and reinsurance / ERGO Insurance Group to contribute significantly to achieving the financial objectives of the Munich Re Group’s Changing Gear programme / ERGO with ambitious targets for 2012: normalised profit of over €900m and sustainable RoE of 12–15% with a premium volume of over €23bn / Optimised capital structure: ERGO plans payment of €1.0bn dividend and financing through hybrid capital
At its Investors’ Day in London, Munich Re presented the capital markets with its strategy for the primary insurance business it combines in ERGO. Dr. Nikolaus von Bomhard, Munich Re CEO: "With ERGO, the Munich Re Group can cover the entire value chain in the global risk market. In the process, we leverage value and cost synergies, and also reduce the risk-based capital required in the Group through improved diversification. And lastly, ERGO’s business is not subject to the reinsurance market cycle and so provides result stability. ERGO is consequently an integral part of the Munich Re Group and will contribute significantly to achieving the financial objectives of our Changing Gear programme."
Chairman designate of ERGO’s Board of Management, Dr. Torsten Oletzky, aims to firmly establish ERGO in the top class of European primary insurers within the next five years. By 2012, ERGO is to be one of the leading companies in the European market in terms of customer satisfaction, profitability and integration experience. Oletzky, moreover, is committed to delivering ERGO’s share of the Munich Re Group's earnings per share growth target of over 10% p.a. on average up to 2010.
By the year 2012, ERGO is to post a normalised profit of more than €900m – an increase of around 90% on 2006 – and attain a sustainable RoE of between 12 and 15%. (The normalised targets do not include any positive one-off effects and assume a sustained return on investments of 4.5% p.a.) Within the same period, premiums in primary insurance are to grow to over €23bn, compared with €16.1bn in 2006. This figure does not include profit and premiums from international health business.
Oletzky is positive about the starting point for his ambitious programme in the ERGO Group: "Our results are excellent; we want to ensure they stay at this high level in a less favourable environment – that is, without the benefit of one-off positive effects from tax or investments. We are recording profitable growth in international business, and are looking to achieve such growth in the German market as well. At the same time, we would like to expand the share of international business."
Oletzky intends to strengthen the sales organisation, to realign ERGO’s strategy in the life insurance market, and to encourage an entrepreneurial mindset among staff, with the aim of becoming faster and more innovative. The full implementation of value- and risk-based management will provide the foundations for achieving these goals. ERGO is to continue with its efforts to improve competitiveness through cost reductions in all segments on an ongoing basis. To optimise the capital structure, as previously announced, the ERGO Board of Management will propose to the Supervisory Board that a dividend of €1.0bn be paid in 2008. This measure is to be financed to the necessary extent by taking up hybrid capital, the exact amount of which has yet to be decided.
The Munich Re Group operates worldwide, turning risk into value. In the financial year 2006, it achieved a profit of €3,519m, the highest since the company was founded in 1880, on premium income of approximately €37bn. The Group operates in all lines of business, with around 37,000 employees at over 50 locations throughout the world and is characterised by particularly pronounced diversification, client focus and earnings stability. With premium income of around €22bn from reinsurance alone, it is one of the world's leading reinsurers. Its primary insurance operations are mainly concentrated in the ERGO Insurance Group. With premium income of almost €17bn, ERGO is one of the largest insurance groups in Europe and Germany. It is the market leader in Europe in health and legal expenses insurance, and 33 million clients in 25 countries place their trust in the services and security it provides. The global investments of the Munich Re Group amounting to €177bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group.
Disclaimer
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.
Note for editorial departments:
In case of enquiries, please contact Dr. Christian Lawrence on +49 (89) 38 91-54 00 or Johanna Weber on +49 (89) 38 91-26 95.
Munich/London, 13 December 2007
Münchener Rückversicherungs-Gesellschaft
signed Dr. von Bomhard signed Dr. Lawrence