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Letter to Shareholders
TEST GB 2021

Dear Shareholders,

Joachim Wenning
Dr. Joachim Wenning
Chairman of Munich Reinsurance Company’s Board of Management

The past year has been a successful one for the Group – Munich Re generated a profit of €2.7bn in 2019. We increased our results once again, and exceeded our profit target of €2.5bn. We want you, our shareholders, to benefit from this success through an increased dividend – and so we are proposing that the Annual General Meeting approve a dividend increase to €9.80 per share. 

Your company’s shares continue to provide you with strong and sustained returns. Our Total Shareholder Return continued to rank among the best in the world in 2019 in comparison with the seven leading reinsurers and European primary insurers. At the same time, Munich Re is an attractive and sustainable investment because we systematically integrate environmental, social and governance aspects into our value creation. 

A central pillar here is our climate strategy. We have undertaken to make our investment portfolio climate-neutral by 2050, in line with the target of the Paris Agreement to limit the global temperature increase to 1.5°C. Munich Re has joined the Net-Zero Asset Owner Alliance under the leadership of the United Nations, in which we are working together with institutional investors with over US$ 4 trillion in assets under management. 

We see an important leverage effect for climate protection in the breakthrough of new technologies for a low-carbon economy – in electricity generation, transport, energy storage and industrial production. Here, too, we are taking responsibility. We offer innovative insurance solutions, and shoulder some special risks – such as offering performance guarantees for battery storage systems and photovoltaic systems. 

But that alone is not enough – there must be monetary incentives to avoid carbon emissions. In all sectors of the economy, there should be a clear price to pay for emitting greenhouses gases. At the same time, investments need a stable and reliable environment in order to generate sufficient amounts of affordable renewable energy. Provided that governments make wise and far-sighted decisions about these rules, the market economy will become the driving force behind the energy transformation necessary to protect the climate. 

Strategically and financially, our Group is well on course. And it continues to gain momentum towards achieving the profit target of €2.8bn for 2020 that we set in our multi-year ambition 2018–2020. We are driving digital transformation, reducing complexity, and growing profitably. The strategic focus is working, and is paying off. 

We are becoming more digital, faster, and more flexible. Our units Munich Re New Ventures and Digital Partners are opening up new digital market access for Munich Re. Digital Partners is working with numerous young, digital start-ups. Back in 2016, we established a relationship of trust and confidence with the Californian start-up Next Insurance, and we support it by providing services and assuming risks; we have also held shares in this company for several years via Munich Re Ventures. 

This approach has paid off: last year we acquired further shares worth US$ 250m in Next Insurance. Once the transaction is completed, we will own almost 30% of the company which offers customised digital insurance solutions to small and medium-sized companies in the US market. This joint venture allows us to participate in a high-margin market segment with a premium volume of around US$ 140bn per year. By tapping into an identified target market through modern online sales, we are advancing our Group strategically. 

Another area we are working on is the development of digital services: With a new online platform, we are giving life insurers the opportunity to clarify medical queries in the application process digitally. The quality of the collected data can thus be improved, and processing time reduced by up to 90%. At the same time, we provide software solutions that insurers can comfortably integrate into their IT systems, thereby reducing the length of the application process by up to two thirds. 

We are also digitally enhancing our core competences. We are investing in data analytics and artificial intelligence in order to support our clients in a targeted manner – for instance, in identifying loss drivers for watermains damage, which accounts for around half of all losses in traditional residential building insurance. We help motor insurers to forecast future losses more precisely and to significantly lower their loss ratios with the help of machine learning that takes account of external weather data, accident statistics and socioeconomic data. 

We are also working on improving the quality and speed of our processes. ERGO has automated many of these in order to offer customers optimal service. The number of robotics applications that support staff in their daily work has risen significantly. Customer requests are now handled more quickly: we have halved the average processing time of applications in the life segment. 

We are opening up new digital fields of business in the Internet of Things: We are setting up a company with sports-car manufacturer Porsche and its consultancy subsidiary MHP to offer digital, flexible production concepts and software solutions. It will allow industrial customers to develop innovations more quickly by means of very small but economical production runs – with minimum capital requirements and reduced investment risk. 

ERGO has entered into a partnership with the Chinese automobile manufacturer Great Wall Motors. The joint aim is to establish a leading company for technology- and data-driven mobility solutions in the Chinese market, and to sell insurance, including through our trading partner Great Wall’s business partners. 

These initiatives and efforts emphasise Munich Re’s commitment to being the leading provider of digital insurance solutions. This allows us to consolidate our existing business, broaden the Group’s profit base in the long term, and bolster our competitive position. 

We are reducing complexity. Munich Re is now more focused and efficient than ever. ERGO has successfully sold 18 smaller international companies, in order to sharpen its focus on relevant core markets. In reinsurance, we have increased our impact in industry business by bundling facultative reinsurance units and direct industry business in a single global unit. We are doing more business with fewer resources and – through lower costs – opening up additional scope for investing in digitalisation and new areas of business. 

We are earning higher revenues. Once again, we succeeded in increasing our profits and we also exceeded our profit guidance. Our primary insurer ERGO continued its upward trajectory and managed to beat its profit target. The basis for this success has been consistent implementation of the Strategy Programme launched in 2016. We have successfully implemented our growth initiatives in the reinsurance field of business – including in the USA, Asia and in the cyber risk market, which continues to grow. Here, too, we have beaten our target, despite high natural catastrophe losses in the second half of the year, due in part to the typhoons Hagibis and Faxai in Japan. 

In 2020, we seek to increase our profits to around €2.8bn – with €2.3bn coming from reinsurance, and more than €500m from ERGO. In reinsurance, we will foster our growth initiatives; ERGO will continue with the successful path of its Strategy Programme. In addition, the ongoing optimisation of our investments will drive profits. In increasingly difficult capital markets, since the appointment of our Chief Investment Officer we have made the Group’s investment process more stringent and have geared it to further enhancing the risk-return profile of our portfolio. 

On our journey to make Munich Re more profitable, more lean and more digital, we took great steps forwards last year. I would like to thank you personally for your support – along with our 39,000 staff members around the world.


Yours sincerely,

Joachim Wenning