Our Strategy –
Munich Re Group Ambition 2025
Scale. Shape. Succeed.
With our Munich Re Group Ambition 2025, we’ve created a strategy that is uniform across the Group – spanning reinsurance, primary insurance and asset management. We have committed ourselves to ambitious financial targets, and we will continue adding value for our shareholders, clients, staff and communities. The Munich Re Group Ambition 2025 will help us to elevate Munich Re to a new level of success.
Scale, the first pillar in the triad, represents growth in the Group’s core business. There are opportunities for organic growth in reinsurance in particular owing to recent, significant improvements in market conditions. Munich Re will also grow profitably over the coming years in its Risk Solutions operating field, including in MR Specialty Insurance, HSB, and Munich Re Facultative & Corporate. In life and health reinsurance, there will be expansion in both traditional business, and the offerings for financial markets and longevity business. ERGO will further enhance its market position in Germany, while also achieving profitable growth – particularly beyond Germany, in B2B and through direct offers. In addition, ERGO prioritises the ongoing modernisation of its IT infrastructure. As for asset management, performance will be improved – thus mitigating the negative trends in bond yields caused by low interest rates.
Shape stands for Munich Re’s mission to develop new business models that span the entire value chain, in turn shaping markets. In this environment, innovative and digital solutions will give rise to additional business opportunities. This pillar also entails the continual scrutiny of innovative ideas and their scalability. Mature innovations such as cyber covers are already contributing to profits achieved as part of the Munich Re Group Ambition; other innovations, such as business models for the Internet of Things (IoT), will conversely play a role in the longer term. At ERGO, Shape will take the form of greater alignment with the hybrid customer business model; the transnational use of technological solutions at ERGO International; the development of new mobility and travel ecosystems; and the ongoing digitalisation of customer-driven and back-office processes.
Succeed symbolises the added value that Munich Re generates for all its stakeholders. For shareholders, this means the sustained financial success of their investments in Munich Re. Clients benefit from bespoke products. For staff, Succeed connotes appealing long-term employment and good career prospects. A particular priority concerns women in management: by 2025, 40% of managers below the Board of Management are to be women. Last but not least, the third pillar of Scale, Shape, Succeed refers to communities benefitting from, in particular, the Group’s ambitious climate protection targets in its asset management, (re)insurance business and in its own business operations.
What is success?
The success of the Munich Re Group Ambition 2025 will be measured using the following financial targets:
Munich Re aims to generate a high return on equity (RoE) between 12 and 14% by 2025. That would establish Munich Re as one of the best in its peer group. RoE increases will be fuelled by higher profitability, growth, and an RoI performance that will counteract the erosion of regular investment income caused by low interest rates.
Continued earnings growth will translate into higher earnings per share, which are set to increase annually by ≥5% on average by 2025.
The implicit dividend commitment of recent decades is now an explicit target of the Munich Re Group Ambition 2025. In “normal” years, the dividend per share is to rise by ≥5% on average, similarly to the increase in earnings per share. In years with unusually high claims expenditure, it is expected that the dividend per share will at least remain the same. As a result, the dividend per share will rise at a higher rate over the next five years than in the past five years, which saw an increase of 4.7% on average. The solvency ratio is to remain in the ideal corridor of 175–220%.
As an environmentally conscientious business, Munich Re will play its part in meeting the targets of the Paris Climate Agreement. The Group has therefore set itself ambitious climate protection targets for its investments, its (re)insurance transactions and its own business operations. More specifically, net greenhouse gas emissions in its investment portfolio will first be reduced by 25–29% between now and 2025, before achieving net-zero emissions by 2050. Munich Re has already ceased to invest in companies that generate more than 30% of their earnings from coal or by extracting oil from oil sands. As for the exploration and production of oil and natural gas (direct and facultative business), Munich Re will be reducing its climate-related industry exposure in such a way that there will be no attributable net CO2 emissions by 2050.
In an initial phase, Munich Re will seek to reduce greenhouse gas emissions by 5% between now and 2025. At the same time, Munich Re will reduce its coal-related exposure in its direct and facultative insurance business by 35% worldwide, before eliminating this exposure altogether by 2040. Munich Re has already stopped insuring new coal-fired power plants, new coal mines, and oil sands mines. In addition, in-house business operations have been climate-neutral since 2015; Munich Re has already cut its CO2 emissions per staff member by 44% since 2009. Current CO2 emissions are to be reduced by a further 12% per employee by 2025. Five years thereafter, in 2030, the Group expects to achieve net-zero CO2 emissions from its business operations. In practice, this means that any CO2 emitted by the Group from 2030 onwards would need to be offset by capturing CO2 in the atmosphere.
31 Dec. 2022
in FY 2022