Record profit of €3.9bn expected for 2007 / Board of Management to propose dividend of €5.50 per share (previous year: €4.50) / Share buy-back / "Subprime" expenses of less than €10m in fourth quarter
On the basis of key preliminary figures, Munich Re clearly surpassed its previous profit targets for 2007, achieving a fourth record result in succession of €3.9bn (previous year: €3.5bn). The Group thus even exceeded its increased profit guidance of €3.5–3.8bn published in August 2007.
Subject to the approval of the Supervisory Board, the dividend proposal of the Board of Management at the Annual General Meeting will be €5.50 (4.50) per share, which would – given the number of shares currently entitled to a dividend – result in an overall payout of around €1,124m (988m) to shareholders. The share buy-back of over €2bn launched in May 2007 has already been concluded. More than 15 million shares were acquired at an average price of €131.96. This means that in the past 14 months, a total of €3bn has been returned to shareholders through share buy-backs. As announced in May 2007, further shares with a volume of €3bn are to be repurchased by 2010, at least €1bn of these by the 2009 Annual General Meeting.
US mortgage crisis and turbulence on the stock exchanges: Munich Re’s prudent investment policy pays off
The crisis in the US subprime mortgage market and the subsequent turbulence on the global credit and financial markets has resulted in relatively low expenses for Munich Re in 2007.
In the fourth quarter, the Group recorded disposal losses of under €10m on financial instruments with exposure to the US subprime mortgage segment. Disposals have reduced the Group’s portfolio of subprime-exposed investments to €0.34bn (30 September 2007: €0.37bn), or less than 0.2% of the overall investment portfolio.
Munich Re’s conservative investment policy is also reflected in its portfolio of fixed-interest investments, totalling approximately €135bn: a good 45% of these are government bonds or similarly secure instruments for which public institutions are liable. Around 30% are securities and debt instruments with top-quality collateralisation, mainly German pfandbriefs. Nearly 20% are corporate or bank bonds or deposits with banks all with very good ratings. Only 4% (€5.5bn) of the fixed-interest securities are structured credit products, of which only €0.34bn – as stated above – have subprime exposure.
In insurance business, the Group has received only provisional loss notifications in connection with the subprime crisis, without any specific claims data, so it is still too early for a sound estimate. Liability insurance in particular (both D&O and professional indemnity) could be affected by lawsuits against financial institutions. Munich Re has made the necessary provision for this in its 2007 financial statements.
Reinsurance: Munich Re continuing to compete successfully
At 1 January 2008, about two-thirds of the Munich Re Group’s treaty business (i.e. without facultative reinsurance) in property-casualty reinsurance was up for renewal. This corresponds to a premium volume of around €8.5bn.
Munich Re succeeded in limiting the average price erosion in renewed business to a very satisfactory 2.8%. Treaties with a total premium volume of €1.2bn were not renewed, but the Group was able to partially make up for this business in more attractive segments. Altogether, the renewals resulted in a 4% decline in premium volume (to €8.1bn) from renewal business, also owing to the planned reduction of a major individual treaty relationship.
Further details of the treaty renewals in reinsurance and the development of new life business may be obtained from the press release.
As planned, details of Munich Re’s provisional figures for the 2007 financial year will be published on 25 February 2008.
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This announcement 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.