Information pursuant to Sections 134b and 134c of the German Stock Corporation Act (AktG)
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1. Information on engagement policy, engagement report and voting behaviour (Section 134b AktG)
1.1 Indirect holdings
For the most part, MR AG invests in Portfolio Companies not directly, but instead indirectly through alternative investment funds (AIFs, i.e. specialised funds) and undertakings for collective investment in transferable securities (UCITS; AIFs and UCITS together also referred to as “Funds”). Such indirect investments are managed by MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH, Munich (“MEAG KAG”), an asset management company with a licence pursuant to Section 20 (1) of the German Asset Management Companies Act (KAGB), and thus an asset management company pursuant to Section 134a, para. 1, no. 2c) of the AktG.
Insofar as shareholder rights (voting rights or other engagement rights) are exercised in the case of indirect investments in Portfolio Companies, MEAG KAG is exclusively authorised to exercise these rights for the Funds it manages. The same applies to the other points of an engagement policy, such as the monitoring of important matters relating to the Portfolio Companies.
Information on the engagement policy of MEAG KAG and its implementation (including the exercise of voting rights) is available under the following link:
As a result, it is unnecessary for MR AG to draw up, publish and implement its own engagement policy.
1.2 Direct participations
To a very limited degree, MR AG also holds direct interests in Portfolio Companies. Nevertheless, MR AG is refraining from publishing an engagement policy within the meaning of Section 134b, para. 1 AktG for these direct shareholdings, for the following reasons:
One of the main purposes of the statutory provisions is to enable so-called final beneficiaries, such as future retirees, to make the best possible investment decisions. However, unlike primary insurance companies, MR AG as a reinsurance company does not directly offer such individuals any investment products or insurance policies that could be the subject of such an investment decision. Having its own engagement policy would therefore in no way serve this intended purpose.
Moreover, the share of its direct investments is relatively insignificant, both in relation to the total amount of all MR AG investments and from the perspective of the individual Portfolio Companies. Due to the relatively minor volume, the informational value of an own engagement policy for the purposes of hypothetical investment decisions by final beneficiaries would be low at best. In addition, elaborate processes would need to be established to create, implement and publish a separate engagement policy.
The share of direct investments in relation to MR AG's total investments is approximately 2% (based on market values as at 30 September 2023). The individual volume of direct holdings is typically insignificant, at less than 0.5% of the voting capital of the respective Portfolio Company (as at 30 September 2023).
As a consequence, there is no obligation under Section 134 (paras. 2 and 3 of the AktG) to disclose information on the implementation of an engagement policy or on voting behaviour.
Nevertheless, MR AG applies appropriate processes to ensure that the interests of its customers are appropriately taken into account in individual cases when exercising shareholder rights, within the scope of the legal and contractual possibilities, which also includes taking sustainability into account.
2. Information on investment strategy and agreements with asset managers (Section 134c AktG)
2.1 Information on investment strategy (Section 134c, para. 1 AktG)
MR AG’s strategy for its overall portfolio of investments (“Investment Strategy”) is designed to comply with the prudent-person principle, which underlies the strategic investment principles of security, quality, profitability, and liquidity. Unreasonable risk concentrations, for example in relation to particular counterparties or sectors, are avoided as far as possible by using a variety of risk criteria and early-warning indicators. Systematically integrating ESG criteria into our investment process is likewise a key component of our Investment Strategy.
Guidelines and internal procedures set the framework for MR AG to act in accordance with these principles in its investment activities.
Asset-liability management (ALM) is a fundamental pillar of MR AG’s value-based management system and a core aspect of its Investment Strategy.
ALM means that in putting together investment portfolios (assets), important qualities of technical and other obligations (liabilities) are taken into account (management). Moreover, ALM aims to ensure that changes in macroeconomic factors influence the value of MR AG’s investments to a similar extent as the value of technical provisions and other liabilities.
Important instances of capital market sensitivity regarding liabilities – such as maturity patterns, currency structures and inflation sensitivity – are hedged on the assets side of the balance sheet by acquiring investments whenever possible that react similarly to capital market fluctuations. Doing so reduces vulnerability to capital market fluctuations and stabilises economic capital resources.
In this approach, any deviations from the structure of MR AG’s liabilities are made consciously, taking due account of MR AG’s risk tolerance and the achievable risk spreads. Investment risks incurred are therefore measured not in absolute terms, but instead in relation to changes of values in liabilities. This tactic means that exchange rates and fluctuations in both interest rates and inflation have the same effect on assets and liabilities. The purpose of economic ALM is to ensure that the currencies and maturities of liabilities are matched as closely as possible for each of the Munich Re Group’s related undertakings. Local accounting and supervisory requirements must also be taken into account.
In addition, derivative financial instruments are used to make economic ALM as effective as possible so as to hedge investment products against fluctuations on the interest-rate, equity and currency markets.
The central building blocks for implementing the Investment Strategy are virtual portfolios based on benchmark indices, known as strategic asset allocation (SAA) and tactical asset allocation (TAA). The primary objective in preparing investment decisions is to maximise the return on investments, while maintaining a specified risk framework.
SAA and TAA are designed to sustainably:
- optimise the risk/return ratio,
- Reflect the structure of liabilities,
- Be well diversified, and
- Generate no unnecessary costs (transaction costs, administrative costs).
SAA and TAA also include requirements such as financial solvency, balance sheet volatility, ratings, solvency, etc.
2.2 Agreements with asset managers (Section 134c, para. 2 AktG)
For the most part, MR AG invests in Portfolio Companies not directly, but instead indirectly through AIFs, and UCITS. These investments are managed by MEAG KAG.
Investments in AIFs are governed by agreements (investment conditions) that set out the design of the fund investments and the investment strategies. The Investment Strategy and investment decisions are aligned with the profile and term of the liabilities by defining a tailored and strategic target portfolio of capital investments – including the requirements of SAA and TAA, special risk management requirements (limits/triggers), supervisory considerations and ancillary accounting constraints.
Investments in UCITS are made under the prerequisite that the asset manager’s investment strategy correspond with MR AG requirements as to the existing liability profile. For details on the investment strategies of individual UCITS, please refer to the mandatory publications on the MEAG KAG website.
MEAG KAG is responsible for exercising shareholder rights. In particular, MEAG KAG is exclusively authorised to exercise voting rights, and acts independently of MR AG. As a rule, it is also entitled to engage in securities lending transactions with the shares concerned.
MEAG KAG earns a management fee customary in the market for its management activities, the amount of which is fixed, is calculated on the basis of the value of the managed fund assets as at certain pre-defined dates, and is withdrawn from the fund assets.
Portfolio turnover costs are reflected in the Funds’ performance. Generally, MEAG KAG must apply the principle of best execution when carrying out transactions. If a strategic decision necessitates a relatively large transaction, for example, costs are kept as low as possible.
MEAG KAG regularly reports to MR AG on the transactions carried out in the Funds (portfolio turnover), among other things. This reporting ensures that all investment activities can continually be monitored.
The agreements concluded between MR AG and MEAG KAG run for an indefinite period and may generally be terminated with three months’ notice to the end of a month.
Apart from indirect investments, MR AG also invests directly in some Portfolio Companies. Such direct investments of MR AG are managed solely by MEAG MUNICH ERGO AssetManagement GmbH, Munich (“MEAG AMG”), a subsidiary of MR AG. MEAG AMG provides its services exclusively within the Munich Re Group and therefore does not require a licence. As it is therefore not considered an asset manager within the meaning of Section 134a, para. 1, no. 2 of the AktG, MEAG AMG is not obliged – with regard to direct investments – to disclose information as per Section 134c, para. 2 of the AktG or to compile corresponding reports pursuant to Section 134c, para. 4 of the AktG.