Information pursuant to Sections 134b and 134c of the German Stock Corporation Act (Aktiengesetz)

In its capacity as institutional investor, Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich (“Munich Reinsurance Company”) is obliged as per Sections 134b and 134c of the German Stock Corporation Act (AktG) to disclose information regarding both its investment strategy and its engagement in companies whose shares are traded on a regulated market (“portfolio companies”). 

For the most part, Munich Reinsurance Company 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 (UCITSs, i.e. public funds). Such indirect investments are managed by MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH, Munich (“MEAG KAG”), a regulated asset management company under the supervision of the German Federal Financial Supervisory Authority (BaFin). MEAG KAG is consequently an asset management company pursuant to Section 134a(1), number 2b of the AktG. 

MEAG KAG is exclusively authorised to exercise voting rights and other forms of engagement in the portfolio companies. Because Munich Reinsurance Company does not exercise shareholder rights, it does not have to disclose information regarding its own engagement. Information on the engagement policy of MEAG KAG and its implementation (including the exercise of voting rights) is available under the following link:

https://www.meag.com/en/inform/1241.html

Apart from the above-mentioned indirect investments, Munich Reinsurance Company also has direct holdings in some portfolio companies. However, the individual volume of such direct holdings is typically insignificant, at less than 0.5% of the voting capital of the respective portfolio company (as at 31 December 2021). In addition, the total volume of all direct holdings is very small (approx. 2% per fair market value as at 31 December 2020) in relation to the total sum of all Munich Reinsurance Company investments. Munich Reinsurance Company therefore chooses, with respect to such direct investments, not to adopt an engagement policy pursuant to Section 134b(1) of the AktG. As a consequence, there is no obligation under Section 134(2) and (3) of the AktG to disclose information on the implementation of an engagement policy or on voting behaviour. 

Information on investment strategy (Section 134c[1] AktG)

Munich Reinsurance Company’s strategy for its overall portfolio of investments (“investment strategy”) is designed to comply with the prudent person principle, which is the basis for the strategic investment principles of security, quality, profitability, and liquidity. Risk concentrations are avoided whenever possible. To this end, we use various risk criteria and early-warning indicators to avoid inappropriate concentrations of risk on individual counterparties or sectors. Systematically integrating ESG criteria into our investment process is likewise a key component of our investment strategy.  

Guidelines and internal procedures ensure that Munich Reinsurance Company acts in accordance with these investment principles when making investment decisions. 

Asset-liability management (ALM) is a fundamental pillar of the Company’s value-based management system and a core aspect of the Company’s 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 Munich Reinsurance Company’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 the Company’s liabilities are made consciously, taking due account of the Company’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 appetite. 

SAA and TAA are designed to sustainably:

• Optimise the risk/return ratio from the perspective of the shareholder, 
• 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. 

Agreements with asset managers (Section 134c[2] AktG)

For the most part, Munich Reinsurance Company 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 (UCITSs, i.e. public funds). These investments are managed by MEAG KAG. 

Investments in specialised funds 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 public funds are made under the prerequisite that both the asset manager’s investment strategy and the index on which the fund is based correspond with Munich Reinsurance Company requirements as to the existing liability profile. For details on the investment strategies of individual public funds, 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 Munich Reinsurance Company. 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 fund performance. Generally, MEAG KAG must apply the principle of best execution when carrying out transactions. If strategic decisions necessitate relatively large transactions, costs are kept as low as possible. 

MEAG KAG regularly reports to Munich Reinsurance Company 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 Munich Reinsurance Company and MEAG KAG run for an indefinite period and generally may be terminated with three months’ notice to the end of a month. 

Apart from indirect investments, Munich Reinsurance Company also has direct holdings in some portfolio companies. Such direct investments of Munich Reinsurance Company are managed solely by MEAG MUNICH ERGO AssetManagement GmbH, Munich (“MEAG AMG”), a subsidiary of Munich Reinsurance Company. 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(1), number 2 of the AktG, MEAG AMG is not obliged – with regard to direct investments – to disclose information as per Section 134c(2) of the AktG or to compile corresponding reports pursuant to Section 134c(4) of the AktG.

As at 1 January 2022