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    • Munich Re draws a line under three difficult years: €434m loss for the year but further increase in the underwriting profit to €2.0bn 

    • Excellent combined ratios of 96.7% in reinsurance and 96.4% in primary insurance 

    • Application of the new IAS rules creates more transparency 

    • Munich Re shares: Free float exceeds 80% mark

    "With the net loss for 2003, we are drawing a line under three difficult years impacted above all by the bear market on the stock exchanges. As the underwriting result for the year under review showed, we are gearing our operations closely and consistently to profitability in all fields of business", said Jörg Schneider, member of Munich Re's Board of Management, when presenting the provisional figures.

    The key figures for the business year 2003: with a slightly increased gross premium income of €40.4bn (previous year: 40.0bn), the combined ratios fell to 96.7% in reinsurance and 96.4% in primary insurance. This is the successful outcome of consistent underwriting policy in both business segments. The Munich Re Group has now absorbed the after-effects of the extremely weak stock markets that prevailed until last March. Its tax expenditure of €1.8bn had a disproportionate impact on the result, given the Group's pre-tax earnings of €1.3bn. In addition, expenses were booked for adjustments of goodwill in the case of the Group's Italian primary insurance operations, for the strengthening of reserves in the USA, and for the writedowns and adjustments of goodwill for HypoVereinsbank as a Munich Re associated enterprise. The consolidated loss for the business year 2003 amounts to €434m.

    Payment of a dividend of €1.25 per share will be proposed to Munich Re's Supervisory Board and the Annual General Meeting.

    Further figures for the business year 2003 may be obtained from the attached table.

    First application of the revised IAS provisions

    Munich Re is one of the first major financial service providers in Europe to apply the new provisions of IAS 32 (rev. 2003) and IAS 39 (rev. 2003) for the business year 2003. Significant changes are required in the Munich Re Group's consolidated financial statements to reflect the stricter impairment rules for equity investments and the ban on recognising write-ups on equity investments in the income statement.

    Equity investments were already recognised at market value in Munich Re's consolidated financial statements. In the balance sheet, therefore, the first application of the revised IAS provisions results merely in a reallocation between various items of shareholders' equity. The overall amount of shareholders' equity remains unchanged by the application of the new provisions and, after the capital increase in October/November 2003, thus totals €18.9bn (13.9bn). However, the stricter valuation rules give rise to changes in the income statements of the last two years, because sustained impairments in the value of equity investments have to be recognised nearer to the period in which they occur and hence more promptly than before.

    Munich Re has a head start of two years, given that the first application of the new IAS rules is only compulsory for business years starting on or after 1 January 2005. Schneider: "This provides a better insight into the earnings performance of our Group. The capital market will respect this prompter and more informative reporting. That's what happened when Munich Re was also among the first companies to switch its consolidated accounting from German Commercial Code to IAS back in 1999."

    More details on the effects of applying the new provisions will be available in the Munich Re Group's annual report.

    Reinsurance: Significantly improved combined ratio

    In the reinsurance segment, premium income fell by 2.6% to €24.8bn owing to changes in exchange rates; in original currencies it increased by 9.8%. Before amortisation of goodwill, the reinsurance group achieved a pre-tax profit of €2.7bn.

    With a combined ratio of 96.7%, the Group's reinsurers fully achieved their goal for 2003, even though they were affected by a number of large loss events. The combined ratio improved by 9.8 percentage points compared with the previous year's figure adjusted to eliminate special factors. The loss ratio of 69.6% includes 1.6 (3.3) percentage points for natural catastrophe losses. A series of tornadoes in the USA gave rise to claims expenditure of €90m for Munich Re; the wildland fires in California cost almost €50m. Hurricanes Fabian and Isabel, and Typhoon Maemi, together produced a claims burden for Munich Re of €110m. On top of this, there were considerable expenses for man-made losses, such as the blackout in North America (€50m) and the explosion in a Canadian oil refinery (over €60m).

    In the previous years' renewal negotiations, Munich Re had substantially improved prices and conditions in its non-life reinsurance business. In the renewals at the turn of the year 2003/2004, Munich Re again succeeded first and foremost in improving the quality of its portfolio. Board member Torsten Jeworrek: "Our policy is geared to an improved risk profile with sustainable earnings opportunities. One key factor in achieving this objective is risk-adequate pricing – as shown by our average price increases of 5% in the recent renewals. But conditions that limit our loss potential are also important."

    In life and health reinsurance, gross premium was up 4.8% to €6.9bn. With systematic focusing on profitable business, this segment was expanded solely through organic growth.

    Primary insurers with better underwriting performance; combined ratio below 100% again

    Munich Re's primary insurance group improved the performance of its underwriting business further in 2003. In the result of €248m before amortisation of goodwill and tax, it had to absorb (like the insurance industry as a whole) writedowns and losses on disposals from the preceding bear market, especially in the first half of 2003; for the business year as a whole, these burdens totalled €3.1bn. In the case of the life and health insurers, the result was also impacted by a disproportionate tax burden originating from system-adverse effects of the German business taxation reform and linked to special features of determining taxable profits for life and health insurance companies. As a result of the new arrangements for life and health insurers adopted at short notice in December, the current tax to be paid is reduced. At the same time, however, deferred taxes now have to be posted to take account of the valuation differences between the IAS reporting of the Group and the individual company financial statements; these deferred taxes initially have no effect on liquidity. Altogether, owing to the above-mentioned writedowns and losses on disposals, to various writedowns on goodwill totalling €581m, and especially to the high tax expenditure of €789m, the primary insurance group recorded a deficit of €1.1bn.

    The primary insurers increased their premium income by 6.3% (market average: 4.7%) to €17.6bn, representing 44% of the Munich Re Group's overall premium volume. Showing yet another significant improvement, the combined ratio in property-casualty insurance (including legal expenses business) stands at an excellent 96.4% (99.9%). This was due both to a lower loss ratio of 60.0% (62.4%) and to a better expense ratio of 36.4% (37.5%).

    The primary insurers recorded good growth in the life and health segment, with premium income rising by 6.9% to €12.5bn. This expansion was fuelled by double-digit growth rates in the life insurers' new business – confirmation of the attractiveness of making private provision through life insurance, despite the market-wide reduction in policyholders' bonuses. New business production in health insurance was adversely affected by the government's raising of the earnings ceiling for compulsory public health insurance at the beginning of 2003, but it still proved possible to achieve a slight increase.

    Munich Re Group's investments at around €172bn

    The Munich Re Group's investments, most of which are managed by MEAG, increased in the year under review to €171.9bn. Earnings on investments, which are incorporated in the underwriting profits of the reinsurers and primary insurers, totalled €7.1bn. Significant transactions in the year under review included the sale of Munich Re's stake in Hypo Real Estate Holding and the reduction of its shareholding in Allianz to 12.2%. The objective was to cut back the Group's exposure in the German financial services sector. A further step in this direction is the recently announced reduction of Munich Re's shareholding in HypoVereinsbank in conjunction with the latter's capital increase.

    Munich Re shares: Free float at over 80%

    Munich Re's free float, which is important for the weighting of its shares in stock indices, has now passed the 80% mark owing to the decrease of the stakes held by Allianz and HypoVereinsbank in Munich Re to under 10% in each case. Despite the difficult capital market environment, the number of Munich Re shareholders has risen from 122,000 at the beginning of 2003 to a current level of 187,000.

    Munich Re's balance sheet conference will take place, as announced, at 10.30 a.m. on 15 April 2004, and the Annual General Meeting at 10 a.m. on 26 May 2004.

    Münchener Rückversicherungs-Gesellschaft
    signed Dr. Schneider          signed Küppers

    This media information 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.