Business figures 1 January - 31 March

• Big step towards target for the year with high quarterly profit of 979m
  
  
• First-rate results in primary insurance and reinsurance 
  
  
• Treaty renewals in reinsurance strictly gearded to profitability
  
  
• European Embedded Value figures published for the first time for 2004/2005: Marked increase

"With a profit of €979m in the first three months, we are in an even better position than at this point last year, despite the fact we had more major losses in this year's first quarter. The excellent quarterly result is a big step towards achieving our target for 2006 – a post-tax return of 15% on risk-adjusted capital. Thanks to very good results from our underwriting business and investments, we are already more than a third of the way there. And that's good, as experience shows that later quarters are more highly exposed," said Jörg Schneider, member of the Board of Management, when presenting the quarterly figures. "ERGO also fully met our expectations with a very much improved quarterly profit of €145m (70m). In all areas of the Group, we are continuing to focus on profitability – the indispensable basis for healthy growth."

The quarterly profit rose to €979m after tax, an increase of no less than 41.7% on the first quarter of last year, and the operating profit was up by 29.4% to an excellent €1,471m. Both figures were a consequence of strict profit orientation and prudent underwriting policy. At €10.0bn (10.2bn), premium income was nevertheless only slightly down on last year's level. Equity increased to €25.1bn (31.12.2005: €24.4bn).

*All previous year's figures have been adjusted owing to first-time application of IAS 19 (rev. 2004).

With a very good operating result of €1,234m, the Group bettered its high profit of €945m in the same quarter last year. The reinsurance segment contributed €841m (604m) to the consolidated result. At €1,055m (1,014m), the reinsurance investment result reached about the same level as last year. Net gains on the disposal of investments rose by 31.9% to €434m, as the Group took advantage of the favourable stock market situation. Buoyed by changes in exchange rates, premium volume increased slightly by 2.6% to €6.0bn (5.8bn).

The life and health segment contributed €182m (132m) to the profit in reinsurance. Premium volume remained stable at last year's level, totalling €1.95bn (1.92bn).

In property-casualty reinsurance, the Group's focus in the treaty renewals at the beginning of the year, at 1 April and 1 July continues to be strictly on profitability. Given this rigorous underwriting policy, the portfolio's earnings potential can be expected to remain high. Premiums in this segment grew slightly to €4.0bn (3.9bn), and the quarterly result rose to €659m (472m).

Claims costs for major losses were higher than in the equivalent quarter last year: Cyclone Larry caused substantial damage in northern Australia, giving rise to claims of almost €50m for Munich Re. Altogether, major losses – including a container ship fire (approx. €30m) and a satellite failure (approx. €20m) – amounted to €274m (251m). However, thanks to the good performance of the rest of the business, the combined ratio improved again significantly to 92.2% (96.5%), with natural catastrophes accounting for 2.0 (2.4) percentage points.

The Munich Re Group's primary insurers posted a further improved operating result of €232m (200m) and a higher profit than in the good first quarter of last year, namely €138m (121m). The investment result totalled €1.1bn (1.5bn). Gross premiums written by the primary insurers fell to €4.6bn (4.9bn), owing to the sale of the Karlsruher Insurance Group and the Nieuwe Hollandse Lloyd Verzekeringsgroep (NHL), which were still members of the Munich Re Group in the first quarter of 2005, when they contributed premium income of €420m (€254m in life insurance and €166m in property-casualty insurance). Premium written by the remaining companies in the Group rose by 2.6%.

The primary insurance segment's figures are largely determined by the ERGO Insurance Group, which writes over 94% of the premium income. Whilst its premium revenues decreased by 0.8% to €4.3bn, mainly due to the sale of NHL, ERGO contributed to the Munich Re Group's very good result with a more than doubled quarterly profit of €145m (70m).

Gross premiums written in the life and health segment fell by a total of 7.9% to €2.9bn.

• The life insurers wrote lower gross premiums of €1.6bn (1.8bn) in the first three months of the year, mainly due to the sale of the Karlsruher Insurance Group. However, they recorded some appreciable growth in sales, particularly in the field of annuity and "Riester" pension products.
• Premium income in the health insurance segment increased by 4.0% to €1.3bn, driven by good new business production and low lapse rates.

In property-casualty insurance, including legal expenses insurance, gross premiums fell by 3.5% to €1.7bn, owing to the sale of Karlsruher and NHL. Thanks to a good portfolio mix with a large proportion of personal lines business, the combined ratio was better than in the first quarter last year, despite the unusually hard winter, and amounted to 97.0% (99.0%). ERGO's combined ratio is even better, standing at 96.1% (97.3%).

The Munich Re Group's investment result totalled €2.1bn (2.5bn) for the first three months. The marked rise in interest rates (leading to falling prices for fixed-interest securities) and the highs on the stock markets made themselves felt. There was a loss in the value of derivative financial instruments used by the Group for hedging against falling interest rates and share prices, resulting in costs of €450m. Net unrealised gains on securities available for sale amounted to €9.6bn (31.12.2005: 11.0bn), and the proportion of equities totalled 15.2% (31.12.2005: 14.0%) of the Group's investments at fair value. The Group took advantage of the favourable stock market situation to sell shares, producing a gain of €924m (909m) on the disposal of investments.

Together with its quarterly figures, the Munich Re Group is publishing European Embedded Value (EEV) figures for its life and health primary insurance business and its life reinsurance business in the business year 2005. The marked increase in the Munich Re Group's European Embedded Value to €8.8bn (EEV at 31.12.2004: €7.5bn) is largely due to the high value of new business and a good result from in-force business totalling €765m.

The very positive treaty renewals in property-casualty reinsurance at the turn of year were followed by similarly successful renewals at the beginning of April with cedants in Japan and South Korea and with a number of global clients. The Group expects its premium income to show a slight increase, with continuing high profit potential. In primary insurance, it estimates that premium development will be stable when adjusted for the premium income of the companies sold last year. For its business operations as a whole, the Munich Re Group again anticipates a premium volume of between €37bn and €38bn, with €22-23bn coming from reinsurance and €16.5-17bn from primary insurance (before consolidation in each case).

Munich Re continues to put profitability before growth and has set itself the target of a post-tax return of 15% on risk-adjusted capital, corresponding to a consolidate profit in the range of €2.6-2.8bn.

The Munich Re Group operates worldwide, turning risk into value. In the business year 2005, it achieved a profit of €2,743m, the highest in its 126-year corporate history. The Annual General Meeting on 19 April 2006 adopted the proposal of the Board of Management and Supervisory Board to pay a dividend of €3.10 (2.00) to the shareholders, of whom there are some 140,000. In 2005, total premium income amounted to approximately €38bn and its investments to around €177bn. The Group is characterised by particularly pronounced diversification. It has more than 38,000 employees in 60 countries throughout the world and operates in all lines of insurance. It is one of the world's leading reinsurers and, through the ERGO Insurance Group, the second-largest provider in the German primary insurance market and a leading player in several other European insurance markets.

Disclaimer
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.