Press release

• Munich Re concludes agreement to acquire specialist US primary insurer The Midland Company (Midland)
  
  
• Expansion of niche segments in US primary insurance as part of the strategic realignment of Munich Re’s US business
  
  
• Peter Röder, Munich Re Board member with sole responsibility for the US market as from 1 January 2008: "We intend to grow profitably in the world’s most important insurance market. Establishing and building on a leading position in niche segments of the US primary insurance market is a significant aspect of our strategy for the USA within our Changing Gear programme."
  
  
• "The specialised business model of insurers like Midland helps us to mitigate the volatility of our traditional reinsurance business," said Röder.
   

As part of its realignment in the US insurance market, Munich Re has concluded an agreement with US primary insurance company Midland – via its subsidiary Munich-American Holding Corporation – under which Munich Re will acquire 100% of the shares in Midland. The agreement provides for an acquisition price of US$ 65 per share; the total offer amounts to around US$ 1.3bn (€0.9bn).

Through its wholly owned subsidiary, American Modern Insurance Group, Midland’s operations focus on specialty insurance, which includes niche segments such as insurance for manufactured housing and motorhomes. Thanks to its disciplined underwriting policy, American Modern has been able to post high earnings in the last few years and low combined ratios (2006: 93.0%; 2005: 93.8%; 2004: 96.3%).

With premium income of US$ 832m (€679m) in 2006, Midland is one of the leading US specialty insurers; in segments like manufactured house insurance, it ranks among the top three providers. The insurer operates through specialist companies and via various distribution channels. "With this set-up and a presence in 50 states, Midland is excellently positioned," said Röder, who will have sole charge of North American business on Munich Re’s Board of Management as from 1 January 2008.

"Establishing and building on a leading position in niche segments of the US primary insurance market is a component of our Changing Gear programme. Cycle and capital management is the basis of our disciplined underwriting policy and ensures profitable growth in reinsurance," said Röder. Just last week, on 9 October, Munich Re unveiled the strategic realignment of the Group’s US business. Röder also made clear that the Munich Re Group would again profit from its diversified set-up: "In the US market, we are building on the existing expertise in Munich and at Munich Re America, which has been active in the primary insurance market via subsidiaries since 1995. Our objective is a leading position in specialised primary insurance segments", stated Röder.

In 2006, Munich Re America wrote gross premiums of US$ 747m (€609m) in primary insurance specialty segments. The total market for specialty insurances in 2006 was estimated at around US$ 80bn (€65bn).

In presenting Munich Re's strategic realignment in the US market, Munich Re America CEO-elect Tony Kuczinski had stressed: "There are attractive specialty segments particularly in the primary insurance market."

Direct operative control of Midland would lie with Munich Re America after the acquisition. Kuczinski: "This will ensure compliance with our strictly profit-oriented underwriting guidelines." At the same time he emphasised: "We are counting greatly on the know-how of Midland's current management and staff. They have made Midland the successful insurer it is today. We are confident of shaping the future even more successfully together with this team."

John W. Hayden, Midland president and chief executive officer, welcomed the agreement with Munich Re: "We are very excited about this unique opportunity to take this premier specialty property and casualty insurance company and join forces with one of the largest insurance companies in the world. Midland has a track record of producing superior returns for its shareholders."

If Midland’s shareholders approve, the acquisition is expected to be completed in the second quarter of 2008, once all the requisite approvals have been obtained from the competent authorities.

Midland, which is headquartered in Cincinnati, Ohio, is a provider of specialty insurance products and services through its wholly owned subsidiary, American Modern Insurance Group, which accounts for approximately 95 percent of Midland’s consolidated revenue. American Modern specialises in writing physical damage insurance and related coverages on manufactured housing and has expanded to other specialty insurance products including coverage for site-built homes, motorcycles, watercraft, snowmobiles, recreational vehicles, physical damage on long-haul trucks, extended service contracts, excess and surplus lines coverages, credit life and related products as well as collateral protection and mortgage fire products sold to financial institutions and their customers. Midland also owns a niche transportation business, M/G Transport Group, which operates a fleet of dry cargo barges for the movement of dry bulk commodities on the inland waterways. Midland’s common stock is traded on the Nasdaq Global Select Market under the symbol MLAN. Additional information on the company can be found on the Internet at www.midlandcompany.com.

Münchener Rückversicherungs-Gesellschaft
signed Dr. Röder           signed Dr. Lawrence