Important tools of corporate management

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Important tools of corporate management

The aim of Munich Re’s entrepreneurial thinking and activity is to analyse risks from every conceivable angle and to assess and diversify them, creating lasting value for shareholders, clients, and staff in relation to the risks assumed. This is the aim of our active capital management and the consistent application of value and risk-based management systems.

The Group's performance indicators

The two main performance metrics at Group level are economic earnings and the return on risk-adjusted capital after tax (RORAC).

Economic earnings

The starting point for value-based management is the economic value added in a fixed period, which we determine based on the key performance indicator “economic earnings”. These correspond with the change in eligible own funds under Solvency II, adjusted for items that do not represent economic value added in the period – such as capital measures, and the change in regulatory restrictions.

In applying the uniform Group performance measurement model of economic earnings in the individual fields of business, we use conceptually consistent value-based and risk-capital-based measurement approaches1 that are individually geared to the characteristics of each of the respective businesses.

Group corporate management is designed so that we are in a position to maximise value creation while observing subsidiary parameters.

Return on risk-adjusted capital (RORAC)

Munich Re's value orientation is also reflected in the after-tax return on risk-adjusted capital (RORAC). RORAC is a mixture of accounting ratios and economic indicators. It relates the performance indicator customary in the capital markets (IFRS consolidated result) – which we adjust to eliminate the risk-free return after tax on additional available economic equity – to the necessary capital requirement. The capital requirement corresponds to 1.75 times the solvency capital requirement under Solvency II, as determined on the basis of our certified internal risk model.

The value added by property-casualty reinsurance and Munich Health, and the excess return from our investment activity (asset-liability management); the value added by new business and the change in value of inforce business in the area of life reinsurance and economic earnings for ERGO.


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