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20 September 2001 | Translation of the German ad-hoc announcement

Munich Reinsurance Company

Based on the information available at this time and taking into account conceivable loss scenarios, Munich Re has estimated its possible pre-tax loss burden at €2.1bn. This would be 11.5% of its reinsurance premiums of €18.3bn for the business year 2000 and in absolute figures constitutes by far the largest loss in the history of Munich Re. In relative terms – i.e. in relation to premium income – the company's claims burden is, however, still marginally less than that following the San Francisco earthquake in 1906.

"Our conservative estimate includes all conceivable scenarios. Even against the background of the overall situation that is now becoming clearer and the ensuing very considerable impact on results, we still expect to be able to pay a dividend of €1.25 per share for the business year 2001", said Dr. Hans-Jürgen Schinzler, Chairman of the Board of Management of Munich Re.

Although Munich Re has not yet received a single claim from the primary insurers affected, the information gathered so far changes the picture previously communicated. Besides the twin towers of the World Trade Center, a number of adjacent buildings have been damaged or destroyed. This will also have an impact on the level of business interruption claims. For these reasons alone, the extent of the overall loss is much greater. Dr. Schinzler: "In view of the complexity of the loss occurrence, it could take a long time to settle claims. We will of course stand by our business partners from the outset and offer them every support."

In addition to the further improvement in rates and conditions that were in any case necessary, Munich Re expects a fundamental reassessment of the risk situation for the renewal of reinsurance treaties that traditionally take place in the last quarter of the year, as the attacks have revealed a previously unimaginable risk potential. This not only affects the US market but applies worldwide. Primary insurance and reinsurance coverage, as well as terms and conditions will have to be completely rethought.

The Munich Re Group also indicated that its companies have not invested in any of the buildings affected. Total Group investments amount to over €165bn (as at 30th June 2001).

Munich Reinsurance Company
The Board of Management