7 November 2006
Share buy-back of EUR 1bn
Excellent reinsurance business performance in the first three quarters
Primary insurance: ERGO with outstanding result
Return on risk-adjusted capital at 16.5% after three quarters / Target of 15% for the year will be clearly surpassed as things stand at present
Given normal claims experience and stable capital markets until the end of the year, consolidated profit in the range of EUR 3.2-3.4bn achievable
Another dividend increase in prospect
Munich Re decides to buy back shares
Today, the Board of Management of Munich Reinsurance Company ("Munich Re") decided that up to 11,000,000 Munich Re shares will be acquired via the stock exchange in the period between 8 November 2006 and, at the latest, the Annual General Meeting on 26 April 2007. The share buy-back will be restricted to a total purchase price (excluding additional charges) of EUR 1bn; on the basis of the share price level on 2 November 2006, this would be nearly eight million shares or 3.4% of the share capital.
The Board of Management is thus availing itself of the authorisation to buy back shares granted by the Annual General Meeting on 19 April 2006. The purpose of the share buy-back is to retire the repurchased shares in order to optimise the Company's capital structure.
The buy-back will be carried out in accordance with Section 14 para. 2 and Section 20a para. 3 of the German Securities Trading Act in conjunction with the rules of Commission Regulation (EC) No. 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments.
Summary of the Munich Re Group's Q1-Q3 figures
In the first nine months of 2006, the Munich Re Group recorded an outstanding profit of EUR 2,861m (first nine months of 2005: EUR 1,390m). The operating result grew by 60.4% to EUR 4,638m (2,891m). Gross premiums written amounted to EUR 28.1bn, a level which – adjusted for disposals (e.g. Karlsruher in October 2005) and positive exchange-rate influences – is about the same as last year's. Shareholders' equity has risen by 5.1% to EUR 25.7bn since the beginning of the year (31.12.2005: EUR 24.4bn), primarily due to the very good development of results.
Reinsurance: High profit of EUR 2,361m / Below-average claims burdens
The result in reinsurance business benefited from risk-adequate prices, terms and conditions. In contrast to the same period last year, Munich Re was also largely spared major losses from natural catastrophes in the first three quarters of the current year.
The operating result increased to EUR 3,694m (2,154m) in the first nine months, and reinsurance contributed EUR 2,361m (1,030m) to the Group profit. Buoyed by positive developments in exchange rates, premium income was up slightly by 0.6% to EUR 16.8bn (16.7bn).
In the life and health segment, premium income was around last year's level at EUR 5.8bn, and the segment contributed EUR 429m (682m) to the profit.
In property-casualty reinsurance, premium grew slightly to EUR 11.0bn (10.9bn), whilst the result jumped to EUR 1,932m (348m). The combined ratio came to an excellent 92.1% (108.2%).
Primary insurance: Substantial profit increase at ERGO / Very good combined ratio
In the first nine months, the primary insurers in the Munich Re Group improved their operating result to EUR 997m (795m), and their profit rose significantly to EUR 573m (461m). The ERGO Insurance Group, which writes about 95% of the gross premiums in Munich Re's primary insurance segment, contributed particularly to the positive development, with an increased profit of EUR 566m (416m). Its combined ratio for property-casualty business including legal expenses insurance amounted to a very good 90.6% (93.0%) and that of the whole primary insurance group to 91.0% (93.4%).
Investments: Result at a high level of EUR 7.0bn
The Munich Re Group's investments totalled EUR 178.2bn as at 30 September (31.12.2005: EUR 177.2bn). For the first nine months of the year, the Group achieved a very good investment result of EUR 6,993m (8,052m). In the third quarter, too, advantage was taken of the favourable mood on the capital markets to restructure or sell investment portfolios.
Outlook for the business year 2006 as a whole: Premium volume at last year's level / Positive business development in primary insurance and reinsurance / Improved combined ratios
Munich Re reckons that, with stable exchange rates, the Group's premium income for the whole of 2006 is likely to be between EUR 37bn and EUR 38bn and thus at the same level (adjusted for sales of subsidiaries) as last year. Before consolidation, it currently expects reinsurance to provide approximately EUR 22-23bn of this, and primary insurance around EUR 16.5-17.0bn.
Munich Re is confident of achieving a combined ratio of below 95% for reinsurance in 2006. In primary insurance, another combined ratio of around 93% should be achievable for 2006.
As things stand at present, the RORAC target of 15% for 2006 will be clearly surpassed. Provided the capital markets and claims experience remain within normal bounds up to end of the year, the consolidated profit should be between EUR 3.2bn and EUR 3.4bn. Given the excellent business performance, the Board of Management sees the possibility of increasing the dividend again, unless there are exceptional adverse developments in the fourth quarter.
Further details may be obtained from the press release.
Munich, 7 November 2006
Aktiengesellschaft in München
This announcement 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.