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20 March 2014
| Group
Press release
Munich Re targets profit of €3bn in 2014
Munich Re is aiming for a profit of €3bn in 2014. CEO Nikolaus von Bomhard is optimistic about the further development of the Group’s business in 2014. Munich Re closed 2013 with a profit of €3.3bn – the third-best result in the Company’s history. As already announced, subject to approval by the Annual General Meeting, the shareholders are to participate in this via an increased dividend of €7.25 (7.00) per share. In addition, Munich Re announced another share buy-back: shares with a volume of up to €1bn are again to be repurchased before the Annual General Meeting in 2015.
Commenting on the 2013 financial year, CEO Nikolaus von Bomhard
said: “The result for 2013 is an indication
of how we have positioned ourselves competitively
– we have strategically prepared Munich Re
for foreseeable challenges which we can now tackle from a position
of strength.” These challenges included the
lingering low-interest-rate environment, increasing competition in
reinsurance, and changes in demand from clients in primary
insurance.
“We have done our homework in recent
years. Our capital base is more than solid, in reinsurance we are
committed to solution-finding competence, and in primary insurance
we are bringing a visionary concept to the German market with our
new generation of life insurance products”,
emphasised von Bomhard. “We want our
shareholders to participate in Munich Re’s
success. The Board of Management and Supervisory Board will thus
propose to the Annual General Meeting to increase the dividend to
€7.25 per
share.”
For 2014, von Bomhard stated: “We are
aiming for a consolidated result of €3bn in
2014.” This is an ambitious objective, he
indicated, given the parameters: Munich Re is reckoning in
particular with a continuation of the low interest-rate levels in
2014 and hence with somewhat lower regular income from investments.
In addition, a normal tax burden is expected again for 2014, after
Munich Re posted a very low effective tax rate in 2013 due to the
recalculation of tax for prior years and the utilisation of loss
carry-forwards. “The quality of our core
business allows us to formulate this ambitious result
target”, said von Bomhard.
Munich Re has announced a further share buy-back programme: before
the Annual General Meeting on 23 April 2015, shares with a volume
of up to €1bn are to be repurchased. The
buy-back is conditional on no major upheavals occurring on the
capital markets or in underwriting business. On the basis of the
current share price, the buy-back would involve around 6.6 million
shares or approximately 3.7% of the share capital.
“With this share buy-back, we are again
paying out currently unneeded earned capital to
shareholders,” said von Bomhard.
“Our good capitalisation enables us to
continue taking selective advantage of opportunities for profitable
growth in individual regions and classes of business. At the same
time, it supports the discipline which is so important to us when
underwriting risks.” The currently ongoing
buy-back is to be concluded by the Annual General Meeting on 30
April 2014; to date, around 5.2 million
shares worth approximately €810m have been
bought back. Since November 2006, Munich Re has thus carried out
share buy-backs with a total volume of
€6.8bn.
Summary of the figures for the financial year
2013
In 2013, the Group posted an operating result of
€4.4bn (5.3bn). Despite low interest rates
and the adverse effects of exchange rates, shareholders' equity
decreased in 2013 by only around €1.2bn to
€26.2bn (31.12.2012:
€27.4bn) – mainly
thanks to the high profit for the year. The return on risk-adjusted
capital (RORAC) was 12.2% (13.2%), whilst the return on IFRS equity
(RoE) amounted to 12.5% (12.5%). Gross premiums written by the
Group in the financial year 2013 fell slightly to
€51.1bn (52.0bn) owing to currency
effects.
In 2013, Munich Re further strengthened its equity capital
according to its internal model, i.e. based on economic and
risk-based calculations, as well as according to IFRS accounting:
as at 31 December 2013, Munich Re’s
available financial resources were 153% (129%) of its self-defined
economic risk-capital requirement
(“economic solvency
ratio”). This internal capital requirement
corresponds to 1.75 times the future risk tolerance under Solvency
II. Subject to pending changes until supervisory recognition, the
solvency ratio according to Solvency II requirements would thus be
267% (225%).
Reinsurance: Very high result of
€2.8bn
The reinsurance business field contributed
€2.8bn (3.1bn) to the consolidated result.
Partly due to the lower income from investments, the operating
result decreased from €4.3bn to
€3.5bn.
Owing to changes in exchange rates, gross premiums written sank
somewhat to €27.8bn (28.2bn); of this,
€17.0bn was attributable to
property-casualty reinsurance and €10.8bn to
life reinsurance. If exchange rates had remained the same, premium
volume would have increased by 3.1%. The rise in premium adjusted
for exchange rates is mainly attributable to the expansion of
Munich Re’s motor business and the growth
of its US agricultural reinsurance business.
Life reinsurance accounted for €413m of the
consolidated result. In Australia, group disability business saw a
market-wide increase in claims. On top of this, additional
provision had to be made for more frequent and more costly claims
under some contracts in individual disability business. In the USA,
Munich Re posted increased expenses –
especially in the first three quarters of the year
– for mortality covers. By contrast, Munich
Re achieved particularly gratifying results in Canada and Asia,
where its expectations were surpassed owing to good claims
experience. The high-volume treaties concluded in recent years
continued to contribute favourably to the result.
The consolidated result in property-casualty reinsurance was down
on the previous year at €2.4bn (2.6bn). The
combined ratio in property-casualty reinsurance was a very good
92.1% (91.0%) of net earned premiums for the year as a whole.
Munich Re’s customary review of reserves
resulted in a reduction in the claims provisions for prior years
amounting to around €0.8bn for the full
year, which is equivalent to around 4.7 percentage points of the
combined ratio.
Natural catastrophe losses in property casualty business remained
below expectations, impacting the full year with
€764m (1,284m), while man-made major losses
amounted to an above-average €925m (515m).
The two largest losses in 2013 were the floods in central Europe in
June (€178m) and the intense rain and
hailstorms in Germany in June and July
(€174m). Overall claims expenditure for
major losses in 2013 totalled €1,689m
(1,799m).
Torsten Jeworrek, Munich Re’s Reinsurance
CEO: “As a well diversified reinsurer with
extensive know-how, we are in a position to offer tailor-made
solutions.” These include multi-year
treaties (occasionally incorporating cross-line and cross-regional
covers), retroactive reinsurance solutions, transactions for
capital relief, comprehensive consultation on capital management,
and the insurance of complex liability, credit and large industrial
risks. “Moreover, with our technical
expertise and risk knowledge, we are able to support rapidly
growing industries and to judiciously extend the boundaries of
insurability with needs-based covers”, said
Jeworrek.
The renewals at 1 April 2014 (mainly Japan) and 1 July 2014 (parts
of the US market, Australia and Latin America) will involve a
premium volume of around €3.2bn of
reinsurance treaty business, with a greater proportion of natural
catastrophe business than the renewals in January. Munich Re
expects the environment to remain competitive if there are no major
loss events. “Given our strong position on
the market, we expect to be able to limit the effects on our own
portfolio”, explained Jeworrek.
Primary insurance: Substantially improved result
situation
In its primary insurance business, Munich Re posted a
significantly higher profit of €433m (240m).
The operating result fell by around 20% to
€693m. Apart from the still-challenging
investment environment, the participation of life-segment
policyholders in a tax refund also played a role here. Gross
premiums written in 2013 decreased by 2.4% to
€16.7bn (17.1bn).
The ERGO Insurance Group, in which Munich Re concentrates its
primary insurance business, showed a profit of
€436m (290m). ERGO CEO Torsten Oletzky:
“I am very satisfied with this result from
ERGO, which is at the top end of our
expectations.”
In international property-casualty insurance, the combined ratio
improved to around 98.7% of net earned premiums. Following a series
of large losses – chiefly due to natural
hazards – the combined ratio in German
business was 96.3%.
Overall premium income across all lines of business decreased by
2.8% to €18.0bn (18.6bn) in 2013. Gross
premiums written in the primary insurance segment in 2013 decreased
by 2.4% to €16.7bn (17.1bn). In the health
and property-casualty segments, gross premiums written reached
roughly the same level as last year at
€5.7bn (5.7bn) and
€5.5bn (5.6bn) respectively. ERGO CEO
Oletzky commented: “In life insurance, it
is true for the industry as a whole that profitable growth is
exceptionally difficult to realise in the current environment. The
market still has a long way to go to combine being profitable with
making clients attractive offers of needs-based products. So I am
pleased that we at ERGO are again able to deliver on our brand
proposition with our new product
generation.”
At the beginning of June 2013, ERGO unveiled a completely new
generation of life insurance products. In the medium term, these
are intended to make up a large portion of new business. The
business figures for 2013 did not yet benefit to a material extent
from the sale of the new products, because the product range has
thus far been limited to what is known as the third layer of
old-age provision. “Now we plan to also
make it marketable for the other two layers
– state-sponsored products and company
pension schemes”, announced Oletzky.
Munich Health: Restructuring in the USA pays
off
This business field posted a profit of
€150m in 2013 (previous year: loss of
€91m). Munich
Health’s operating result increased to
€167m (109m), mainly owing to the
restructuring of US Medicare business. The sale of the Windsor
Health Group (WHG), agreed in late August 2013 and completed as at
31 December 2013, concludes the restructuring measures.
Owing to negative currency effects, Munich
Health’s premium income in 2013 was down by
around 2% to €6.6bn (6.7bn). In reinsurance,
premiums amounted to €4.6bn (4.7bn),
including premium income from large-volume treaties providing
capital relief for clients in North America. In primary insurance,
there was a fall in premiums of 4.4%, mainly a consequence of
discontinuation of WHG’s loss-producing
business with pure cost reimbursement products in the US Medicare
sector. If exchange rates had remained the same overall, Munich
Health's gross premiums in the reporting year would have increased
by 1.4%. The combined ratio for 2013 amounted to 98.3%
(100.2%).
Investments: Investment result of
€7.7bn despite low interest
rates
With a carrying amount of €209.5bn (market
value of €217.7bn), total investments at 31
December 2013 were down on the year-end 2012 figure of
€213.8bn (€224.5bn at
market value). This decline was due to a rise in interest rates and
to currency translation effects. The Group extended its investments
in infrastructure, renewable energies and new technologies (RENT)
to around €1.5bn. Munich Re intends to
further expand investment in this sector in 2014, provided that the
parameters are reliable and an appropriate return can be
generated.
The Group’s investment result fell to
€7.7bn (8.4bn). Of this,
€400m was income from unit-linked life
insurance. This result represents a return of 3.5% in relation to
the average market value of the portfolio. Munich
Re’s equity-backing ratio at 31 December
2013, including equity derivatives, increased to 4.5% (31 December
2012: 3.4%). Fixed-interest securities, loans and short-term
fixed-interest investments continued to make up the largest portion
of Munich Re's investments, with a share of 81% at market
value.
Regular income sank by 3.4% year on year in 2013 to
€7.5bn. The running yield fell from 3.6% to
3.4%. In the write-ups and write-downs of its investments, Munich
Re posted net write-downs of €670m
(–8m), particularly on its inflation,
equity and interest-rate derivatives. The result from the disposal
of investments, which primarily involved government bonds, amounted
to €1,059m (652m).
CFO Jörg Schneider expressed satisfaction
with the investment result: “3.5% is a good
return from our diversified investment portfolio with only moderate
risks. We are adhering to our balanced investment
policy.”
The Group's asset manager is MEAG, whose assets under management
as at 31 December 2013 included not only Group investments but also
segregated and retail funds totalling
€12.9bn (11.5bn).
Outlook for 2014: Group objective of
€3bn
Assuming exchange rates remain stable, the Group anticipates that
for the financial year 2014 its gross premiums written will be
around €50bn. It expects gross premium
income of some €28bn in the reinsurance
segment, and a figure of slightly above over
€16.5bn for primary insurance. Total premium
income in primary insurance (including the savings premiums of
unit-linked life insurance and capitalisation products) should be
slightly above €18bn. Gross premiums written
of slightly above €5.5bn are projected for
Munich Health.
For property-casualty reinsurance, Munich Re's target remains a
combined ratio of around 94% of net earned premiums. In
property-casualty primary insurance, the combined ratio for 2014
should be approximately 95%. The combined ratio for Munich Health
is likely to be around 99%.
For 2014, Munich Re anticipates consistently low interest-rate
levels and hence somewhat lower regular income from fixed-interest
investments. Overall, Munich Re expects a return on investment of
around 3.3%, equivalent to a decrease of 0.2 percentage points on
last year.
The consolidated result for 2014 in reinsurance should be in the
range of €2.3–2.5bn.
For the primary insurance segment, Munich Re projects a
consolidated result for 2014 in the range of
€400–500m, with
€350–450m for the
ERGO Group. The difference between the consolidated result targets
for the primary insurance segment and ERGO is mainly attributable
to intra-Group business between primary insurance and reinsurance.
Munich Re targets a profit of around €100m
for Munich Health.
The Group is aiming for a consolidated result of
€3bn, subject to claims experience with
regard to major losses being within normal bounds and to its income
statement not being impacted by severe currency or capital market
developments, significant changes in fiscal parameters, or other
exceptional factors.
As already announced, subject to approval by the Annual General
Meeting, Munich Re intends to pay an increased dividend for the
2013 financial year of €7.25 per share in
May 2014, equivalent to a total payout of nearly
€1.3bn based on the shares currently in
circulation.
Note for editorial departments In case of enquiries, please contact:
Media Relations Munich, Johanna Weber
Tel.: +49 (89) 3891-2695
Media contact in Asia, Nikola Kemper
Tel.: +852 2536 6936
Media Relations North America:
Beate Monastiridis-Dörr
Tel.: +1 (609) 235-8699
Terese Rosenthal
Tel.: +1 (609) 243-4339
Munich Re stands for exceptional solution-based
expertise, consistent risk management, financial stability and
client proximity. This is how Munich Re creates value for clients,
shareholders and staff. In the financial year 2013, the Group
– which combines primary insurance and
reinsurance under one roof – achieved a
profit of €3.3bn on premium income of over
€51bn. It operates in all lines of
insurance, with almost 45,000 employees throughout the world. With
premium income of around €28bn from
reinsurance alone, it is one of the world’s
leading reinsurers. Especially when clients require solutions for
complex risks, Munich Re is a much sought-after risk carrier. Its
primary insurance operations are concentrated mainly in the ERGO
Insurance Group, one of the major insurance groups in Germany and
Europe. ERGO is represented in over 30 countries worldwide and
offers a comprehensive range of insurances, provision products and
services. In 2013, ERGO posted premium income of
€18bn. In international healthcare business,
Munich Re pools its insurance and reinsurance operations, as well
as related services, under the Munich Health brand. Munich
Re’s global investments amounting to
€209bn are managed by MEAG, which also makes
its competence available to private and institutional investors
outside the Group.
Disclaimer
This press release 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.
Munich, 20 March 2014
Münchener
Rückversicherungs-Gesellschaft
Aktiengesellschaft in München
Media Relations
Königinstrasse 107
80802 Munich
Germany
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