Group finance and risk Financial results 2019 – Strong earnings despite high large losses and low/negative interest rates ▪ Earnings growth in Reinsurance despite challenging Q4 – improved IFRS net income underlying C/R of ~98-99% € 2.7 bn (€2.3bn) ▪ ERGO contributing €440m – ahead of its ESP targets ▪ High investment result (RoI: 3.2%) and low tax expenses ▪ Decline in HGB result due to lower underwriting result and higher HGB result tax expenses … € 1.5 bn (€2.2bn) ▪ … partially offset by strong investment result ▪ Distributable earnings support continuation of attractive capital management returns ▪ Well above target capitalisation Solvency II ratio ▪ High economic earnings 1 of >€7bn compensate for … 237 % (245%) ▪ … increase of required capital due to business growth and further decline of interest rates 14 Analysts’ and Investors’ Call 2020 28 February 2020 Figures as at 31.12.2019 (31.12.2018). 1 Comprehensive disclosure on economic earnings will be available on 18 March 2020.
Group finance and risk – IFRS IFRS result Q4 2019 – Major drivers Reinsurance: €116m ERGO: €101m FX losses: Net income –€241m High large losses in P-C and Fully in line with run-rate € 217 m strengthening of disability of FY guidance assumptions in Australian life Tax income: business (approx. –€200m) €127m (€238m) P-C Re C/R: 112.5% – ERGO P-C Germany Technical result Major-loss ratio: 27.4% C/R: 93.2% –€ 225 m Reserve releases 1 : 7.1% L/H Re technical result ERGO International (€335m) including fee income: €70m C/R: 94.8% Investment result Return on investment Disposal gains overcompensate for derivative losses € 1,965 m 3.1% Reinvestment yield slightly down to 1.9% due to investments in shorter maturities in Q4 (€1,661m) 15 Analysts’ and Investors’ Call 2020 28 February 2020 Figures as at Q4 2019 (Q4 2018). 1 Basic losses from prior years, already adjusted for directly corresponding sliding-scale and profit-commission effects.
Group finance and risk – IFRS IFRS result FY 2019 – Operating performance supported by strong balance sheet Reserving Investments Taxes Resilience to adverse Valuation reserves Ongoing prudent Strong development, e.g. US casualty – increased to €33bn setting of reserves balance unchanged reserve strength sheet Some tax releases – Ongoing high reserve ALM and ZZR-driven Earnings releases for basic losses – realisations overcompensate tax rate of 15.1% support 2019: 5.6% derivate losses from equity- in 2019 and interest-rate hedging 16 Analysts’ and Investors’ Call 2020 28 February 2020
Group finance and risk – IFRS – Reserving Prudent reserving protecting balance sheet against negative surprises while continuously contributing to earnings strength Ongoing reserve releases 1 Managing industry hot spots Munich Re impact Asbestos De-risking with large 7.2 claims settlements Complex litigation, in the past and very changes in legal and strong survival ratio regulatory environment 5.6% 5.5 5.2 US workers ’ comp. 4.6 Prudent reserving High losses for reinsurers situation allowed for in business underwritten reserve releases during late 90s; significant again in 2019 late-loss emergence Worsening loss trends 2015 2016 2017 2018 2019 US liability in selected portfolios, continuous and pro-active High litigation risk and increasing social-inflation strengthening of reserves Positive claims experience by far trends to ensure prudence level exceeding adverse development in selected hot-spot areas 17 Analysts’ and Investors’ Call 2020 28 February 2020 1 Reinsurance Property-casualty, in % of net earned premium, basic losses after sliding scale commissions.
Group finance and risk – IFRS – Investments Investment return – Resilience to low interest rates expected to persist 3.2% 3.2% 3.2% RoI 2.8% Disposal ZZR financing, prudent ALM Negative and usual portfolio turnover – 1.1 1.1 gains impact on ~5 bps 1.1 0.7 valuation reserves partly realised running yield Expected attrition Running Portfolio Running ~10 bps share 1 yield 1 yield Fixed Regular ~80 % ~2.5 % ~5 bps income 2.8 2.8 2.8 attrition 2.7 ~60 bps 8.4 Non-fixed ~20 % ~4.0 % income Delta reinvestment Asset and running yield 1 duration 1 Well-balanced, high-quality investment portfolio reduces impairment risk – Other – 0.6 – 0.7 – 0.7 – 0.7 items 2 ALM-based equity and interest-rate hedges protect against adverse development 2016 2017 2018 2019 18 Analysts’ and Investors’ Call 2020 28 February 2020 1 Munich Re, as at 31.12.2019. 2 Write-ups/write-downs, derivatives, other income/expenses.
Group finance and risk – HGB German GAAP (HGB) – Capital repatriation well funded despite decline of distributable earnings HGB result below capital repatriation €3.8bn – 1.3 HGB result 2018 2.2 1.5 – 0.1 €3.0bn €bn – 1.0 Equalisation provision – 0.9 Underwriting result €9.3bn Investment result +0.6 8.5 +€ 0.8 bn – 0.4 Other HGB result 2019 1.5 1 Distributable Dividend Share HGB result Other Distributable 2018 2019 earnings buy-back 2019 earnings 31.12.2018 31.12.2019 19 Analysts’ and Investors’ Call 2020 28 February 2020 1 Changes in restrictions on distribution.
Group finance and risk – Solvency II Sound economic capitalisation continues to support our capital- management strategy – First-time application of VA for four ERGO entities Development of Solvency II ratio SII sensitivities % 302% 267% 253 245% 247 244% 3 237% 220% 232 226 224 219 Optimal range 213 175% 140% Interest Equity Spread Spread Atlantic 1 1 2 rates markets GOV CORP Hurricane 100% +/-50bps +/-30% +50bps +50bps 2019 2015 2016 2017 2018 2015 – 2019: Economic earnings cover capital €41.5bn 40.7 40.7 35.1 36.0 EOF repatriation, while business growth and low interest rates have driven the increase of required capital €17.5bn 13.5 15.3 14.4 14.7 SCR 20 Analysts’ and Investors’ Call 2020 28 February 2020 1 Parallel shift until last liquid point, extrapolation to unchanged UFR. 2 Based on 200-year event. 3 SII ratio includes volatility adjustment for ERGO Leben, Victoria Leben, ERGO Belgium and DKV Belgium. VA impact in 2019 ~6%-pts.
Group finance and risk – Solvency II SCR development – Balanced risk profile between insurance and investment risks maintained € bn SCR increase largely driven by selective business growth and low interest rates Total SCR Property-casualty Life and Health (incl. diversification) 8.8 7.6 Selective business Insurance 6.4 5.3 17.5 risks growth in Reinsurance +1.2 +1.1 (esp. nat cat), FX and 14.7 +2.8 low interest-rates 2018 2019 2018 2019 Market Credit 10.1 9.2 Further decline in Investment risks interest rates +0.9 4.2 3.2 +1.1 2018 2019 2018 2019 2018 2019 21 Analysts’ and Investors’ Call 2020 28 February 2020
Group finance and risk Selected changes in disclosure as from Q1 2020 to increase comparability across segments and peers Changes as from Q1 2020 1 Current situation ▪ IFRS ROE 1 to replace external RORAC ▪ Focus on economic value creation, Group stronger consideration of IFRS ▪ Harmonise allocation of admin costs between ▪ Some inconsistency of KPIs across ERGO and Reinsurance 2 segments ▪ Most peers allocate some costs ▪ Reallocation of some admin costs affecting Re- technical and investment result 3 outside admin costs insurance ▪ No impact on operating result ▪ P-C Re combined ratio reduces by approx. 0.5%-pt. to ~1%-pt. ▪ Some costs, especially related to ▪ Allocation of respective costs to other ERGO Strategy Programme (e.g. project operating result costs) accounted for as non-operating, ▪ Decline of operating result, other non- albeit being rather operating operating result increases accordingly 22 Analysts’ and Investors’ Call 2020 1 Calculation method of shareholders‘ equity based on beginning and end of year (not quarterly averages), adjusted for unrealised gains/losses and including currency 28 February 2020 translation effects. 2 Further details provided in the backup. 3 E.g. Group project, overhead and innovation costs.
ERGO 3 Image: dem10 / iStockphoto Getty Images
ERGO ERGO Strategy Programme (ESP) – On track to deliver targets 2020 Actual Guidance Actual ESP guidance 2020 2 2018 2019 2019 ~€ 18.5 bn € 18.7 bn ~€ 18.5 bn 1 € 18.9 bn Total premiums ~€ 530 m € 412 m ~€ 400 m 1 € 440 m Net profit Investments € 1,008 m € 597 m € 908 m 2 € 770 m (net, accumulated) Total cost savings € 279 m € 174 m € 227 m 2 € 234 m (net, accumulated) Combined ratio 92 % 96.0 % ~93 % 1 92.3 % P-C Germany 24 Analysts’ and Investors’ Call 2020 1 From Annual Report 2018. 2 ESP guidance (total premiums adjusted for Munich Health integration and portfolio streamlining). 28 February 2020
ERGO ERGO Strategy Programme – Progress in focus areas Germany Digital Ventures International ▪ Product portfolio optimisation continued, ▪ nexible ▪ High earnings contribution and profitability in simplified product approach shows first results core markets continued ▪ Growth continued (~62k policies; +23% 1 ; ▪ Sales increased by ~6% 1 ; tied-agent ▪ Top 5 positions in core markets maintained ~100k risks insured) productivity further improved (~18% 1,2 ) ▪ Focus on process optimization after ▪ Footprint in emerging markets expanding, ▪ Progress in hybrid customer business model: successful launch e.g. regional expansion in China; merger in India leading to increasing business ▪ ERGO Direkt, ERV and D.A.S. Germany ▪ ERGO Mobility Solutions opportunities unified in one brand ERGO; modern ▪ Cooperation strategy successfully expanded OneWebsite “Ergo.de” launched ▪ International portfolio streamlining finalised ▪ SAP platform for B2B2C mobility business while maintaining strong earnings level; ▪ Integrated campaigns performed based on launched sale of 18 subsidiaries completed 3 new CRM analytics – leads to tied agents ▪ Robotics and Artificial Intelligence (AI): significantly increased (>230k, +330% 1 ) Process automation scaled up; more than ▪ Registered customer portal users reached 70 Bots and first AI applications in operation one million (2018: 900k users) Technology Unlocking further business potential through Delivery volume of Digital IT significantly Integrated target IT architecture across continued technical integration of products increased while improving efficiency and ERGO brands currently in implementation into omni-channel sales system (e.g. health) time-to-market (e.g. OneWebsite, new KPI cockpit for tied agents) 25 Analysts’ and Investors’ Call 2020 1 Compared to previous year. 2 ERGO Beratung und Vertrieb only. 3 Thirteen transactions closed. 28 February 2020
ERGO ERGO Group – Key financials 2019 Group L&H Germany P-C Germany International € 17.5 bn € 9.2 bn (€9.3bn) € 3.5 bn (€3.4bn) € 4.7 bn (€4.6bn) 1 GWP (€17.4bn) 1 Strong growth – increase in Growth in Life new book partially Premiums increased in core markets compensates for back-book attrition; commercial and retail business positive development in Health € 148 m (€45m) € 187 m (€264m) € 105 m (€103m) Net € 440 m Significant improvement of result Adjusted for one-off in 2019, Good operating performance offsets (€412m) technical result net profit in Life increased; divestment effects ongoing high Health contribution Return on investment Combined ratio Combined ratio % % % – 3.7%-p – 0.3%-p +20bp +7% 440 96.0 94.3 3.1 94.6 92.3 412 2.9 2018 2019 2018 2019 2018 2019 2018 2019 26 Analysts’ and Investors’ Call 2020 Figures as at 31.12.2019 (31.12.2018). 1 Adjusted for portfolio streamlining: Group: €17.7bn (€17.8bn), International: €4. 9bn (€5.1bn), without JV. 28 February 2020
ERGO Life and Health Germany – Addressing low-interest-rate environment in Life New book Back book ▪ ERGO Vorsorge as unified risk carrier for ▪ Progress in portfolio migration onto new new product offering through merger 1 IT platform GWP ▪ Profitable new business concentrating on ▪ Foundation for TPA business model set through € 9.2 bn biometric offers and products with significantly additional sales joint venture with IBM reduced market risk ▪ Resilient investment yields exceeding guarantee ▪ Double-digit APE growth, mainly driven obligations (incl. ZZR), total yield even higher Health by capital-market related 2 products Digital Germany ▪ Measures to mitigate interest-rate risks continued, Ventures ▪ Already substantial share of Life Germany e.g. hedging and interest-rate reinsurance premiums (~20%) Life Germany New business (APE) Investment margins € 2.9 bn €m % (32%) Avg. yield Biometric Avg. guarantee (incl. ZZR) Capital-market related +29% 3.4 3.0 3.0 2.9 134 29 104 75 41% 83% 44% 2.5 29% 17% 2.2 59% 2.1 56% 1.9 71% New book EDL 2018 2019 2016 2017 2018 2019 2018 2018 27 Analysts’ and Investors’ Call 2020 1 Merger of ERGO Vorsorge Lebensversicherung AG with ERGO Direkt Lebensversicherung AG (EDL) in 01 2019. 2 Index- and unit-linked products. 28 February 2020
ERGO Life and Health Germany – Maintaining leading positions in Health Business development on track Extension of market leading position in Life Germany supplementary insurance ▪ Market leader with >20% market share 2 ; strong ▪ Strong and sustainable earnings contribution GWP new business development € 9.2 bn ▪ Focus on profitable and low-risk ▪ Expansion in long-term care and dental insurance supplementary insurance without ageing ▪ Further integration of on- and offline sales reserves Digital ▪ Launch of integrated mobile application channels with positive impact on new business Ventures (thereof Health €0.6bn) “ Meine DKV” Health Germany Business mix (GWP) Insured persons (supplementary insurance) € 5.6 bn 1 €bn 3 1,000 (60%) +3% Supplementary insurance Comprehensive insurance 5,231 5,171 5,116 5.5 5,084 5.4 5.3 5.2 31.3% 32.0% 30.4% 29.8% 68.0% 70.2% 69.6% 68.7% 2016 2017 2018 2019 2016 2017 2018 2019 28 Analysts’ and Investors’ Call 2020 1 Travel included. 2 GWP. 3 Local GAAP for DKV and ERGO Krankenversicherung AG. 28 February 2020
ERGO Property-casualty Germany – Ongoing profitable premium growth Other Transport/ Business development on track 2020 level already almost achieved in 2019 Motor Marine ▪ Strong premium growth in 2019 – increases in ▪ Sustainable improvement in 2019 driven by Legal commercial and retail ▪ Reduction of claims ratio: favourable claims GWP protection ▪ Simplified product approach and process € 3.5 bn development in basic losses driven by Personal accident optimisation with first successes: improved underwriting (esp. commercial lines) and claims management (esp. motor) as well ▪ Successful renewal of new motor insurance Liability as lower nat-cat and man-made losses – simplified product approach continued Fire/ ▪ Improvement of cost ratio: stable cost with legal protection and business content Property insurance development despite strong growth and supported by reduced fixed cost level ▪ Digitalisation of claims processes with focus ▪ Lowest combined ratio since 2011 on speed and improved efficiency in motor completed; customer satisfaction increased Gross premiums written Combined ratio €bn % 99 ESP guidance CAGR +3.1% 98 Actual +3.6% 96 3.5 97.5 97.0 93 3.4 96.0 92 3.3 3.2 92.3 2016 2017 2018 2019 2016 2017 2018 2019 2020 29 Analysts’ and Investors’ Call 2020 28 February 2020
ERGO International – Sustainable increase of profitability Consolidated portfolio with leading positions Successful expansion in selected growth in core markets markets GWP 1 Premium increase 1 in both core and growth ▪ ▪ India (P-C, Health): HDFC ERGO with substantial (without JVs) premium growth (+8% 3 ); announced merger with markets € 4.7 bn Apollo Munich Health will create second-largest ▪ Strong earnings level continued despite of private accident/health insurer disposal effects ▪ China (Life): Significant premium increase ▪ Continuous improvement of combined ratio Other (+48% 3 ); regional presence expanded to Hebei in supported by already achieved sustainable 2019, third province after Shandong and Jiangsu cost savings of €35m (net, accumulated) Core markets € 3.9 bn Gross premiums written in growth markets 4 Combined ratio (82%) €m % CAGR +30% 98.0 in addition (JVs): Growth markets 696 95.3 592 94.6 567 € 0.7 bn 94.3 316 2016 2017 2018 2019 2016 2017 2018 2019 30 Analysts’ and Investors’ Call 2020 1 Adjusted for portfolio streamlining. 2 Non- adjusted International: €4.9bn. 3 2019 vs. 2018. 4 ERGO share in ERGO Chin a Life, HDFC ERGO, ThaiSri ERGO. 28 February 2020
Reinsurance 4 Image: John Lund Getty Images
Reinsurance – Financials 2019 Property-casualty – Earnings growth fully supports the 2020 ambition Net Combined € 1,562 m (€1,135m) 101.0 % (99.4%) result ratio ▪ Strong volume increase by almost €2bn – ▪ Major losses (15.2%) above average earnings trajectory supported by growth ▪ Underlying combined ratio ~98 – 99%, from renewals and strategic initiatives slightly elevated due to non-outlier losses, ▪ Overall sound underlying profitability of higher admin expenses and cautious portfolio – comfortably exceeding cost loss picks of capital ▪ High nat cat (esp. typhoons in Japan) Reserve 5.6 % (4.6%) and man-made claims, particularly in Q4 releases 1 ▪ Strong investment result, incl. disposal gains ▪ Sustained favourable reserve development ▪ Normalised for single large events – releases exceed last year’s level in (e.g. aerospace) positive development absolute and relative terms of profitability in Risk Solutions business ▪ Confidence level preserved – showing ▪ Support from low tax expenses resilience as positive claims experience exceeds adverse development in selected hot-spot areas 32 Analysts’ and Investors’ Call 2020 28 February 2020 Figures as at 31.12.2019 (31.12.2018). 1 Basic losses from prior years, already adjusted for directly corresponding sliding-scale and profit-commission effects.
Reinsurance – Financials 2019 Life and Health – Result below guidance on strain from Australia – Favourable experience in other markets Technical Net € 456 m (€584m) € 706 m (€729m) result 1 result ▪ On aggregate positive claims experience ▪ Decline of technical result ▪ Strong contribution from new business and ▪ High investment result driven by positive impact from restructuring of certain restructuring of assets in Canada, large treaties overcompensating strain on technical result ▪ Negative impact from reserve review in Australia; overall global reserve position considered strong New business ~€ 1.3 bn (€1.1bn) ▪ Strain on technical result from restructuring contribution of asset portfolio in Canada ▪ Again high level ▪ Positive 2020 outlook: vital new business proposition and earnings stabilisation from ▪ Strong traditional business development 2019 inforce management and reserve review in North America and Asia ▪ FinMoRe with ongoing strong demand 33 Analysts’ and Investors’ Call 2020 28 February 2020 Figures as at 31.12.2019 (31.12.2018). 1 Incl. Fee income.
Reinsurance Munich Re is well positioned to profitably grow its core business fields and drive innovation in the industry Trends Data-driven Expanding the solutions boundaries of Reshuffling insurability the value chain Risk Solutions Reinsurance Reinsurance P-C Life and Health Building a diversified profit base – 1 Sustainable new 2 Effectively serving 3 Reinforcing 4 business proposition our clients and underlying shaping and seizing opportunities and active portfolio strengthening the profitability in the digital transformation of the management business model and growth (re)insurance industry 34 Analysts’ and Investors’ Call 2020 28 February 2020
Reinsurance Life and Health – Overview of major markets 1 Strong footprint in all major markets Canada ( € 1.7 bn / 14 %) Continental Europe ( € 1.0 bn / 9 %) Asia / MENA ( € 3.0 bn / 26 %) ▪ Attractive margins despite ▪ Sound but stagnating traditional business overall ▪ Pleasing development of new competitive environment ▪ Demand for tailor-made FinMoRe solutions business, including vital pipeline ▪ Maintain leadership position of FinMoRe solutions ▪ Substantial share of health in traditional business ▪ Develop footprint in reinsurance ▪ Product trends to be monitored Group business closely, particularly in critical illness USA ( € 2.9 bn / 25 %) Australia ( € 0.8 bn / 7 %) ▪ Solid position among market ▪ State of disability market remains leaders ▪ Further develop FinMoRe an area of concern ▪ Strengthening of assumptions business and predictive reflecting recent experience – in Q4 analytics to foster growth UK / Ireland ( € 1.8 bn / 15 %) technical result impact of ~ –€200m ▪ Attractive risk-return profile ▪ Successful FinMoRe and longevity proposition ▪ Rehabilitation of in-force top priority of new business ▪ Successful inforce ▪ Margins in protection business remain unattractive ▪ Highly selective new business ▪ Organisational set-up ready for Brexit management execution proposition 35 Analysts’ and Investors’ Call 2020 28 February 2020 Gross premiums written 2019 / share of total (core regions).
Reinsurance Life and Health – New business 1 Strong new business generation continues – Portfolio composition fosters steady earnings growth Core Ambition 2 Strong footprint in Technical result, incl. fee income Fundament of traditional reinsurance earnings generation In-depth expertise in risk ~€550m assessment and management 500 Portfolio management Improves 475 Australian disability portfolio earnings stability 450 US pre-2009 mortality block Growth Established growth areas 1 Safeguards earnings progress Leading digital services Risk-related services 2017 2018 2019 2020e New (re-) insurance products 36 Analysts’ and Investors’ Call 2020 28 February 2020 1 FinMoRe, Asia, USA, longevity and financial markets. 2 Ambition assumes claims in the range of expectation and no major one-offs from inforce management.
Reinsurance Property-casualty – January renewals 2019 2 January renewals 2020 – Overall positive outcome Market developments Munich Re January renewals Further improving environment – Overall price increases over- uneven distribution across lines compensating loss-trend expectations and geographies Flat pricing in Asia (ex Japan), distinct price increases in Europe Positive trends for loss-affected business and specialty lines Worldwide and North American business with stronger rate development Alternative capital: volume stagnation – some strain in Business expansion for selected retro markets markets – top-line growth driven by specialty lines and Europe/Asia Primary markets for commercial single risk and specialty lines Actively giving up business not meeting developing favourably our criteria, e.g. casualty with US clients Continued disciplined Cautiously optimistic outlook on upcoming treaty renewals portfolio management 37 Analysts’ and Investors’ Call 2020 28 February 2020
Reinsurance Property-casualty – January renewals 2020 2 Select growth in firming market environment January renewals 2020 – 10.3 104.4 % 100 89.7 +5.3 +9.3 – 1,046 €m 10,655 10,205 9,159 +545 +950 +4.4% Change in premium ~ 1.2% Thereof price movement 1 +3.2% Thereof change in exposure for our share Total renewable Cancelled Renewed Increase New Estimated from 1 January on renewable business outcome 38 Analysts’ and Investors’ Call 2020 28 February 2020 1 Price movement is risk-adjusted, i.e. includes claims inflation/loss trend and is adjusted for portfolio mix effects. Furthermore, price movement is calculated on a wing-to-wing basis (including cancelled and new business).
Reinsurance Property-casualty – Strategic initiatives 2 Growth initiatives gaining traction – Profitable business expansion Gross premiums written 1 €bn Mature Emerging Risk Solutions +4% +21% +14% 22.1 markets 2 markets 2 business 2 20.4 France: Successful re-entry and India: Executing growth strategy already ahead of plan, further and broadening offer successful, +8% strengthened as at 1.1.2020, leading to diversified portfolio now >€300m premiums now >€300m premiums Global Clients : Growth in long- Latin America : Growing in F&C : Direct Property and standing relationships, focus on line with our ambition and Energy business seizing balanced portfolios and adequate market position with existing market opportunities to write reflection of client strength partners and new business more business at hardening terms and better rates US : Selective expansion in local or regional business, when pricing and AMIG : Transformation risk relation deemed good, cautious efforts bearing fruit and 2018 2019 on casualty permitting growth of 17%, well above market average Underlying combined ratio Japan : Expansion of nat cat business reacting to increasing ~98 – 99% ~99% rates in wake of recent typhoons Expansion of nat cat business 39 Analysts’ and Investors’ Call 2020 1 Compared to previous year. 2 Examples. F&C = Facultative & Corporate. 28 February 2020
Reinsurance Property-casualty – Strategic initiatives 2 Growth areas – Expansion of nat cat business globally, but locally selective based on risk appetite and terms US Secondary perils, e.g. wildfire, only written with material price increases, nat cat otherwise reduced appetite in reinsurance for US and global clients Reinsurance with selective increase and opportunities written, e.g. in Florida – US hurricane also given up business in January renewals, which did not meet expectations Japan Wind prices better after Jebi and Trami, therefore exposure slightly increased Caribbean After strong hit in the Bahamas (Dorian), acutely aware of need for markets appropriate cover, thus willing to accept material price increases Given loss experience 2017 – 2019, all primary units profiting from the Risk Solutions primary market hardening and certain capacity retreat, e.g. F&C direct 40 Analysts’ and Investors’ Call 2020 28 February 2020
Reinsurance Property-casualty – Strategic initiatives 2 US casualty – Sustaining a robust portfolio US traditional casualty book 1 Global traditional % % casualty book 1 approx. 40% of global traditional casualty book Workers’ Workers’ Workers’ Motor Motor Commercial comp. 2 liability comp. liability comp. liability 6 50 6 27 6 prop. 70 TOTAL TOTAL TOTAL € 6.8 bn € 2.7 bn € 2.7 bn Financial General Financial General Personal Comm. lines liability lines liability lines liab. XL 18 26 29 38 18 6 ▪ Additional casualty premium via ▪ Munich Re with early response in portfolio management and pricing Risk Solutions business of ~€900m ▪ Loss drivers (social inflation) identified and being addressed, risk (thereof ~€750m US) … appetite clearly defined and coverage-specific restrictions for critical ▪ … providing balance for the overall exposures stated in underwriting best practices US casualty book with very high ▪ Personal lines business minimally exposed to social inflation share of smaller commercial and ▪ Proportional business >90% personal lines business 41 Analysts’ and Investors’ Call 2020 1 Expected yearly premiums without motor-own damage; business incepting 2.1.2019 – 1.1.2020, i.e. incl. 2020 January renewals. 2 Includes personal accident. 28 February 2020
Reinsurance Property-casualty – Risk Solutions 3 Risk Solutions – 2019 with another step back to target profitability Gross premiums written Combined ratio € 5.0 bn (€4.3bn) 100.7 % (103.4%) Capturing profitable growth opportunities Normalised for large losses (aerospace) C/R in line with mid-nineties ambition (elevated prior to 2019 due to attritional losses) American Modern Facultative & Corporate Aerospace ▪ Transformation investments ▪ Good and profitable market ▪ Unusual accumulation of large-loss events bearing fruit with growth of 17% 1 , position confirmed by a 93% C/R for Space and Aviation business leading to in 2019 – following a period showing attractiveness of new a C/R of 166%. Market materially reshaped product suite affected by severe outlier events after these events allowing for positive ▪ One-off IT costs and business ▪ Premiums with strong growth outlook run-off partly impact the result above expectation, particularly ▪ Growing premium due to better market in property, leading to an increase ▪ Combined ratio of 88% confirms conditions and an improving competitive of 35% 1 earnings potential of the unit landscape by 20% in 2019 already. Further improvement expected for 2020 42 Analysts’ and Investors’ Call 2020 1 Compared to previous year. Gross premiums written. Economic view – not fully comparable with IFRS figures. 28 February 2020
Reinsurance – Creating new strategic options 4 We focus on tangible business impact – Innovative and more disruptive offerings are gaining traction Munich Re Domain expertise in Efficient Global Financial Strong brand No IT underwriting, claims, access to presence strength and reputation legacy strategic risk management new solutions advantages … … foster Reshuffling Expanding the Data-driven the value chain creation boundaries of insurability solutions of new ▪ Digital cooperation models ▪ Cyber (re)insurance: GWP 2019 ▪ Newly developed risk strategic (e.g. Digital Partners) US$ 604m, good profitability, scores (e.g. climate risk) ▪ IoT 1 applications and accumulation control Details options ▪ Digitally augmented next slides ▪ Cyber embedded service services (e.g. MHP/ underwriting/claims Porsche cooperation) solutions and growing cooperation solutions for our cedants ▪ Munich Re New Ventures – network (e.g. DXC Technology) (e.g. Munich Engine, ▪ Insurance of AI technology Parachute platform Realytix, Improvex) Details next slides Levers Investments in Strategic investments technology and people in partnerships 43 Analysts’ and Investors’ Call 2020 1 Internet of Things. 28 February 2020
Reinsurance – Creating new strategic options 4 Munich Re New Ventures – Tapping opportunities in the CAD 44bn Canadian group insurance market Bringing concrete solutions to our clients with the vision to enhance the Group insurance market and create new income streams Munich Re ▪ Create ~€100m annual income Platform income in the mid- to long-term, by unlocking untapped markets Admin ▪ Grow the voluntary group benefits services market with a B2B2C model provided ▪ Improve scalability and efficiency Third-party New of mandatory and voluntary administrator insurance products by straight-through Munich Re business and broker processing carrier ▪ Ensure scalability and expansion In-force partner insurance in other markets and product lines Quota business where possible share 44 Analysts’ and Investors’ Call 2020 28 February 2020
Reinsurance – Cyber (re)insurance 4 Cyber insurance – Continuously one of Munich Re’s main strategic growth areas Gross premiums written cyber portfolio 1 US$ m ▪ Early and full commitment to cyber allows us to 604 shape the market and results in a lead position 473 ▪ Good profitability of the cyber insurance book 354 ▪ Competitive knowledge advantage and further investments in leading cyber expertise (~100 FTE) ▪ Further establishing relevant and efficient partner- ships and detecting new distribution channels ▪ Actively addressing the topic silent cyber, 2017 2018 2019 managing our own exposure and creating new ▪ Profitable growth in line with strategy and ambition business by supporting clients ▪ Cautious participation in a further growing market ▪ Accumulation management is constantly balancing growth and stringent risk management – challenged, further refined and state of the art market share of up to 10% 45 Analysts’ and Investors’ Call 2020 1 Munich Re Group excl. ERGO 28 February 2020
Additional information 5 Image: imaginima / Getty Images
Additional information: Group finance and risk Segment income statement Q4 2019 €m Reinsurance Reinsurance ERGO ERGO ERGO Total L/H 1 P-C L/H Germany P-C Germany International Q4 2019 3,091 5,172 2,327 695 1,256 12,540 Gross premiums written Net earned premiums 2,778 5,347 2,331 863 1,195 12,515 Income from technical interest 155 327 849 18 127 1,477 – 2,315 – 3,947 – 2,752 – 529 – 919 – 10,462 Net expenses for claims and benefits – 589 – 2,071 – 392 – 281 – 422 – 3,754 Net operating expenses – 344 – 20 – 225 30 36 72 Technical result Investment result 225 623 932 52 132 1,965 Insurance related-investment result 11 39 173 0 69 292 – 20 – 17 Other operating result 47 14 2 25 – 155 – 327 – 849 – 18 – 127 – 1,477 Deduction of income from technical interest 128 315 239 48 77 805 Non-technical result – 30 158 275 120 57 580 Operating result – 3 – 93 – 64 – 32 – 193 Other non-operating result 0 – 36 – 102 – 95 – 6 – 1 – 241 Currency result – 10 – 33 – 6 – 1 – 7 – 56 Net finance costs – 23 – 37 – 5 – 4 Taxes on income 195 127 89 27 44 43 13 217 Net result 47 Analysts’ and Investors’ Call 2020 1 Technical result incl. fee income: €70m. 28 February 2020
Additional information: Group finance and risk Segment income statement 2019 €m Reinsurance Reinsurance ERGO ERGO ERGO Total L/H 1 P-C L/H Germany P-C Germany International 2019 11,716 22,091 9,238 3,500 4,912 51,457 Gross premiums written Net earned premiums 10,540 20,566 9,191 3,362 4,621 48,280 Income from technical interest 652 1,215 4,196 75 591 6,729 – 8,580 – 13,714 – 11,701 – 2,056 – 3,633 – 39,685 Net expenses for claims and benefits – 2,283 – 7,066 – 1,415 – 1,077 – 1,408 – 13,249 Net operating expenses 329 1,000 271 303 171 2,074 Technical result Investment result 1,080 2,152 3,916 157 430 7,737 Insurance related-investment result 30 65 751 0 330 1,176 – 238 – 61 – 39 – 254 Other operating result 62 22 – 652 – 1,215 – 4,196 – 75 – 591 – 6,729 Deduction of income from technical interest 520 763 410 105 131 1,930 Non-technical result 849 1,764 681 408 302 4,004 Operating result – 10 – 47 – 305 – 212 – 92 – 665 Other non-operating result – 41 – 24 – 59 Currency result 47 149 73 – 39 – 128 – 23 – 5 – 27 – 222 Net finance costs – 142 – 176 – 127 – 19 – 19 – 483 Taxes on income 706 1,562 187 148 105 2,707 Net result 48 Analysts’ and Investors’ Call 2020 1 Technical result incl. fee income: €456m. 28 February 2020
Additional information: Group finance and risk IFRS P&L statements – Changes as from Q1 2020 Actual 2019 (restated) €m Reinsurance ERGO Munich Re L&H P-C L/H Germany P-C Germany International Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Gross premiums written 11,716 11,716 22,091 22,091 9,238 9,238 3,500 3,500 4,912 4,912 51,457 51,457 10,540 10,540 20,566 20,566 9,191 9,191 3,362 3,362 4,621 4,621 48,280 48,280 Net earned premiums 652 652 1,215 1,215 4,196 4,196 75 75 591 591 6,729 6,729 Income from technical interest Net expenses for claims and – 8,580 – 8,580 – 13,714 – 13,714 – 11,701 – 11,701 – 2,056 – 2,056 – 3,633 – 3,633 – 39,685 – 39,685 benefits – 2,283 – 2,246 – 7,066 – 6,910 – 1,415 – 1,415 – 1,077 – 1,077 – 1,408 – 1,408 – 13,249 – 13,056 Net operating expenses 329 365 1,000 1,157 271 271 303 303 171 171 2,074 2,267 Technical result 1,080 1,097 2,152 2,220 3,916 3,916 157 157 430 430 7,737 7,822 Investment result Insurance related-investment 30 37 65 65 751 751 0 0 330 330 1,176 1,182 result – 238 – 463 – 61 – 354 – 174 – 39 – 124 – 254 – 1,112 Other operating result 62 2 22 Deduction of income from – 652 – 652 – 1,215 – 1,215 – 4,196 – 4,196 – 75 – 75 – 591 – 591 – 6,729 – 6,729 technical interest – 91 Non-technical result 520 484 763 607 410 118 105 131 45 1,930 1,163 Operating result 849 849 1,764 1,764 681 389 408 212 302 217 4,004 3,430 – 10 – 10 – 47 – 47 – 305 – 12 – 212 – 16 – 92 – 6 – 665 – 91 Other non-operating result – 41 – 41 – 24 – 24 – 59 – 59 47 47 149 149 73 73 Currency result – 39 – 39 – 128 – 128 – 23 – 23 – 5 – 5 – 27 – 27 – 222 – 222 Net finance costs – 142 – 142 – 176 – 176 – 127 – 127 – 19 – 19 – 19 – 19 – 483 – 483 Taxes on income Net result 706 706 1,562 1,562 187 187 148 148 105 105 2,707 2,707 49 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: Group finance and risk Actual vs. analysts’ consensus Operating result – Actual vs. analysts’ consensus 1 €m Major developments in Q4 2019 Q4 2019 Consensus Delta Reinsurance Property-casualty Combined ratio: 112.5% (consensus: 105.1%) – major-loss – 30 – 281 251 Reinsurance Property-casualty ratio: 27.4%, reserve releases basic losses: 7.1%; RoI: 3.8% 158 63 95 Reinsurance Life and Health Reinsurance Life and Health 275 115 160 ERGO Life and Health Germany Technical result, incl. fee income of €70m; RoI: 3.1% 120 84 36 ERGO Property-casualty Germany ERGO Life and Health Germany – 18 57 75 ERGO International Policyholder participation in FX result and tax-related positive one-off; RoI: 2.9% 580 – 8 Operating result 588 ERGO Property-casualty Germany Combined ratio: 93.2% (consensus: 94.8%); RoI: 2.8% – 241 FX ERGO International – 249 Other Combined ratio: 94.8% (consensus: 98.0%); RoI: 2.8% 127 Taxes 217 – 76 Net result 293 50 Analysts’ and Investors’ Call 2020 28 February 2020 1 Simple average of estimates the Munich Re Investor Relations team has gathered from analysts covering Munich Re, not taking into account any external data providers.
Additional information: Group finance and risk – Capitalisation IFRS capital position €m € bn Equity Capitalisation 0.4 Equity 31.12.2018 26,500 Change in Q4 0.3 0.3 217 Consolidated result 2,707 4.2 0.3 3.8 0.3 3.8 Changes 2.8 3.7 – 1,335 0 Dividend – 1,078 Unrealised gains/losses 3,661 – 313 Exchange rates 422 – 236 – 957 Share buy-backs 13.2 12.6 – 423 407 12.0 Other 11.5 10.0 – 1,003 Equity 31.12.2019 30,576 31.8 28.2 26.5 31.6 30.6 2016 2017 2018 30.9.2019 31.12.2019 Unrealised gains/losses Exchange rates FX effect mainly driven by US$ Fixed-interest securities Debt leverage 1 (%) 2019: +€2,672m Q4: –€1,195m Senior and other debt 2 Subordinated debt Non-fixed-interest securities Equity 2019: +€992m Q4: +€119m 51 Analysts’ and Investors’ Call 2020 28 February 2020 1 Strategic debt (senior, subordinated and other debt) divided by total capital (strategic debt + equity). 2 Other debt includes Munich Re bank borrowings and other strategic debt.
Additional information: Group finance and risk Premium development €m €m Gross premiums written Segmental breakdown Reinsurance ERGO Property-casualty Life and Health Germany 2018 49,064 22,091 (43%) ( p 8.1%) 9,238 (18%) ( p – 1.1%) Foreign 921 exchange ERGO TOTAL Property-casualty Germany € 51.5 bn Divestments/ – 330 3,500 (7%) ( p 3.6%) investments Organic 1,802 change Reinsurance ERGO 51,457 2019 Life and Health International 11,716 (23%) ( p 8.0%) 4,912 (10%) ( p – 2.9%) 52 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: Group finance and risk Reconciliation of operating result with net result €m Reconciliation of operating result with net result 2019 Q4 2019 4,004 580 Operating result – 665 – 193 Other non-operating result – 241 73 Currency result – 222 – 56 Net finance costs – 483 127 Taxes on income 2,707 Net result 217 Other non-operating result (€m) 2019 Q4 2019 Tax rates (%) 2019 Q4 2019 – 1 – 139.8 0 15.1 Goodwill impairments Group – 60 – 4 12.3 307.7 Restructuring expenses Reinsurance – 605 – 189 27.2 31.4 Other ERGO 53 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: Group finance and risk – Reserves Very strong reserve position – Actual basic losses continue to be consistently below actuarial expectations Reinsurance group – Comparison of incremental expected losses with actual reported losses 1 €m By exposure year By line of business 10,000 10,000 Actual reported loss Actual reported loss 2018 2017 1,000 Motor Third-party liability 2016 1,000 2014 Risks other property Fire 2015 2013 100 Engineering Marine 2012&prior Aviation Personal accident Expected reported loss Expected reported loss Credit 10 100 10 100 1,000 10,000 100 1,000 10,000 Actuals below expectation for all contract years – Also on a line-of-business view all actuals are overall picture consistent with previous years below expectations Legend: Green Actuals below expectation Red Actuals above expectation Solid line Actuals equal expectation Dotted line Actuals 50% above/below expectations 54 Analysts’ and Investors’ Call 2020 1 Reinsurance group losses as at Q4 2019, not including parts of Risk Solutions, special liabilities and major losses (i.e. even ts of over €10m for Munich Re's share). 28 February 2020
Additional information: Group Finance – IFRS view – Reserving position Positive run-off result despite reserve strengthening in selected portfolios without weakening resilience against future volatility Ultimate losses 1 – Favourable actual vs. expected comparison facilitates ultimate reductions for prior years Accident year (AY) €m ≤2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total ▪ Ultimate reductions in 31.12.2009 53,838 particular for basic losses 31.12.2010 53,118 13,517 ▪ Negative run-off in AY 2018 31.12.2011 52,226 13,707 17,594 largely driven by adverse outlier development (e.g. 31.12.2012 51,079 13,585 17,745 14,520 Typhoon Jebi), and to a 31.12.2013 50,588 13,669 17,459 14,301 14,409 much smaller extent also 31.12.2014 49,641 13,698 17,043 14,096 14,630 14,324 impacted by prudent reserving for US casualty 31.12.2015 48,728 13,496 16,918 13,883 14,586 14,351 13,587 loss trend 31.12.2016 48,380 13,270 16,446 13,848 14,291 14,328 13,640 14,486 ▪ Reserve position remains 31.12.2017 48,210 13,140 16,418 13,748 14,190 14,117 13,429 14,324 17,667 strong 31.12.2018 47,495 12,971 16,124 13,488 13,917 13,851 13,219 14,366 17,693 17,907 31.12.2019 46,377 12,915 15,855 13,254 13,765 13,668 13,068 14,196 17,563 18,773 18,928 € 1,531 m Reinsurance 2 CY 2018 run- – 1,597 1,118 56 269 234 151 183 151 170 130 -866 off change € 66 m ERGO CY 2018 run- – 0.9 off change (%) 2.4 0.4 1.7 1.7 1.1 1.3 1.1 1.2 0.7 -4.8 55 Analysts’ and Investors’ Call 2020 1 Basic and major losses; accident-year split partly based on approximations. Adjusted to exchange rates as at 31.12.2019. 28 February 2020 2 Basic losses: €1,494m, major losses: €37m.
Additional information: Group Finance – Reserves – Property-casualty – Reinsurance Response to benign emergence of basic losses in line with considered judgement Actual vs. expected Changes in projection Business rationale Property Releases follow favourable indications ▪ Positive actual-versus-expected indications ▪ Short-tail lines develop relatively quickly Reserve release ▪ Releases spread across various property lines of business Specialty 1 Favourable loss development leads to release ▪ Favourable indications across all lines Reserve release ▪ Reserve release primarily in credit and marine Casualty Small releases despite favourable indications Reserve release ▪ Deliberately small reserve release, despite favourable overall actual-versus-expected development ▪ Releases in motor and third-party liability ▪ Cautious reaction to signs of deterioration in selected casualty portfolios 56 Analysts’ and Investors’ Call 2020 1 Aviation, credit and marine. 28 February 2020
Additional information: Group Finance – Reserves Non-life – Reinsurance Property-casualty provision for outstanding claims By line of business % By maturity % 0 – 1 years Other >15 years Third-party liability 6 (4) 4 (4) 35 (36) 37 (38) Aviation 10 – 15 years 3 (2) 3 (4) Credit 3 (3) 5 – 10 years 12 (11) TOTAL TOTAL Marine €50.7bn €50.7bn 3 (3) 4 – 5 years 5 (5) Personal accident 4 (5) 3 – 4 years Engineering 8 (8) 6 (6) 2 – 3 years 1 – 2 years Fire Motor 17 (17) 22 (22) 12 (12) 20 (20) 57 Analysts’ and Investors’ Call 2020 28 February 2020 Fair values (gross) as at 31.12.2019 (31.12.2018).
Additional information: Group Finance – Reserves Asbestos and environmental survival ratio 31 December 2019 Munich Re (Group) – Net definitive as at 31 December 2019 1 €m Asbestos Environmental A&E total Paid 3,319 1,002 4,320 Case reserves 450 126 576 IBNR 618 175 793 Total reserves 1,067 301 1,368 3-year average annual paid losses 56 21 77 Survival ratio 3-year average % 19.0 14.7 17.8 58 Analysts’ and Investors’ Call 2020 1 Non-euro currencies converted at rate of exchange year-end 2019 28 February 2020
Additional information: Group finance and risk – Investments Investment result €m Q4 2019 Return 1 2019 Return 1 2018 Return 1 1,618 2.6% 6,751 2.8% 6,586 2.8% Regular income – 24 – 309 – 0.1% – 1,054 – 0.5% 0.0% Write-ups/write-downs 1,108 1.8% 2,779 1.1% 1,582 0.7% Disposal gains/losses – 509 – 0.8% – 717 – 0.3% Derivatives 2 103 0.0% – 228 – 0.4% – 767 – 0.3% – 691 – 0.3% Other income/expenses 1,965 3.1% 7,737 3.2% 6,526 2.8% Investment result – 4.9% 7.7% 1.4% Total return Write-ups/ Disposal Write-ups/ Disposal 3-month write- gains/ De- write- gains/ De- reinvestment yield Q4 2019 downs losses rivatives 2019 downs losses rivatives – 3 – 269 – 51 1.9 % 597 1,530 184 Fixed income Fixed income Q4 2019 – 83 – 268 – 311 – 927 Equities 500 Equities 1,037 2.1% Q3 2019 Commodities/Inflation 7 0 46 Commodities/Inflation 70 0 13 2.2% Q2 2019 – 18 – 18 55 11 211 12 Other Other 59 Analysts’ and Investors’ Call 2020 28 February 2020 1 Annualised return on quarterly weighted investments (market values) in %. Impact from dividends in regular income: 0.2%-points in Q4 and 0.3%-points in Q1-4. 2 Result from derivatives without regular income and other income/expenses.
Additional information: Group finance and risk – Investments Return on investment by asset class and segment 2019 ᴓ Market Regular Write-ups/ Disposal Extraord. Other value (€m) % 1 income -downs result derivative result inc./exp. RoI – 0.0 Afs fixed-income 2.3 1.0 0.0 0.0 3.2 130,076 – 1.7 Afs non-fixed-income 4.1 5.7 0.0 0.0 8.1 18,112 – 32.9 – 1.1 – 27.3 Derivatives 6.7 0.0 0.0 2,181 – 0.0 Loans 2.8 0.3 0.0 0.0 3.1 65,979 – 1.1 Real estate 4.7 1.4 0.0 0.0 5.0 10,899 Other 2 – 4.5 3.3 1.0 0.3 0.0 0.1 16,416 – 0.1 – 0.3 – 0.3 Total 2.8 1.1 3.2 243,663 – 0.1 – 0.1 – 0.4 Reinsurance 2.9 1.2 3.5 91,991 – 0.2 – 0.4 – 0.3 ERGO 2.7 1.1 3.0 151,672 Return on investment Average 3.1% 3.6% 3.4% 3.4% 3.1% 3.2% 3.1% 3.1% 3.1% 2.9% 2.9% 2.7% 2.3% Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 60 Analysts’ and Investors’ Call 2020 28 February 2020 1 Annualised. 2 Including management expenses.
Additional information: Group finance and risk – Investments Investment portfolio Fixed-interest securities 1 Investment portfolio % % Fixed-interest securities Land and buildings Structured products Governments/ 53.9 (53.8) 4 (3) Semi-government 4.7 (4.6) 63 (64) Corporates Shares, equity funds TOTAL 18 (17) TOTAL and participating € 247 bn € 133 bn interests 2 Banks 7.1 (6.2) 2 (2) Miscellaneous 3 Loans Pfandbriefe/Covered bonds Cash/Other 13 (14) 1 (0) 8.1 (7.7) 26.1 (27.7) Miscellaneous Loans 1 % % Other Deposits on Loans to policyholders/ Governments/ 25 (22) reinsurance Semi-government mortgage loans 40 (41) 41 (41) 13 (12) Derivatives 4 6 (9) TOTAL TOTAL Corporates € 20 bn € 65 bn Investment funds 5 4 (2) 11 (10) Pfandbriefe/ Bank deposits Banks Covered bonds 19 (18) 1 (2) 41 (44 ) 1 Approximation – not fully comparable with IFRS figures. Fair values as at 31.12.2019 (31.12.2018). 2 Net of hedges: 6.4 (5.2%). 3 Deposits retained on assumed 61 Analysts’ and Investors’ Call 2020 28 February 2020 reinsurance, deposits with banks, investment funds (excl. equities), derivatives and investments in renewable energies and gold. 4 Non-fixed derivatives. 5 Non-fixed property funds and non-fixed bond funds
Additional information: Group finance and risk – Investments Fixed-income portfolio Total Fixed-income portfolio % Bank bonds Governments/ 1 (2) Semi-government 53 (53) Structured products 2 (2) Loans to policyholders/ TOTAL Mortgage loans €208 bn 4 (4) Cash/Other 5 (5) Corporates 13 (12) Pfandbriefe/ Covered bonds 21 (23) 62 Analysts’ and Investors’ Call 2020 Approximation – not fully comparable with IFRS figures. Fair values as at 31.12.2019 (31.12.2018). 28 February 2020
Additional information: Group finance and risk – Investments Fixed-income portfolio Total Rating structure % Regional breakdown % Without With Total NR 1 AAA policyholder participation 31.12.2019 31.12.2018 5 (5) 43 (43) 4.8 22.0 26.8 28.2 Germany BB 14.0 1.7 15.6 14.3 US 3 (3) TOTAL 2.2 5.1 7.3 8.1 €207.9 bn France BBB 3.1 2.0 5.1 4.9 UK 12 (12) 4.1 0.7 4.7 4.5 Canada A AA 1.4 2.9 4.3 4.5 Netherlands 13 (13) 24 (25) 0.7 2.9 3.6 3.7 Supranationals 1.0 2.1 3.1 2.8 Spain Maturity structure % 2.6 0.4 3.1 2.8 Australia 0 – 1 years 0.5 2.1 2.6 2.5 n.a. Austria 3 (3) 9 (10) 0.8 1.6 2.4 2.3 Belgium 0.7 1.4 2.2 2.1 1 – 3 years Ireland AVERAGE 13 (13) 1.3 0.5 1.8 1.7 Poland >10 years MATURITY 34 (33) 3 – 5 years 0.2 1.2 1.4 1.6 Sweden 9.5 years 13 (13) 0.5 0.8 1.3 1.7 Italy 6.7 7.8 14.6 14.2 7 – 10 years 5 – 7 years Other 15 (15) 13 (13) 44.7 55.3 100.0 100.0 Total 63 Analysts’ and Investors’ Call 2020 Approximation – not fully comparable with IFRS figures. Fair values as at 31.12.2019 (31.12.2018). 28 February 2020 1 Mainly loans to policyholders, mortgage loans and bank deposits.
Additional information: Group finance and risk – Investments Fixed-income portfolio Governments/semi-government Rating structure % Regional breakdown % Without With Total BB AAA policyholder participation 31.12.2019 31.12.2018 2 (2) 43 (43) 3.1 20.8 23.9 25.1 Germany BBB 15.2 1.3 16.5 15.6 US 7 (7) TOTAL 1.3 5.5 6.7 6.9 €111.2 bn Supranationals A 5.8 0.7 6.5 6.2 Canada 16 (15) 1.3 3.0 4.3 3.7 Spain AA 1.3 2.8 4.1 3.9 Belgium 32 (33) 4.0 0.1 4.0 3.6 Australia 1.7 2.1 3.8 4.6 France Maturity structure % 2.3 0.9 3.2 3.1 Poland 0 – 1 years 0.5 2.6 3.2 3.4 >10 years Austria 44 (42) 9 (10) 2.8 0.0 2.8 2.7 UK 0.3 1.8 2.0 2.2 1 – 3 years Finland AVERAGE 11 (13) 0.6 1.3 1.9 2.2 Netherlands MATURITY 3 – 5 years 0.4 1.2 1.6 1.7 Ireland 11.2 years 11 (10) 0.5 0.9 1.4 2.1 Italy 7.6 6.5 14.1 13.0 7 – 10 years 5 – 7 years Other 15 (15) 11 (10) 48.5 51.5 100.0 100.0 Total 64 Analysts’ and Investors’ Call 2020 Approximation – not fully comparable with IFRS figures. Market values as at 31.12.2019 (31.12.2018). 28 February 2020
Additional information: Group finance and risk – Investments Fixed-income portfolio Pfandbriefe/covered bonds Rating structure % Regional breakdown % 31.12.2019 31.12.2018 NR AAA 35.4 37.7 Germany 1 (1) 77 (74) 19.5 19.7 France BBB 9.8 8.4 UK 0 (1) TOTAL Netherlands 8.4 7.8 €43.4 bn Sweden 5.9 6.0 A Norway 5.4 5.7 2 (4) Spain 1.8 2.0 1.1 1.0 Italy AA 0.3 0.3 Ireland 20 (21) Other 12.5 11.5 Maturity structure % Cover pools % 0 – 1 years >10 years Mixed and other Mortgage 21 (25) 5 (7) 9 (10) 62 (61) 1 – 3 years AVERAGE 15 (12) TOTAL MATURITY € 43.4 bn 3 – 5 years 6.8 years 17 (18) 7 – 10 years 5 – 7 years Public 21 (19) 20 (19) 29 (29) 65 Analysts’ and Investors’ Call 2020 Approximation – not fully comparable with IFRS figures. Fair values as at 31.12.2019 (31.12.2018). 28 February 2020
Additional information: Group finance and risk – Investments Fixed-income portfolio Corporate bonds (excluding bank bonds) Rating structure % Sector breakdown % 31.12.2019 31.12.2018 NR AAA 0 (1) 2 (2) 14.2 13.7 Industrial goods and services <BB 13.6 16.2 Utilities 2 (2) TOTAL AA 10.9 11.9 Oil and gas €26.5 bn 5 (4) BB 9.6 9.0 Financial services 11 (12) 8.0 7.9 Telecommunications BBB A 61 (60) 19 (20) 7.5 7.3 Healthcare 6.0 4.8 Technology Maturity structure % 4.0 3.7 Food and beverages 0 – 1 years >10 years 3.9 3.0 Automobiles 24 (21) 10 (10) 3.6 4.1 Media AVERAGE 3.5 2.7 7 – 10 years 1 – 3 years Basic resources MATURITY 12 (13) 19 (19) 7.5 years 3.1 3.7 Personal and household goods 2.8 3.1 Construction 5 – 7 years 3 – 5 years Other 9.2 8.9 15 (16) 20 (22) 66 Analysts’ and Investors’ Call 2020 Approximation – not fully comparable with IFRS figures. Fair values as at 31.12.2019 (31.12.2018). 28 February 2020
Additional information: Group finance and risk – Investments Fixed-income portfolio Structured products €m Structured products portfolio (at market values): Breakdown by rating and region Rating Region Market-to- Total par AAA AA A BBB <BBB NR USA + RoW Europe ABS 174 80 66 0 0 0 188 133 320 101% Consumer-related ABS 1 Corporate-related ABS 2 0 7 188 40 0 0 32 202 235 100% 1 0 0 0 0 0 1 0 1 95% Subprime HEL CDO/ 0 0 0 0 0 0 0 0 0 0% Subprime-related CLN 748 1,359 35 18 0 9 764 1,405 2,169 100% Non-subprime-related MBS 1,402 26 0 0 0 0 1,428 0 1,428 104% Agency Non-agency prime 4 17 1 0 0 0 1 22 23 100% 101 26 2 0 0 0 18 110 129 100% Non-agency other (not subprime) 446 13 11 0 0 0 438 32 470 104% Commercial MBS 2,876 1,527 303 58 0 9 2,870 1,904 4,774 101% Total 31.12.2019 60% 32% 6% 1% 0% 0% 60% 40% 100% In % Total 31.12.2018 2,217 1,264 378 89 0 0 2,107 1,840 3,947 100% 67 Analysts’ and Investors’ Call 2020 28 February 2020 1 Consumer loans, auto, credit cards, student loans. 2 Asset-backed CPs, business and corporate loans, commercial equipment. Approximation – not fully comparable with IFRS figures. Fair values as at 31.12.2019 (31.12.2018).
Additional information: Group finance and risk – Investments Fixed-income portfolio Bank bonds Rating structure % Regional breakdown % Total NR AAA Senior bonds Subordinated Loss-bearing 31.12.2019 31.12.2018 26.1 8.8 0.5 35.4 43.4 US 1 (0) 1 (0) 11.4 0.0 0.0 11.4 5.4 Canada <BB Germany 4.9 0.3 5.1 10.2 11.8 0 (0) TOTAL Ireland 8.8 0.0 0.0 8.8 8.6 AA €3.0 bn UK 5.9 1.0 0.2 7.2 7.8 17 (12) BB 4.2 0.8 0.0 5.0 France 4.8 4 (5) 2.8 0.0 0.0 2.8 Australia 1.1 Netherlands 2.5 0.0 0.0 2.6 1.4 BBB A Guernsey island 2.3 0.0 0.0 2.3 2.6 38 (42) 38 (40) Other 12.8 1.5 0.0 14.3 13.1 Maturity structure % Cover pools % 0 – 1 years >10 years Loss-bearing 1 Senior 2 (4) 13 (25) 6 (7) 82 (80) AVERAGE TOTAL 7 – 10 years 1 – 3 years MATURITY € 3.0 bn 7 (9) 40 (31) 3.4 years 5 – 7 years 3 – 5 years Subordinated 2 8 (5) 30 (25) 12 (13) 68 Analysts’ and Investors’ Call 2020 Approximation – not fully comparable with IFRS figures. Fair values as at 31.12.2019 (31.12.2018). 1 Classified as Tier 1 and upper Tier 2 capital for Solvency purposes. 28 February 2020 2 Classified as lower Tier 2 and Tier 3 capital for Solvency purposes.
Additional information: Group finance and risk – Investments Sensitivities to interest rates, spreads and equity markets Sensitivity to risk-free interest rates – Basis points – 50 – 25 +50 +100 – 8.3 – 15.7 Change in gross market value (€ bn) +9.1 +4.4 – 2.1 – 4.1 Change in on-balance-sheet reserves, net (€ bn) 1 +2.3 +1.1 – 0.4 – 0.7 Change in off-balance-sheet reserves, net (€ bn) 1 +0.4 +0.2 – 0.2 – 0.4 P&L impact (€ bn) 1 +0.2 +0.1 Sensitivity to spreads 2 (change in basis points) +50 +100 – 6.0 – 11.3 Change in gross market value (€ bn) – 1.4 – 2.8 Change in on-balance-sheet reserves, net (€ bn) 1 – 0.3 – 0.5 Change in off-balance-sheet reserves, net (€ bn) 1 – 0.1 – 0.2 P&L impact (€ bn) 1 – 30% – 10% Sensitivity to equity and commodity markets 3 +10% +30% – 6.0 – 2.0 Change in gross market value (€ bn) +2.0 +6.2 – 1.4 – 0.6 Change in on-balance-sheet reserves, net (€ bn) 1 +0.9 +2.7 – 1.1 – 0.4 Change in off-balance-sheet reserves, net (€ bn) 1 +0.4 +1.3 – 1.5 – 0.3 – 0.0 P&L impact (€ bn) 1 +0.1 1 Rough calculation with limited reliability assuming unchanged portfolio as at 31.12.2019. After rough estimation of policyholder participation and deferred tax; linearity of relations cannot be assumed. Approximation – not fully comparable with IFRS figures. 2 Sensitivities to changes of spreads are calculated for every category of fixed- 69 Analysts’ and Investors’ Call 2020 28 February 2020 interest securities, except government securities with AAA ratings. 3 Worst-case scenario assumed, including commodities: impairment as soon as market value is below acquisition cost. Approximation – not fully comparable with IFRS figures.
Additional information: Group finance and risk – Investments On- and off-balance-sheet reserves €m p 31.12. 31.12. 31.12. 30.9. 2017 2018 2019 2019 in Q4 – 6,210 253,521 247,310 231,885 231,876 Market value of investments – 5,029 33,120 Total reserves 25,395 22,002 38,148 On-balance-sheet reserves – 3,288 10,738 7,622 4,953 14,026 Fixed-interest securities 3,632 320 Non-fixed-interest securities 3,261 1,817 3,311 – 19 203 189 207 223 Other on-balance-sheet reserves 1 – 2,987 14,574 Subtotal 11,072 6,977 17,560 Off-balance-sheet reserves 5,600 659 Real estate 2 2,744 4,769 4,941 – 2,750 12,147 10,788 9,453 14,897 Loans 3 799 49 792 803 750 Associates – 2,042 18,546 Subtotal 14,323 15,024 20,588 13.4% 11.0% 9.5% 15.0% Reserve ratio 70 Analysts’ and Investors’ Call 2020 28 February 2020 1 Unrealised gains/losses from unconsolidated affiliated companies, valuation at equity and cash-flow hedging. 2 Excluding reserves from owner-occupied property. 3 Excluding insurance-related loans.
Additional information: Group finance and risk – Investments On- and off-balance-sheet reserves €m Off-balance-sheet reserves 1 On-balance-sheet reserves Total reserves (gross) 14,574 18,546 – 6,200 – 10,861 Provision for deferred premium refunds – 1,782 – 2,348 Deferred tax – 7 0 Minority interests – 206 0 Consolidation and currency effects 6,379 5,338 Shareholders' stake 71 Analysts’ and Investors’ Call 2020 28 February 2020 1 Excluding reserves for owner-occupied property and insurance-related loans.
Additional information: Group finance and risk – Risk management – Risk disclosure Breakdown of SCR – Increase driven by substantial business growth and lower interest rates Risk category Group RI ERGO Div. €bn Delta 2018 2019 2019 2019 2019 Substantial growth of nat cat portfolio, – 0.4 7.6 8.8 +1.2 8.8 0.4 Property-casualty depreciation of the euro Business growth, decreasing interest rates, – 0.4 5.3 6.4 +1.1 5.5 1.2 Life and Health depreciation of the euro – 2.2 9.2 10.1 +0.9 6.3 6.0 Market Lower interest rates – 0.2 3.2 4.2 +1.0 2.5 1.9 Credit – 0.2 Operational risk 1.1 1.1 +0.0 0.7 0.6 Other 1 0.7 0.7 +0.0 0.4 0.2 – 3.3 Simple sum 27.0 31.2 +4.2 24.2 10.3 – 9.9 – 10.7 – 8.8 – 1.2 -0.8 Diversification – 2.4 – 3.0 – 2.8 – 0.8 Tax -0.5 – 3.4 14.7 17.5 +2.8 12.6 8.3 Total SCR 72 Analysts’ and Investors’ Call 2020 28 February 2020 1 Capital requirements for associated insurance undertakings and other financial sectors, e.g. institutions for occupational retirement provisions.
Additional information: Group finance and risk – Risk management – Solvency II Property-casualty risk – Increase mainly driven by business growth in P-C Reinsurance Top scenario exposures €bn €bn 2019 2018 (net of retrocession) – AggVaR 1 4.0 Basic losses 4.0 Top exposures Major losses 2 8.3 2019 2018 7.1 1 Atlantic Hurricane – 3.5 – 3.5 6 Diversification 2 Earthquake North America 3 Earthquake Japan Total 8.8 7.6 5 4 Storm Europe 5 IT-Virus 4 ▪ Exploiting opportunities in an improving market environment – exposure growth in all major scenarios in 3 accordance with higher risk-bearing capacity (strongly 2 increased EOF) ▪ Additional exposure expansion due to depreciation of euro 1 ▪ Well-diversified cat portfolio across perils and regions 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 73 Analysts’ and Investors’ Call 2020 28 February 2020 1 Munich Re. Return period 200 years, pre-tax. 2 Natural catastrophes, man-made (including terrorism and casualty accumulations) and major single losses.
Additional information: Group finance and risk – Risk management – Life and Health risk Life and Health risk Life and Health – VaR 1 €bn 2019 1.6 Longevity 1.5 2018 4.3 Mortality 3.6 3.4 Morbidity 2.7 0.9 Health 0.8 0.5 Other 0.3 6.4 Total 5.3 Overall increase driven by Reinsurance ERGO Lower interest rates and increase in exposure, esp. US mortality business Lower Euro interest rates 74 Analysts’ and Investors’ Call 2020 28 February 2020 1 Munich Re (Group). Return period 200 years, pre-tax
Additional information: Group finance and risk – Risk management – Market risk Market risk – Solvency capital requirement Risk category Group RI ERGO Div. € bn 2018 2019 2019 2019 2019 – 0.1 3.6 4.2 2.8 1.5 Equity Exposure increase and rising markets Reduction of duration mismatch and increased downside – 1.3 General interest rate 3.7 3.0 1.5 2.8 protection Exposure increase in Reinsurance, higher shareholder – 0.6 3.2 4.1 1.6 3.1 Credit spread participation at ERGO – 0.1 2.1 2.2 1.5 0.8 Real estate – 0.1 3.8 4.6 4.5 0.2 Currency Increase of FX mismatch position – 2.2 16.3 18.1 12.0 8.3 Simple sum – 7.1 – 8.1 – 5.7 – 2.4 – Diversification – 2.2 9.2 10.1 6.3 6.0 Total market risk SCR 75 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: Group finance and risk – Risk management – Market risk Market risk – Interest-rate sensitivity €m DV01 1 Portfolio duration Net DV01 Assets Liabilities Assets Liabilities – 1 ( – 4) 172 (146) 173 (150) 8.4 (7.5) 9.0 (8.2) Munich Re 2 6.5 (5.0) 46 (34) 34 (30) 6.3 (5.8) 12 (4) Reinsurance – 13 ( – 8) 126 (112) 139 (120) 9.4 (8.8) 10.1 (9.2) ERGO €m DV01 development Reinsurance ERGO 160 60 140 Fixed-income 40 assets 120 20 Asset-liability mismatch Asset-liability mismatch Economic 100 liabilities 80 0 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 1 Fair values as at 31.12.2019 (31.12.2018): Market value change due to a parallel downward shift in yield curve by one basis point, considering the portfolio size of 76 Analysts’ and Investors’ Call 2020 28 February 2020 assets and liabilities (pre-tax). Negative net DV01 means rising interest rates are beneficial. 2 Liabilities comprise technical provisions according to Solvency II. 3 Figures for ERGO and consequently Munich Re Group include VA for Q4 2019. Historical values are not restated.
Additional information: Group finance and risk – Risk management – Operational risk Operational risk Operational risk scenarios 1 – VaR €m 500 Top exposures 2 1 Inappropriate financial reporting RI 400 (misreporting, erroneous tax statement) 2 Inappropriate financial reporting ERGO 300 3 Product flaws RI 200 100 0 1 2 3 Integral part of the internal model Internal control system implemented to actively manage Overall no changes to quantitative assessment operational risks for Munich Re (Group) 77 Analysts’ and Investors’ Call 2020 28 February 2020 1 Scenarios at field-of-business level, before diversification. 2 Listed are the first-level categories according to the standard of Operational Risk Consortium.
Additional information: Group finance and risk – Risk management Sensitivities of SII ratio 237 % Ratio as at 31.12.2019 Interest rate +50bps 1 247 Interest rate – 50bps 1 224 226 Spread +50bps GOV 232 Spread +50bps CORP Equity markets +30% 253 Equity markets – 30% 219 FX – 20% 233 Inflation +100bps 2 234 Atlantic Hurricane 3 213 UFR – 50bps 235 Target capitalisation 175 220 78 Analysts’ and Investors’ Call 2020 28 February 2020 1 Parallel shift until last liquid point, extrapolation to unchanged UFR. 2 Based on CPI inflation. 3 Based on 200-year event.
Additional information: Group finance and risk – Risk management Preliminary SII ratios of Munich Re and solo entities 1 € bn EOF SCR S-II Ratio S-II Ratio (without TM 2 ) (without TM 2 ) (without TM 2 ) (incl. TM 2 ) Internal Model Munich Re 41.5 17.5 237% 274% 41.9 17.5 239% 276% Munich Reinsurance Company – 3.0 0.7 431% Munich Re of Malta – 0.4 0.2 184% GLISE – 2.8 0.6 455% ERGO Versicherung AG – 3.8 1.1 335% DKV Standard Formula 2.2 3 ERGO Leben 2.1 107% 420% 1.3 4 0.5 262% 677% Victoria Leben – 0.8 0.1 520% ERGO Vorsorge Leben 0.5 5 0.3 156% 305% ERGO Austria – 0.8 0.3 259% ERGO Belgium Life – 2.6 1.7 148% ERGO Poland P-C (PLN bn) 79 Analysts’ and Investors’ Call 2020 1 Entities with internal model and selected companies with standard formula application. 2 Transitional measures. 3 Includ ing transitional measures €6.4bn. 28 February 2020 4 Including transitional measures €3.3bn. 5 Including transitional measures €0.9bn.
Additional information: ERGO ERGO Life and Health Germany (1) €m €m Gross premiums written Major result drivers p p Q4 2019 Q4 2018 2019 2018 9,345 2018 – 58 – 281 36 94 271 552 Technical result 1 Foreign exchange 239 118 120 410 238 172 Non-technical result – 5 Divestments/investments – 76 932 1,008 3,916 3,502 415 thereof investment result – 102 Organic change – 231 – 147 – 84 – 494 – 527 Other 33 9,238 – 22 – 77 2019 Net result 44 66 187 264 Life and Health Germany (€m) Q4 2019 Return 1 2019 Return 1 2018 Return 1 849 2.6% 3,571 2.8% 3,489 2.9% Regular income – 69 – 0.2% – 249 – 0.2% – 387 – 0.3% Write-ups/write-downs 611 1.9% 1,439 1.1% 650 0.5% Disposal gains/losses – 362 – 1.1% – 499 – 0.4% 83 0.1% Derivatives 2 – 97 – 0.3% – 345 – 0.3% – 333 – 0.3% Other income/expenses Investment result 932 2.9% 3,916 3.1% 3,502 2.9% 129,142 125,982 120,251 Average market value 80 Analysts’ and Investors’ Call 2020 28 February 2020 1 Return on quarterly weighted investments (market values) in % p.a. 2 Result from derivatives without regular income and other income/expenses.
Additional information: ERGO ERGO Life and Health Germany (2) – Key figures Health Germany GWP – Market view 3 €bn Life Germany Comprehensive insurance – ERGO number 2 in German market Key figures 1 % 5.5 2017 2018 2019 3.7 1.5 1.6 1.8 Reinvestment yield 2.8 2.8 2.3 2.8 3.0 2.9 Average yield 1.9 Average guarantee 2 2.1 2.0 Peer 1 ERGO Peer 2 Peer 3 Peer 4 Key financials 1 €bn Supplementary insurance – ERGO clear market leader 2017 2018 2019 1.6 Free RfB 1.4 1.3 1.7 0.8 0.9 0.9 Terminal bonus fund 0.9 0.7 0.6 0.5 13.3 Unrealised gains 10.4 9.4 6.2 5.0 5.4 Accumulated ZZR ERGO Peer 1 Peer 2 Peer 3 Peer 4 81 Analysts’ and Investors’ Call 2020 28 February 2020 1 German GAAP figures. 2 Actuarial interest rate incl. effect from ZZR. 3 Market data as at 2018.
Additional information: ERGO ERGO Property-casualty Germany (1) €m €m Gross premiums written Major result drivers p p Q4 2019 Q4 2018 2019 2018 3,377 2018 72 37 36 Technical result 303 166 138 1 Foreign exchange 48 18 30 Non-technical result 105 62 42 0 Divestments/investments 52 35 17 thereof investment result 157 133 24 122 Organic change – 77 – 49 – 27 – 260 – 183 – 77 Other 3,500 2019 Net result 43 5 38 148 45 103 Property-casualty Germany (€m) Q4 2019 Return 1 2019 Return 1 2018 Return 1 40 2.1% 159 2.1% 148 2.1% Regular income – 5 – 0.2% – 27 – 0.4% – 40 – 0.6% Write-ups/write-downs 27 1.4% 100 1.3% 30 0.4% Disposal gains/losses – 6 – 0.3% – 51 – 0.7% 13 0.2% Derivatives 2 – 4 – 0.2% – 23 – 0.3% – 19 – 0.3% Other income/expenses 52 2.8% 157 2.1% 133 1.9% Investment result 7,617 7,504 7,085 Average market value 82 Analysts’ and Investors’ Call 2020 28 February 2020 1 Return on quarterly weighted investments (market values) in % p.a. 2 Result from derivatives without regular income and other income/expenses.
Additional information: ERGO ERGO Property-casualty Germany (2) % Gross premiums written 2019 (2018) €m Combined ratio ◼ Loss ratio ◼ Expense ratio Other Fire/property 278 (264) 684 (635) 2017 97.5 64.1 33.5 96.0 2018 62.5 33.4 2019 92.3 60.3 32.0 Transport/Marine 243 (228) 93.2 60.7 32.5 Q4 2019 TOTAL € 3,500 m Motor 680 (665) (€3,377m) 101.7 98.1 97.9 Legal protection 93.2 94.7 92.1 410 (411) 90.3 86.2 Personal accident Liability Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 599 (556) 605 (619) 2018 2018 2018 2018 2019 2019 2019 2019 83 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: ERGO ERGO International (1) €m €m Gross premiums written Major result drivers p p Q4 2019 Q4 2018 2019 2018 5,057 2018 – 20 – 26 – 57 7 171 228 Technical result – 28 Foreign exchange 77 15 62 131 14 116 Non-technical result – 142 Divestments/investments thereof investment result 132 107 25 430 348 82 25 Organic change – 44 – 40 – 4 – 197 – 139 – 58 Other 4,912 – 18 2019 Net result 13 31 105 103 2 International (€m) Q4 2019 Return 1 2019 Return 1 2018 Return 1 96 2.0% 368 2.0% 406 2.3% Regular income – 55 – 0.3% 8 0.2% 40 0.2% Write-ups/write-downs 59 1.3% 112 0.6% 3 0.0% Disposal gains/losses – 24 – 0.5% – 65 – 0.4% 22 0.1% Derivatives 2 – 6 – 0.1% – 25 – 0.1% – 27 – 0.2% Other income/expenses Investment result 132 2.8% 430 2.4% 348 2.0% 18,763 18,186 17,361 Average market value 84 Analysts’ and Investors’ Call 2020 28 February 2020 1 Return on quarterly weighted investments (market values) in % p.a. 2 Result from derivatives without regular income and other income/expenses.
Additional information: ERGO ERGO International (2) €m Combined ratio % Gross premiums written 2019 (2018) Property-casualty Life 95.6 95.4 95.3 95.0 94.8 2,791 (2,840) 698 (843) 94.5 TOTAL € 4,912 m 93.3 91.8 (€5,057m) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Health 2018 2018 2018 2018 2019 2019 2019 2019 1,424 (1,374) 2019 2019 2018 P-C 2019 2018 Life 94.3 97.6 93.8 93.6 thereof: 91.9 93.1 thereof: 84.6 Austria 367 376 Poland 1,463 1,404 Belgium 161 185 Legal protection 647 642 Health Greece 240 239 thereof: Baltics 144 137 820 792 Spain Poland Spain Austria Baltics Greece Legal Total Austria 96 84 604 580 Belgium protection 85 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: Reinsurance Life and Health Overweight in North America and traditional mortality risk 30% 70% ~65 % Mortality 55% 45% Canada ~25 % Morbidity 25% Continental Europe ~10 % 65% Longevity 10% UK/Ireland 10% ~50 % NA 35% USA ~30 % Europe 65% 90% ~15 % Asia/MENA Asia / MENA <5 % Australia Latin America 25% 10% < 5 % Africa/LA Africa 90% 30% 75% 70% Australia 86 Analysts’ and Investors’ Call 2020 28 February 2020 Size of bubbles indicative of present value of future claims.
Additional information: Reinsurance Life and Health Reinsurance Life and Health €m €m Gross premiums written Major result drivers p p Q4 2019 Q4 2018 2019 2018 10,849 2018 – 111 – 175 30 141 329 503 Technical result 309 Foreign exchange 128 40 87 520 427 94 Non-technical result 0 Divestments/investments – 36 thereof investment result 225 261 1,080 988 92 558 Organic change – 69 – 56 – 13 – 144 – 201 Other 58 2019 11,716 – 37 – 23 Net result 89 126 706 729 Reinsurance Life and Health (€m) Q4 2019 Return 1 2019 Return 1 2018 Return 1 191 2.6% 791 2.8% 806 3.1% Regular income – 108 – 0.4% 14 0.2% 14 0.0% Write-ups/write-downs 48 0.7% 322 1.1% 358 1.4% Disposal gains/losses – 13 – 0.2% – 9 – 2 0.0% 0.0% Derivatives 2 – 15 – 0.2% – 38 – 0.1% – 65 – 0.3% Other income/expenses Investment result 225 3.1% 1,080 3.8% 988 3.8% 29,170 28,205 25,812 Average market value 87 Analysts’ and Investors’ Call 2020 28 February 2020 1 Return on quarterly weighted investments (market values) in % p.a. 2 Result from derivatives without regular income and other income/expenses.
Additional information: Reinsurance Life and Health Result below guidance – Growth of fee income partly balances lower than expected technical result €m Gross premiums written 2019 2018 ▪ Top-line growth in Europe, Asia and the US 11,716 10,849 Gross premiums written 51% 51% Mortality Technical result ▪ Strain from disability business in Australia (claims experience and 42% 41% Morbidity reserve strengthening) ▪ Negative impact from restructuring of asset portfolio in Canada Other 7% 8% ▪ Aggregate positive claims experience (including Australia) 329 503 ▪ Strong contribution from new business and positive impact from Technical result restructuring of certain large treaties 124% 50% Mortality ▪ Positive impact from reserve review (except Australia) – 28% Morbidity 34% Fee income 4% 16% Other ▪ Comprises business with little or no risk transfer ▪ Stable and predictable result contribution 127 81 Fee income ▪ Strong growth particularly in Asia and the US 88 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: Reinsurance Life and Health Financially Motivated Reinsurance – Strong demand prevails €m €m €m Gross premiums written 1 Technical result 1 New business contribution 2 % of total % of total % of total 257 154 4,793 231 136 4,306 214 127 205 178 3,313 88 68 35 47 1,264 1,201 32 31 34 34 23 22 17 13 19 18 17 12 10 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Portfolio development Expectations going forward ▪ New business dominated by US and Asia ▪ Demand expected to remain high ▪ 2018’s drop in top line due to scheduled termination and ▪ Transaction types tailored to client needs restructuring of two particularly premium-intensive ▪ Number and size of transactions will vary on an annual basis transactions 89 Analysts’ and Investors’ Call 2020 28 February 2020 1 From 2016 including Health; technical result incl. fee income. 2 From 2017 including Health; 2019 still preliminary.
Additional information: Reinsurance Life and Health Asia – Success through tailor-made market and client strategies €m €m €m Gross premiums written 1 Technical result 1 New business contribution 2 % of total % of total % of total 162 3,045 149 315 2,338 2,182 244 108 1,909 100 198 190 86 180 33 26 22 910 28 16 14 23 21 24 23 19 21 9 18 15 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Portfolio development Expectations going forward ▪ Strong organisational set-up throughout the region ▪ Growth path in the region prevails ▪ Sustained growth path ▪ High demand for solvency relief and financing solutions ▪ Growing fee income ▪ Competition expected to increase ▪ New business contribution volatile on amount of FinMoRe ▪ Closely watch product trends, particularly in critical illness written in a particular year 90 Analysts’ and Investors’ Call 2020 28 February 2020 1 From 2016 including Health; technical result incl. fee income. 2 From 2017 including Health; 2019 still preliminary.
Additional information: Reinsurance Life and Health Longevity – Hold on to prudent underwriting approach €m €m Gross premiums written Liability p.a. Strategic proposition % of total 3,292 ▪ Portfolio comprises longevity 685 transactions in the UK 614 ▪ Market entry in 2011 after in-depth 484 2,020 research 1,884 417 381 ▪ Prudent approach in pricing and 1,366 valuation 6 6 697 4 4 3 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Portfolio development Expectations going forward ▪ Book carefully developed in line with risk appetite ▪ No change to prudent underwriting approach ▪ Claims emerge better than expected in pricing ▪ Carefully consider expansion beyond UK and extension of product offering ▪ Positive contribution to IFRS and SII earnings ▪ 2019: one large transaction executed late in the year 91 Analysts’ and Investors’ Call 2020 28 February 2020
Additional information: Reinsurance Life and Health Financial Markets 1 – Comprehensive market risk solutions for the financial services industry €m IFRS earnings contribution 2 Strategic proposition ▪ Offer comprehensive solutions to manage market risks and returns globally 103 ▪ Innovate new business, optimise inforce business, and boost asset returns of insurers, pension providers and other institutional and private investors ▪ Capitalise on growth and consolidation opportunities in the global savings, retirement and investment industry 59 ▪ Leverage capital market, structuring, accounting, legal, and regulatory 44 37 expertise on the basis of technical and quantitative capabilities 26 ▪ Transfer and transform financial risks to markets via state-of-the-art platform 2015 2016 2017 2018 2019 Portfolio development Expectations going forward ▪ Initial focus on Europe and Asia (mainly Japan) ▪ Intensify coverage of existing markets and expand into further markets ▪ Expansion across Europe, Asia, and North America ▪ Support growth by further scaling up the organisation ▪ Market exploration in Latin America and Australia ▪ Broaden product, service and regulatory scope ▪ Portfolio has gained stand-alone significance ▪ Grow contribution to IFRS earnings and new business contribution 92 Analysts’ and Investors’ Call 2020 1 Formerly “asset protection”. 2 Recognised in non -technical result. 28 February 2020
Additional information: Reinsurance Property-casualty Reinsurance Property-casualty €m €m Gross premiums written Major result drivers p p Q4 2019 Q4 2018 2019 2018 20,437 2018 – 344 – 401 – 249 56 1,000 1,250 Technical result 638 Foreign exchange – 122 315 436 763 284 479 Non-technical result – 183 Divestments/investments thereof investment result 623 249 374 2,152 1,555 597 1,200 Organic change – 67 – 202 – 399 Other 57 124 197 2019 22,091 – 32 Net result 27 59 1,562 1,135 427 Reinsurance Property-casualty (€m) Q4 2019 Return 1 2019 Return 1 2018 Return 1 442 2.7% 1,862 2.9% 1,736 2.9% Regular income – 87 – 0.1% – 463 – 0.8% 28 0.2% Write-ups/write-downs 363 2.2% 807 1.3% 540 0.9% Disposal gains/losses – 104 – 0.6% – 94 – 0.1% – 12 0.0% Derivatives 2 – 106 – 0.6% – 336 – 0.5% – 246 – 0.4% Other income/expenses Investment result 623 3.8% 2,152 3.4% 1,555 2.6% 65,725 63,786 60,684 Average market value 93 Analysts’ and Investors’ Call 2020 28 February 2020 1 Return on quarterly weighted investments (market values) in % p.a. 2 Result from derivatives without regular income and other income/expenses.
Additional information: Reinsurance Property-casualty – Traditional portfolio Consistently managing portfolio quality – Profitability comfortably exceeds cost of capital Traditional P-C portfolio – Outlook 2020 1 ▪ Quite stable portfolio composition with slight move to specialty lines ILLUSTRATIVE ▪ Varying pricing trends depending Low Pricing pressure High on distinct geographies and lines of business Property ▪ Favourable development in nat cat XL Marine and Aviation Aviation ▪ Upcoming renewals to determine situation on cat XL markets Casualty ▪ Overall economic profitability of Credit excluding motor Property Marine portfolio slightly increased without nat cat XL ▪ Interest rate environment puts pressure on economic profitability for long-tail lines Motor Low Economic profitability High 94 Analysts’ and Investors’ Call 2020 1 Bubble size reflecting gross premiums written as at 31.12.2019 (grey) – Outlook 2020 (blue). 28 February 2020
Additional information: Reinsurance Property-casualty – US casualty US casualty – Closely monitoring adverse trends, reserving risks manageable US casualty provisions for % Immediate response to early signs outstanding claims of adverse development Continuous and strong reaction to adverse US casualty loss Risk Solutions Traditional US casualty US casualty trends over the last years to maintain prudence level for our 17 83 reserve position TOTAL € 16.5 bn 2017 2018 2019 Decisive action on Action on individual Further reserve Traditional US casualty by % our US primary book portfolios in our strengthening in underwriting years by changing strategy, reinsurance liability reinsurance motor but also by strength- book where we saw liability, general UY 2002 and prior UY 2015+ ening reserves in elevated loss liability and financial 19 (62% IBNR) 48 (88% IBNR) motor and general reporting from lines to respond to TOTAL liability lines our cedants ongoing loss trends € 13.7 bn UY 2003-2014 33 (79% IBNR) 95 Analysts’ and Investors’ Call 2020 28 February 2020 Fair values (net) as at 31.12.2019
Additional information: Reinsurance Property-casualty – US casualty US casualty market highly differentiated – Still allows us to seize opportunities while active risk management remains key Market observations Munich Re approach ▪ ▪ Social inflation reflects the changing values of society Long-term track record in managing and early responding to risk of and particularly materialises as a frequency of severity change, e.g. social inflation ▪ ▪ Mainly exposed are bodily-injury related classes of Active portfolio management business, e.g. commercial auto, general and product ▪ Selective opportunities in some proportional business lines – liability and healthcare/medical malpractice benefitting from increasing original rates, credible alignment of ▪ Limit reductions on original policies interest and high transparency ▪ ▪ Accelerating rate increases on original policies, Expansion of personal lines business from 7% to 18% 1 primarily in the non-admitted market, e.g. E&S and ▪ Reduction of portfolio parts with imbalanced premium/risk reward, D&O e.g. US commercial liability XL business from 10% to 6% 1 ▪ Further firming in primary admitted market to be ▪ Proactive adjustment of pricing parameters to reflect dynamic market/ expected after adjusted rate filings claims environment and avoid anti-selection ▪ Accelerated rate increases expected throughout 2020 ▪ Reduction of ceding commissions renewals, especially for high excess Bermuda and ▪ Risk management – strict limit management, accumulation control and financial lines renewals feedback loops between underwriting, claims and reserving Ongoing qualitative improvement of our proportional US commercial liability portfolio 96 Analysts’ and Investors’ Call 2020 28 February 2020 1 Share in % of total US traditional casualty book, 2017 to 2020.
Additional information: Reinsurance Property-casualty – Risk solutions Risk Solutions: AMIG, F&C and MRS with particularly good results – Aerospace hit by large loss events Combined GWP growth Combined GWP growth ratio 2019 1 ratio 2019 1 2019 1,2 2019 1,2 American Modern (AMIG) 88% +17% F&C 93% +35% ▪ Transformation investments bearing ▪ Good and profitable market position after fruits with higher growth than expected a period affected by severe outlier events ▪ One-offs IT costs and business run off ▪ Premiums with strong growth above partly impact the result expectations, particularly driven by property Hartford Steam Boiler 92% +13% Munich Re Syndicate (MRS) 96% +31% ▪ Strong growth of strategic products and ▪ Better market conditions and further growth in core business diversification in new specialty lines supporting positive growth ▪ Investing in new MR wide IoT activities ▪ Investing in digitalisation and process automation Munich Re Specialty Insurance 102% +7% Aerospace 166% +20% ▪ Investing in newly created unit and ▪ Unusual accumulation of large loss building up E&S business events for Space and Aviation business ▪ Solid property result ▪ Growing premium due to better market conditions and an improving competitive ▪ Turnaround of casualty business landscape executed 97 Analysts’ and Investors’ Call 2020 1 Economic view – not fully comparable with IFRS figures. 2 Compared to previous year. Gross premiums written. 28 February 2020
Additional information: Reinsurance Property-casualty Reinsurance Property-casualty – Combined ratio % ◼ Basic losses ◼ Major losses ◼ Expenses 114.1 2017 54.8 25.8 33.5 2018 99.4 53.6 11.6 34.2 112.5 101.0 2019 51.4 15.2 34.4 105.1 104.7 112.5 46.4 27.4 38.7 Q4 2019 102.0 97.9 100.7 88.6 Reserve releases 1 87.7 Major losses Nat cat Man-made – 5.6 15.2 10.0 5.2 2019 – 7.1 27.4 21.1 6.3 Q4 2019 Ø Annual ~ – 4.0 ~12.0 ~8.0 ~4.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 expectation 2018 2018 2018 2018 2019 2019 2019 2019 98 Analysts’ and Investors’ Call 2020 28 February 2020 1 Basic losses from prior years, already adjusted for directly corresponding sliding-scale and profit-commission effects. 2 Based on reserve releases of 4%-pts.
Additional information: Reinsurance Property-casualty – Risk trading Retrocession – Stable programme structure despite a tightened market €m Retrocession – Maximum in-force Munich Re key channels protection per nat cat scenario 1 Traditional retrocession Australia Cyclone US Windstorm NE US Windstorm SE ▪ Munich Re has one of the largest retrocession 1,500 programmes globally ▪ Capacity constraints in the broader market, some 1,000 locked-in capital ▪ Reliable Munich Re approach – placements well 500 received 0 2015 2016 2017 2018 2019 2020 Sidecar program 2 ▪ Protection against peak risks via multiple instruments – ▪ One of the largest sidecar programmes in the market mainly traditional retrocession (CXL) and sidecars (US$ 685m); QS cessions of certain lines of business ▪ Well-balanced buying strategy reflecting ▪ Placed with a broad range of investors and targeting ▪ strong Munich Re capital base and risk-bearing capacity, long-term partnerships with large institutional accounts ▪ expected IFRS result stabilisation, ▪ Two products: (1) placed with broad investor group, ▪ market terms (2) bilateral (single counterparty) 99 Analysts’ and Investors’ Call 2020 28 February 2020 1 Including indemnity retrocession, ILW/derivatives, risk swaps, cat bonds and the sidecars including Eden Re. Selection of main scenarios. 2 Munich Re structured and arranged transactions.
Additional information: Reinsurance Property-casualty – Risk trading Munich Re's maximum in-force nat cat protection €m Nat cat protection before reinstatement premiums, as at January 2020 Risk swaps Sidecars Indemnity retro 1,000 500 0 Australia US Windstorm US Windstorm US EU EU Japan Cyclone Northeast Southeast Earthquake Windstorm Other perils Earthquake 100 Analysts’ and Investors’ Call 2020 28 February 2020
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