Half-year financial report as at 30 June 2016 9 August 2016 - PowerPoint PPT Presentation

Source: Shutterstock [M] Half-year financial report as at 30 June 2016 9 August 2016 Nikolaus von Bomhard Jörg Schneider

Agenda 1 Introduction 2 2 Munich Re (Group) 5 3 ERGO 10 4 Munich Health 16 5 Reinsurance 18 6 Outlook 24 7 Backup 26 2 Half-year financial report as at 30 June 2016

Introduction Munich Re well-positioned to prevail through challenging times Many countries now have negative government bond yields 1 After Brexit vote – Quick recovery following nervous capital markets … Maturity  Ongoing decline of reinvestment yield 2 3 4 5 6 7 8 9 10 15 20 30 Yield Switzerland  Pressure on running yield mitigated by long duration Japan ≤ 0% Germany Netherlands  Positive contribution from interest-rate hedging Yield Finland > 0% France  Valuation reserves increasing to €34.5bn Austria Sweden Belgium Spain Italy Norway UK US … while enormous Increasing capital-market volatility uncertainty still remains  Well-balanced investment portfolio provides resilience Strong FX moves  Political risks  Limited exposure to credit risks, esp. banks Equity markets  Macroeconomic risks  Commodity investments serving as hedge Financial sector  International diversification benefiting the FX result Precious metals Resilience in an unpredictable and unstable environment – No hunt for yields to compensate for low interest rates 3 1 Source: Bloomberg, UBS. July 2016. Half-year financial report as at 30 June 2016

Introduction Short-term earnings pressure mitigated by strong balance sheet – Attractive mid to long-term growth perspectives Promoting innovative products 2 Strong balance sheet % €m ERGO: Increasing earnings €m 1 Investment reserve ratio (lhs) 16 8 ~500+ P-C reinsurance reserve releases (rhs) ~450 13 7 500 10 6 7 5 4 4 2013 2014 2015 2013 2014 2015 H1 2016 … 2016e 2017 2020 2021 … Conservative accounting eventually Munich Re actively shaping the trans- ERGO becoming a significant earnings translates into earnings formation of the (re-) insurance industry contributor for Munich Re (Group) Annual net profit guidance of €2.3bn to stand so long as pressure from low interest rates and ongoing (albeit slowing) attrition of reinsurance margins remains – Munich Re paving the way for a more balanced earnings structure 4 1 Unrealised gains in % of total investments. 2 Premium Munich Re (Group). Half-year financial report as at 30 June 2016

Munich Re (Group) 5 Half-year financial report as at 30 June 2016

Munich Re (Group) – Financial highlights H1 2016 High Q2 result – Prudent positioning and strong balance sheet offset earnings pressure Munich Re (Group) Q2 2016 (H1 2016) Net result Technical result €m Investment result €m Net result €m €974m (H1: €1,411m) 4,341 4,322 1,780 1,866 1,474 High investment and currency result 1,411 compensates for lower technical result 2,750 945 974 and ERGO restructuring expenses 1,572 529 436 Return on investment 1 4.7% (H1: 3.7%) Q1 Q2 H1 H1 Q1 Q2 H1 H1 Q1 Q2 H1 H1 2016 2016 2015 2016 2016 2016 2015 2016 2016 2016 2015 2016 Portfolio de-risking prior to Brexit vote proves beneficial Reinsurance ERGO Munich Health Reinsurance: Life: Technical result €103m L/H Germany: Shareholders' equity (H1: €172m) – In line with High investment result Combined ratio 103.0% (H1: 102.1%) expectations €32.0bn (+0.7% vs. 31.3.) P-C: Primary insurance: Combined ratio 93.3% (H1: 95.9%) Combined ratio 94.6% (H1: 95.6%) P-C: Combined ratio 99.8% Increase despite capital repatriation of (H1: 94.3%) – Major-loss ratio of International: €1.5bn in Q2 – ESR reduction mainly 12.3% (H1: 7.5%) Combined ratio 103.6% (H1: 98.5%) driven by declining interest rates 6 1 Annualised. Half-year financial report as at 30 June 2016

Munich Re (Group) – Capitalisation IFRS capital position Equity €m Capitalisation €bn 30,966 0.4 0.4 Equity 31.12.2015 Change Q2 0.4 0.3 1,411 974 Consolidated result 4.3 4.3 4.4 0.3 4.4 Changes 4.4 –1,329 –1,329 Dividend 2,011 616 Unrealised gains/losses –388 272 Exchange rates –393 –158 Share buy-backs –267 –156 Other 15.3 13.6 13.4 32,012 218 12.8 Equity 30.6.2016 12.6 Unrealised gains/losses Exchange rates 26.2 30.3 31.0 31.8 32.0 2013 2014 2015 Q1 2016 Q2 2016 Fixed-interest securities FX effect mainly driven by US$ H1: +€2,269m Q2: +€796m Debt leverage 1 (%) Non-fixed-interest securities Senior and other debt 2 H1: –€253m Q2: –€180m Subordinated debt Equity 7 1 Strategic debt (senior, subordinated and other debt) divided by total capital (strategic debt + equity). 2 Other debt includes bank borrowings of Munich Re and other strategic debt. Half-year financial report as at 30 June 2016

Munich Re (Group) – Investment portfolio Investment portfolio Investment portfolio 1 % Portfolio management in Q2  Government bonds: Shift from Germany, UK Land and buildings Fixed-interest securities 2.7 (2.9) 56.7 (55.7) and Portugal to France, USA and Canada  Covered bonds: Overall reduction, esp. Shares, equity funds and participating interests 2 in Germany and Ireland TOTAL 4.6 (5.2)  Decrease of inflation exposure €238bn  Miscellaneous 3 Shift from ABS/MBS to cash 6.7 (7.5)  Reduction of net equity exposure to 3.6%  Loans Further decline of interest rates leads to 29.3 (28.7) increase of duration and market values Portfolio duration 4 DV01 1,4 €m Assets Liabilities Assets Liabilities Net 5.7 (5.4) 5.1 (4.8) 45 (41) 47 (44) –2 Reinsurance 9.4 (8.4) 10.7 (9.1) –22 ERGO 126 (111) 148 (126) 8.0 (7.3) 8.4 (7.4) 171 (151) 195 (170) –24 Munich Re (Group) 1 Fair values as at 30.6.2016 (31.12.2015). 2 Net of hedges: 3.6% (4.8%). 3 Deposits retained on assumed reinsurance, deposits with banks, investment funds (excl. equities), derivatives 8 and investments in renewable energies and gold. 4 Market value change due to a parallel downward shift in yield curve by one basis point considering the portfolio size of assets and Half-year financial report as at 30 June 2016 liabilities (pre-tax). Negative net DV01 means rising interest rates are beneficial.

Munich Re (Group) – Investment result Investment result Investment result €m Q1 2016 Return 1 Q2 2016 Return 1 H1 2016 Return 1 H1 2015 Return 1 1,628 2.8% 1,823 3.1% 3,451 3.0% 3,863 3.2% Regular income Write-ups/write-downs –219 –0.4% –22 –0.0% –242 –0.2% –239 –0.2% 218 0.4% 910 1.5% 1,128 1.0% 1,806 1.5% Disposal gains/losses Derivatives 2 74 0.1% 176 0.3% 251 0.2% –841 –0.7% –128 –0.2% –137 –0.2% –266 –0.2% –250 –0.2% Other income/expenses 1,572 2.7% 2,750 4.7% 4,322 3.7% 4,341 3.6% Investment result Total return 13.2% 8.9% 11.0% –0.4% 3-month Write-ups/ Disposal Write-ups/ Disposal reinvestment yield Q2 2016 write-downs gains/losses Derivatives H1 2016 write-downs gains/losses Derivatives 47 894 177 –40 1,114 406 Fixed income 3 Fixed income 3 1.6% Q2 2016 –105 147 19 –255 144 –117 Equities Equities 1.9% 26 40 78 10 Q1 2016 Commodities Commodities –52 –32 Inflation Inflation 1.8% Q4 2015 10 –131 –7 –25 –130 –16 Other Other 9 1 Annualised return on quarterly weighted investments (market values) in %. Impact from dividends on regular income 0.4%-pts in Q2 and 0.2%-pts in Q1. Half-year financial report as at 30 June 2016 2 Result from derivatives without regular income and other income/expenses. 3 Thereof interest-rate hedging ERGO: Q2 €179m/€19m (gross/net); H1 €446m/€53m (gross/net).

ERGO 10 Half-year financial report as at 30 June 2016

ERGO ERGO Life and health Germany H1 2016 vs. H1 2015 Gross premiums written €m Net result €m  Technical result 4,727 105 H1 2015 H1 2015  Decrease in Health, partly compensated for –1 –9 Foreign exchange Technical result by Life and Direct business  Q2 vs. Q1: Main improvement in Life, Health 0 Divestments/investments Non-technical result 1 301 slightly positive –205 –329 Organic change Other  Investment result (+€824m) 4,520 69 H1 2016 H1 2016  Significant increase of derivative result – Swaption impact +€574m/+€55m (gross/net)  Life: –€190m  Release of unrealised gains for ZZR Decline of regular premiums due to ordinary  Lower regular income 14 Q1 2016 attrition while single premiums suffered from  Other lower product sales 35 Technical result  Restructuring expenses in Q2  Health: –€14m Non-technical result 1 132 €215m/€41m (gross/net) Positive development in supplementary  Negative one-off effect from accounting insurance but overcompensated by –126 Other difference between IFRS and local GAAP discontinuation of a large contract; 55 Q2 2016 regarding pension liabilities in Q1 comprehensive cover flat  Health: Extraordinary tax charges in Q1 11 1 Non-technical result including investment result, insurance-related investment result, other operating result and deduction of income from technical interest. Half-year financial report as at 30 June 2016