Innovation Translating ideas into business Monte Carlo, 13 - PowerPoint PPT Presentation

Image: David Malan / Getty Images Innovation – Translating ideas into business Monte Carlo, 13 September 2015 Torsten Jeworrek, Thomas Blunck

Agenda 1 2 Global reinsurance landscape Munich Re strategy Torsten Jeworrek Torsten Jeworrek 3 4 Munich Re innovations Key takeaways Thomas Blunck Torsten Jeworrek Innovation – Translating ideas into business, Monte Carlo 13 September 2015 2

Global reinsurance landscape Moderate reinsurance premium growth, stronger growth in primary insurance Global premium development from 2008–2014/2015e–2017e P-C RI: Ceded premiums 2014 €bn P-C RI and PI real growth rates (CAGR) Africa/Middle East RI PI (5%) 08–14 15–17 08–14 15–17 Latin America Europe -1% 1% -1% 2% (7%) Europe 14 10 (36%) North America -1% 1% 0% 2% 67 Total 46 Asia Pacific 1 4% 0% 6% 6% ~ 188 = 100% Latin America 6% 3% 7% 5% Africa/Middle 3% 3% 4% 5% East 51 Asia Pacific North America Total 1% 1% 1% 3% (25%) (27%) 1 RI premium growth influenced by volatile motor solvency-relief deals in China Source: Munich Re Economic Research Innovation – Translating ideas into business, Monte Carlo 13 September 2015 3

Global reinsurance landscape Reinsurance capital growing, but not excessively compared to exposure Dedicated reinsurance capital US$bn Reinsurance capital often overestimated  The capitalisation of the reinsurance industry is Traditional RI capital growing 400  In 2014 about US$335bn was allocated to 350 reinsurance business 300  Alternative capital grew from US$48bn in 2013 to US$60bn in 2014 250  Comparing alternative and traditional reinsurance 200 capital directly is misleading as reinsurance 150 capital can be leveraged, whereas alternative capital has to collateralise limits by almost 100% 100 50 0 2012 2013 2014 HY 2015 The absolute size of dedicated reinsurance capital has a significant influence on the effect of nat cat events, stricter solvency regimes and capital market crises, etc. Source: AM Best, Guy Carpenter Innovation – Translating ideas into business, Monte Carlo 13 September 2015 4

Global reinsurance landscape Changing reinsurance buying patterns following M&A in the (re-)insurance industry Consolidation will continue Reasons Consequences   Cost and capital synergies Business models are changing → better financials, more competitive,  Companies are bringing together primary insurance and greater diversification reinsurance  Access to new markets, clients or business segments  Bigger primary insurers have different demand patterns:  Acquisition of know-how and models  Buy reinsurance more centrally  Buy more capital driven reinsurance solutions  Consolidation on the reinsurance side will lead to the development of more second tier market players  Short term: more capacity offered by these larger companies; more competition  Mid term: consolidation may lead to price consolidation Munich Re is in a position to flexibly react to each arising demand Innovation – Translating ideas into business, Monte Carlo 13 September 2015 5

Munich Re strategy Munich Re strategy in challenging market environment 1 2 3 Traditional Risk Solutions Innovations reinsurance: generating strong Tailor-made earnings solutions and cycle management  Munich Re in excellent  Tapping new profit pools by  Excellent profitability; largely position to successfully expanding existing market detached from reinsurance manage the soft cycle due to: boundaries with innovative cycle products and services  Broadest geographic reach  With €4bn premium larger than P-C reinsurance portfolios of  Preferential client access several top-ten peers  Leading risk know-how  Superior diversification Innovation – Translating ideas into business, Monte Carlo 13 September 2015 6

Munich Re strategy Flexibility in managing the portfolio due to superior diversification Total P-C book [%] Traditional [%] Risk Solutions [%] Risk Solutions Tailor-made Nat cat XL Casualty Other American Modern solutions 25 (24) 10 (12) 45 (40) 22 (19) 23 (23) 18 (18) Hartford TOTAL 1 TOTAL TOTAL Steam Watkins Boiler €17bn €13bn €4.2bn 10 (12) 17 (18) Corporate Insurance Specialty 2 Other traditional business Other property Specialty Markets Partner 57 (58) 34 (36) 11 (12) 13 (12) 15 (16)  Stable and well-diversified portfolio  Cycle management mitigates  Continued expansion of US price pressure specialty primary business where  Risk Solutions and tailor-made rates are still increasing  Shift from nat cat XL and other solutions less impacted by  Combined ratio 2014: 88.6% market terms property to casualty 1 Gross premiums written property-casualty reinsurance as at 31.12.2014 (31.12.2013) 2 Aviation, marine and credit Innovation – Translating ideas into business, Monte Carlo 13 September 2015 7

Munich Re strategy Future drivers of insurance demand Growth drivers in traditional (re-)insurance Innovation-driven demand  Higher demand from emerging markets  New risk landscape (e.g. cyber, supply chains, logistics, mobility)  Large portion of non- or underinsured risks  New data and IT technologies  New forms of capital and risk management  New distribution channels  New services due to changes in customer behaviour Change as the driver – risk as the opportunity – innovation as the answer Innovation – Translating ideas into business, Monte Carlo 13 September 2015 8

Munich Re strategy Anticipating insurance demand due to excellent client access Industrial & commercial companies Strategic … … partnerships with primary insurers SAP SAS Innovative Risk ERGO solutions Solutions … … Munich Re … IBM … … HP Innovation – Translating ideas into business, Monte Carlo 13 September 2015 9

Munich Re strategy Impulses for innovative business ideas Munich Re present in innovation hubs around the world Princeton Berlin  Internal incubator  Partnership with Axel Springer Plug & Play,  Cooperation with MIT focus on digital start-ups  ERGO Digital Lab Munich  Cooperation with Silicon Valley Munich universities  Innoscouts  Partnership with Tel Aviv Plug & Play Accelerator, emphasis on Internet  Innoscouts of Things  Strategic investment in London start-ups  Partnership with Startupbootcamp Madrid/São Paulo  First FinTech accelerator  Mundi Lab – Accelerator worldwide with insurance for RI and Munich Health focus Access via primary insurance Access via reinsurance Digitalisation and highly competitive reinsurance markets speed up innovation process Innovation – Translating ideas into business, Monte Carlo 13 September 2015 10

Munich Re innovations Munich Re emphasises innovation in four key development areas New (re-)insurance products New business models Munich Re strives to position itself as leading Munich Re ensures its competitiveness (re-)insurance product developer for new against existing and new players by further and emerging risks (in a digital world) developing its business model New risk-related services New clients and demands Munich Re offers risk-related services Munich Re brings in non-insurance players creating tangible value for clients as business partners, and expands business relationships within existing customer groups Data Proprietary and big data; data analytics Enabler Agile IT Fast and flexible IT, interconnectivity, digital customer experience and process chains Collaboration Collaboration models with players within and beyond insurance eco-system Innovation – Translating ideas into business, Monte Carlo 13 September 2015 11

Munich Re innovations Set of strategic business initiatives in each key development area  Cyber risks  Automation and digitalization of  Energy and technology (e.g. processes (e.g. automated technical performance underwriting platform)  White Labelling guarantees)  Risk-sharing with pension funds  Non-damage BI New New business  Weather and Climate (re-)insurance models  Project cost insurance products  Product design in Life and Health based on enhanced data analytics Key development areas New risk-  Consulting (e.g. Motor and  Corporate finance / capital related New clients Property Consulting services) management solutions services and demands  Project risk rating (e.g. Capital Partners)  Virtual simulation of e.g. constructions  Public-sector business development  Predictive- and preventive services  Sharing economy / mobility ~ €400m 1 premium generated by innovative products 1 Approximation – not fully comparable with IFRS figures Innovation – Translating ideas into business, Monte Carlo 13 September 2015 12