Shaping change in insurance Balance sheet press conference 2017 - PDF document

Image: Getty Images/fStop Shaping change in insurance Balance sheet press conference 2017 Munich, 15 March 2017

Agenda Nikolaus von Bomhard 1 Shaping change in insurance 2 Jörg Schneider 2 Group Finance 11 Markus Rieß 3 ERGO 17 Torsten Jeworrek 4 Reinsurance 29 Nikolaus von Bomhard 5 Outlook 37 2 Balance sheet press conference 2017 Shaping change in insurance Strategic keystones laying foundation for Munich Re’s good positioning Emphasis on Integrated Risk PI and RI profitable Management under one roof Underwriting Shareholder Conservative Innovative Corporate friendly Asset Responsibili ty Solutions dividend policy Management 3 Balance sheet press conference 2017

Shaping change in insurance Munich Re delivers financial stability IFRS net income HGB result € 2.6 bn € 3.4 bn Meeting guidance Safeguards capital repatriation Dividend per share 1 Solvency II ratio € 8.60 267 %  + 4.2 % Well above target capitalisation 4 1 Subject to approval of AGM. Balance sheet press conference 2017 Shaping change in insurance Seizing long-term opportunities while managing short-term pressure Changing competitive landscape Digitalisation Macroeconomic/political risks  Emergence of new players and  New technologies and partnerships  Persistently low interest rates business models  Dramatically enhanced availability  Reflation  Proliferation of “alternative” capital of data and analysis tools  Global political uncertainty  Transformation of traditional  Changing customer expectations value chain Source: Shutterstock [M] GOAL GOAL GOAL Agile business model Fostering innovation Dampening volatility 5 Balance sheet press conference 2017

Shaping change in insurance Strong balance sheet supports sound profitability Medium RoE exceeds cost of capital Strong capitalisation % Low High according to all metrics 16 12 8  Average cost of capital Rock-solid 4 reserving position 0 2005 2016 € 28 bn ~ 10.7 % > ~ 8 % unrealised investment gains 1 12-year average RoE Average cost of capital 6 1 As at 31.12.2016. Balance sheet press conference 2017 Shaping change in insurance Attractive shareholder returns Further dividend increase, continuation of share buy-back Continuous growth of dividend per share Outperforming major peers and insurance index 2 % CAGR: 9.7% € 8.60 Total shareholder return (p.a.) 18 Peer 3 15 3.10 12 1 2005 2016 9 Peer 1 Peer 4 Peer 6 > € 23 bn 6 Index Peer 5 Total pay-out since 2005 3 (dividend and share buy-back) 0 Peer 2 74 million 50.9 million – 3 > 20 25 30 35 40 45 Shares repurchased Shares issued in 2003 Volatility of total shareholder return (p.a.) since 2006 (capital increase) 7 1 Subject to approval of AGM. 2 Annualised total shareholder return defined as price performance plus dividend yield over the period from 1.1.2005 until 28.2.2017; based on Datastream total return Balance sheet press conference 2017 indices in local currency; volatility calculation with 250 trading days per year. Peers: Allianz, Axa, Generali, Hannover Re, Swiss Re, ZIG, Stoxx Europe 600 Insurance (“index”).

Shaping change in insurance Reinsurance – Well positioned to manage the current market environment and drive innovative solutions ILLUSTRATIVE New Traditional reinsurance TOTAL 1,2 Solutions Successfully managing € 23 bn for emerging the soft cycle Emerging risks New markets products/ risk-related Risk services Markets Solutions Risk Solutions TOTAL 3 Tailor-made Continuous growth in € 4.8 bn solutions specialty and niche business Under- insurance in developed markets Incremental Innovation Established innovations Traditional TOTAL 1,4 reinsurance Steady expansion of ~ € 650 m innovative products/solutions Established Products New 1 Gross premiums written as at 31.12.2016. 2 Life (traditional and strategic initiatives): € 10bn, traditional P-C: € 13bn. 3 Management view, not comparable with IFRS reporting. 8 4 Munich Re (Group); indirect effects on traditional business not included. Balance sheet press conference 2017 Shaping change in insurance ERGO – Turnaround initiated, well on track to become a significant earnings contributor € m Increasing IFRS net profit 1 ERGO Strategy Programme/International Strategy ~600+ F it D igital S uccessful! 530 150 – 200 Leaner and Transforming Convincing solutions, more efficient the business committed to structures model profitable growth – 40 … 2016 2017 2020 2021 9 1 From 2017, figures include primary insurance business of Munich Health. Balance sheet press conference 2017

Shaping change in insurance Innovation – Munich Re establishing a strong position to tap opportunities – Focus on tangible business impact Munich Re has successfully laid the groundwork … Innovation strategy Group-wide approach Leveraging core competencies Intensive know-how and Data analysis Defined innovation areas resource sharing Corporate venturing and partnering Agile IT Innovation infrastructure Joint business development Cooperation models … to seize opportunities from digitalisation Business model Products/services Provide digital infrastructure Improve customer experience Expand offering for online customers (e.g. “ nexible ”) Digitalise insurance offerings Improve process efficiency Customised products and tailor-made solutions Foster customer-centric support 10 Balance sheet press conference 2017 Group Finance 11 Balance sheet press conference 2017

Group Finance – Financial highlights 2016 2016 net result meets annual guidance Munich Re (Group) 2016 (Q4 2016) € m € m € m Net result Technical result Investment result Net result € 2,581m (Q4: € 486m) 7,536 7,567 3,924 3,122 Sound underlying performance without 2,815 dilution of strong balance sheet – 2,581 investments in ERGO strategy programme and FX gains 1,322 1,664 1,625 731 525 486 Return on investment 1 3.2% (Q4: 2.7%) 2015 2016 Q4 Q4 2015 2016 Q4 Q4 2015 2016 Q4 Q4 Solid return given low interest rates – 2015 2016 2015 2016 2015 2016 prudent asset liability management once again proved beneficial Reinsurance ERGO Munich Health Life: Technical result € 487m L/H Germany: Reinsurance: (Q4: € 169m) Result impacted technical one-offs Combined ratio 99.5% (Q4: 95.4%) Shareholders' equity P-C: Primary insurance: € 31.8bn ( – 1.8% vs. 30.9.) Combined ratio 97.0% (Q4: 100.0%) Combined ratio 94.2% (Q4: 98.8%) P-C: Combined ratio 95.7% (Q4: 101.9%) Strong capitalisation according International: to all metrics Major-loss ratio 9.1% (Q4: 14.8%) Combined ratio 99.0% (Q4: 100.4%) 12 1 Annualised. Balance sheet press conference 2017 Group Finance – Capitalisation IFRS capital position € m € bn Equity Capitalisation 30,966 Equity 31.12.2015 Change Q4 0.4 0.4 0.4 0.4 0.4 0.3 2,581 486 Consolidated result 4.2 4.3 4.3 4.2 4.4 4.4 Changes – 1,329 – Dividend – 2,049 265 Unrealised gains/losses 345 910 Exchange rates – 971 – 260 Share buy-backs – 71 344 Other – 570 13.6 31,785 13.4 Equity 31.12.2016 12.8 12.6 12.4 12.6 Unrealised gains/losses Exchange rates 30.3 31.0 31.8 32.0 32.4 31.8 2014 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Fixed-interest securities FX effect mainly driven by US$ 2016: –€ 37m Q4: –€ 2,390m Debt leverage 1 (%) Non-fixed-interest securities Senior and other debt 2 2016: + € 304m Q4: + € 335m Subordinated debt Equity 13 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. Balance sheet press conference 2017

Group Finance – Risk management High Solvency II ratio Munich Re actions SII ratio % >220%: Above target capitalisation  Capital repatriation  Increased risk-taking 267%  Holding excess capital to meet external constraints 220% 175% – 220%: Target capitalisation  Optimum level of capitalisation 140% – 175%: Below target capitalisation 175%  Tolerate (management decision) or  If necessary, take management action (e.g. risk transfer, scaling- down of activities; raising of hybrid capital) 140% <140%: Sub-optimal capitalisation  Take risk-management action (e.g. risk transfer, scaling-down of activities; raising of hybrid capital) or 100%  In exceptional cases, tolerate situation (management decision) 2014 1 2010 2011 2012 2013 2015 2016 14 1 Transition into SII metric. Balance sheet press conference 2017 Group Finance – Investment portfolio Well diversified investment portfolio Investment portfolio 1 % Portfolio management in Q4  Ongoing geographic diversification Land and buildings Fixed-interest securities 2.9 (2.9) 56.3 (55.7)  Slight decrease in corporate bonds  Reduction of cash and bank bonds  Increase of net equity exposure to 5.0% Shares, equity funds and participating interests 2  Increase of asset duration in reinsurance 6.1 (5.2) TOTAL € 236bn Miscellaneous 3 6.2 (7.5) Loans 28.5 (28.7) 15 1 Fair values as at 31.12.2016 (31.12.2015). 2 Net of hedges: 5.0% (4.8%). 3 Deposits retained on assumed reinsurance, deposits with banks, investment funds (excl. equities), derivatives Balance sheet press conference 2017 and investments in renewable energies and gold.