Strong balance sheet Strong returns Analysts' conference 2014 - PDF document

Strong balance sheet – Strong returns Analysts' conference 2014 Munich, 20 March 2014

Munich Re Agenda Strong balance sheet – Strong returns Nikolaus von Bomhard 2 Jörg Schneider 13 Munich Re (Group) Bernhard Kaufmann 26 Risk management Torsten Oletzky 37 Primary insurance Torsten Jeworrek 48 Reinsurance property-casualty Joachim Wenning 62 Reinsurance life 71 Backup Analysts' conference 2014 2 Strong balance sheet – Strong returns Delivering on our promise, reliable for shareholders … Delivering on promised net result … € bn Outlook 2014 3.3  Expected net result: € 3bn Actual 3.2 3.0 2.5 2.4  Technical profitability becoming 2.4 2.0 even more relevant … Guidance  … in an environment of low interest 0.7 rates and competitive reinsurance markets 2010 2011 2012 2013 1 … facilitating attractive shareholder participation 2 € bn  Strong capital position according Cash yield 3 11.2% 7.8% 5.4% 6.0% to all metrics 2.4 Share  Dividend increase: buy-back 1.5 1.6 1.1 from € 7.00 to € 7.25 per share Dividend  Continuation of share buy-back: € 1bn between AGM 2014 and AGM 2015 2010 2011 2012 2013 High level of diversification and disciplined bottom-line focus facilitating reliable earnings generation 1 Assuming normal nat cat claims based on 8.5% budget, net result would have exceeded guidance. Analysts' conference 2014 3 2 Cash-flow view. 3 Total payout (dividend and buy-back) divided by average market capitalisation.

Munich Re Strong balance sheet – Strong returns … resulting in stable long -term shareholder returns throughout different market phases … throughout multiple time periods 2 Attractive risk/return profile 1 … % % Total shareholder return (p.a.) Total shareholder return (p.a.) 20 20 Peer 3 Last 5 years 10 10 Peer 4 Peer 2 9Y Peer 5 Peer 6 8Y 0 0 6Y Peer 1 7Y – 10 – 10 20 30 40 50 60 20 30 40 50 60 Volatility of total shareholder return (p.a.) Volatility of total shareholder return (p.a.) Below-average volatility leading to lower Performing well – irrespective of fluctuations in cost of capital the capital markets Munich Re shareholders enjoy attractive returns with comparatively low volatility 1 Annualised total shareholder return defined as price performance plus dividend yield over the period from 1.1.2005 until 31.12.2013; based on Datastream total return indices in local currency; volatility calculation with 250 trading days per year. Peers: Allianz, Axa, Analysts' conference 2014 4 Generali, Hannover Re, Swiss Re, ZIG. 2 Same calculation as left chart with different starting points until 31.12.2013. Strong balance sheet – Strong returns Stability reflected in solid financial position Excellent economic solvency ratio Substantial capital buffer Strengthened German GAAP further improved supporting AA rating capital position Internal Rating HGB 1 model agencies flexibility Agency Rating Distributable earnings € bn Economic solvency ratio Solvency II ratio A.M. Best A+ (Superior) 3.7 267 3.4 225 194 2.3 Fitch AA – (Very strong) 153 129 111 Moody’s Aa3 (Excellent) S&P AA – (Very strong) 2011 2012 2013 2011 2012 2013 Strong capitalisation according to all metrics facilitating financial flexibility 1 German statutory accounting standards. Analysts' conference 2014 5

Munich Re Strong balance sheet – Strong returns Low interest rates – Technical profitability becoming even more relevant Increasing earnings contribution from Run-off result 2 : Profitability in p-c reinsurance underwriting 1 supported by strong reserving position 100% 6% 84% 4.7% 75% 4% 50% 2% 25% 0% 0% 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Net DV01 3 € m IFRS net result 4 € bn Low 0.2 Reinsurance – 7.7 +100bps sensitivity to Primary insurance 10.3 +50bps 0.1 interest-rate changes Munich Re (Group) – 50bps – 0.1 2.6 Becoming less dependent on investment income – focus remains on creating value in core underwriting business 1 Contribution of technical result as a percentage of operating result. 2 Run-off result in % of net earned premiums in property-casualty reinsurance (incl. large losses). 3 As at 31.12.2013. Net DV01: Sensitivity to parallel upward shift of yield curve by one basis point Analysts' conference 2014 6 reflecting portfolio size. 4 Rough calculation with limited reliability assuming unchanged portfolio as at 31.12.2013. Strong balance sheet – Strong returns Reinsurance – Competitive environment in property- casualty following increasing supply of capacity Structural increase of business diversification 1 € bn Munich Re well prepared CAGR Diversification Risk 27.8 Solutions 21.9 4.0 +16%  Risk Solutions – Profitable specialty business 1.9 largely detached from reinsurance market Reinsurance 5.3 10.8 +15% life  Reinsurance life – Global market leading Trad. p-c 14.7 position stabilising overall results 13.0 – 2% reinsurance  Flexibility – Swiftly adjusting to client demand 2008 2013 (e.g. regions, perils, proportional and XL) Property-casualty – Diversified business portfolio 1 Know-how and client proximity Tailor- Traditional Facultative Propor-  Structuring expertise – Providing holistic tailor- made tional made solutions beyond pure capacity TOTAL  Innovation – Creating solutions for new and TOTAL € 17bn € 13bn emerging risks Risk  Achieving differential terms and conditions Solutions XL Increasing share of business largely decoupled from reinsurance cycle and competition in traditional reinsurance 1 Gross premiums written. Analysts' conference 2014 7

Munich Re Strong balance sheet – Strong returns Primary insurance – Proactively tackling challenges International – Combined ratio % German life – New product Reorganisation 107.8 Yield 104.5 New product 102.5 Classic products 99.8 98.7 96.7 Flexibility Security 2008 2013  Getting back to normal –  Successful introduction of new  Streamlining of sales completed Management measures bearing life product – Already making  Organisational changes aiming fruit, reflected in further up ~50% of new business in for leaner structures and improving technical profitability private pensions 1 stronger customer orientation  Combined ratio close to mid-  Continuously improving  Improving cost efficiency over term target of ~98% risk/return-profile the coming years Well on track to continuously increase earnings contribution 1 Annual premium equivalent (APE), only third-layer private provision and tied agent organisations. Analysts' conference 2014 8 Strong balance sheet – Strong returns Munich Health – Key financials Gross premiums written € bn Regional premium breakdown 1 % Major drivers Other North America Primary insurance 6.7 6.5 8 (7) 65 (66) Organic growth in Spain and Benelux, decline in USA due to 2.0 1.9 exit from PFFS business Reinsurance Northern/ 4.7 Southern 4.6 Negative FX effects ( –€ 242m); Eastern/ Europe, new business in Middle East and Central Europe Latin America increased large-volume deals 2012 2013 15 (16) 12 (11) Combined ratio % Net income € m Return on investment % 150 100.2 2.7 2.5 98.3 – 91 2012 2013 2012 2013 2012 2013 2013 results driven by improved US Medicare business and release of premium deficiency reserve in the USA 1 Gross premiums written as at 31.12.2013 (31.12.2012). Analysts' conference 2014 9