Image: Getty Images/Oaltindag Balance sheet press conference 2018 Executing business opportunities Munich, 15 March 2018
Agenda 1 Executing business opportunities 3 ERGO Joachim Wenning Markus Rieß 2 15 2 Group Finance 4 Reinsurance Jörg Schneider Torsten Jeworrek 9 24 5 Outlook Joachim Wenning 31 2 Analysts' and Investors' Call 2018
Executing business opportunities A year of record-high insured natural catastrophe losses Record-high insured Munich Re delivers nat cat losses of US$ 135bn good underlying results IFRS NORMALISED Overall nat cat losses NET INCOME NET RESULT Insured nat cat losses € 0.4 bn ~ € 2.2 bn Diversification Adjusted for severe nat cats in line with guidance 1 proved beneficial GERMAN GAAP (HGB) SOLVENCY II DISTRIBUTABLE EARNINGS RATIO € 4.0 bn 244 % Safeguards Well above capital repatriation target capitalisation 1980 1985 1990 1995 2000 2005 2010 2015 3 1 Adjusted for 8%-pts. nat cat expectation. Analysts' and Investors' Call 2018
Executing business opportunities Despite loss volatility, Munich Re proves a superior risk/return profile RoE exceeds Performance vs. major peers % % and insurance index 1 cost of capital Total shareholder return (p.a.) 16 Value creation 20 12 Peer 4 15 Peer 3 8 Average cost of capital 10 Peer 7 Peer 1 Peer 5 4 Index Peer 6 5 0 2005 2011 2017 0 Peer 2 ~ 10 % ~ 8 % > – 5 20 25 30 35 40 13-year average RoE Average cost of capital Volatility of total shareholder return (p.a.) 4 1 Annualised total shareholder return defined as price performance plus dividend yield over the period from 1.1.2005 until 28.2.2018; based on Bloomberg data in local currency; volatility Analysts' and Investors' Call 2018 calculation with 250 trading days per year. Peers: Allianz, Axa, Generali, Hannover Re, Scor, Swiss Re, ZIG, Stoxx Europe 600 Insurance (“index”).
Executing business opportunities Executing strategic priorities of the Group (1/2) STRATEGIC PRIORITIES Earnings stabilisation and Digital Leanness, increase of earnings power transformation complexity reduction Focus on leveraging Focus on business and Focus on all our strengths 1 smart governance Profitability De-focus from rest, and Business development divest from sub-critical Building new business models business 5 1 Details provided at the Investor Day on 21 November 2017. Analysts' and Investors' Call 2018
Executing business opportunities Executing strategic priorities of the Group (2/2) GROUP Corporate venture-capital activities $ Munich Health integration into ERGO and Reinsurance $ Interlocked business model $ Improve and grow German life back-book: New platform ERGO $ Portfolio streamlining of international operations $ nexible, Mobility Solutions, Digital IT, … $ REINSURANCE Business growth in traditional Reinsurance Business growth in Risk Solutions $ $ Run growing traditional book at lower cost Transformation Invest and new Increasing investments into transformation competence and divest businesses and business cases: Digital Partners, IoT, data and $ analytics, cyber, multi-channel distribution, … 6 Analysts' and Investors' Call 2018
Executing business opportunities Transformation Programme in the Reinsurance Group RESHUFFLING THE VALUE CHAIN RESTRUCTURING ACCORDING TO Digital cooperation models CLIENTS NEEDS Munich Re Transformation Programme IoT applications and services Munich Health integration Regional hubs (Asia & Latin America) EXPANDING THE BOUNDARIES OF New structure in Claims INSURABILITY E.g.: Cyber with GWP 2017 US$ 354m INCREASING OF ORGANISATIONAL Investing in Reducing EFFICIENCY digitalisation complexity/ DATA-DRIVEN SOLUTIONS Smart governance Digitally augmented Increasing Simplification of internal processes underwrtiting/claims solutions efficiency Investing in automation TECHNOLOGY AND PEOPLE REALLOCATION OF RESOURCES Bi-modal IT, smart data analytics, data Voluntary measures to reduce staff in storage, cooperations traditional business >150 FTEs with data-science Simultanious development of new background competencies STRATEGIC PARTNERSHIPS LEVERAGE SYNERGIES IN THE Investments focusing on InsurTech, GROUP IoT and data specialists Interlocked business models > € 60m invested into >10 assets FUTURE VIABILITY OF MUNICH RE 7 Analysts' and Investors' Call 2018
Executing business opportunities Leverage traditional value creation and transform businesses to reduce distance to end customer – ILLUSTRATIVE – Data companies PI incumbents RI incumbents Capital market Underwriting- Reinsurance driven Digital services Reinsurance UW & capacity Partnerships Digital Partners Insurance business AMIG, MR Syndicates, CIP 1 , AMIG, MR Syndicates, CIP, Specialty Markets, … Digital operations Specialty Markets,… model Specialties Internet of Things HSB Pure online sales nexible ERGO Hybrid customer ERGO Push sales Sales-driven Distance to end-customer (insurance value-chain perspective) 8 1 Corporate Insurance Partner. Analysts' and Investors' Call 2018
Group Finance 9 Analysts' and Investors' Call 2018
Group Finance Nat cats dominating 2017 REINSURANCE NET INCOME ERGO NET INCOME € 120 m ( € 2,540 m) € 273 m ( € 41 m) Above guidance – High nat cat claims, strong life and health result, tax income, FX losses Strategy Programme well on track HGB RESULT ECONOMIC EARNINGS € 2.2 bn ( € 3.4 bn) € 0.5 bn ( € 2.3 bn) Release of equalisation provision Nat-cat-driven economic losses in mitigates high nat cat losses P-C Reinsurance offset by pleasing performance at ERGO and L/H Reinsurance 10 Figures as at 31.12.2017 (31.12.2016). Analysts' and Investors' Call 2018
Group Finance Prudent approach allows for reserve releases without weakening resilience against future volatility Run-off change of ultimate basic and major losses 1 Prudent reserving approach € 1.1 bn For example Ogden rate fully anticipated – Reserve release no adverse P&L impact in 2016/17 P-C reinsurance 2 (reserves still based on – 0.75%) 5.2 % Cautious reaction to signs of deterioration in selected casualty portfolios Cautious initial loss picks for new underwriting year Positive run-off responds to benign loss emergence while preserving confidence level Strong reserving position, resilient to a rise in inflation ≤2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total AY 11 1 Accident year split is partly based on approximations. 2 Basic losses, adjusted for commission effects. Analysts' and Investors' Call 2018
Group Finance Trough of running yield attrition reached – Diversification and real investments improve return Reinsurance portfolio – Enhancement of running yield Running yield % Fixed-income 1 Share of real investments 1 Reinsurance ERGO 3.2 53 % ( 54 %) 18 % ( 15 %) 3.0 North America 2.9 ~2.8% 2.8 2.7 2.7 9 % ( 9 %) Emerging markets Ongoing diversification – Cautious increase in Investments in countries real estate, infrastructure, 2015 2016 2017 2018e with higher yields private and public equity 12 1 As at 31.12.2017 (31.12.2016). Analysts' and Investors' Call 2018
Group Finance HGB result in 2017 meets capital repatriation of ~ € 2.3bn HGB result Equalisation provision ILLUSTRATIVE 0.2 – 0.9 3.4 Maximum requirement – 0.5 10.1 9.8 9.1 € 2.2bn € 7.7bn 7.7 6.6 HGB result Underwriting Investment Other HGB result 2012 2013 2014 2015 2016 2017 2016 result result 2017 Underwriting result stabilised by releases of equalisation provision 2012 – 2016: Strengthening of reserve Investments: Lower dividend income from subsidiaries and lower 2017: Relief in fire and aviation disposal gains (intra-Group disposal gains in 2016) Replenishment in the following years Other: Lower FX result partly offset by lower tax expenses Level of distributable earnings almost unchanged at € 4.0bn 13 Analysts' and Investors' Call 2018
Group Finance Strong balance sheet allows us to execute business opportunities SOLVENCY CAPITAL DEBT II STRONG BALANCE SHEET facilitating earnings growth enabling HIGH CAPITAL RETURN CAPITAL DEPLOYMENT Sustainable dividend per share growth Organic growth € 8.60 ~ € 25 bn M&A Total pay-out 3.10 2005 – 2017 (dividends and Partnerships share buy-backs 2 ) 1 2005 2017 14 1 Subject to approval of AGM. 2 Further continuation of € 1bn share buy-back until AGM 2019. Analysts' and Investors' Call 2018
ERGO 15 Analysts' and Investors' Call 2018
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