Munich Re has made a good start to 2012 and is aiming for a profit of around €2.5bn. CEO Nikolaus von Bomhard was optimistic about the Group’s business prospects. Munich Re concluded the financial year 2011 with a profit of €712m, despite an extremely difficult environment. Thanks to its financial strength, Munich Re intends to pay an unchanged dividend of €6.25 per share for the financial year 2011. This proposal is subject to the approval of the Annual General Meeting.
In the financial year 2011, the insurance industry faced an unprecedented cluster of severe natural catastrophes. At the same time, the financial crisis worsened, with interest-rate levels generally remaining low. CEO Nikolaus von Bomhard summed up the year 2011 for Munich Re: “In this exceptional situation, our integrated business strategy – combining primary insurance and reinsurance under one roof – proved its worth. We were able to conclude 2011 with a respectable annual result, a notable achievement and impressive testimony to the Group’s resilience.”
“With our still robust capitalization and favorable earnings prospects, we will be able to propose an unchanged dividend of €6.25 a share at the Annual General Meeting”, von Bomhard emphasized, adding that Munich Re had sufficient financial strength to exploit opportunities for growth in all three fields of business. Von Bomhard was optimistic regarding 2012: “Particularly after major losses of the kind we experienced in the past financial year, risk awareness is heightened. Our global presence enables us to take specific advantage of business opportunities in attractive markets and segments.” He stated that the satisfactory renewals of reinsurance treaties in the property-casualty segment at 1 January 2012 had provided a good start to the year. Furthermore, Munich Re anticipated that demand for reinsurance solutions would continue to rise in the further course of the financial crisis and as a result of the introduction of Solvency II.
“In primary insurance, ERGO will further advance the internationalization of its business, while in Germany its objective is to expand mainly in the profitable property-casualty insurance sector”, said the CEO.
Summary of the figures for the financial year 2011
In 2011, the Group posted an operating result of €1,180m (3,978m). Group equity increased to €23.3bn (31 December 2011: €23.0bn) owing partly to the consolidated result, but also to a rise in the reserve for currency translation adjustments and net unrealized gains. The return on risk-adjusted capital after tax (RORAC) amounted to 3.2% for 2011 (previous year: 13.5%), and the return on equity (RoE) to 3.3%. Gross premiums written rose significantly by almost 9% to €49.6bn (45.5bn) due to strong organic growth, especially in the life and property-casualty reinsurance segments and Munich Health.
Munich Re has a comfortable capital buffer. Its available financial resources, including the subordinated bonds it has issued, amounted to €28.3bn at 31 December 2011. This figure compares with a risk capital requirement of €24.4bn based on conservative internal calculations. The economic solvency ratio thus totals 111% (136%), a year-on-year decline of 25 percentage points that is largely ascribable to the very low interest rates and high volatility on the capital markets. Nevertheless, the figure still clearly reflects Munich Re’s capital strength – Munich Re’s economic risk capital, which produces the solvency ratio described above, corresponds to 1.75 times the capital that is likely to be necessary under Solvency II based on the Group’s internal risk model. Munich Re’s available financial resources therefore add up to 194% of the required risk capital under Solvency II.
As part of its active capital management, Munich Re intends to buy back an outstanding subordinated bond and to issue a new subordinated bond. Owing to restrictions resulting from US legislation, offers will only be made to investors resident outside the USA. It is not possible to provide further written information at present, also for legal reasons. This new bond is designed to be compliant with the existing (Solvency I) and anticipated future (Solvency II) supervisory regime, and to meet current rating agency requirements.