Munich Re Confirms Profit Forecast with $2.34 Billion 2004 Net Earnings

February 16, 2005

Munich Re announced 2004 net earnings of 1.8 billion euros ($2.34 billion), confirming its earlier revised estimates of between $2.22 billion and $2.48 billion (See IJ Web site Jan.23). The move back to profitability – the world’s largest reinsurer lost over half a billion dollars last year – was welcome news.

The company announced that it plans to ask board approval to raise its dividend to 2 euros per share ($2.60) from last year’s 1.25 euros ($1.56).

Munich Re said the improved profits were “largely due to further very satisfactory results in the reinsurance sector. But the primary insurance sector also contributed appreciably to net income, with ERGO making a striking return to the profit zone; cost savings and the absence of exceptional burdens on the investment result produced an annual profit of 202 million euros [$262.6 million].” The sector lost 1.431 billion euros ($1.86 billion) in 2003.

However Munich Re acknowledged some costly developments in the U.S. with its American Re subsidiary heavily impacted by the hurricanes. Profits dropped to $103 million and the company’s reserves were strengthened by $482 million.

“In the non-life reinsurance market, the bulk of treaty business is customarily concluded for the period of one calendar year, said the announcement. “In Munich Re’s case, nearly two-thirds of this business (i.e. excluding life reinsurance and facultative business) with a premium volume of around 9.4 billion euros [$12.22 billion] was renegotiated as at 1 January 2005.”

Munich Re stressed its continued adherence to making underwriting profits. It noted that Group companies had given up “individual accounts with a total business volume of 754 million euros [$980 million] where, as in the USA for example, their requirements could not be met.” This was largely offset by “acquiring new business of 782 million euros [$1.016 billion] in other markets such as China. They were able to agree prices and conditions for renewals and new business that met their objectives and reflected the increased risks.”

Dr. Torsten Jeworrek, member of Munich Re’s Board of Management commented: “Despite some early Cassandra-like prophecies regarding the general state of the reinsurance market, Munich Re is starting the year 2005 with a portfolio which again promises a good level of profitability, given normal claims experience. In the forthcoming renewals at 1 April (including Japan and Korea) and 1 July (Australia, parts of the US market and Latin America), we will be sticking to our business line of profitability and added value. Apart from the risk-bearing capacity we offer, primary insurers seek us out as treaty partners in particular for our expertise, reliability and flexibility.”

Munich Re noted that after three years characterized by “a swift adjustment of prices and conditions to take account of significantly increased risks and liabilities,” the market seems to have stabilized at a relatively high level. It also noted that “global competition has intensified, with differing trends in individual areas, especially in the case of claims-free treaties, but the large losses from the windstorm events in the Atlantic and Pacific and the low level of interest rates worldwide have meant that many market players have maintained a disciplined approach.”

“As a result of these renewals, our premium volume for 2005 in non-life reinsurance should reach the same high level as last year in original currencies. Most clients understand and accept our underwriting policy, especially as they themselves apply the same economic criteria to their own business,” Jeworrek concluded.

Further information and details can be obtained on the company’s Web site at

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