Munich Re Records $3.66 Billion 9 Month Profit; On Track for the Year

November 8, 2006

Munich Re profited from the absence of major catastrophes to post a nine month profit of €2.861 billion ($3.66 billion), compared to €1.39 billion ($1.78 billion) in the first 9 months of 2005. Operating profits grew by 60.4 percent to €4.638 billion ($5.94 billion), while gross premiums written amounted to €28.1billion ($35.98 billion), around the same as in 2005. Shareholders’ equity rose 5.1 percent to €25.7 billion ($32.9 billion) since the beginning of the year.

Other highlights cited in the report included the following:
— Excellent reinsurance business performance in the first three quarters: Combined ratio of 92.1 percent.
— Comparatively low major-loss burden from natural catastrophes.
— Primary insurance: ERGO with outstanding result.
— Return on risk-adjusted capital at 16.5 percent after three quarters. Target of 15 percent for the year will be clearly surpassed as things stand at present.
— Given normal claims experience and stable capital markets until the end of the year, consolidated profit in the range of €3.2-3.4 billion [$4.1 to $4.35 billion] achievable.
— Another dividend increase in prospect.
— Share buy-back of €1billion [$1.28 billion]

“We have achieved another extraordinarily good quarterly result, which boosts our shareholders’ equity further. Following the substantial dividend increase in April, we are now offering our shareholders a share buy-back”, stated Jörg Schneider, member of the Board of Management, adding that this capital management measure would also reinforce the disciplined underwriting policy in reinsurance. Growth would continue to be sought only where the Group’s return targets could be met.

Concerning its first ever share repurchase, Munich Re said it would acquire the shares “with a purchase price of up to €1billion [$1.28 billion] via the stock exchange – at the current share price level, this would be nearly eight million shares or 3.4 percent of the share capital. The shares will then be retired. The parameters for acquiring up to 10 percent of the share capital were created at the last Annual General Meeting. Full details of Munich Re’s first-ever share buy-back will be published in the next few days.”

With regard to business performance in the first nine months of 2006, Schneider commented: “Our interim result is very positive, even if allowance is made for the unusually good claims experience and the favorable stock market situation. As things stand at present, we will clearly surpass our 15 percent RORAC target for 2006. Provided the capital markets and claims experience remain within normal bounds up to end of the year, the consolidated profit should be between €3.2 billion and €3.4 billion [$4.1 to $4.35 billion]. That would be the third record year in succession.”

Munich Re noted that its “reinsurance business benefited from risk-adequate prices, terms and conditions. In contrast to the same period last year, Munich Re was also largely spared major losses from natural catastrophes in the first three quarters of the current year.”

The operating result increased to €3.694 billion ($4.73 billion) from €2.154 billion ($2.758 billion) in the first nine months of 2006, compared to the same period of 2005. Reinsurance contributed €2,361 billion ($3.02 billion) to the Group’s profit.

Torsten Jeworrek, member of Munich Re’s Board of Management in charge of reinsurance operations, nonetheless warned of the “persistent threat from natural catastrophes. “The moderate hurricane season to date does not break the trend,” he noted. “The cyclical warm phase in the Atlantic and man-made global warming entail a substantial increase in extreme weather anomalies. There are no grounds for relaxing or being complacent. We must continue to face the prospect of severe natural catastrophes whose loss potential is huge and growing, given the increasing concentration of values. It is to this loss potential that we will have to gear our prices, terms and conditions.”

Schneider also indicated that he was confident of achieving a combined ratio of below 95 percent for reinsurance in 2006. However, the tropical cyclone season was not yet over. He pointed out that the autumn and winter storms typical of this time of year in Northern Europe might also result in large claims burdens, as indicated by last week’s events on the North Sea coast. In primary insurance, another combined ratio of around 93 percent should be achievable for 2006. “We would then surpass our targets in both reinsurance and primary insurance and be on course for another record result”, he concluded.

The full report and additional commentary and analysis may be obtained on the Group’s Website at

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