Munich Re Group. Investors' Day on Life Reinsurance

Transcription

1 Group Investors' Day on Life Reinsurance 7 Octobe

2 Agenda 9.00 Life reinsurance Essential segment for sustainable Group profits Torsten Jeworrek 2 Ensuring sustainable profitability and growth Wolfgang Strassl 3 Q&A 0.5 Break 5 min Excellence in core business: North American best practice Mary Forrest Michael DeKoning 28 Growth opportunities in Asia: Positioned for leadership Rudolf Lenhard Daniel Cossette 39 Superior value-based management Hermann Pohlchristoph Erwin Schnauder 5 Conclusion Wolfgang Strassl Informal get-together 2

3 Life reinsurance Essential segment for sustainable Group profits Investors' Day on life reinsurance Third event to present strategy in business segments Gross premiums written 2007, before consolidation Group International Health 2.bn Life reinsurance 6.0bn Today Primary insurance 6.5bn 2 P-C reinsurance 4.2bn Incl. 0.3bn health reinsurance not allocated to international health. 2 Excl. internation health. 3 Consolidation:.5bn. Total 38.8bn 3 After consolidation: 37.3bn 3 3 Life reinsurance Essential segment for sustainable Group profits Life reinsurance Core segment for sustainable Group profits Key takeaways is second-largest player in global life reinsurance successfully combines life and non-life reinsurance to increase value for shareholders Life reinsurance target by 20 confirmed 5% VANB average growth p.a. to > 440m Life reinsurance is a consistently profitable and low volatile core element that contributes to Group's target: Most profitable among the top 5 reinsurers Mid-term expectation by 205 VANB > 600m Steer life reinsurance operations in line with Group profitability target At least 5% RoRaC 4

4 Life reinsurance Essential segment for sustainable Group profits Estimated market volume development Life reinsurance market with solid growth prospects Global reinsurance market bn CAGR 5.6% e 205e Life P-C Updated in 06/2008. Gross premiums written. Source: Economic Research. Thereof life reinsurance bn CAGR 5.8% e 205e Regional split bn CAGR Europe 6 5 ~5% North America ~4% Asia, Australasia 4 7 ~9% Latin America ~% Africa, Near/Middle East ~% Total % 5 Life reinsurance Essential segment for sustainable Group profits Life reinsurance life reinsurance Essential pillar with increased importance Gross premiums written life reinsurance segmental split reinsurance 2 bn % CAGR 5.% CAGR 9.% Global market P-C 9.% %life reinsurance CAGR, Life reinsurance share mainly based on organic growth increased by 50% Life Source: economic research. 2007: Estimate. 2 Share in reinsurance gross premiums written. 6

5 Life reinsurance Essential segment for sustainable Group profits Split of consolidated result in reinsurance Strong and sustainable contribution by life and health business Segmental split in reinsurance % P-C L&H Before consolidation. Health business includes only medical reinsurance; little impact. 2 P-C negatively influenced by high NatCat claims (Katrina, Rita, Wilma). Life reinsurance contribution to overall reinsurance result sustainably exceeds 20% 7 Life reinsurance Essential segment for sustainable Group profits Life reinsurance supplements cycle management Stable development of life result due to low correlation with P-C reinsurance Life low volatile business compared to P-C Relative change in result % Based on result before impairment losses of goodwill, finance costs and taxes on income. 2 Health business includes only medical reinsurance; little impact. P-C L&H 2 evolves from unique characteristics Long-term business Profits locked in by business in force persist on average in excess of 0 years High independencies of risks within homogeneous portfolios Correlation to P-C reinsurance only in very limited number of event scenarios Excellent data availability and statistics increase statistical certainty 8

6 Life reinsurance Essential segment for sustainable Group profits Risk capital requirements Diversification effects significantly reduce capital requirements Economic risk capital (ERC) in reinsurance segment % Excl. life Before diversification with primary insurance Incl. life Diversification effect Diversified ERC Sum of standalone ERC Increased diversification mainly driven by mortality, morbidity and longevity risks Those are largely uncorrelated to market and P-C risk Increased importance due to acknowledgement of diversification effects also in external models, e.g. QIS4 model (Solvency II) and rating models Inclusion of life reinsurance almost doubles diversification effect 9 Life reinsurance Essential segment for sustainable Group profits Impact of Solvency II in optimal position to cover new business opportunities Possible impact of Solvency II on life insurance Increased capital requirements Long-term products Consideration of guarantees and options Higher risk capital requirements for aggressive asset allocation Available financial resources may rise, but with increased volatility Quantitative modelling of overall risk situation and increased transparency Product adaptations due to risk capital intensity 's solvency consulting unit Consulting Interaction Modelling Investigate impact of current developments with clients Act as sparring partner Interactive Solvency II seminars Illustrate quantitative impacts of reinsurance to clients Stochastic modelling approach for biometric risks Risk capital calculation: Standard model vs. capital model Final standard risk model not yet decided But: Insurers expect general advice on Client view: offers best Solvency II from reinsurers right now Solvency II information in market well positioned to meet clients needs and generate new business Source: 2008 Flaspöhler Reports Europe Non-Life and Life. 0

7 Life reinsurance Essential segment for sustainable Group profits Financial strength and client perception best positioned to benefit under current market developments Recent market developments Significant capital market stress reduces capital base in financial services industry Insurance industry faces restricted refinancing options in capital market Increased uncertainty likely to result in lower tolerance to risk and weak security Rising demand for highly rated reinsurance capacity 's commitment Excellent risk management Providing maximum capacity with superior security Focus on client and underwriting excellence Quality reinsurer Besides capacity and security providing service, expertise and innovative solutions 's position and competitive edge confirmed by independent institutions S&P Flaspöhler survey "Risk-based capital adequacy as measured by "Best reinsurer overall non-life and life" S&P s model showed a redundancy at the AAA "Preferred reinsurer" in level l at year-end 2007" 5 out of 7 professional factors "We consider 's strong balance sheet to 7 out of 8 operating attributes be a competitive advantage" 8 out of 2 lines of business Unique combination of capacity, security, quality and brand Rating report on, published on 8 Septembe Flaspöhler Reports Europe Non-Life and Life. Life reinsurance Essential segment for sustainable Group profits Outlook Expansion of life reinsurance is in line with Changing Gear programme Leverage strong market position in core segment and growth in adjacent segments Forward integration on value chain Asset protection Distribution power Traditional reinsurance Leverage the core business Risk capacity Risk know-how Financially motivated life reinsurance Biometric risks Life reinsurance market provides room for further profitable growth Strong market position in traditional life reinsurance core business life reinsurance business model enables further expansion Low-volatile profitability supplements non-life business Global Life Strategy facilitates expansion of life reinsurance 2

8 Agenda Life reinsurance Essential segment for sustainable Group profits Torsten Jeworrek Ensuring sustainable profitability and growth Wolfgang Strassl Excellence in core business: North American best practice Growth opportunities in Asia: Positioned for leadership Superior value-based management Conclusion Mary Forrest Michael DeKoning Rudolf Lenhard Daniel Cossette Hermann Pohlchristoph Erwin Schnauder Wolfgang Strassl 3 Ensuring sustainable profitability and growth Competitive position One of the two leading global life reinsurers Global market share % Swiss Re 23 2 Principles Focus on organic growth RGA Hannover Re 8 Strict profit orientation SCOR GenRe Transamerica Scottish Re XL Re Partner Re 2 4 Other Top 2 players dominate the global life reinsurance market Source: Economic Research. Based on net earned premiums Source: 2008 Flaspöhler Reports Europe Non-Life and Life. Focus on underwriting profits instead of relying on capital market gains Client view Prudent actuarial assumptions Superior risk capabilities confirmed by independent Flaspöhler client survey: Best overall life reinsurer 2 4

9 Ensuring sustainable profitability and growth Premium growth and profitability Solid success story founded on organic growth Gross premiums written bn CAGR basic book ~5% EV earnings (as % of EV beginning of year) % TEV MCEV Operating EV earnings Total EV earnings Business with planned recaptures Basic book of business EV = Embedded value TEV = Traditional embedded value MCEV = Market-consistent embedded value Basic book of business with stable growth and consistent profitability Planned recaptures of three large-volume accounts in Canada and Germany. All other treaties allocated to basic book of business. 2 According to 's current MCEV methodology. Based on 2004 published CFO Forum EEV principles Ensuring sustainable profitability and growth Markets Leading position in most regions Distribution of gross premiums written Excellent geographic diversification % Market share Significant market shares, but % Global market 2 Germany Canada 53 UK USA Canada Other TOTAL bn Germany UK 28 Asia 4 Rest of Europe 0 USA 9 room for further expansion in some markets 50 6

10 Ensuring sustainable profitability and growth market split North America with significant contribution Contribution to VANB by region Continental Europe, Asia 9% Canada 34% UK, Australia, Africa 20% TOTAL m USA 27% e Incl. rest of world. 7 Ensuring sustainable profitability and growth Risk portfolio Emphasis on mortality and morbidity risks Products Inherent risks Ordinary life Group life Living benefits 2 Annuity Biometric risk portfolio 3 risk appetite Mortality 72% Morbidity 24% Longevity 4% Focus on mortality and morbidity Longevity under review Bio- metric risks Lapse risk Selective approach to lapse and Investment investment risk risks Ordinary life and group life include all types of mortality covers such as term life and permanent life. 2 Living benefits business comprises critical illness, disability income and long term care. 3 Share of net premium Full cover Selective cover 8

11 Ensuring sustainable profitability and growth Sustainable profitability Prudent risk management pays off Consistently positive experience variances and operating assumption changes m Focus on risks TEV 24 MCEV we understand Application of prudent actuarial assumptions in pricing Solid risk management and underwriting Adequate assumptions for valuation Continuous optimisation of in-force business According to 's current MCEV methodology. Based on 2004 published CFO Forum EEV principles. 9 Ensuring sustainable profitability and growth Strategic ambition Extension of profitable growth Strategic ambition Quantum growth in EV earnings by doubling our VANB until 20 m 228 CAGR 5% VANB development >440 CAGR >8% > In accordance with Group RoRaC-target of 5% 20

12 Ensuring sustainable profitability and growth Global Life Strategy Achieve ambition through key strategies and enabling initiative Strategic ambition Quantum growth in EV earnings by doubling our VANB until 20 VANB m Our key strategies 2 3 plus Continuously improve core business Grow nontraditional business Expand business model Additional VANB by 20 20m 40m 25m Additional VANB by 205 Evaluate nonorganic growth opportunities Enabling initiative Put in place superior financial model 35m Total contribution 220m VANB 20 > 440m 95m 65m 5m 0m 75m VANB 205 > 600m 2 Ensuring sustainable profitability and growth Strategy : Continuously improve core business Best-in-class capabilities in biometric analysis and underwriting Excellence in biometric analysis Share best-in-class actuarial and biometric know-how Continuous improvements in price differentiation Price Illustrative High Leverage large market-specific data base Continuous enhancement of risk segmentation and modelling Underwriting expertise Low High level of segmentation Cutting edge clinical expertise in medical underwriting State-of-the-art underwriting manual and analysis tools Efficient control systems for internal and client reviews High Risk Avoid adverse selection Competitive pricing i for good risks Low level of segmentation Low 22

13 Ensuring sustainable profitability and growth Strategy 2: Grow non-traditional business Asset protection for variable annuity business Demand for financial solutions Shift in lines and policy Variable annuities and unitlinked policies growth Increased risk awareness in respect of options and guarantees Raise demand for protection of life insurer's liabilities Naturally extending to variety of ALM issues, where holistic cover is sought for overall balance sheet 's approach to asset protection Internal steering of "asset protection" ti Product development Advice in developing manageable products approach Risk transfer Transfer of investment/ insurance risks Value proposition for client Active risk management/ hedging Platform for effective management Close cooperation with cedant at early stage Risk controlling Combined insurance and financial markets expertise to structure and price risks resulting from these products Sound platform for management of inherent complexity resulting from hybrid insurance and financial i risks 23 Ensuring sustainable profitability and growth Strategy 3: Expand business model contributes to underwriting and processing Provide underwriting and processing services Extend consulting service range Processing and admin tools combined with 's underwriting expertise Benefits for Become indispensable partner for clients Improved underwriting quality and efficiency Life insurance value chain Product development Distribution Support alternative channels Underwriting Cooperate with banks or brokers as direct distribution channel for insurance products Close involvement in product development Risk-taking support through reinsurance Processing/ Admin Claims handling Risk taking Benefits for Create reinsurance opportunities in mature and emerging markets Substitute fully integrated primary insurer in parts of value chain 24

14 Ensuring sustainable profitability and growth Outlook VANB growth ambition achievable VANB development m CAGR >8% > actual actual CAGR 5% 2008 forecast plan plan target VANB growth ambition: Well on track expectation According to 's current MCEV methodology. Based on 2004 published CFO Forum EEV principles. 25 Ensuring sustainable profitability and growth Global Life Strategy Following presentations will provide more detail Strategic ambition Quantum growth in EV earnings by doubling our VANB until 20 Key strategies Enabling initiative 2 3 plus Continuously improve core business Grow non- traditional business Expand business model Evaluate non- organic growth opportunities Put in place superior financial model Presentations detail initiatives in exemplary markets and introduce steering methodology Excellence in core business: Growth opportunities in Asia: Superior value-based North American best practice Positioned for leadership management 26

15 Ensuring sustainable profitability and growth Key takeaways Ensuring sustainable profitability Strong track record in life reinsurance is based upon superior risk management and excellent underwriting Ambition: Significantly extend profitability growth achieving > 440m VANB in 20. Expected VANB 205: > 600m Clear strategy to strengthen the core and expand business model Leverage our Opportunistically Grow our Extend our excellence in evaluate nonorganic growth traditional business life risk value chain and underwriting proportion in non- positioning on the biometric analysis opportunities 27 Agenda Life reinsurance essential segment for sustainable Group profits Torsten Jeworrek Ensuring sustainable profitability and growth Wolfgang Strassl Excellence in core business: North American best practice Growth opportunities in Asia: Positioned for leadership Superior value-based management Conclusion Mary Forrest Michael DeKoning Rudolf Lenhard Daniel Cossette Hermann Pohlchristoph Erwin Schnauder Wolfgang Strassl 28

16 Excellence in core business: North American best practice North America The largest and most developed markets Global life reinsurance market Distribution of life gross premiums written % Other Canada 27% 7% portfolio VANB by region % UK, Australia, Africa 20% Canada 34% UK 0% Germany 6% Source: Economic Research USA 50% Continental Europe, Asia 9% Incl. rest of world. Growth opportunity in price competitive and sophisticated market place USA 27% 29 Excellence in core business: North American best practice North American business philosophy Translate core principles into entrepreneurial approach Business model Large case capacity with unsurpassed financial strength Profit-maximising and risk-management mindset Client model Client focus Superior knowledge of customer Operations model Availability and ability to utilise data better than competitors Employ industry leaders in all key roles Allocate resources and capital to opportunities with greatest profit potential Nimble and opportunistic approach to the market Retrench from markets where risk-reward balance is not appropriate Strive to anticipate client needs Superior local capital management Regulatory development knowledge Deal structuring skills 30

17 Excellence in core business: North American best practice Canada: Market share and premium development has become the unrivalled market leader in Canada Canada market share %ofgrosspremi premiums ms written Canada premium development CAN$ m 2,330 2,453 2,37,947,664,295,306,56 645, ,035,47,25, Decline in premium and market share driven by scheduled termination of one short-term nontraditional business treaty Non-traditional Traditional 3 Excellence in core business: North American best practice New business No. 5 with upside potential 2007 US recurring new business assumed US$ bn Market share RGA % Transamerica 44 2.% Swiss Re % Generali USA % % Canada Life % SCOR 24 36% 3.6% Scottish Re % General Re 4 2.% Wilton Re 7.% Optimum Re 7.0% Hannover Re 6 0.8% Ace-Tempest 5 0.7% XL Re 4 0.6% Total % High potential for future development Source: reinsurance survey conducted on behalf of the Society of Actuaries. Top 5 control 85% of market Large gap between and next competitor 32

18 Excellence in core business: North American best practice Market development and market share Stable market share due to underwriting discipline Peak of US competitive cycle Cession rate 42% 6% 6% 5% 52% 9% market share 62% 62% 59% 60% 56% 2% % 7% 56% 47% 0% 3% 2% % % 37% peak primarily related to irrational High cession rates in pricing by reinsurers 9% with stable position over years In a market that has seen rising and falling stars market share remains within 0% range 33 Excellence in core business: North American best practice Changed market conditions and scope of business Significant improvements support to benefit from market changes High competition in pricing results in market action and changed market conditions Scottish Re Swiss Re RoE Cession rates ING even paid for US life re business transfer due to underpricing Improved pricing for traditional life business in the US Market profitability increased from mid single to double digit Declined due to more rational pricing well prepared for future challenges Re-priced every treaty in 2005/06 Enhanced management information systems and mortality analysis capabilities Restructured sales and pricing functions resulting in greater pricing discipline and risk management Profit margin improved by 50% since

19 Excellence in core business: North American best practice Large case programme Ability to provide large capacity differentiates from competitors Superpool programme: Innovation example for North America Purpose Maximise benefits of 's increased per life capacity Create sustainable competitive advantage for selected clients Control access to larger retention for retention management purposes Detail Clients get access to increasing levels of 's US$50m capacity per life Capacity Tiered based on volume ceded Unencumbered by retrocession constraints Programme well on track in Canada and US Large case programme supports growth and profit ambitions 35 Excellence in core business: North American best practice Best practice North America Leveraging strengths across North America Early example Life underwriting Moved to a Introduction of one Usage of one Implemented a North US$50m per life uniform improved uniform improved American underwriting retention underwriting manual underwriting system best practices leader More opportunities to be looked at in next 6 9 months Administration and claims processes and tools Operational and financial information systems Human resources 36

20 Excellence in core business: North American best practice Scope of business Leveraging best practices in all lines of business Not a "one-trick pony" Long term care (LTC) incl. LifePlans Critical illness Individual life Individual disability income Diversification of VANB Group life and Group LTC Individual life is core, but leading positions in all lines of business Options for future growth Enhanced solution-orientation through cross-line offerings 37 Excellence in core business: North American best practice Key takeaways Extremely strong franchise in Canada, with significant potential for profitable growth in the US We will leverage resources and best practices across North America Growth will only come with strict adherence to disciplined pricing and underwriting Our goal: to be nimble, entrepreneurial and business-minded with unparalleled customer focus 38

21 Agenda Life reinsurance Essential segment for sustainable Group profits Torsten Jeworrek Ensuring sustainable profitability and growth Wolfgang Strassl Excellence in core business: North American best practice Growth opportunities in Asia: Positioned for leadership Superior value-based management Conclusion Mary Forrest Michael DeKoning Rudolf Lenhard Daniel Cossette Hermann Pohlchristoph Erwin Schnauder Wolfgang Strassl 39 Growth opportunities in Asia: Positioned for leadership Life reinsurance markets in Asia Strong growth prospects in Asian markets Status quo China and Korea dominate New ceded d premiums 2008 US$ m SEA Japan Relative attractiveness of Asian markets India India Growth rates SEA Greater China South Korea Greater China Total US$454m SEA = South-East Asia Source: NMG Life and Health Reinsurance Programme 2008 By far largest population with strong economic growth South Korea Significant growth in underlying insurance market SEA = South-East Asia Drivers for future growth High demand for reinsurers' service, capital and expertise EXPECTED TOTAL NEW CESSION MARKET GROWTH 0 5% p.a. Reinsurance volume Japan Increasing weight of Takaful model gekürzt 40

22 Growth opportunities in Asia: Positioned for leadership Future growth prospects initiatives support above-market growth expectation Ambitious growth expectations Gross premiums written, m 44 5 CAGR 9% e 2009e 200e Global Life Strategy Clear focus on profitability MID-TERM GROWTH EXPECTATION >5% p.a. Additional growth from health and non-traditional business expected 4 Growth opportunities in Asia: Positioned for leadership in Asia Strong presence basis for significant share in future growth Local presence in every important market Mumbai Beijing Kuala Lumpur Seoul Shanghai Taipei Hong Kong Singapore Tokyo Regional head office in Singapore established in 2007 Multiple l locations provide flexibility and advanced marketability Asia excludes Australia, New Zealand, Middle East and Pakistan. Strong and increasing market share % of estimated total new reinsurance premiums in 2008 Multinational reinsurer (70%) RGA Swiss Re Gen Re Hannover Re Scor Transamerica Other 2% 3% Domesticreinsurer i (30%) Korea Re China Re Other 5% 7% 7% 8% 8% 2% Source: NMG Life and Health Reinsurance Programme % 5% 9% Market dominated by top 3 global life reinsurers; domestic reinsurers face more intensified competition 42

23 Growth opportunities in Asia: Positioned for leadership Business, relationship and operational management quality index Leading perception in business quality and operational management Market penetration Operational management quality index (diff. from avg.) Business quality index All respondents Relationship management quality index (diff. from avg.) All respondents Source: NMG Life and Health Reinsurance Programme 2008 Source: NMG Life and Health Reinsurance Programme 2008 Favourable terms of trade based on superior business quality index Superior retention supported by high level of customer satisfaction 43 Growth opportunities in Asia: Positioned for leadership Key growth initiatives Participate in Asian growth ensured by selected initiatives 's key growth initiatives Product development Financially motivated reinsurance Process consulting Takaful Infrastructure, processes and data management system improved continuously Significant demand for consulting service across Asia 44

24 Growth opportunities in Asia: Positioned for leadership Product development Remains key business strategy Client needs Example: Living benefits Fast-growing segment Underwriting, claims, actuarial and product design expertise needed Mostly long term care (LTC), disability income and critical illness (second generation) benefits Leveraging exclusive partners LifePlans LTC expertise Best Doctors Exclusive joint venture agreement across Asia Leveraging global network Expertise in Germany Direct and reinsurance level Expertise from advanced Anglo-Saxon markets 45 Growth opportunities in Asia: Positioned for leadership Financially motivated reinsurance Large potential for future growth Environmental factors Joint venture partners with limited capital New business growth is capital intensive New solvency regime Subprime and credit crisis High volatility in equity market Unfavourable environment to raise equity or debt capital Key success factors Ability to structure and leverage local knowledge Availability of capital and collateral Financial strength 's position Structuring expertise in Germany and Singapore regional head office Strong local knowledge with offices in all key markets Availability of collateral Excellent balance sheet as leading global reinsurer Strict focus on genuine risk transfer transactions 46

25 Growth opportunities in Asia: Positioned for leadership Process consulting Allfinanz brings international best practice to Asia Combining the strength of two leading companies in their respective area of expertise SOFTWARE SOLUTIONS AUTOMATED UNDERWRITING UNDERWRITING RULES We expect Asia to follow trend of UK and Australia More compelling proposal for distribution and customers Clear advantages: Superior data management, lower costs, UW consistency and improved profitability Allfinanz will be significant contributor to 's long-term success in Asia 47 Growth opportunities in Asia: Positioned for leadership Retakaful Participating in significant Takaful growth Islamic markets with low insurance penetration d Worl UK a Malaysi Thailand a Indonesi Pakista an E UA Oma an Qata ar Kuwa ait a Saudi Arabi s International Retakaful Hub Composite Retakaful license by Central Bank of Malaysia in 2007 First foreign Retakaful operator in Malaysia Highest rated Retakaful operator worldwide under Wakala model International Shari a Advisor Board to ensure worldwide compliance s unique value proposition Life insurance penetration GDP per capita (US$) Genuine Retakaful model, high rating and full service capabilities Strong growth potential in countries with low life insurance penetration, high GDP per capita and large and young Muslim populations Increasing acceptance of Takaful, Islamic Banking and "Bancatakaful" Already placed treaties in Malaysia, Indonesia, Pakistan and Middle East Trend towards conversion from conventional reinsurance to Retakaful Expect higher reinsurance penetration rate under Takaful model aims to be the dominant player in the worldwide Retakaful market 48

26 Growth opportunities in Asia: Positioned for leadership Need for service, capacity and capital competitive advantages Consulting service Capacity Capital management Motivation position Access to reinsurers know-how Risk transfer Improve balance sheet or finance growth Intellectual capital Good understanding of Structuring expertise in capabilities due to risk: Research and Munich and Singapore unique positioning as experience studies Easy access to collateral direct insurance and High internal retentions Large and solid balance reinsurance player in all Strong rating: S&P AA- sheet lines of business Strong local knowledge and presence Exclusive partners Allfinanz and LifePlans 49 Growth opportunities in Asia: Positioned for leadership Key takeaways Significant competitive advantage and high barrier to entry due to strong local presence and intellectual capital Aggressive service strategy to ensure solid growth Growth will come together with strict underwriting discipline geared to profitability Combination of strong capital management expertise and capacity provides incommensurable reliability in volatile environment 50

27 Agenda Life reinsurance Essential segment for sustainable Group profits Torsten Jeworrek Ensuring sustainable profitability and growth Wolfgang Strassl Excellence in core business: North American best practice Growth opportunities in Asia: Positioned for leadership Superior value-based management Conclusion Mary Forrest Michael DeKoning Rudolf Lenhard Daniel Cossette Hermann Pohlchristoph Erwin Schnauder Wolfgang Strassl 5 Superior value-based management Gross premiums written Steady growth of base business despite more difficult market environment Life Top-line development IFRS gross premiums written bn CAGR basic book ~5% Business with planned recaptures Basic book of business Drivers Decrease from 2005 onwards result of planned recaptures of three large-volume accounts in Canada and Germany Portfolio excluding those treaties shows steady growth partially offset by trend of treaties being transformed from coinsurance to pure risk premium reinsurance Recent impacts: strengthening of euro and slight reduction of cession rates in North America and Europe Steady capitalisation on profitable growth opportunities along with strict adherence to profitability targets 52

28 Superior value-based management Underwriting result IFRS underwriting result reveals contribution of operations to overall success Life and health Transition from IFRS underwriting result to reported IFRS consolidated result Underwriting result 2. Consolidated result m m 5, , Net earned premiums, Health Life Income from Expenses for Operating Underwriting Underwriting Other technical claims and expenses result result investment interests benefits 2 result Investment result from assets backing technical provisions. 2 Investment result of reinsurance L&H less investment result from assets backing technical provisions Other Income Consolidated result taxes result 53 Superior value-based management Underwriting result Value orientation at is already reflected in improved IFRS result Life Result contribution of life reinsurance IFRS underwriting result separated for life m ~ 300m normalised levell Expectation Slight, but steady increase from current normalised level and its drivers Steady increase in IFRS results but slight volatility unavoidable Margins flowing through from historical superior business selection Exceptionally good mortality and morbidity experience in 2007 Development in line with portfolio growth and value orientation 's course for profitable growth visible in IFRS figures Strong performance to continue in the future 54

29 Superior value-based management Market-consistent embedded value (MCEV) The challenge is to adequately value and steer long-term business Long-term life reinsurance business Pattern of shareholder cash-flows Illustrative - + Present value of future profits available to shareholder Adjustments for risks of cash flows Capital required for/allocated to the portfolio at time of valuation but what is the shareholder value at present? Present value of future after tax regulatory profits Time value of financial options and guarantees Cost of non-hedgeable risks Cost of double taxation and cost of asset management related to assets backing required capital Required capital Free surplus MCEV e 55 Superior value-based management MCEV movement analysis MCEV discloses the drivers of value creation in life reinsurance MCEV earnings 2007 m , ,962 Opening MCEV VANB Operating MCEV earnings Experience variances & assumption changes Value generation through management action Total MCEV earnings Expected return Risk-free rate of return Focus of internal steering approach Economic variances According to 's current MCEV methodology. Based on 2004 published CFO Forum EEV principles. Other nonoperating variances Capital and currency movements Changes due to external factors Closing MCEV 56

30 Superior value-based management 's life reinsurance business Timing of the emergence of distributable earnings Distributable earnings (undiscounted) bn, 5-year steps, as at PRESENT VALUE EQUALS EMBEDDED VALUE EXCLUDING FREE SURPLUS 5.8bn Superior value-based management Benefits MCEV perfectly combines external requirements with internal steering Strong theoretical foundation through market consistency Standardised rules ensure high degree of transparency and consistency Market value of liabilities fully compatible with finance theory Compliance with MCEV Principles and Guidance as published in June 2008 by CFO Forum (representing 20 of the largest European life (re)insurers) In conformity with IASB, European regulators and the CRO Forum Allowing for optimal integration of economic risk capital Overall methodology perfectly suits our steering and pricing philosophy Using rationale for determining cost of capital comparable to CFO Forum Adopting economic risk capital model enables steering of life business on overall RoRaC targets Powerful alignment of pricing, valuation and controlling of business 58

31 Superior value-based management Risk capital in MCEV Risk capital requirements clearly reflected in MCEV in two ways Definition of required capital in ANW Maximum of I II III Minimum level of solvency capital requirements Minimum target level of capital demand by third parties Requirements from internal risk model Allocation of required capital fully reflects all requirements from regulators, rating agencies and internal risk models Asset net worth. Allowance for non-hedgeable risks Cost of non-hedgeable risks Annual charge Cost of non-hedgeable risk Economic risk capital for nonhedgeable risk X Non-hedgeable risk rate Present value of annual charge discounted at risk-free interest rate Approach to calculating cost of non-hedgeable risk entirely in line with 's risk capital model 59 Superior value-based management Derived VBM targets Internal steering at aims for maximum value creation VANB Target VANB Absolute VANB target to ensure desired level of new business generation in terms of size and profitability New business targets In-force business target 2 VANB at "target RoRaC spread" 0 3 VANB at "target IRR spread" 0 4 Operating experience variances + operating assumption changes 0 Relative target ensuring a minimum return relative to inherent business risk consistent with the RoRaC steering principle of Relative target ensuring a minimum return relative to the full capital invested to meet overall expectations on return on equity Absolute target based on movement analysis ensuring adequate actuarial assessment and risk management All management incentive schemes are strictly based on these VBM targets 60

32 Superior value-based management Connection between MCEV and IFRS Convergence between MCEV earnings, IFRS result and cash flows Life Development of MCEV earnings vs. IFRS result Illustrative Shareholder cash flow After tax IFRS result MCEV earnings Shareholder cash flows High investment in the first year mainly due to acquisition costs Compensated for in subsequent returns Σ IFRS result Profits distributed evenly (as a percentage of IAS benefit reserves) over the lifetime of the business First-year profit usually close to zero MCEV earnings Value creation shown at time of policy issue Expected return based on roll-forward of MCEV MCEV most appropriately reflects the value of life business 6 Superior value-based management Key takeaways We continuously advance our steering methodology to ensure profitability MCEV reflects adequate actuarial approach to risk management Applying MCEV for internal steering with RoRaC target ensures consistency with overall Group targets Development and prognoses of IFRS result and VANB prove 's ability to generate profitable business 62

33 Agenda Life reinsurance Essential segment for sustainable Group profits Torsten Jeworrek Ensuring sustainable profitability and growth Wolfgang Strassl Excellence in core business: North American best practice Growth opportunities in Asia: Positioned for leadership Superior value-based management Conclusion Mary Forrest Michael DeKoning Rudolf Lenhard Daniel Cossette Hermann Pohlchristoph Erwin Schnauder Wolfgang Strassl 63 Conclusion of the day Life reinsurance is an attractive market, has successfully established a global leadership position We have a clear strategy for future development Life reinsurance is not always sexy, but will create value for clients and shareholders Profitability is key dependent on market situation we adjust market shares in different countries We are persistent in our approach therefore we invest today into the growth markets of the future Superior steering is basis of our success therefore we are at the forefront in developing state-of-the-art industry standards 64

34 Appendix Financial calendar Contacts Disclaimer e 65 Appendix Financial calendar 7 Novembe Interim report as at 30 Septembe 3 March 2009 Balance sheet press conference fo financial statements (preliminary figures) Analysts' conference, Munich 22 April 2009 Annual General Meeting 23 April 2009 Dividend payment 6 May 2009 Interim report as at 3 March August 2009 Interim report as at 30 June 2009; Half-year press conference 5 November 2009 Interim report as at 30 September

35 Appendix For information please contact Sascha Bibert Head of Investor & Rating Agency Relations Tel.: +49 (89) [email protected] Ralf Kleinschroth Tel.: +49 (89) [email protected] Dr. Thomas Dittmar Christine Franziszi Tel.: +49 (89) [email protected] Andreas Silberhorn Tel.: +49 (89) [email protected] Münchener Rückversicherungs-Gesellschaft Königinstrasse 07, München, Germany Fax: +49 (89) [email protected] Internet: Tel.: +49 (89) [email protected] Martin Unterstrasser Tel.: +49 (89) [email protected] 67 Appendix Disclaimer This presentation contains forward-looking statements that are based on current assumptions and forecasts of the management of. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments. e 68