The Munich Re Group Renewals 2005 Telephone conference for analysts and investors

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1 Telephone conference for analysts and investors Torsten Jeworrek Jörg Schneider Agenda Overview 4 Reinsurance Group 7 Lines of /Regions 13 Outlook 29 2

2 Important notice Unless otherwise stated, this presentation is based on underwriting-year figures. This basis is only remotely comparable with calendar-year figures, which are in turn the basis of quarterly and annual accounts Portfolio developments are measured at constant foreign exchange rates Developments and comments refer to the treaty book of only All numbers on 2005 renewals contain estimates 3 Agenda Overview 4 Reinsurance Group 7 Lines of /Regions 13 Outlook 29 4

3 Overview General highlights 65% of our total portfolio was due for renewal in January Overall stable prices realised in our portfolio Further portfolio enhancement New of 8% driven by selected growth opportunities (e.g. China) Premium volume remains at a high level: 4.4%, thereof planned termination of RSA quota share 5.2% Munich Re maintained improvements in terms and conditions of last years renewal Necessary margins achieved in all markets and lines of Our is priced for a combined ratio of well below 97% for 2005 Outstanding profitability through disciplined underwriting Favourable outlook for upcoming renewals 5 Overview Market sentiment Rates Terms and conditions Differentiated rate development by line of, region and loss experience: Improvements in loss-affected treaties (e.g. hurricaneaffected, motor XL Europe) Pressure on rates and increased competition especially in loss-free accounts US: Easing of terms and conditions due to increased competition Europe and Asia: Generally disciplined markets, selective attempts to broaden coverage Overall largely stable reinsurance market, but increasing challenges Market capacity Global reinsurance capacity continues to increase due to good underwriting results Overall capacity sufficient 6

4 Agenda Overview 4 Reinsurance Group 7 Lines of /Regions 13 Outlook 29 7 Reinsurance Group January renewals 2005 (Premiums written) Total portfolio Facultative Total treaty Later renewals January renewals 8

5 Reinsurance Group Changes in premium Treaty total in m Cancelled mainly consists of: RSA (as planned) 5.2% Motor Europe 75 Casualty US 50 Increase on renewed: 0.7% Thereof rate increase: 0.2% share increase: 0.5% 0 Total January 2005 Cancelled Renewed Increase on New Estimated outcome 9 Reinsurance Group Changes in premium Treaty without RSA in m Increase on renewed: 0.7% Thereof rate increase: 0.2% share increase: 0.5% 0 Total January 2005 Cancelled Renewed Increase on New Estimated outcome 10

6 Reinsurance Group Risk adequacy is key Proportional Only clients that implement strict risk-related original rates policy and procure reinsurance for pure capacity reasons get proportional cover Application of sophisticated prospective pricing tools Permanent monitoring of original rates introduced by segment/by market to have most up-to-date information available for adequate underwriting decision (avoid retrospective view) Additional underwriting audits to verify the underwriting of our cedants Introduction of performance-related remuneration to secure necessary margin XL-treaty/facultative Application of state-of-the-art pricing tools Good knowledge of price adequacy Worldwide monitoring of price developments 11 Reinsurance Group Active Munich Re portfolio management New Business rationale China Property/Casualty/Marine + 330m First mover advantage USA/Europe Property Prop/XL + 70m Attractive rates on Europe Casualty Prop/XL + 90m selected accounts Cancelled Business rationale USA Casualty Prop 120m Inadequate prices in WC Europe Casualty Prop/XL 180m Inadequate prices in motor 12

7 Agenda Overview 4 Reinsurance Group 7 Lines of /Regions 13 Outlook Lines of /Regions Split of renewed by lines of /regions Lines of Credit 5 (5) Aviation/Space 5 (4) Marine 8 (7) Property 32 (33) Casualty 50 (51) Regions Special lines 10 (9) Americas 11 (13) Asia/Pacific 10 (6) Europe 69 (72) 14

8 Lines of /Regions Property Changes in premium Including RSA: 96.3% Increase on renewed: 0.0% 0 Total January 2005 Cancelled Renewed Increase on New Estimated outcome 15 Lines of /Regions Property Overview of pricing The market is Munich Re is Europe Showing stable to slightly softening rate levels for Decreasing portfolio by 2% and switching from non-loss-affected areas and loss-affected areas pro rata to XL up significantly Americas Showing stable to slightly softening rate levels for non-loss-affected areas and loss-affected areas Decreasing volume by 16% driven by pro rata (US) up significantly Asia/Pacific Showing stable to slightly softening rate levels for Growing in selected markets (China) non-loss-affected areas and loss-affected areas up significantly 16

9 Lines of /Regions Property Overview of terms and conditions Holding on to achieved improvements Sliding-scale commissions in proportional treaties Event limits maintained Terrorism (TRIA): Conditional exclusion 17 Lines of /Regions Casualty Changes in premium Including RSA: 92.6% Increase on renewed: 2.0% 0 Total January 2005 Cancelled Renewed Increase on New Estimated outcome 18

10 Lines of /Regions Casualty Overview of pricing Europe Americas Asia/Pacific The market is Still showing slight rate increases, with generally stable risk-adequate prices Accelerating competition is putting pressure on margins as well as on terms and conditions Showing slightly decreasing rates remaining on a risk adequate level Munich Re is.. Maintaining its volume Selectively adding new and getting out of inadequately priced Substantially reducing its casualty book (US) Overall approx. 23% reduction Mainly by pro rata book (workers' compensation) Growing in selected markets (China) 19 Lines of /Regions Casualty Overview of terms and conditions Workers' compensation: Further limitation of coverage for terrorism (limited reinstatements) Munich Re is resisting the softening trend in terms and conditions in the US 20

11 Lines of /Regions Marine Changes in premium Decrease on renewed: 1.5% 50 0 Total January 2005 Cancelled Renewed Increase on New Estimated outcome 21 Lines of /Regions Marine Overview of pricing Worldwide The market is Showing generally riskadequate rate levels Increasing pressure on XL rates compensated by hurricane events Munich Re is.. Optimising the in-force book and Growing in selected areas with risk-adequate returns (e.g. China) 22

12 Lines of /Regions Marine Overview of terms and conditions New RACE* and biochemical clause introduced worldwide Introduction of occupational disease clause (one man one event) in marine liability Retentions at a high level * Radioactive contamination exclusion 23 Lines of /Regions Aviation/Space Changes in premium Increase on mainly driven by special additional treaty 75 Increase on renewed: 26.3% 50 0 Total January 2005 Cancelled Renewed Increase on New Estimated outcome 24

13 Lines of /Regions Aviation/Space Overview of pricing Worldwide The market is Showing rate reductions at reduced speed due to low claims frequency in proportional and nonproportional covers for airlines at still adequate levels Showing price increases for risks with unchanged exposures in product liability Showing general Aviation at constant rate level Munich Re is.. Starting to reduce its overall aviation book Note: picture distorted due to temporary share increase in GAUM which is the sole driver for the increase Lines of /Regions Credit Changes in premium Decrease on renewed 9.5% Decrease on mainly driven by higher retentions on proportional 50 0 Total January 2005 Cancelled Renewed Increase on New Estimated outcome 26

14 Lines of /Regions Credit Overview of pricing Worldwide The market is Showing rates generally on a risk-adequate level Showing strict terms and conditions widely accepted with mounting pressures in non-lossaffected accounts Showing increased retentions and reduced cessions for reinsurers due to good results Munich Re is.. Maintaining shares in a reduced cession volume (increased client retentions in pro rata) Resulting in an overall decrease of approx. 8% on its overall treaty book 27 Lines of /Regions Credit Overview of terms and conditions Strict terms and conditions widely accepted with mounting pressures in non-loss-affected accounts Increased retentions and reduced cessions for reinsurers due to good results 28

15 Agenda Overview 4 Reinsurance Group 7 Lines of /Regions 13 Outlook Outlook 1 April renewals: Rates in general risk-adequate Price increases in loss-affected lines Korea Japan Property: Stable renewal on prices and terms and conditions; demand for capacity remains high Casualty: Only minor changes compared to 2004 expected; prices in some specialty lines (e.g. D&O) remain at too low levels Marine: Biggest claims burden in the past year e.g. major car carrier losses; need for further improvement of terms and conditions; strain on capacity expected Property: Major claims (five storms 2004) show need for continued increases to include climatic change into pricing. Man-made industrial losses further support market discipline Casualty: Stable market expected, need for further improvements in case of US exposure Marine: Favourable results 2004; prices, terms and conditions expected to remain stable Munich Re Group committed to risk-adequate pricing: Best guarantee that we can continue to be our clients' preferred and reliable partner 30

16 Appendix Financial calendar Contacts Disclaimer 31 Appendix Financial calendar 15 March 2005 Annual Report 2004 Balance sheet press conference Analysts conference, Munich 28 April 2005 Annual General Meeting, Munich 29 April 2005 Dividend payment 9 May 2005 Interim report at 31 March August 2005 Interim report at 30 June November 2005 Interim report at 30 September

17 Appendix For information please contact Pedro Janeiro Martins Head of Investor Relations Tel.: +49 (0) 89/ Ralf Kleinschroth Tel.: +49 (0) 89/ Robert Kinsella Tel.: +49 (0) 89/ Ingrid Grunwald Tel.: +49 (0) 89/ Frank Kopfinger Tel.: +49 (0) 89/ Fax: +49 (0) 89/ Internet: 33 Appendix Disclaimer The information given here, in particular the Outlook section, refers to statements relating expressly and implicitly to the future and contains words such as expect, believe, assume, targets and other similar expressions. Such forward-looking statements are based on current expectations, estimates, forecasts and prognoses concerning the development of the market as well as management estimates and assumptions. Such forward-looking statements are no guarantee that events or results will actually materialise in the future and are subject to risks, uncertainties, assumptions and other factors that could lead to actual events or results deviating substantially from those anticipated in these forward-looking statements. Other factors include in particular catastrophes that could lead to extraordinary loss burdens as well as considerable price changes on the capital market, namely share price changes which may have an impact on the financial situation of the Munich Re Group. Munich Re assumes no obligation to update any information contained in this presentation. 34