Annual General Meeting 2009 Report of the Chairman of the Board of Management. Nikolaus von Bomhard 22 April 2009

Transcription

1 Annual General Meeting 2009 Report of the Chairman of the Board of Management Nikolaus von Bomhard 22 April 2009

2 Embargo: 22 April 2009, commencement of speech Check against delivery Knowledge at work that is how Munich Re sees its operations. We concentrate our know-how on our core business: risks and their management. This year s annual report provides interesting insights into the Munich Re Group s different fields of business. More at

3 Ladies and gentlemen, Good morning to you here at the ICM and to those taking part online. On behalf of the Board of Management, I would like to welcome you most warmly to the 122nd Annual General Meeting of your Munich Re. I am delighted that so many of you have accepted our invitation again this year. It is impressive confirmation of the affinity you feel with Munich Re and your interest in our business performance. The agenda for today s meeting is substantial. Besides the usual resolutions, we are asking you to approve a number of amendments to the Articles of Association. At the end of my report, I will be presenting the proposals of the Board of Management and the Supervisory Board for the individual items to be voted on. And lastly, there will be the election of your representatives to the Supervisory Board. To begin with, I will take a look at the result of the past financial year and outline what you can expect from Munich Re in 2009 and beyond. (Slide 2: Growth expectations revised downwards) Financial year 2008, Group Let me say straight out that in a stable financial market environment, we would not have been satisfied with the business result for 2008 that we are presenting to you today. However, last year was anything but normal in many respects. It was an exceptional year which subjected the international financial markets to their hardest test for decades. Many highly respected financial-sector heavyweights were badly hit. They have been saved by government rescue packages or have even had to file for bankruptcy. Although this mainly involves banks, it also includes a few insurers and reinsurers. In the second half of 2008, the crisis spread to the real economy, taking the world into a severe recession whose intensity and duration are not yet foreseeable. (Slide 3: Result satisfactory in the light of difficult markets) I have thus already mentioned the determining influence on our business result: as a major investor, we cannot completely detach ourselves from the developments on the financial markets. The consequences for our investments were higher write-downs, reduced regular income, and lower gains on disposals than in the previous year. Altogether, this caused our investment result to decrease by 37% to 5.8bn. It should be mentioned in passing here that 1

4 the previous year s figure had benefited from special factors, such as the sale of a large parcel of real estate. The technical result in reinsurance was marked by above-average claims costs for major losses, which increased the combined ratio to 99.5%. This includes 6.2 percentage points for natural catastrophes, primarily Hurricanes Gustav and Ike in the Caribbean and the USA. Claims expenditure for natural catastrophes thus reached approximately the level we calculate as the long-term mean, following two years with relatively low losses. In primary insurance, the combined ratio in property-casualty business was a gratifyingly low 91.2% of premiums, and only 90.9% for ERGO on its own. ERGO consequently remained well within its long-term target of 95%, putting it in the top group in its sector. This in itself is a very pleasing result, reflecting not only the good claims performance but also the success of the cost-saving programmes to date. In addition, it is a further endorsement of our integrated business model of primary insurance and reinsurance, which enables us to steer through market cycles better and benefit appreciably from diversification effects. (Slide 4: A challenging environment Our solid path proves its worth) All in all, we posted a consolidated profit for the year of just over 1.5bn. Of this, we propose to pay out more than 1bn to you in the form of an unchanged dividend of 5.50 per share. Not all the losses in the value of our investments were recognised in the income statement some had a direct impact on equity. Together with the expenses for our 2008 share buyback programme and the dividend for the financial year 2007, this impact reduced our equity to 21.3bn as at 31 December This figure represents around two-and-a-half times the amount required by the supervisory authorities and is also ample for our AA rating we even have an appropriate buffer. In other words, our capitalisation continues to be very solid, which is of inestimable value in these difficult times. (Slide 5: Munich Re shares defy the crisis) Although we did not achieve our ambitious result target for the past year, under the given circumstances I do not consider this a failure. We have managed the financial crisis well so far, as a direct comparison with our main competitors demonstrates: whether share price performance or balance sheet ratios, we show up well in terms of all the usual key indicators. The market values of most of our competitors fell substantially. Munich Re shares 2

5 decreased by a comparatively modest 16.5% over the course of the year, making us one of the defensive stocks on the stock market. (Slide 6: Financial solidity rewarded by the markets) A further point of comparison are the so-called CDS spreads. These are the premiums on risk-free interest for protection against a debtor s credit default risk. The spreads for Munich Re are lower than those for all our competitors and are even below those for nearly all countries. This is clear proof of the markets confidence in our financial solidity, reliability and dependability. All this is essentially down to two success factors: our risk management and our prudent investment policy. (Slide 7: Test successfully passed) Risk management Our forward-looking and uncompromising risk management has successfully passed a severe test. What did we do differently to many of our competitors? We consistently practised what we preached in our risk management, which is deeply ingrained in our dayto-day business. The models we used in support largely worked and provided important indicators. We took these signals seriously and acted on them in both our underwriting business and our investments. And that, evidently, is just what a whole series of market players failed to do. The explanations now frequently advanced for the crisis, with references to a procyclicality of accounting rules, to systemic risks, or to false incentive systems, are not helpful. They merely distract from the real causes. It was not accounting that failed: accounting ultimately just mirrors reality, i.e. the result and capital position. What failed in many cases was risk management with common sense frequently not accorded the importance it deserved. We have gained many new insights from the financial crisis. In retrospect, we could certainly have done some things better. Naturally, with a view to improving, we are incorporating these insights directly into our risk management. But we can nevertheless certainly be a little proud of what we have already achieved. 3

6 (Slide 8: Investment policy) Investment policy, accounting A special aspect of our risk management is our investment policy. For our industry, the risk should mainly lie in our core business, that is in the technical items on the liabilities side of the balance sheet. These involve commitments of differing durations in a variety of currencies, which are covered by appropriate asset items. In this context, we talk of assetliability management. We aim to earn attractive returns on these investments, but these returns must be sustainable. In other words, the investments must match the nature of the liabilities they cover and the returns must match the risk for which they are paid. This means that we aim to run investment risks only to a limited extent so as not to jeopardise our ability to meet our long-term commitments to clients in insurance and reinsurance. This conservative policy has paid off. At an early stage in the crisis, we reduced a good portion of our risks from equity investments through disposals or by means of suitable hedging instruments. We did not reinvest the resultant funds in fixed-interest items that offered seemingly high returns but notably also high risks. Instead, we preferred conservative some might say boring lower-risk investments. As a consequence, we achieved an overall Group return on investment of 3.4% a result clearly below our return target of 4.5%. But here, too, we have to say that in the light of the crisis, this result was satisfactory. That is all the more true when one takes the total performance figure after also considering the valuation reserves, which at 2.5% is among the best in class. In this connection, I would like to stress that we have not taken advantage of the relaxations in international accounting regulations open to us since the third quarter. This means that we have refrained from glossing, smoothing or other such adjustments in the presentation of our results. The disclosure of our embedded value has also been market-consistent, thus underlining how committed we are to transparency. We stand by an unfiltered economic view of our financial performance. Investors need to have clarity and appreciate dependability that is what Munich Re stands for. Particularly given the crisis of trust in the financial sector, credibility is more important for us than ever. The financial crisis exacted a good deal of us in the past year and confronted us with new challenges. But we have not become its playball. We have been able to continue implementing our strategic initiatives in our different fields of business and even make some acquisitions. Our sustained capital strength has allowed us to finance these purchases entirely from our own resources. 4

7 (Slide 9: Expansion of profitable special lines and niche segments) Business field of reinsurance Our strategic initiatives in reinsurance include the expansion of profitable special lines and niche segments. We have made very good progress with the realignment of our operations in the USA, the world s most important insurance market, following decisions taken at the end of In April 2008, we concluded the acquisition of speciality insurer The Midland Company. The company has meanwhile been integrated into our structures and processes. The same applies to the Roanoke Companies, also acquired last April. Comprising both a major US underwriting agency and a broker of marine insurance, Roanoke ideally complements our successful UK Watkins Syndicate, which has not been represented in North America before. In return, Roanoke can broaden the spectrum of its offering to clients. The crisis has also provided us with attractive opportunities. Our acquisition of the Hartford Steam Boiler Group, which we announced in December and concluded on 31 March this year, is an impressive example. HSB was previously part of the AIG Group and would probably not have been offered for sale if its parent had not run into difficulties. The business model of this leading and very profitable insurance and inspection company for engineering risks is a perfect fit with ours, combining a high degree of risk expertise with successful insurance and reinsurance products. The integration project has already begun and we aim to leverage synergies, even though the purchase also makes financial sense without them. We made prudent use of our position of relative strength in this acquisition. And we will continue to make sure that our financial capabilities do not tempt us into taking any rash steps. (Slide 10: Market environment at end of 2008) The environment for reinsurance was and is not easy, with rates in nearly all lines of business still under pressure worldwide until well into the autumn. For many local markets and business with low exposure, this trend continued into the new year. Our position was made more difficult by the weakness of some of our competitors, which appears to have made them too conciliatory and thus hindered implementation of the technically necessary terms and conditions. Only since the financial crisis has spread does the market appear to be hardening. The position is quite different in global segments with high loss exposure, such as aviation insurance, offshore business, D&O and natural hazard covers, where we have witnessed appreciable increases in rates since the turn of the year. 5

8 As at 1 April this year, a section of our treaty business with a volume of around 1.3bn was up for renewal. Nearly 40% of this involved the Japanese and Korean markets, with most of the remainder distributed between North America and global business. Our analyses by market and client group are still in progress, so I am unable to give you any figures at present. But the trends I have just described have continued. In other words, terms and conditions are still not hardening on a broad front, but are definitely doing so in specific segments especially covers for natural catastrophes. We have been able to exploit opportunities to selectively expand our portfolio and enhance the quality of the reinsured business to around the same extent as in the January renewals although the portfolio involved in this case is considerably smaller. Altogether, we expect demand for reinsurance cover to increase markedly in the medium term owing to the reduced capital base of many of our clients. The breakthrough just achieved in the political negotiations on the new European supervisory regime for insurers Solvency II will certainly boost demand for reinsurance. The directive provides for strictly risk-based supervision, i.e. a consistently economic evaluation of all an insurer s assets, liabilities and risks. That is exactly the approach we not only propagate but have also long been practising ourselves. It will tend to result in higher capital requirements for insurers that have not yet taken this approach. Raising fresh capital in the current market environment is difficult and, above all, expensive. Under Solvency II, reinsurance will provide capital relief, making it a very favourable option for primary insurers when compared with a capital increase. We are prepared for this, and can advise our clients with our Solvency Consulting Team, jointly devising solutions tailored to their individual needs. Naturally, we will charge an appropriate price for the capacity and high security we provide. (Slide 11: Cooperations) That brings me to another initiative. In our Group, we have a wealth of risk knowledge, which we intend to deploy and also market in an even more result-oriented way in future. To this end, we last year signed cooperation agreements with several strategic partners, with whom we aim to pool and further develop our expertise in the areas of emerging and accumulation risks. Let me cite as an example our collaboration with the newly established Centre for Climate Change Economics and Policy at the London School of Economics. The institute will be headed by leading economist Lord Nicholas Stern. Together, we will research the economic costs arising from the climate-related increase in natural catastrophes. Our goal is to model and evaluate these risks more precisely. At the same time, we will assess the benefits of adaptation and prevention strategies and of the related expansion of new technologies. We are already leaders in the linking of climate research to our daily business. 6

9 With this cooperation at the interface of climate research and economics, we are purposefully expanding our risk knowledge and enhancing our competitiveness. By sharing our knowledge and thus also helping to curb the consequences of climate change, we are at the same time demonstrating our social responsibility. For one thing is clear: it is society that will have to bear the costs of unabated climate change. We naturally advanced and concluded many internal projects last year as well. For instance, we introduced a new marketing and consultancy set-up throughout our global life and nonlife reinsurance operations. In the operational units, Client Management Teams prioritise the use of our resources, focusing our capacity, our risk knowledge and our provision of services on business partners with whom we can generate the greatest added value. (Slide 12: Establishing ERGO in the top group of European primary insurers) Business field of primary insurance In primary insurance, we intend to establish ERGO in the top group of European insurers. Here, too, our starting point is the risk-based, economically consistent management of its business. Unfortunately, in business such as life insurance, this approach is still not standard among some of its competitors, which confronts ERGO with particular challenges. As announced last year, we have launched a raft of growth initiatives in Germany and beyond. In addition, ERGO is continuing to work hard on achieving its cost targets. It also improved its capital structure in 2008 by way of an exceptionally high dividend payment of 1bn. In accordance with its ownership structure, nearly 95% of this dividend was paid to the group s parent. New business production in life insurance was not satisfactory last year. This was partly due to the competitive situation I have just mentioned. Outside the insurance industry, confidence in products for saving and retirement provision has been badly hit by the financial crisis. We expect that traditional life and annuity insurance with guarantees will become considerably more attractive for old-age provision again in the foreseeable future, and particularly in comparison with bank products. In order to meet the guaranteed entitlements of our clients in an unusually long phase of low interest rates, we have hedged part of the interest-rate risk. This is a direct consequence of our economic view of life insurance business. We are convinced that our market position and our attractiveness vis-àvis our competitors will be permanently strengthened as a result. 7

10 In German health insurance, our business has held up well despite the impact of the government health reform. We have expanded our healthcare networks and taken measures to enhance client loyalty. But above all we have launched a new generation of products which have been favourably received and have also done well across the board in external product comparisons. We have also made progress with the modernisation of our product range in propertycasualty insurance, where we are operating with modular products that can be combined to cover clients differing needs. This has met with a positive reception: our property-casualty business is growing at a higher rate than the market average, whilst remaining highly profitable. (Slide 13: Difficult environment, but numerous initiatives under way) In 2008, we worked hard on increasing the effectiveness of our distribution channels. We have, for example, combined the broker sales forces of the ERGO Group s four main brands in a single new unit. This move is designed to significantly enhance our marketing strength whilst lowering costs. Last year, we took the necessary organisational and personnel measures, enabling the new ERGO broker sales force to start operating at the beginning of Besides this, ERGO acquired the remaining shares in KarstadtQuelle and Neckermann Versicherungen, making it the sole shareholder, and signed an exclusive distribution partnership agreement for insurance products with the former co-shareholder Arcandor. KarstadtQuelle Versicherung has been designated Germany s most popular direct insurer. It is a proven specialist in direct marketing, as is the South Korean company ERGO Daum Direct, which we consolidated for the first time in Lastly, ERGO acquired Europäische Reiseversicherung and Mercur Assistance from its parent. The two companies have become part of a new Centre of Competence for Travel, designed to provide the generally growing and profitable market of private and business travellers with solutions geared to their needs. This is yet another example of ERGO s competence in integrating business units and managing a broad range of brands. 8

11 (Slide 14: Increase of 12.5% in premium income from foreign business) ERGO s operations outside Germany are also making good progress. Each step has only been small in itself, but the overall result has been a gratifying increase of 12.5% in premium from international business. Strong organic growth in Poland, the Baltic States and Turkey has been supplemented by a balanced mix of newly formed companies and acquisitions. ERGO is now the sole owner of ERGOISVIÇRE in Turkey, having acquired the remaining 25% stake from the family founders in September. The range of products marketed has also been extended through the formation of a new pension insurer. At the beginning of October, ERGO increased its 30% stake in Bank Austria Creditanstalt Versicherung to 90%. This puts ERGO in third place in the Austrian life insurance market. Unfortunately, the impact of the financial crisis has required write-downs of goodwill for this transaction. But we continue to be convinced of the strategic benefit of the investment, given the significant market position it has achieved for us. At the same time, we aim to establish a centre of competence for bancassurance in Austria, which we will use to advance the expansion of our business in central and eastern Europe. Things are moving forward in Asia as well. I have already mentioned Daum Direct, which we acquired in ERGO opened a representative office in Singapore in 2008, while in China we have been seeking a suitable joint-venture partner. The joint venture for propertycasualty business concluded with the Indian HDFC Group in 2007 is proceeding according to plan. Last year, we also signed an agreement for the establishment of a life insurance joint venture in India. However, in the light of the financial and economic crisis, our partner the HERO Group wishes to shelve the plan and concentrate on its own business. We respect this decision and have dissolved our partnership by amicable agreement. Nevertheless, our belief in the potential offered by this significant market is undiminished. We will therefore be pursuing our plans in life insurance there further. (Slide 15: Extensive organisation measures) All these activities in the ERGO Group are being accompanied by extensive organisational measures. ERGO now has a joint back office, for example. By 2010, we aim to save a further 180m, which involves the cutting of 1,800 jobs. We did not take this decision lightly, but it is urgently necessary and must now be swiftly and consistently implemented. It is the only way of achieving competitive cost structures and safeguarding jobs in the long term. We are placing our confidence in the ERGO co-determination bodies to fulfil their 9

12 responsibilities, ensuring that the agreement reached at the end of 2008 provides a viable basis for constructive cooperation in this process. (Slide 16: Third field of business with its own management) Business field of International Health Our integrated business model is particularly striking in International Health, our third field of business alongside primary insurance and reinsurance. Back in 2006, we established a virtual structure in which we pooled all our Group s expertise and over 20 years experience in international health business. Our objective is to become the leading international risk carrier in this market, which is growing at an above-average rate. In the past year, we restructured International Health s organisation and are now transforming it from a virtual to a fully-fledged business field with its own management. (Slide 17: Competence and regional organisation) To meet local clients needs as well as possible, we have decided in favour of a decentralised organisation with four regional hubs in Princeton, Munich, Abu Dhabi and Singapore. Besides our combined risk expertise in the international health market, we have a broad spectrum of service providers and risk carriers. (Slide 18: Business models geared to markets) This enables us to cover every element of the healthcare value chain, which is an important precondition for high-quality healthcare provision at competitive prices. By skilfully combining the individual units, we can offer a wide range of different business models. These extend from being simply a reinsurer or a traditional primary insurer to a full-range provider of services that go beyond pure risk carrying. Our presence in a particular market will depend on the relevant needs and restrictions. At the same time, we can use this strategy to selectively operate in those parts of the value chain where we can create the greatest added value. We have defined priorities for our expansion in attractive target markets. In this connection, it is interesting that over 80% of global healthcare expenditure is concentrated in just 13 10

13 countries. The USA alone accounts for nearly 50% of total health expenditure and almost 80% of the global private insurance market. We are already established in some of today s largest markets, such as Italy through DKV Salute or Spain through DKV Seguros. And besides this, we are gaining a footing in attractive growth markets that will generate business expansion in the medium term India, for example, through our joint venture with the Apollo Hospitals Group. For completeness sake, I should add that Germany also a very important market in healthcare business does not fall within International Health s responsibility but will be handled by ERGO. (Slide 19: Significant acquisitions in the USA) With the purchase of Sterling Life Insurance Company, we already made a significant acquisition in the USA in The company specialises in the rapidly growing market for seniors and is an ideal fit with our s healthcare unit at Munich Re America. We succeeded in integrating Sterling both earlier and more cost-efficiently than expected in With premium growth of 29% and a solid result, the company met its financial targets last year despite lower investment income. We have to wait and see exactly what form the changes for the healthcare market announced by President Obama will take. But we are confident that we can adapt Sterling s business model to meet future requirements. (Slide 20: Prudent strategy for profitable growth maintained) Summary, outlook Ladies and gentlemen, after this look at our youngest field of business, let me return to the Group as a whole. As I have said, we came through the year 2008 comparatively well and were able to improve our competitive position. Our balanced strategy, strictly geared to economic risks, paid off. But the financial crisis is not over the severity and length of the recession are uncertain. That inevitably means further burdens for our assets and earnings which will be reflected in our accounts. We have prepared ourselves for these challenges as well as possible and have developed scenarios against which we test our portfolios. As part of this process, we have studied the effects of an economic decline on demand in individual lines of insurance and reinsurance. We have also identified segments with increased loss exposure and are adjusting our 11

14 underwriting guidelines and acceptance policy accordingly. With our strategic set-up, we are broadly diversified, which makes us more resilient and will prove a definite advantage. We will systematically exploit our relative competitive strength, but even our scope is limited. This means we will not become imprudent, let alone reckless. In contrast to others, we do not need to change our strategy. Our business model is geared to long-term and sustained value creation. Our financial solidity will remain attractive for our clients in the crisis. And the same should apply to you as our investors. In my report on ERGO, I already talked about the opportunities that may present themselves for insurances of the person. In reinsurance, we can benefit from a further hardening of the market in the medium term. The relevance of reinsurance is growing, as is the demand for more security. We can continue to provide our clients with high capacities, for which we can charge an appropriate price. (Slide 21: Targets adjusted to new realities) We set our result target of 18 per share for 2010 under conditions that ceased to exist months ago and will not be restored in the near future. Therefore, it was only logical and consistent to abandon this objective. We do not wish to formulate another earnings target for the time being. In view of the high volatility that is persisting on the financial markets and the uncertainty about future economic development, it would be unprofessional to do so. But we are adhering to our target of a 15% return on risk-adjusted capital over the cycle. Even though this target is considerably more ambitious today than it was a year ago, we continue to be convinced of our business model s potential for sustained profitability. We also wish to adhere to our share buy-back programme, which is scheduled to run for a further 24 months until the 2011 Annual General Meeting. In view of the economic crisis, however, we will hold back with further share-buy backs for the time being. In your interest, we will carefully weigh the benefits of share buy-backs against the advantages of secure capitalisation and the opportunities that arise from the crisis. Let me sum up: The Munich Re Group came through a difficult year comparatively well. Our risk management paid off; we continue to be very solidly capitalised. Our strategy geared to sustained value creation has proved its worth; we put our knowledge to work. 12

15 We are well prepared for the challenges of the current year; at the same time, we see opportunities which we will actively exploit. Our financial strength gives us the necessary headroom. We owe our success in the past year to the know-how and dedication of our staff throughout the Group. May I thank them most cordially at this point for all their hard work. We will not relax in our commitment, because we want to continue presenting you with results that confirm our leading status in the industry. (Slide 22: Comments on the agenda) Information on the items to be voted on Ladies and gentlemen, I now come to the items on the agenda on which you will vote today. We sent the agenda to you with the invitation. You will also find a copy among the documents you were given at the entrance to the meeting. I would like to comment briefly on a few of the items. First, agenda item 2, "Appropriation of the balance sheet profit from the financial year 2008". The motion proposes an unchanged dividend of 5.50 per share, representing a total payout of nearly 1.1bn and making us one of the few companies able to maintain an attractive dividend in these turbulent times. This is equivalent to a dividend yield of more than 5% in relation to the current share price. In addition, 432m is to be allocated to retained earnings in order to strengthen our capital base further in the difficult current market environment. Agenda items 5 and 6 concern the authorisation to buy back and use own shares, also employing derivatives. The validity of such authorisations continues to be limited by law to 18 months. The authorisation granted at the last Annual General Meeting expires in October and we would therefore ask you to renew it today. I have explained before to what extent and under what conditions we intend to utilise the authorisation. On the basis of the existing authorisation, we repurchased a total of 7,692,180 shares at an average price of in our 2008/2009 share buy-back programme, representing 3.73% of the share capital at the time the authorisation was granted. Besides this, a further 1.31 million shares or 0.63% of the share capital were bought back under this authorisation. These shares were acquired in October 2008 by means of put options issued under the preceding authorisation in February The average price of the repurchased shares was 13

16 The 9,002,180 shares repurchased in total have meanwhile been retired, again without reducing the overall amount of our share capital. The proportion of the share capital represented by each of the other shares has consequently increased. Since the beginning of the share buy-backs in November 2006, Munich Re has returned about 4bn to its shareholders in this way. Outside the share buy-back programme, companies of the Munich Re Group have acquired a further 506,697 shares, or 0.25% of the share capital at the time of the last Annual General Meeting. 61,921 shares have been issued to staff under employee share programmes. But the majority of the shares like those acquired in previous years serve solely to safeguard stock appreciation rights granted to management. Since the 2008 Annual General Meeting, we have parted with a total of 177,017 shares through the aforementioned employee share programmes and through sales via the stock exchange. At present, 2,313,773 own shares are thus in the possession of the Munich Re Group, representing 1.17% of the current share capital. You can read more about the share buybacks on pages 229 and 230 of our annual report and on Munich Re s website. The annual report again also contains an explanatory report on Munich Re shares and your related rights. Under agenda item 8, the authorisation to increase the share capital is to be renewed in order to allow the Company, if necessary, to strengthen its shareholders equity flexibly and at short notice by means of this instrument in the coming years. The current authorisation expires this May. There are no concrete plans at this juncture regarding utilisation of the new Authorised Capital Increase The Board of Management will carefully examine in every case whether it is in the interests of the Company and its shareholders to use this authorisation. Under agenda item 9, we propose amendments to the Articles of Association, based on the German Risk Limitation Act, which has been in force since last year. Knowing who our shareholders are enables us to communicate with them better. It also facilitates the exercising of investors rights. The new German law proceeds on the basis of direct entry of shareholders in the share register. The proposed amendment to the Articles of Association supports this approach. We know from many talks with shareholders that they would like to be entered in the register directly. Whilst this is already standard practice for German investment funds and private shareholders, it is currently does not apply to many of our non-german investors. This appears to be partly due to international depositary structures. With the amendment to the 14

17 Articles of Association, we want to encourage more foreign investors to have their names entered directly in the register. So-called nominee entries can still be made as well as direct entries. We want to have a complete register and therefore want to continue entering all acquirers of shares or the persons holding the shares on their behalf. And we wish to obtain more clarity about our 100 largest shareholders in cases where they are not entered in their own names. The targeted threshold of 0.1% represents just under 200,000 shares, or an investment volume of nearly 19m. We would like shareholders who invest such an amount in our Company to be informed better and more directly than is currently possible via the banks in the custody chain. Let me stress again that we will not require intermediaries to make a commitment to disclose information on investors, as envisaged in the amendment to the Articles of Association, until a market standard exists for such notification; in other words, not until an efficient and costeffective channel is in place for transmitting the data. The process should not give rise to any additional expense or burden for investors. We are currently working hard with other market participants to produce such an efficient and generally acceptable solution, which is envisaged for the beginning of Before then, we will not make the request explicitly provided for in the amended Articles of Association. Under agenda item 10, we are proposing a few general authorisations. These also serve the purpose of promoting communication with our shareholders and making it easier for investors to exercise their rights. We wish to avail ourselves as soon as possible of the new opportunities to be created by the implementation of the Shareholder Rights Directive in Germany. The proposed authorisations give us the possibility of taking advantage of these opportunities for the Annual General Meeting in 2010 for instance, giving you the chance to vote by post. So much for my comments on the items to be voted on at today s Annual General Meeting. Mr. Schinzler will be saying a few words in a minute about the elections to the Supervisory Board under agenda item 7. I will conclude my remarks by asking you to vote in favour of our motions on the agenda. 15

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29 Disclaimer This publication contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. 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.

30 2009 Münchener Rückversicherungs-Gesellschaft Königinstrasse München Germany