The Munich Re Group Analysts' conference Nikolaus von Bomhard Jörg Schneider Charlie Shamieh

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1 Nikolaus von Bomhard Jörg Schneider Charlie Shamieh 15 March 2006

2 We did our homework in 2005 Focus on risk as our business Turning risk into value A challenging year Nat Cat activities highlighted need for sound risk management Reserve developments at American Re addressed Excellent steering and control Active risk diversification ERGO: Back on track to strong profitability Still, in 2005 Munich Re was one of the most profitable reinsurers with a Group result of 2.7bn 2 and now we are laying the foundation for smarter growth Key figures Jörg Schneider - Munich Re Group in total Reinsurance segment Primary insurance segment Business opportunities - Nikolaus von Bomhard - Integrated health strategy Focussing on attractive US middle/regional market Efficiency improvement in primary business More sophisticated exposure mapping Active capital management - Nikolaus von Bomhard - Alignment of internal steering and external target communication Outlook Risk management - Charlie Shamieh - Economic financial strength improved More conservative allocation of risk capital Derisking and hedging interest-rate risks Accumulation control safeguards diversification benefits 3 1

3 Agenda Key figures Jörg Schneider - Munich Re Group in total Reinsurance segment Primary insurance segment Business opportunities - Nikolaus von Bomhard - Integrated health strategy Focussing on attractive US middle/regional market Efficiency improvement in primary business More sophisticated exposure mapping Active capital management - Nikolaus von Bomhard - Alignment of internal steering and external target communication Outlook Risk management - Charlie Shamieh - Economic financial strength improved More conservative allocation of risk capital Derisking and hedging interest-rate risks Accumulation control safeguards diversification benefits 4 Key figures 2005 Munich Re Group in total The business year 2005 at a glance Claims Investments Others Winterstorm Erwin Windsor Tower Madrid Floods in GER, AUT, SWI Hurricanes Katrina, Rita and Wilma Sale of MAN and BHW Commerzbank and Allianz stake reduced to < 5% Exchange of HVB into UniCredit shares UniCredit stake reduced to < 5% Most business units with top performance, Excellent result for ERGO Net profit of 2,743m, operating result of 4,130m Combined ratios Reinsurance 110.5% (thereof 17.7% pts. Nat Cat) Primary insurance 93.1% Equity strengthened by 4.0bn to 24.7bn, RoE at 12.3% Reserve developments at American Re addressed Sale of Karlsruher leads to a more streamlined structure in primary insurance 5 2

4 Key figures 2005 Munich Re Group in total Quantification of the most important events in m Reserve strengthening AmRe Atlantic windstorms Sale of 3% Allianz shares Exchange UCI/HVB Total Investment result ,551 Total income 563 1,073 1,636 Total expenses before retro 1,327 2,694 4,021 Total expenses after retro 1,294 2,285 3,579 Release of Group IBNR Total expenses 388 2,285 2,673 Result before amortisation and impairment losses of goodwill 388 2, ,073 1,037 Operating result 388 2, ,073 1,037 Taxes on income Group result 750 1, , Tax from release of Group IBNR. 6 Key figures 2005 Munich Re Group in total Income statement High level of profit in m Gross premiums written Net earned premiums ,199 36, ,071 36,534 in % Effect in 2005 of the most important events: Investment result Total income 10,818 48,493 8,041 45, Income 1,636 Total expenses 44,356 42, Expenses 2,673 Result before amortisation and impairment losses of goodwill Amortisation of goodwill 4, , Result before amortisation and impairment losses of goodwill 1,037 Operating result Finance costs Taxes on income Group result Thereof minority interests 4, ,009 2, , , Operating result Taxes Result after tax 1, Earnings per share in

5 Key figures 2005 Munich Re Group in total Premium development Overall stable, diverging developments within segments in m Gross premiums written 2004 Foreign-exchange effects Divestment/ Investment Organic change Gross premiums written , (0.6%) 363 ( 1.0%) 268 (0.7%) 38,199 (0.3%) Breakdown by segment (consolidated) Reinsurance Property-casualty 13,699 (35.9%) ( 2.1%) Primary insurance Property-casualty 5,219 (13.6%) ( 0.8%) Reinsurance Life: 5,889 (15.4%) ( 8.9%) Health: 1,063 (2.8%) ( 9.6%) Primary insurance Life: 7,437 (19.5%) ( 4.5%) Health: 4,892 (12.8%) ( 7.8%) 8 Key figures 2005 Munich Re Group in total Return on investment Target exceeded again in m Regular income % Return 7,649 Excellent return on investments (RoI) of 5.9% IFRS Economic view Other income/ expenses Non-current income 2 Investment result Change in total reserves 3 Total income 0.3% 2.0% 5.9% 1.0% 6.9% 594 3,763 10,818 1,846 12,664 Equity-backing ratio within target corridor (13.4% after hedges) Ratings structure of bonds excellent (more than 95% A or better) Corporate bond ratio low (< 5%) 1 Return on quarterly weighted investments (market values) in %. 2 Non-current income includes gains/losses on the disposal of investments, write-downs and write-ups on investments. 3 On- and off-balance-sheet reserves. 9 4

6 Key figures 2005 Munich Re Group in total Equity Substantially increased by excellent result in m Equity ,644 Impact of exchange rates mainly driven by strong US dollar Paid dividends 457 Change in unrealised gains/losses 1 Change resulting from valuation at equity 1, Consolidated result 2,743 Changes in exchange rates 651 Other changes 379 Equity ,653 1 On other securities. 10 Key figures 2005 Reinsurance segment Income statement Strong result despite severe losses from hurricanes in m Gross premiums written Net earned premiums Investment result Total income Total expenses Result before amortisation and impairment losses of goodwill Amortisation of goodwill Operating result Finance costs ,358 20,961 4,756 26,476 24,092 2,384 2, ,397 21,475 3,597 25,547 22,805 2, , in % Very good investment result due to gains from disposal, of which due to change UCI/HVB: 171m (spanned) 744m (consolidated) Total expenses reflect increase in Nat Cat losses Taxes on income Group result 1,394 1, Thereof minority interests Consolidated group result 1,866 1,

7 Key figures 2005 Reinsurance segment Major claims (gross) Four major claims add up to 93% of total Nat Cat losses in 2005 Nat Cat claims (gross) over 5m for Munich Re Group in m Man-made claims (gross) over 5m for Munich Re Group in m , , , Incl. WTC reserve strengthening of 531m. Major claims and their impact on profit and loss lines in 2005 in m Hurricane Katrina Hurricane Wilma Hurricane Rita European Floods Total Before retro 2, ,817 After retro Group result 1,654 1, ,404 1, Key figures 2005 Primary insurance segment Income statement Operating and Group result more than tripled in m Gross premiums written Net earned premiums Investment result Total income Total expenses Result before amortisation and impairment losses of goodwill Amortisation of goodwill Operating result Finance costs Taxes on income Group result ,572 15,249 5,907 22,816 21,291 1, , , ,526 15,059 4,587 21,091 20, in % Very good investment result due to improved gains from disposal of investments Result due to change UCI/HVB: 551m (spanned) 409m (consolidated) High allocation of earnings to reserve for premium refunds (RfB) Thereof minority interests Consolidated group result

8 Key figures 2005 Primary insurance segment Key figures Profitability at an excellent level Gross premiums L&H, P-C 1 in m Net profit L&H, P-C 1 in m Strong combined ratio in propertycasualty ,558 5, ,324 5, ,330 5, Life and health Property-casualty 1 Gross premiums new business Life Combined ratio (93.1%) 1 in m in % , Slight decrease of expense ratio 1 : 34.7% (34.9%) Slight increase in loss ratio 1 : 58.4% (58.1%) Decrease in new business driven by change in taxation in 2005, on APE basis 33% ,012 Single premiums 513 1,525 Regular premiums 1 Incl. legal expenses. 2 Adjusted due to first time application of IAS 1 (rev. 2003) Legal expenses Property-casualty Disclosure of European Embedded Values on 9 May Agenda Key figures - Jörg Schneider - Munich Re Group in total Reinsurance segment Primary insurance segment Business opportunities - Nikolaus von Bomhard - Integrated health strategy Focussing on attractive US middle/regional market Efficiency improvement in primary business More sophisticated exposure mapping Active capital management - Nikolaus von Bomhard - Alignment of internal steering and external target Outlook Risk management - Charlie Shamieh - Economic financial strength improved Strengthened allocation of risk capital Derisking and hedging interest-rate risks Accumulation control safeguards diversification benefits 15 7

9 Business opportunities Integrated health strategy Global healthcare market Has grown significantly since 2000 and will continue to grow Global healthcare market Main growth drivers Market volume in US$ bn 3,000 4,100 5,400 CAGR: ~6.0% 7,000 Demographic developments Medical improvements Lifestyle changes Economic situation Source: OECD Health Statistics, Compustat, Bloomberg 16 Business opportunities Integrated health strategy Health primary insurance and reinsurance Similar components in the value chain Financial protection Managed care services Brand/ Licence Sales Risktaking Administration Disease mgmt Demand mgmt Medical mgmt Network mgmt Business models Munich Re Group companies (examples) Classical capacity reinsurance Munich Re, American Re HealthCare Classical primary insurance DKV, Victoria Administration plus managed care services MedNet, Arztpartner, Paramount Integrated reinsurance ( MedNet model ) Munich Re, American Re HealthCare Integrated primary insurance ( Unternehmen Gesundheit ) Munich Re, DKV Parts of the value chain covered Core business Integrated parts of the value chain (market-dependent) 17 8

10 Business opportunities Integrated health strategy Market evolution in global healthcare Provides opportunities for the different business models Top-line potential Primary insurance Services Flexible and parallel use of business models leads to maximisation of top-line and bottom-line results Reinsurance India China Saudi Arabia/ Abu Dhabi Germany USA Development status Illustrative 18 Business opportunities Integrated health strategy Institutionalised health cooperation First success stories Services/Disease management products In the US, strategic minority shareholding in Health Dialog Consolidation of our position in the disease management market as a means of further generating risk-carrying business Classical primary insurance Establishment of the first specialised health insurer in Abu Dhabi with the backing of the entire Munich Re Group's health sector expertise Reference model for other economies in the region Expatriate business Provision of insurance for Spanish expatriates with access to Munich Re Group's international provider network Assumption of risk-carrying and management of the expatriate product ExpaCare in the UK with access to Munich Re Group's international provider network Integrated primary insurance Provision of combined risk-carrying and healthcare services Provision of cover for the public healthcare system in the Spanish administration district of Denia by DKV Seguros/Spain 19 9

11 Business opportunities Focussing on attractive US middle/regional market American Re Strong presence in US middle/regional market sector Split of core business clients 1 Underwriting year net premiums written in USD bn % 40% % 39% % Middle/regional market National accounts 32% Excluding finite, HealthCare, Credit Enhancement and Corporate Retrocessions High client loyalty underpins strong relationship Services offered result in a higher pricing leverage Ranked #1 by clients as "Best Overall Reinsurer in the US" by Flaspöhler again in 2005 Use in-depth knowledge of our clients and the marketplace to generate higher profitability 20 Business opportunities Focussing on attractive US middle/regional market American Re Quality of portfolio optimised Focus on US core business 2002 termination of international operations 2003 termination of service-for-fee operations 2003 termination of international Risk Partner operations Exited unprofitable business 2004 Global Risk Management (GRM) (Volume USD 136m) Combined ratios of GRM business in % Discontinued types of business: Pharmaceuticals Certain classes of professional liability 80% reduction in long-haul trucking facultative exposure 21 10

12 Business opportunities Efficiency improvement in primary business ERGO Shifting gears Strategic modules Maximum utilisation of client relationship and improvement of distribution efficiency Increase of market share in company pensions business Competitive and profitable products Overproportionate expansion of property-casualty business Operative excellence Strict cost discipline Value- and risk-based management Net profit target 2006: m European Embedded Value earnings 2006: 8 9% Enhancement of foreign activities Leading market position in "reachable" markets in Eastern Europe Current initiatives Restructuring of the distribution organisation Development of modular products New tariffs in motor insurance introduced as at 1 July New 200m cost-saving programme 1 Creation of standardised process architecture, e.g. IT integration 1 Full integration in Munich Re's management system: Value-based management, European Embedded Value Expansion of health as an independent business model Expansion of legal expenses insurance especially in Eastern Europe 1 Further information on following pages. 22 Business opportunities Efficiency improvement in primary business ERGO Attractive business mix 1 July 2005 New motor tariff introduced Initiatives 2006 Price competition in motor business. ERGO sticks to profit-oriented underwriting Increased allowance of client specific risk characteristics in tariff Same tariff for ERGO companies Victoria, Hamburg- Mannheimer, D.A.S. Expansion of affinity distribution and distribution co-operation Further development of cancellation prevention Further reduction of operating costs ERGO 2005 Gross premiums written Market Gross premiums written Other 7.5% Third-party liability 17.0% Motor 28.7% Other 13.5% Third-party liability 13.2% Motor 39.8% Fire and property 18.6% Personal accident 28.2% Fire and property 22.6% Personal accident 10.9% Under proportionate share in motor business, high proportion of attractive personal accident business 1 For 2005 no market figures available yet

13 Business opportunities Efficiency improvement in primary business ERGO Strict focus on cost discipline 2005 From 2008 onwards Conclusion of the cost-saving programme set up in 2003 amounting to 300m p.a. Further cost savings amounting to 200m p.a. to be attained D.A.S. 12% DKV 22% Hamburg- Mannheimer 26% Victoria 40% Improvements in efficiency constantly in focus Objective: Maintaining profitable growth in the long term Propertycasualty 35% Health 10% Life 55% Business opportunities Efficiency improvement in primary business ERGO Ahead of peers Example IT Building of ERGO Computer Centre (CC) CC expansion: Victoria/D.A.S. CC integration: HM (2000), DKV (2001) Building of ERGO PC platform Design of standard platform (2005) Roll-out (2005/06) Development of ERGO back-office application platform Enhancement of basic platform Victoria/D.A.S. (2002) Migration of HM (2003) Migration of D.A.S. legal expenses (2004) Integration of DKV (2007) Development of ERGO frontoffice application platform Concentration of investments (MEAG) since 2000 Uniform claims management since 2000 New management structure in 2004 Founding of ITERGO 1 Jan Stage 1 Stage Phase 1: Increase in efficiency Stage 3 Stage Phase 2: Promotion of innovation 25 12

14 Business opportunities More sophisticated exposure mapping Geo-coding Increased data transparency and quality of underwriting Geo-code Attaching geographical latitude and longitude to a risk address Address level Example Windstorm Lothar Visualisation Identify patterns and critical risk concentrations Analysis Estimate the modelled exposure to natural and man-made hazards Decision Increased transparency facilitates risk-adequate decisions km/h Residential buildings exposed to wind speeds exceeding 80 km/h. Residential buildings exposed to wind speeds of less than 80 km/h. 26 Business opportunities More sophisticated exposure mapping Geo-coding Munich Re initiatives for expansion and penetration Active support of the GDV 1 initiative to achieve a better and standardised availability of cedant portfolio data Upgrading of Munich Re's Geo-Data-Services, including geo-coding for northern European and Asian markets Integration and detailed analysis of all ERGO non-life portfolios Expansion of the CatLossEstimation-Service to more European countries Consideration of detailed loss data based on customers' experience Implementation of new flood models for Eastern Europe and hailstorm models for Central Europe Investigations on further applications of handheld GPS/GIS tools for high-resolution risk assessment Munich Re's accumulation control strongly supported by geo-coding initiatives 1 Gesamtverband der Deutschen Versicherungswirtschaft

15 Agenda Key figures - Jörg Schneider - Munich Re Group in total Reinsurance segment Primary insurance segment Business opportunities - Nikolaus von Bomhard - Integrated health strategy Focussing on attractive US middle/regional market Efficiency improvement in primary business More sophisticated exposure mapping Active capital management - Nikolaus von Bomhard - Alignment of internal steering and external target communication Outlook Risk management - Charlie Shamieh - Economic financial strength improved More conservative allocation of risk capital Derisking and hedging interest-rate risks Accumulation control safeguards diversification benefits 28 Risk management Economic financial strength improved Group economic capital position 2005 Significant quantitative and qualitative improvement Group available financial resources Group required risk capital Economic financial strength bn + 2.6bn + 1.4bn Further reductions in concentration risks Allianz, Commerzbank and UniCredit stakes Protection against falling interest-rates in primary life 12.5bn swaptions in place < 5% Move of some of the 2005 stress tests to the base model Large "model changes", but no change to "after-stress" assessment of economic capital buffer Munich Re's excellent capital position leaves the door open for a wider range of active capital management actions 1 Model changes accounted for approx. 1.7bn of the increase in Group Required Risk Capital Economic Financial Strength improved by 3.1bn based on the 2005 Capital Model 29 14

16 Risk management Economic financial strength improved Munich Re Group balance sheet as of Detailed derivation of economic equity from IFRS equity in bn Items that are subsequently "stressed" in buffer capital solidity tests Increase in discounting of p-c reserves (from 2.2bn) largely explained by volume effects and increases in USD yield curve Loss carry-forward component of deferred tax assets increased (from 1.6bn) on account of the effects of the US hurricanes IFRS equity Valuation reserves Embedded value not recognised in IFRS equity 1 Discounting (after tax) of p-c reserves 2 Goodwill and other intangibles Loss carryforward component of deferred tax assets Economic equity 1 Embedded value not recognised in IFRS equity as disclosed as of Represents IFRS reserves less the economic value of reserves, determined by discounting the expected pay-out pattern of outstanding claims at the after-tax currency-specific risk-free rates. 30 Risk management More conservative allocation of risk capital Breakdown of Group required risk capital as at 1 January 2006 in bn 1 January January 2005 Risk category 1 Stand-alone Group Stand-alone Group Reinsurance segment Property-casualty Life and health Market Credit Simple sum Segment diversification effect Total reinsurance segment Primary insurance segment Property-casualty Life and health Market Credit Simple sum Segment diversification effect Total primary insurance segment Munich Re Group total in % Risk categories broadly based on refined "Fischer II" risk categories recommended for standardised industry disclosures. Munich Re Group includes an allowance for operational risk in each of the risk categories. 2 The measured diversification effect depends on the number of risk categories considered. Represents diversification effect recognised in internal model diversification effects between legal entities within primary segment and between primary and reinsurance segment are not recognised. Risk type diversification within primary segment legal entities is recognised

17 Risk management More conservative allocation of risk capital Market risk reinsurance segment in 2005 Progress made in derisking Development of stand-alone market risk capital requirements of the reinsurance segment 1 in % of beginning-of-year requirements Increased equity markets 13 Derisking concentrations 3 Protective equity put strategy 3 FX translation risk alignment Significantly reducing our concentration risks and improving the quality of our capital Bulk of derisking benefit in reinsurance segment derived from reduction in holdings of Allianz (85% of the benefit) and swapping of HVB holding for Unicredit (ca 9% of the benefit) 1 Based on our internal model Risk capital requirements calibrated to withstand two consecutive 1-in-100-year losses. 2 Economic surplus is allocated a currency structure based on the currency distribution of required risk capital. 32 Risk management More conservative allocation of risk capital Property-casualty required risk capital developments Reconciliation of changes from 2005 to 2006 Development of stand-alone non-life capital requirements of the reinsurance segment 1 in % of beginning-of-year requirements 100 Requirements as at Items that were previously relegated to "stress tests" now in the base model for better allocation to business units/ lines of business Model strengthening man-made cat Increased p-c linear correlation 9 Strengthened extreme event linkages 12 Model strengthening Nat Cat 4 Increased exposure renewal Requirements as at Model strengthening especially in natural and man-made catastrophes Model changes that were included in 2005 stress tests but have been moved to base model for more conservative allocation: Increased linear dependencies for basic losses supported by model back testing Strengthened extreme event linkages recognises the increased interconnectedness of risks 1 Based on our internal model Risk capital requirements calibrated to withstand two consecutive 1-in-100-year losses

18 Risk management More conservative allocation of risk capital Life and health required risk capital developments Reconciliation of changes from 2005 to 2006 Development of stand-alone life and health capital requirements of the reinsurance segment 1 in % of beginning-of-year requirements Item previously relegated to stress tests now in the base model for better allocation to business units/lines of business Stochastic risk modelling rolled out to minor lines of business and incorporation of contract level risk mitigation features Changes due to FX rate movements reflect mainly impact of strengthening of USD and CAD on required risk captial Requirements as at Strengthening of Correlation Assumptions Portfolio Changes Enhancement of Stochastic Risk Modelling Interest-rate Changes FX Rate Changes Requirements as at Based on our internal model Risk capital requirements calibrated to withstand two consecutive 1 in 100 year losses. 34 Risk management More conservative allocation of risk capital Primary insurance segment Reconciliation of changes from 2005 to 2006 Development of capital requirements of the primary segment in % Item previously relegated to stress tests now in the base model for better allocation to business units/ lines of business Model changes strengthen solidity of within legal entity diversification benefit Increases for p-c companies are on account of increased market risk In the life and health companies, capital requirements reduced by impact of the swaption protection Requirements as at Model change Sale of Karlsruher Versicherung ERGO holding Property and casualty companies Life and health companies Requirements as at

19 Risk management More conservative allocation of risk capital Summary of economic capital disclosure Position as at 1 January 2006 Position as at 1 January 2005 in bn in bn Economic and hybrid capital Economic and hybrid capital Margin for future risks Margin for future risks Available financial resources Available financial resources Required risk capital Required risk capital Economic capital buffer Economic capital buffer Thereof additional available equity 4.6 Thereof additional available equity 3.2 Economic capital Hybrid capital Reinsurance segment Primary segment 1 Allowance for additional risk capital charge for uncertainty from p-c reinsurance segment beyond the current calendar year's requirements. In 2005 the charge was deducted in the stress test calculations of the economic capital buffer. In 2006 this item has been deducted directly from available financial resources. 2 Sum of economic capital and hybrid capital less the margin for future risks. 3 Based on requirements of internal risk model, calibrated to withstand two 1-in-100-year losses; equivalent to an economic probability of default in the AA to AAA range. 36 Risk management More conservative allocation of risk capital Stress testing of capital position Shows resilience of Munich Re Group capital adequacy Position as at 1 January 2006 Notes in bn 1) Excess of available financial resources (AFR) Economic capital buffer 1) 8.0 over required risk capital (RRC) on internal model Internal model stress tests 2) 6.8 2) Economic capital buffer less internal model stress tests that allow for increased Economic balance sheet credits 3) 4.1 secondary loss (i.e. storm surge, demand surge, fire following earthquake, secondary uncertainty etc.) components of Nat Cat, Residual capital buffer "Stress test" increased operational risk charges in the reinsurance segment, "liability catastrophes" and increased policyholder expectations in primary life Stress tests applied 3) Deduction of credit taken for discounting of p-c reserves and embedded value not recognised in IFRS equity Munich Re Group's excellent economic capital position resilient to major stress tests 37 18

20 Risk management Derisking and hedging interest-rate risks Asset derisking Hedging of interest-rate risks in primary life Promised Delivered Volume in bn Swaptions in Source: Analysts' Conference, March Risk management Derisking and hedging interest-rate risks Hedging interest-rate risk The strategic decision in primary life insurance Market developments Highlights of ERGO transaction Move towards economic solvency regimes Low interest rates in and in -related currencies Largest oneoff swaptions transaction in the ( 12.5bn) Policyholder/shareholder split for costs and benefits Further development of risk management in insurance Competition on policyholder expectations Reinvestment risk is hedged at low interest rates Policyholder expectations are taken into account Increasing need for A/L hedges for life insurers Landmark transaction in life insurance ALM Interest-rate hedges place ERGO life companies on solid ground in competitive environment 39 19

21 Risk management Derisking and hedging interest-rate risks Hedging interest-rate risk In life insurance using receiver swaptions Present value (in ) Pure lengthening of asset duration minimises guarantee risks but does not take into account policyholder expectations Yield curve shift (in bps) Asset w/o swaptions Asset with swaptions Guaranteed liabilities Low interest rates: Guarantee risk is reduced High interest rates: Policyholder expectations can continue to be met Solution: Purchase of convexity using receiver swaptions. Receiver swaptions dynamically lengthen the asset duration when interest rates fall. Franchise value increased due to reduced probability of financial distress and upside potential in rising interest-rate markets. Reduction of A/L mismatch risk capital required 1 for primary life by 12% 1 Measured across protected legal entities using value at risk. 40 Risk management Accumulation control safeguards diversification benefits Key drivers for increase in Katrina ultimate loss estimate in 2005 Storm itself <1-in-50-year event; unprecedented tsunami-like wave caused by >1-in-500-year storm surge intensified power of destruction First loss figures underestimated due to complex loss situation Dimension of water damage not fully factored in Size of claims (particularly for facultative/ direct business) exceeded expectations Market share higher compared to past events Significant demand surge due to leveraged effect of 2004 and 2005 hurricane series Late access to disaster areas; revised loss adjuster reports in USD bn % 16% 35% 41% Increase of USD bn USD 558m Most expensive Nat Cat loss ever with USD 45bn insured market loss 1 6th strongest hurricane in Gulf of Mexico since recordings began Wind speeds reaching peak gusts of 350 km/h Ultimate as of September 2005 Other AmRe Facultativ XL/Proportional treaty Thereof IBNR Lesson's learned from Katrina were reflected in models for January 2006 renewals Ultimate as of December Excl. National Flood Insurance Programme 41 20

22 12% 10% 8% 6% 4% 2% 0% 0,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Market Loss in MM 12% 10% 8% 6% 4% 2% 0% 0,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Market Loss in MM 12% 10% 8% 6% 4% 2% 0% 0,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Market Loss in MM 12% 10% 8% 6% 4% 2% 0% 0,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Market Loss in MM Risk management Accumulation control safeguards diversification benefits Loss uncertainty for a single event Example: Storm Europe Modelled Munich Re share of market loss (%) Illustrative Actual Munich Re loss depends on Precise storm characteristics (track followed, wind speed, etc.) Munich Re portfolio (mix of residential, commercial, industrial) Treaty structure (type and layer mix) 0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Market loss in bn Single event loss uncertainty explicitly captured in Munich Re capital model 42 Risk management Accumulation control safeguards diversification benefits Keys to sustainable profitability of Nat Cat business Global diversification plus strict accumulation control Stochastic fluctuation: Expected vs. realised Munich Re share of market loss for a single event Diversification benefits Available to everyone Available to privileged few MR Share of Market Loss (%) MR Share of Market Loss (%) Time dynamics: Levelling out loss uncertainty over time provided strict accumulation control is practised Portfolio diversification by type of peril and geographical spread Hail Cyclone EQ Storm Flood EQ Hurricane Typhoon... > South large loss Australia US/SF Europe Germany Japan US/SE Taiwan exposures Africa MR Share of Market Loss (%) MR Share of Market Loss (%) 2005 Illustrative Active risk diversification and strict accumulation control Avoids dominance of single events Ensures total portfolio risks are consistent with strategic risk tolerances Illustrative 43 21

23 Risk management Accumulation control safeguards diversification benefits Risk-management strategy for peak (Nat Cat) exposures Our accumulation control did not fail Return period After tax income at risk 1 in bn Planned Group net income Our strategy Is to price and write inward business on a gross basis (assumes zero external capacity) Is based on a portfolio concept Aims to optimise risk-return profile Lines of defence Risk-adequate pricing 0.5 Strict budgeting and accumulation control Retrocession: Conventional and secured All 2005 Nat Cats Capital markets Net exposures do not represent a threat to excellent economic capital position 1 After tax income at risk: Portfolio aggregate losses less expected Nat Cat losses, net of purchased retro and tax as at Assumes a 35% tax rate; actual tax rate may differ according to specific circumstances. 44 Agenda Key figures - Jörg Schneider - Munich Re Group in total Reinsurance segment Primary insurance segment Business opportunities - Nikolaus von Bomhard - Integrated health strategy Focussing on attractive US middle/regional market Efficiency improvement in primary business More sophisticated exposure mapping Active capital management - Nikolaus von Bomhard - Alignment of internal steering and external target communication Outlook Risk management - Charlie Shamieh - Economic financial strength improved More conservative allocation of risk capital Derisking and hedging interest-rate risks Accumulation control safeguards diversification benefits 45 22

24 Active capital management Alignment of internal steering and external target communication Munich Re's strategy for sustainable value creation Dedicated to use financial resources most efficiently Maximising return Efficient deployment of capital-optimised risk return profile Optimal use of capital Minimising capital costs Keeping excess capital reasonably low RoRaC Active capital management 46 Active capital management Alignment of internal steering and external target communication Better alignment of internal steering and external target communication + Simple and accepted measure to be directly calculated from P&L and balance sheet Net Income RoE = Shareholders' Equity Previous - Shareholders' equity does not correspond to capital that is involved in value creation - Gives incentive to steer according to total earnings rather than risk adequate performance (marginal additional profit with substantial increased risk position) - Shareholders' equity distorted by accounting conventions RoRaC = Adjusted net income Risk-based capital New + Measure to be directly calculated from P&L and annually published capital information + Builds on net income as an accepted measure to communicate earnings of respective period. + Earnings are only adjusted by one minor, fully transparent component which is logical consequence of using risk-based capital in the denominator. + Risk capital reflects capital involved in value creation - Numerator still mainly driven by accounting convention Enhanced disclosure of risk position has prepared ground to link earnings with capital involved in value creation 47 23

25 Active capital management Alignment of internal steering and external target communication Focus on sustainability of high earnings requires risk adjusted targets 1. Internal steering according to Value-based management through Risk Based Capital allocation using RoRaC in non-life and European Embedded Value in life 2. Absolute return targets and RoE important, but not reflecting risk-adequate employment of capital measured by risk-return profile (=> RoRaC) 3. In 2005 risk-adequate level of earnings achieved 4. Focus in future on Sustainability of earnings Resilience to adverse market developments by applying strictest business discipline in underwriting and asset management 48 Active capital management Alignment of internal steering and external target communication Calculation of RoRaC Target net income = RoRaC x RBC + i x (1-t) x Additional available equity Consolidated IFRS net income Measure for the efficient use of capital involved in the value creating process Risk-based capital (RBC) beginning of year derived from comprehensive stochastic modeling I:= 1-Year LIBOR-rate t:= Munich Re's tax rate of 40% Additional available equity beginning of year = Economic equity margin for future risks - RBC 2.6bn 15% 17bn 3.0% x 60% 4.6bn RoRaC = Net income Risk-free interest rate x (1- tax rate) x Additional available equity Risk-based capital 49 24

26 Active capital management Outlook New RoRaC target Assumptions 2006 RoRaC target : 15% Gross premiums written Currency environment Normal major losses Combined ratio non-life European Embedded Value Earnings Return on investment Tax environment Net profit Consolidated net profit for the Group Reinsurance 22 23bn stable Nat Cat 5% below 97% in the range of 8 9% 4.5% stable bn bn Primary insurance bn Nat Cat n.a. below 95% in the range of 8 9% bn 50 Active capital management Outlook Munich Re's capital management strategy Key considerations Munich Re risk model Solvency requirements/ regulatory constraints Strategic direction/ growth opportunities Active capital management Shareholders' expectations Rating agencies' constraints Very strong ratings and a solid capital position are an important part of our value proposition. A very strong capitalisation opens the door for profitable growth, both organically and through acquisitions, but not for complacency. Capital is regarded as a scarce and valuable resource. Therefore, a tight capitalisation is the catalyst to ensure business discipline. If circumstances permit, we will return capital to shareholders. Shareholders participate in profits we are highly committed to our dividend policy of a payout ratio of at least 25% of IFRS net income. Buy backs might supplement our dividend policy and become a recurring theme with timing and absolute size depending on market conditions

27 Backup 52 Backup: Key figures 2005 Munich Re Group in total Unrealised gains and losses on securities available for sale in m ,675 5,924 3, ,812 6, ,866 8, ,399 10,973 Unrealised losses (gross) Unrealised gains (gross) Gross unrealised gains and losses 10,973 Policyholders' participation 4,075 Deferred taxes 845 Minorities 80 Consolidation 63 Shareholders' stake 6,

28 Backup: Key figures 2005 Munich Re Group in total Investments Off-balance-sheet reserves in m Land and buildings 1 1,334 At equity 225 Other investments 890 Off-balance-sheet reserves ,449 Off-balance-sheet reserves Policyholders' participation Deferred taxes Minorities Shareholders' stake 2,449 1, Without reserves on own properties. 54 Backup: Key figures 2005 Munich Re Group in total Investments Well-balanced portfolio mix Investment structure by asset classes (market values) in % in bn , Land and buildings Participating interests Loans Fixed-interest securities Shares and equity funds Miscellaneous 1 After reallocation of own properties of Munich Reinsurance Company to other assets. 2 After reallocation of own properties of Munich Reinsurance Group to other assets. 3 Decrease of assets of 13,2bn (market values) due to sale of Karlsruher in Q Equity exposure in % Before hedges After hedges

29 Backup: Key figures 2005 Munich Re Group in total Calculation of RoI and RoE m RoE m RoI Equity ,644 Investments ,268 Equity ,246 Investments ,393 Equity ,965 Investments ,421 Equity ,591 Investments ,566 Equity ,653 Investments ,620 Equity (quarterly weighted) 22,220 Investments (quarterly weighted) 184,454 Group result 2, % Regular income 7, % Other income/expenses % Non-current income 3, % Investment result 10, % Changes in total reserves 1, % Total income 12, % 56 Appendix Financial calendar Contacts Disclaimer 57 28

30 Appendix Financial calendar 19 April 2006 Annual General Meeting 20 April 2006 Dividend payment 9 May 2006 Interim report as at 31 March 2006 European Embedded Value as at 31 December August 2006 Interim report as at 30 June November 2006 Interim report as at 30 September Appendix For information please contact Sascha Bibert Head of Investor Relations Tel.: +49 (89) sbibert@munichre.com Ralf Kleinschroth Tel.: +49 (89) rkleinschroth@munichre.com Robert Kinsella Tel.: +49 (89) rkinsella@munichre.com Frank Kopfinger Tel.: +49 (89) fkopfinger@munichre.com Fax: +49 (89) InvestorRelations@munichre.com Internet:

31 Appendix Disclaimer This report 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 forwardlooking 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