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Shaping change in insurance
Balance sheet press conference 2017
Munich, 15 March 2017
Agenda
1 Shaping change in insurance
Nikolaus von Bomhard
2 Group Finance
Jörg Schneider
11
3 ERGO
Markus Rieß
17
4 Reinsurance
Torsten Jeworrek
29
5 Outlook
Nikolaus von Bomhard
37
2
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2
Shaping change in insurance
Strategic keystones laying foundation
for Munich Re’s good positioning
Integrated Risk
Management
Conservative
Asset
Management
PI and RI
under one roof
Innovative
Solutions
Emphasis on
profitable
Underwriting
Shareholder
friendly
dividend policy
Corporate
Responsibility
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Shaping change in insurance
Munich Re delivers financial stability
IFRS net income
HGB result
€2.6bn
€3.4bn
Meeting guidance
Safeguards
capital repatriation
Solvency II ratio
Dividend per share1
267%
€8.60
Well above
target capitalisation
 +4.2%
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1 Subject to approval of AGM.
4
Shaping change in insurance
Seizing long-term opportunities
while managing short-term pressure
Changing competitive landscape
Digitalisation
Macroeconomic/political risks
 Emergence of new players and
business models
 New technologies and partnerships
 Persistently low interest rates
 Dramatically enhanced availability
of data and analysis tools
 Reflation
 Proliferation of “alternative” capital
 Transformation of traditional
value chain
 Global political uncertainty
 Changing customer expectations
Source: Shutterstock [M]
GOAL
GOAL
GOAL
Agile business model
Fostering innovation
Dampening volatility
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Shaping change in insurance
Strong balance sheet supports sound profitability
Medium
Low
High
Strong capitalisation
RoE exceeds cost of capital
according to all metrics
16
%
12
8

Average cost of capital
Rock-solid
4
reserving position
0
€28bn
unrealised investment
2005
2016
~10.7% > ~8%
gains1
12-year average RoE
Average cost of capital
1 As at 31.12.2016.
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Shaping change in insurance
Attractive shareholder returns
Further dividend increase, continuation of share buy-back
Outperforming major peers and insurance index2
Continuous growth of dividend per share
CAGR: 9.7%
€8.60
Peer 3
15
3.10
%
Total shareholder return (p.a.)
18
12
2016 1
2005
9
>€23bn
6
Total pay-out since 2005
(dividend and share buy-back)
3
Peer 1
Index
Peer 4
Peer 6
Peer 5
0
Peer 2
74 million > 50.9 million
Shares repurchased
since 2006
Shares issued in 2003
(capital increase)
–3
20
25
30
35
40
45
Volatility of total shareholder return (p.a.)
1 Subject to approval of AGM. 2 Annualised total shareholder return defined as price performance plus dividend yield over the period from 1.1.2005 until 28.2.2017; based on Datastream total return
indices in local currency; volatility calculation with 250 trading days per year. Peers: Allianz, Axa, Generali, Hannover Re, Swiss Re, ZIG, Stoxx Europe 600 Insurance (“index”).
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Shaping change in insurance
Reinsurance – Well positioned to manage the
current market environment and drive innovative solutions
New
ILLUSTRATIVE
Traditional reinsurance
Emerging
markets
Markets
Risk
Solutions
New
products/
risk-related
services
Solutions
for emerging
risks
Established
Traditional
reinsurance
€23bn
Risk Solutions
Tailor-made
solutions
Underinsurance
in developed
markets
TOTAL1,2
Successfully managing
the soft cycle
TOTAL3
Continuous growth in
specialty and niche business
Incremental
innovations
Innovation
TOTAL1,4
Steady expansion of
innovative products/solutions
Established
€4.8bn
~€650m
New
Products
1 Gross premiums written as at 31.12.2016. 2 Life (traditional and strategic initiatives): €10bn, traditional P-C: €13bn. 3 Management view, not comparable with IFRS reporting.
4 Munich Re (Group); indirect effects on traditional business not included.
8
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Shaping change in insurance
ERGO – Turnaround initiated, well on track
to become a significant earnings contributor
ERGO Strategy Programme/International Strategy
Fit
Digital
Successful!
Leaner and
more efficient
structures
Transforming
the business
model
Convincing solutions,
committed to
profitable growth
€m
Increasing IFRS net profit1
530
~600+
150–200
–40
2016
1 From 2017, figures include primary insurance business of Munich Health.
2017
…
2020
2021
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Shaping change in insurance
Innovation – Munich Re establishing a strong position
to tap opportunities – Focus on tangible business impact
Munich Re has successfully laid the groundwork …
Innovation strategy
Group-wide approach
Defined innovation areas
Corporate venturing and partnering
Innovation infrastructure
Leveraging core competencies
Intensive know-how and
resource sharing
Data analysis
Joint business development
Cooperation models
Agile IT
… to seize opportunities from digitalisation
Business model
Products/services
Provide digital infrastructure
Improve customer experience
Digitalise insurance offerings
Expand offering for online customers (e.g. “nexible”)
Improve process efficiency
Customised products and tailor-made solutions
Foster customer-centric support
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Group Finance
Group Finance – Financial highlights 2016
2016 net result meets annual guidance
Munich Re (Group)
2016 (Q4 2016)
Net result
€m
Technical result
€2,581m (Q4: €486m)
3,924
Sound underlying performance without
dilution of strong balance sheet –
investments in ERGO strategy
programme and FX gains
2,581
1,322
1,664 1,625
525
2015 2016
Solid return given low interest rates –
prudent asset liability management
once again proved beneficial
Q4
Q4
2015 2016
Reinsurance
Life: Technical result €487m
(Q4: €169m)
Shareholders' equity
€31.8bn (–1.8% vs. 30.9.)
P-C:
Combined ratio 95.7% (Q4: 101.9%)
Major-loss ratio 9.1% (Q4: 14.8%)
Strong capitalisation according
to all metrics
€m
Net result
3,122
2,815
Return on investment1
3.2% (Q4: 2.7%)
€m
Investment result
7,536 7,567
2015 2016
Q4
Q4
2015 2016
ERGO
731 486
2015 2016
Q4
Q4
2015 2016
Munich Health
L/H Germany:
Result impacted technical one-offs
Reinsurance:
Combined ratio 99.5% (Q4: 95.4%)
P-C:
Combined ratio 97.0% (Q4: 100.0%)
Primary insurance:
Combined ratio 94.2% (Q4: 98.8%)
International:
Combined ratio 99.0% (Q4: 100.4%)
1 Annualised.
12
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Group Finance – Capitalisation
IFRS capital position
€m
Equity
Equity 31.12.2015
Consolidated result
30,966
2,581
Change Q4
486
Changes
Dividend
Unrealised gains/losses
Exchange rates
Share buy-backs
Other
Equity 31.12.2016
–1,329
265
345
–971
–71
31,785
–
–2,049
910
–260
344
–570
Unrealised gains/losses
Exchange rates
Fixed-interest securities
2016: –€37m
Q4: –€2,390m
FX effect mainly driven by US$
€bn
Capitalisation
0.4
0.4
0.4
0.4
0.4
4.4
4.4
4.3
4.3
4.2
4.2
13.6
13.4
12.8
12.6
12.4
12.6
30.3
31.0
31.8
32.0
32.4
31.8
2014
2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
0.3
Debt leverage1 (%)
Non-fixed-interest securities
2016: +€304m Q4: +€335m
Senior and other debt2
Subordinated debt
Equity
1 Strategic debt (senior, subordinated and other debt) divided by total capital (strategic debt + equity). 2 Other debt includes Munich Re bank borrowings and other strategic debt.
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Group Finance – Risk management
High Solvency II ratio
Munich Re actions
SII ratio
%
>220%: Above target capitalisation
 Capital repatriation
 Increased risk-taking
 Holding excess capital to meet external constraints
267%
220%
175% – 220%: Target capitalisation
 Optimum level of capitalisation
140% – 175%: Below target capitalisation
 Tolerate (management decision) or
 If necessary, take management action (e.g. risk transfer, scalingdown of activities; raising of hybrid capital)
<140%: Sub-optimal capitalisation
 Take risk-management action (e.g. risk transfer, scaling-down of
activities; raising of hybrid capital) or
 In exceptional cases, tolerate situation (management decision)
175%
140%
100%
2010
2011
2012
2013
20141
2015
2016
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1 Transition into SII metric.
14
Group Finance – Investment portfolio
Well diversified investment portfolio
Investment portfolio1
%
Land and buildings
2.9 (2.9)
Fixed-interest securities
56.3 (55.7)
Portfolio management in Q4
 Ongoing geographic diversification
 Slight decrease in corporate bonds
 Reduction of cash and bank bonds
 Increase of net equity exposure to 5.0%
Shares, equity funds and
participating interests2
6.1 (5.2)
 Increase of asset duration in reinsurance
TOTAL
€236bn
Miscellaneous3
6.2 (7.5)
Loans
28.5 (28.7)
1 Fair values as at 31.12.2016 (31.12.2015). 2 Net of hedges: 5.0% (4.8%).
and investments in renewable energies and gold.
3 Deposits retained on assumed reinsurance, deposits with banks, investment funds (excl. equities), derivatives
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Group Finance – Investment result
Investment result
Investment result (€m)
Regular income
Write-ups/write-downs
Disposal gains/losses
Derivatives2
Other income/expenses
Investment result
2016
Return1
2015
Return1
6,663
–400
2,603
–713
–586
7,567
2.8%
–0.2%
1.1%
–0.3%
–0.2%
3.2%
4.3%
7,370
–754
2,693
–1,226
–548
7,536
3.1%
–0.3%
1.1%
–0.5%
–0.2%
3.2%
0.9%
Total return
2016
Fixed income3
Equities
Commodities/Inflation
Other
1 Annualised return on quarterly weighted investments (market values) in %. 2 Result from derivatives without regular income and other income/expenses.
3 Thereof interest-rate hedging ERGO: Q4 2016 (–€261m gross/–€34m net) and 2016 (€233m gross/€25m net).
Write-ups/ writedowns
Disposal
gains/losses
Derivatives
–23
2,263
70
–323
440
–777
–2
27
–69
–99
4
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ERGO
ERGO
ERGO Strategy Programme (ESP) fully on track
seven months after announcement
ESP guidance as at 1 June 2016
Total premiums1
Net profit
Investments2 (net)
Actual 2016
2016
2017
2020
13,202
13,180
–
13,460
–40
Slightly
negative
130
~450
–247
–302
–259
–1,0083
30
30
963
2793
97.0
98
99
92
Total cost savings (net)
Combined ratio P-C Germany
1 L/H Germany, P-C Germany.
2 Including restructuring expenses.
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3 Accumulated.
18
ERGO
ESP – Timeline
Fit
Digital
Workers´
council has
agreed on
major topics
30 June
More than
90% of restructuring
expenses
booked
Implementation of
new structures in
admin and central
functions
Sales:
New organisational
setup implemented
Digital IT fully
established
IT workers´
council has
agreed on
major topics
Successful!
New IT
organisational
structure
implemented
ERGO Mobility Solutions
GmbH started
New Sourcing
organisation
implemented
Q3: nexible to start with
first product (motor)
Products innovation:
Residential building
Legal protection
Commercial liability online
Launch of new MEAG funds
Product innovation:
Personal liability
Motor
Q2 2016
Q3 2016
Q4 2016
Go-live of separate
organisational entity
“Traditional Life”
Product innovation:
Personal accident
Household
H1 2017
Life Germany:
Launch of new
pension products
End of Q4: New
term-life and new
annuity product life
H2 2017
H1 2018
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ERGO
Life and Health Germany – Status 2016
Gross premiums written
Net result
ROI
€9.2bn
€114m
3.6%
Successful launch of new risktype product (“Solo-BU”) –
24,000 policies sold
Above expectation, given
restructuring expenses
High investment result – Positive
contribution from derivatives
and disposal gains offset lower
regular income
Discontinuation of traditional life
Exceptionally high
technical result in Q4
Positive development in
supplementary health
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ERGO
Property-casualty Germany – Status 2016
Gross premiums written
Net result
Combined ratio
€3.2bn
–€72m
97.0%
Profitable growth
in almost all lines of business
Impacted by strategic investments
and restructuring charges –
In line with expectations
Better than ESP1 guidance
(–1%-pt.)
Product innovations – Launch of
cyber protection
Strategic investments impacted
combined ratio ~1%-pt.
Confidence level of reserves increased
1 ERGO Strategy Programme.
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ERGO
Property-casualty Germany – Attractive portfolio for
customers, consistent cost reduction
P-C Germany – Combined ratio
98
Product innovations
 Launch of new cyber product in 2016
99
ESP Guidance
Actual
96
97
2016
93
2017
2018
2019
92
 Start of new modular product concept in H2 2016
(motor and private liability)
 Further products consistent in look and feel
(e.g. personal accident, household contents,
homeowners’ insurance) will follow in 2017
2020
 P-C Germany to maintain and strengthen balanced portfolio
 Significant cost reduction in the medium term – improvement
of expense ratio as main driver of higher profitability
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ERGO
International – Status 2016
P-C – Gross premiums written
Life – Gross premiums written
€2.5bn
€1.2bn
Strong new business growth,
driven by Poland
De-risking classical life business –
Italy, Belgium
P-C – Combined ratio
Net result
99.0%
–€82m
Improvement in Poland –
Recovering results and reduction
of losses in UK and Turkey
Restructuring of Belgian
life entity planned
Several one-offs, e.g. goodwill
impairment, strategic investments
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ERGO
International strategy embedded in ERGO Strategy
Programme (ESP) to achieve ambitious goals
Fit
Digital
Successful!
Governance
▪ Central steering with dedicated
responsibilities
Best practice exchange
▪ Interregional transfer of capabilities, e.g.
implementation of adapted iMonitor from
Poland in Turkey
Portfolio
▪ Foster strong market positions
▪ Establish efficient global business
models
▪ Exploit growth market exposure
Regional cooperation
▪ Integration of back offices, e.g. in Baltics
and Poland
Interlocked business model
reinsurance/primary insurance
▪ Identify value drivers in an interlocked
business model between ERGO entities
and MR
Commercial business
▪ Strengthen commercial business
internationally
Accelerated innovation
▪ Digital delivery, e.g. via omni-channel
communication to customers in India
Establishing leaner and more
effective structures to ensure
swift execution
Pure digital player
▪ Roll-out of nexible in attractive markets
Laying the foundations for
transforming the business
model
Committing to profitable growth
Munich Health primary insurance business to be managed by ERGO in 2017
24
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ERGO
ERGO International portfolio focuses on three pillars
Share
Rank
Strong presence in selected developed markets
GWP
2016
€m
Country
Poland
1,178
Focus
segment
Non-life
Market
position5
2
14%
Austria
627
Life
4
9%
Baltics
206
Non-life
3
5%
Greece1
194
Non-life
Specialised global business expertise
Existing global businesses2
Pure Digital Player
Mobility Solutions
1 ATE acquisition effective 1 June 2016; hence, only half year of ATE premium included.
6 Thereof German LPI business: €401m. 7 Thereof German travel business: €182m.
4527
Travel
Market
presence in
24 countries
Launch new global businesses
1
Leverage existing scale to
strengthen organic growth
1,1466
Legal protection
Market
presence in
18 countries
8%
GWP3
2016 €m
JVs
China
25
India4
Segment
Expected
CAGR
2016-20, %
Life
70
270
Non-life
21
Vietnam
11
Non-life
16
Thailand
21
Non-life
8
249
Non-life
10
Subsidiaries
Turkey
Efficient management and
expansion of global businesses
2 Respective German and international business; D.A.S. including Italian JV.
Promising exposure in prioritised growth markets
GWP
2016
€m
3 ERGO share.
Capture opportunities
in growth markets
4 Step-up during 2016; premiums based on average share during the year.
5 In focus segment
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ERGO
ESP facilitates an interlocked business model between
primary insurance and reinsurance
Strategy
development
Innovation
Product
development
Sales and
distribution
 Leverage
 Link
 Joint
Munich Re’s
innovation
approach to
presence for
labs and
FinTech and
market
development
InsurTech
entries
processes
start-ups,
 Regional
combining RI  Bundled
market
product
and PI
committees
solutions
capabilities
to coordinate

Common
strategic
data
initiatives
analytics
methodologies
Risk analysis/
underwriting
 International
broker
management
 Cooperation
in commercial
lines
 Facilitation of
cross-selling
(white
labelling)
 Automated
underwriting
Policy
administration
 Group-wide
churn rate
analysis
 Leverage
technical
 Joint policy
skills from RI
administration
and PI –
establish
business
lines expert
groups
Claims
management
Asset
management
 Leverage
 Group-wide
MEAG's
fraud
investment
analytics tool
expertise
 Data
 Monitor
investment
risks centrally
analytics to
identify
claims
prevention
and risk
mitigation
HR
 Employee
rotation to
exchange
RI and PI
skills
 MEAG to
support
financial
product
initiatives
 PI sales
skills to
support RI
services
26
Balance sheet press conference 2017
ERGO
International business to contribute substantially to ERGO’s
results by 2020
Germany1
Net profit, €m
530
18,589
1,354
4,032
190
19,500
~2%
Munich Health PI
5,900
20,900
19,061
1,465
~6%
Total
▪ Reduction of
~+€1,800m
~+€900m
~600+
International
Total premium incl. JVs, €m
Total premium, €m
7,300
4,393
traditional back
book in
international Life
business between
2016 and 2020 of
more than €300m
GWP (Italy,
Belgium)
▪ Required capital
39
340
13,203
~1%
13,600
A2016
CAGR
P2020
13,203
~1%
13,600
A2016
CAGR
P2020
78
42
-82
A2016
P2020
Ambition
2021
International and MH PI to contribute
~€190m to overall profit in 2020
International and MH PI premiums
amount to ~€5,900m in 2020
will be financed
within ERGO
Group, i.e. there
will be no capital
injection from
Munich Re
Premiums generated by JVs amount
to ~€1,400m in 2020
1 Includes segments “Life and Health Germany” as well as “Property-casualty Germany”, hence including German share of LPI business as well as German and international travel business.
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Reinsurance
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Reinsurance – Financials 2016
Strong 2016 result at the upper end of guidance –
Reinsurance P-C remains profitable core of our business
P-C – Gross premiums written
P-C – Net result
Life – Gross premiums written
€17.8bn
€2.0bn
€10.0bn
Active cycle and
portfolio management
Strong technical result
Reduction of one large deal,
increasing contribution from initiatives
P-C – Combined ratio
P-C – Reserve releases
Life – Net result
95.7%
5.5%
€459m
Below average
major loss activity
At least preserved
confidence level
Sound result
contribution
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29
Reinsurance Property-casualty – Portfolio quality
Traditional book and Risk Solutions complement
each other and provide diversification
Total P-C book
%
Risk
Solutions
Tailor-made
solutions
27 (28)
23 (18)
1 Traditional
%
Casualty
Other
10 (10)
47 (47)
24 (23)
TOTAL1
TOTAL
€18bn
€13bn
Other
traditional business
Other property
50 (54)
34 (33)
 Demand for tailor-made solutions
compensates for the reduction in other
traditional business
2 Risk Solutions
Nat cat XL
%
American Modern
22 (23)
TOTAL4
Watkins
€5bn
8 (9)
Hartford
Steam Boiler
21 (19)
Specialty2
Specialty
markets
Corporate
Insurance Partner3
9 (10)
13 (13)
12 (13)
 Well-balanced traditional portfolio
 Dominated by US business – More than 50%
 Slight shift from specialty lines to other
property
 HSB top-line growth driven by new innovative
products
 Risk Solutions an important pillar for
top-line contribution
Well balanced portfolio from a regional and line of business perspective
1 Gross premiums written property-casualty reinsurance as at 31.12.2016 (31.12.2015). 2 Aviation, marine and credit.
large corporate clients. 4 Management view with rounded figures, not comparable with IFRS reporting.
3 Part of Special and Financial Risks providing solutions for
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Reinsurance Property-casualty – January renewals 2017
Resilient January renewals – Client-centric approach pays off
Market developments
 Abundant reinsurance capital,
but signs of price stabilisation
 Flattening alternative capital
growth
 Continued tiering – increasing
discipline for Tier 1 reinsurers
 Hardly any pressure
on wordings
January renewals
Price change
–0.5%
Munich Re
 Well positioned to counterbalance regional rate differences
and flexibly shape the portfolio
Decline slowed down further
 Scale and financial strength
provide competitive advantage
Exposure change
 Value proposition as strategic
partner strongly valued
–4.4%
Cycle management reduction mitigated
by new business opportunities
 Tailor-made solutions meet
client demand
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Reinsurance Property-casualty – Traditional portfolio
Best-in-class solutions in mature markets –
Dynamic growth and opportunities in emerging markets
First foreign reinsurer to establish branch in
Structured, holistic 3-year programme
for regional
India – Highly dynamic insurance market
US client
Nat cat schemes to mitigate
Flood Re: One of Europe’s largest
extreme weather events
natural hazard RI programmes
National Flood
Program
Insurance
(NFIP) in the
MARKETS
Rating solution South Africa
Sovereign rating-triggered
transaction for regional player
US
Product development for digital
business models in Asia together
with insurers and internet giants
Northern Marmara Motorway –
world’s longest suspension bridge
Sample
deals/opportunities
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32
Reinsurance Property-casualty – Innovation
Munich Re fosters innovation throughout the global
organisation – Strong focus on tangible business impact
Significant focus on innovation …
Innovation
infrastructure
… with significant impact on business already today
Innovation scouting
Innovation labs
Ideation
Corporate partnering
Innovation
areas
1 New (re)insurance products
2 New business models
3 New clients and demands
4 New risk-related services
Innovation
enabler
Data analytics
Agile IT
Collaboration
1 Munich Re (Group); indirect effects on traditional business not included.
 Innovation-related
business already
generating premium
volume of
€650m1
 Risk carrier for established
and new (digital) insurance
and non-insurance companies
 Provider of integrated risk
services (e.g. sensor-based)
 Tailored risk solutions
and white-label products
 Data analytics-based services
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Reinsurance Property-casualty – Innovation areas: Cyber (re)insurance
Strong long-term growth in cyber (re)insurance expected –
Munich Re with leading-edge expertise and market presence
1 New (re)insurance products
GWP global cyber insurance market1
10
US$ bn
GWP Munich Re cyber portfolio
US$ m
Reinsurance
Primary insurance
RoW
US
263
191
5
0
2015
2016
2019
2020
126
135
2013
2014
2015
2016
Reinsurance: First mover and global market leader
Primary insurance: Specialised single-risk taker
 Dynamic growth through joint projects with cedents
 Hartford Steam Boiler: Established player in US
for SMEs and individuals
 Steady growth in the US
 Corporate Insurance Partner: Focus on larger corporate
clients – Cooperation with IT providers and Beazley
 Strong accumulation models
1 Estimates based on different external sources (Marsh & McLennan, Barbican Insurance, Allianz).
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Reinsurance Property-casualty – Innovation areas
Focus areas: Internet of Things (IoT),
corporate partnering and data analytics
2 New business models
3 New clients and demands
Digital Partners – Partnering with
start-ups to digitalise insurance
IoT is expected to disrupt the
(re)insurance industry –
Munich Re well positioned
Data volume in exabytes
Internet of Things
Social
Media
VoIP
Enterprise
data
Source: “IDC’s Worldwide Internet of Things Taxonomy, 2015” IDC, May 2015.
Digital distribution
Digital economy
Making insurance like
the rest of the internet
Insuring the sharing
and gig economies
For
example:
For
example:
Digital data
Using new sources of
data to price risk better
4 New risk-related services
Most advanced data
analytics platform
Early Loss Detection
System
Digital Risk
Management
Platform
Sales analytics
For
example:
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Outlook
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Outlook 2017
Group
Reinsurance
ERGO
Gross premiums written
Gross premiums written
Gross premiums written
€48–50bn
€31–33bn
€17–17.5bn
Net result
Net result
Net result
€2.0–2.4bn
€1.8–2.2bn
€150–200m
Return on investment
Combined ratio1
Combined ratio
~3 %
~97%
1 ~100% on a normalised basis (12%-pts. major losses, 4%-pts. reserve releases). Expectation for reserve releases in 2017 ~6%.
~99%
~98%
Germany
International
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Disclaimer
This presentation 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 make them
conform to future events or developments.
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