Press release

• Munich Re presents detailed business figures for the first quarter of 2004 
  
  
• Profit of €534m – Solid start thanks to consistent earnings orientation 
  
  
• Reinsurance and primary insurance with significant result improvements
   

"Munich Re has turned its business around; the consistent profit orientation is making itself felt. The quarterly profit of €534m is the result of hard work. We now want to sustain this profitability over the whole year", said member of the Board Jörg Schneider in a media teleconference.

The Munich Re Group's figures in the first three months of 2004 (see attachment) in summary:
The Group's first-quarter profit of €534m (Q1/03: -557m) is well within plan. Premium income fell by 4.3% to €10.4bn as compared with the first quarter of 2003; if exchange rates had remained unchanged, it would have reached almost the same high level as last year. Shareholders' equity rose by €630m to €19.5bn in the first three months, net unrealised gains on investments shown at market values increasing by €983m to €7.9bn.

Reinsurance business continued to perform very pleasingly in the first quarter. At €6.2bn, reinsurance premiums were 5.4% lower than last year's level of €6.5bn, mainly owing to currency translation effects; if exchange rates had remained unchanged, they would have declined by 0.7%. In life and health reinsurance, premium income climbed by no less than 20.9% to €2.0bn. This was largely attributable to strong new business, some of which had already been written in the second and third quarter of the previous year. In property-casualty business, premium was down as expected; the decline of 14.0% to €4.2bn was due partly to currency translation effects (5.2 percentage points) and partly to our profit-oriented underwriting policy.

In the renewal of its non-life reinsurance treaties as at the beginning of 2004, Munich Re not only achieved improvements in prices and conditions but also withdrew from treaties that did not meet its return requirements. "Long-term profitability takes precedence over growth. We accept the current consolidation of premium volume as one of the temporary side-effects of our strict underwriting policy", said Schneider, the member of the Board responsible among other things for accounting.

The high quality of the portfolio and favourable claims experience in the first quarter contributed to a further improvement in the combined ratio of 96.3% (96.8%) over the same period last year. The target ratio of 97% for 2004 as a whole was thus clearly undercut in the first three months. Although Munich Re has thus far been spared losses from major natural catastrophes, the costs for other major losses were higher on the whole than in the comparable period last year. The largest single loss was an explosion at the gas liquefaction plant Sonatrach in Algeria which is expected to cost the Munich Re Group an estimated €44m.

In life reinsurance, Munich Re's premium income in the first quarter grew by €175m to €1.5bn. In health reinsurance, Munich Re – which holds a leading position in many markets – grew its business further to €435m (275m).

At €771m (469m), the investment result in the reinsurance segment was up noticeably on the previous year. In the first quarter, reinsurers contributed an excellent total profit of €498m (-29m) to the Group's result.

Compared to the strong growth recorded in the same period last year, premium in primary insurance fell marginally by 1.4% (+8.1%) up to the end of March. Adjusted to eliminate the figures of DKV's Dutch subsidiary, which has been sold in the meantime, there was a modest rise of 0.7%. Premiums in the first quarter varied across the classes of business, totalling €4.9bn (5.0bn).

Life insurance companies appreciably expanded business in the field of unit-linked products in Germany in particular. The same holds true for company pensions, where special corporate pension schemes were the most-favoured product. In endowment insurance, on the other hand, the debate about taxation has caused a great deal of uncertainty among consumers. In addition, life insurers in the Munich Re Group lowered policyholders' bonuses in order to adjust them to the altered capital market environment. Following the past five years of very high growth rates that were distinctly above market level, life insurers in the Munich Re Group recorded marginally lower premiums of €1.8bn (1.9bn) in the first three months of the year. The extraordinarily high increase of 10.5% in premiums in the first quarter of 2003 basically puts this slight decrease into perspective.

Premium income in health insurance was down 4.9% to €1.2bn. Adjusted to eliminate the effects of the sale of DKV's Dutch subsidiary (premium volume Q1/03: €103m), growth amounted to 4.0%. In the area of supplementary benefits insurance, DKV's partnership with 13 regional offices of the Allgemeine Ortskrankenkasse (AOK), a German state health insurance provider, is beginning to bear fruit. In the course of the year, positive effects will also be derived from the acquisition as at 30 March 2004 of GLOBALE Krankenversicherung and Zürich Krankenversicherung as well as from the long-term marketing cooperation with the Gerling Group, Zurich Group Germany and Deutsche Bank.

Property-casualty insurance premiums experienced a slight increase of 0.7% to €1.9bn and profitable personal accident insurance was further expanded within personal lines business. The combined ratio in the first quarter was once again outstanding at 95.4% (98.5%).

In primary insurance, the upswing in the investment result was particularly evident because in the same period last year the result had been characterised by high losses on disposals and writedowns. The investment result totalled €1.1bn (-1.2bn) in the first quarter. Overall, primary insurers achieved a significantly improved quarterly result of €43m (-545m).

The Munich Re Group's investment result totalled €1.9bn (-0.8bn) for the first three months. The stock markets stabilised in the first quarter. At €181m, writedowns for the Group were considerably lower than in the same period last year (€1,383m). Net realised gains came to €248m (-1,282m).

As a whole, the Munich Re Group's equity exposure fell slightly by 0.5 percentage points to 14.7% of the overall investment portfolio – after hedging against falling share prices, it stood at 13.8% (14.5%). As announced, Munich Re did not participate in HypoVereinsbank's capital increase in March. Its share in HypoVereinsbank thus fell to 18.4% (25.7%), but the strategic character of its stake nevertheless remained unaffected.

The Munich Re Group continues to consistently pursue its profit-oriented underwriting strategy. After several years of high growth rates (1999-2003: 8.1% on average), it expects its premium volume for the current business year to be hardly changed. The Munich Re Group adheres to its objective of achieving a profit of €2bn for the year 2004. "The solid first-quarter results illustrate that we are on the right track", said Schneider.

Unlike the Group's primary insurance business, which is chiefly written in Europe, its premium in reinsurance business is to some extent affected by exchange rate fluctuations. Munich Re estimates that its reinsurance premium income at the end of the year will be somewhat below that of last year, among other things because of the scheduled reduction of a large reinsurance treaty with a client in the United Kingdom. For three consecutive years, Munich Re was able to obtain risk-adequate prices and conditions. The latest renewal negotiations in Korea and Japan involving event limits in the treaties and premiums at a stable and risk-commensurate level will contribute to an improvement in the risk profile and earnings potential. The collapse of part of the roof of the new terminal at Roissy-Charles de Gaulle Airport could affect Munich Re in the mid double-digit million euro range, depending on the cause of the disaster. On the other hand, the recent natural catastrophes on the Caribbean island of Hispaniola (floods) and in Iran (earthquake) will have virtually no impact on the Group. Munich Re anticipates again in 2004 a combined ratio in reinsurance of below 97% if major losses remain within normal bounds.

Primary insurance will chiefly depend on the course politicians take to reform the German social insurance system. The Group's life insurers have begun to make early preparations for the changes in the fiscal treatment of endowment insurance policies that are likely to result from the Retirement Income Act as from 2005. The Munich Re Group expects the increase in private provision in the area of life and health insurance to generate strong growth impulses in the medium to long term. For 2004, Munich Re reckons that primary insurance will grow moderately. The other improvements in operative business should also be reflected in the result for 2004. The combined ratio in property-casualty insurance should remain below 97% in 2004.

Additional information (slides) on the figures of the first quarter 2004, the quarterly report itself and a presentation of the quarters of 2003 as adjusted according to IAS 39 are available on our website www.munichre.com. The key figures for the first quarter of 2004 were published by Munich Re at the Annual General Meeting on 26 May 2004.

Münchener Rückversicherungs-Gesellschaft
signed Dr. Schneider           signed Küppers