Press release

•  Very good half-year result of €1.2bn
  
  
• Profit target of €2bn for 2004 affirmed 
  
  
•  Further improvement in combined ratios in both reinsurance and primary insurance: 95.5% and 93.4% respectively 
  
  
•  Pleasing treaty renewals in reinsurance business at 1 July in USA, Latin America and Australia 
  
  
•  Shareholding in Allianz reduced to below 10%
   

Munich Re is on course to meet its target with a very solid half-year profit. In the words of Nikolaus von Bomhard, Chairman of the Board of Management, at the half-year press conference: "Our hard work is bearing fruit. Discipline and consistency are proving their worth on the way to achieving our result target."

A summary of the Group's half-year figures: (See attachment for further details) The profit for the first half of 2004 totalled €1,162m, the second quarter – with a profit of €628m – continuing the good start to the year achieved in the first quarter, where the profit had been €534m. Compared with the first half of 2003 (-€529m), the result thus shows an improvement of nearly €1.7bn. The main reasons for this were the satisfying performance of the reinsurance business and the increase in the investment profit (€4,063m compared with €2,006m last year), which also benefited the primary insurers' policyholders. Written premiums fell by 5.2% to €19.7bn compared with the first half of 2003; if exchange rates had remained unchanged, premium income would have been only 2.7% below the high level of last year (€20.8bn). Shareholders' equity has risen by €210m to €19.1bn since the beginning of the year.

The performance of the reinsurance business continued to be excellent in the second quarter, yielding a profit of €595m (346m). The reinsurers contributed €1,093m (317m) to the Group's profit in the first half year, with improvements in both the underwriting result and the investment figures. Thanks to the high quality of the portfolio that has meanwhile been achieved, and also to favourable claims experience in the second quarter, the combined ratio in non-life business improved further to 94.7% (94.9%). The figure for the first half year was 95.5% (95.9%). Notable individual losses for Munich Re in the second quarter were the collapse of the roof of the terminal at Roissy-Charles de Gaulle Airport and the collision between a car carrier and an oil tanker south of Singapore; the estimates for these losses are around €20m and €10m respectively.

As in the preceding negotiations at 1 January and 1 April, Munich Re provided capacity only at strictly risk-adequate prices and conditions in the renewals at 1 July 2004, which involved such markets as the USA, Latin America and Australia. It will maintain this result-oriented approach in the renewals at the turn of the year 2004/5. The market environment for Munich Re remained stable. Although rates showed varying trends in the individual segments, overall they stayed at around a risk-adequate level. On the basis of a detailed analysis, Munich Re is differentiating its approach in US liability business more than ever. Von Bomhard: "We are convinced that with our underwriting know-how and our proximity to the market we can write these risks selectively and therefore profitably. To this end, the underwriting units of Munich Re and American Re will be working together even more closely. We see no need to fundamentally change our strategy, but we will continue to make certain segment-specific adjustments where still necessary. This could lead to a decrease in premium volume overall."

To further enhance the quality and earnings potential of its reinsurance business, Munich Re also consistently withdrew from treaties in the first half of 2004 that did not satisfy its return requirements. But nearly half of the 7.6% decline in premium income to €11.9bn (12.9bn) was attributable to changes in exchange rates. Property-casualty reinsurance recorded premium of €8.0bn (9.5bn) and contributed €900m (265m) to the reinsurance result. American Re, the largest reinsurance subsidiary, shows a US GAAP result of US$ 187m (265m) after tax, with gross premium income of US$ 2.1bn (2.3bn). In life and health reinsurance, premium income climbed by 15.4% to €3.9bn (3.4bn). This was mainly attributable to attractive new business, some of which had already been written in the second and third quarters of the previous year. The life and health segment contributed €193m (52m) to the profit in reinsurance.

The Group's primary insurers, in particular ERGO, Karlsruher and Europäische, did well and improved their half-year result by more than €900m compared with 2003 (€71m as opposed to -€834m), last year having been strongly impacted by the after-effects of the stock market slump. Greater efficiency, reduced costs and an improved investment result were responsible for this increase. The ERGO Insurance Group, by far the largest part of this segment, continued its successful consolidation phase by achieving a profit of €107m (-683m). The lower group result is partly attributable to the normal amortisation of goodwill in connection with Munich Re's acquisition of ERGO's shares. Overall, premium income in the primary insurance group grew marginally by 0.3% to €4.0bn in the second quarter of 2004, and fell by 0.6% to €8.9bn in the first half year, partly as a result of the sale of DKV's Dutch subsidiary.

The life and health insurers improved their result by around €640m to €44m (-598m) in the first half of 2004; premiums falling slightly to €5.9bn (6.0bn). In life insurance, the Group companies were subject to fierce competition from other providers of private-provision products in the aftermath of the bear market. Their premium income dropped to €3.6bn (3.7bn); although new business declined, this decrease was partly the consequence of the fact that growth in German life insurance in the same period last year had been favoured by automatic policy adjustments as a result of the higher contribution ceiling under state social security. Company pension business is thriving: here, Hamburg-Mannheimer and VICTORIA Leben closed the first half of the year with new business premiums of €184m (approximately 8% growth). There was an especially high demand for corporate pension schemes which, with 116,000 new contracts concluded, generated new business worth almost €80m (an increase of roughly 10%). The life insurers expect new business in Germany to increase by the end of the year, since customers will wish to take advantage of the tax exemption still applicable to endowment policies taken out until then.

Following the sale of DKV's small Dutch subsidiary (as at 1 January 2004), premiums in health insurance, at €2.3bn, were slightly below last year's level; premiums for the remaining companies in the Group, however, grew by 4.1%. There was a particularly strong increase in new German business with supplementary benefit covers. The property-casualty insurers achieved a profit of €27m (-236m), thus reversing the result in the same period last year by €263m. With a slight rise in premiums to €3.0bn (2.9bn), the combined ratio once again fell, standing at a very good 93.4% (97.3%) for the first half year.

According to von Bomhard, if business continues to develop pleasingly in the second half of the year, the Group will be able to achieve its ambitious profit target of €2bn. to which reinsurance will contribute the major share. He expects that the combined ratios in reinsurance and primary insurance will remain below the 97% target.

Von Bomhard anticipates that the primary insurance group will be able to successfully maintain its positive development throughout the year. "ERGO's new management organisation will drive the upward trend that has already set in further forward. With effect from 1 January 2005 there will be uniform group-wide accountability for each segment, a fact that should have an additional positive influence on the result situation." By the end of this year, ERGO will have achieved two-thirds of the €300m in savings it plans to attain by the end of 2005.

In accordance with its consistent "profit before growth" approach, the Group expects that, mainly because of currency effects, premiums for the year as a whole will decrease marginally to about €39bn (40.4bn). It currently estimates that, before consolidation, total premium income in reinsurance will come to about €23bn (24.8bn), with life and health reinsurance growing by some 10%, and that premiums in primary insurance will total approximately €18bn (17.6bn).

The quarterly report is available at www.munichre.com, where from the beginning of today's press conference at 10.30 a.m. you will also find the related presentation.

Münchener Rückversicherungs-Gesellschaft
signed Dr. von Bomhard           signed Küppers