Business figures 1 January – 31 March 2005:

• On course with a quarterly profit of €688m 
  
  
• Significantly higher results in primary insurance and reinsurance 
  
  
• Further strengthening of earnings potential through reinsurance treaty renewals as at 1 April

"A good start to the business year 2005. Our strict profit orientation is paying off. The quarterly profit of €688m is higher than that of any quarter last year. It is too early to make a reliable forecast but with our result for the first three months we are on course to meet our ambitious return target of 12%", said member of the Board Jörg Schneider in a media telephone conference. "At 96.5%, the combined ratio in reinsurance remained within our target of 97% for the year, although the incidence of major losses was greater than in the previous year. This speaks for the very solid quality of our basic business. And ERGO, too, recorded a higher quarterly profit of €69m (55m)."

Munich Re's quarterly profit* rose by 26.7% to €688m after tax compared with the first quarter of last year. The result before amortisation of goodwill climbed by 17.7% to an outstanding €1,132m. As a consequence of the Group's strictly profit-oriented underwriting policy, premium income of €10.2bn (10.4bn) was, as expected, slightly down on last year's level. Shareholders' equity* increased further to €21.3bn
(31 December 2004: €20.7bn).

In the first quarter of the year, reinsurance continued to perform as pleasingly as in 2004, contributing a substantial profit of €601m (503m) to the consolidated result. At €942m (809m), the result before amortisation of goodwill was also well above the previous year's level. The investment result in reinsurance amounted to €1,014m (771m) owing to lower writedowns and losses on disposals as well as higher realised capital gains. Premium income declined by 5.3% to €5.8bn (6.2bn).

The life and health segment contributed €129m (74m) to the higher profit in reinsurance. Following several years of strong increases, premium income stabilised at €1.9bn. Life reinsurance shows a rise of 2.9% to €1.5bn, whereas in health reinsurance, premium volume decreased to €379m (435m) owing to isolated reductions in shares by clients and business terminated due to Munich Re's rigorous profit-oriented business policy.

In property-casualty reinsurance, the Group successfully continued to focus on risk-adequate prices and conditions in the treaty renewals at both the beginning of the year and as at 1 April. Consequently, it was prepared to accept a reduction in premium income to €3.9bn (4.2bn), for which the scheduled termination of a particularly large quota share treaty (RSA) was also responsible. In line with its strictly result-oriented underwriting approach, the Group partially withdrew from highly competitive US liability business with industrial clients because return requirements did not appear achievable.

Given the portfolio's excellent quality, the higher number of major losses in the first quarter was satisfactorily absorbed. These losses include the winter storm Erwin, which raged over northern Europe in January 2005 and gave rise to claims expenditure of €70m for Munich Re, and the Madrid skyscraper fire, which cost €35m. Nevertheless, the combined ratio remained within the 97% target, standing at a good 96.5% (96.3%). Natural catastrophes accounted for 2.4 (0.0) percentage points of this figure.

The Group's largest reinsurance subsidiary American Re, which writes US non-life business, showed a US GAAP profit of US$ 88m (81m) after tax for the first three months of 2005, with gross premium income totalling US$ 954m (975m). Schneider was satisfied with current developments in the USA: "At American Re, we are well on our way with our newly written business and are aiming for a combined ratio of 96% for the accident year 2005, including all losses affecting the current year." He mentioned, however, that there were still uncertainties regarding the risks involved in calculating reserves for prior-year losses, particularly in the area of liability business.

The primary insurers in the Munich Re Group – ERGO, Karlsruher, Europäische Reiseversicherung and the Watkins Syndicate, which focuses on international marine business – contributed a profit of €121m to the consolidated result, more than twice as much as in the same period last year (€55m). The result before amortisation of goodwill increased to €198m (162m) and the investment result totalled €1.5bn (1.1bn). Premium income in primary insurance remained stable at €4.8bn.

Growth in the life and health segment amounted altogether to a 3.9%. The life insurers' premium income in the period under review remained unchanged at €1.8bn. This figure was, for the most part, ascribable to the good new regular-premium business acquired in the fourth quarter of 2004. Following the surge in new business towards the end of the previous year, which was also influenced by anticipatory effects, fewer insurance policies were concluded, as expected, in the first quarter of 2005. New business with unit-linked policies doubled, however. These products offer policyholders the full range of investment opportunities presented by an investment fund combined with coverage against the mortality risk and provision for old age.

Premium income in the health insurance segment increased by 9.3% to €1.3bn. New business with supplementary benefits insurance grew significantly, reflecting the fact that the marketing cooperation with public health insurers is beginning to bear fruit. Above all, however, policyholders are increasingly seeing the need to close the widening gaps in public health insurance coverage by making private provision.

In property-casualty insurance gross premiums were down 6.3% to €1.8bn, a reduction that was above all attributable to Lloyd's Watkins distributing premium due dates more regularly throughout the year. Net premiums were nearly unchanged at €949m (968m). Despite marginally lower prices in the German motor market, the Group adhered to the principle of "profitability before growth" throughout the segment. Thanks to a good portfolio mix with a high proportion of private clients, the combined ratio totalled 99.1% (95.4%) – despite the harsh winter and various storms in northern and eastern Europe.

The ERGO Insurance Group, which is responsible for over 88% of premium income, had a decisive influence on the primary insurance segment. Premium written by ERGO grew by 3.2% to €4.3bn. The combined ratio (including legal expenses insurance) was 97.3% (94.1%). ERGO contributed an improved quarterly profit of €69m (55m) before consolidation to the Munich Re Group's very good result.

The successful treaty renewals in property-casualty reinsurance as at the turn of the year were followed as at 1 April by the traditionally later renewals in South Korea and Japan. With an overall improvement in the profitability of its portfolio, Munich Re achieved clear growth here. For its reinsurance business as a whole, Munich Re expects premium income to decline slightly by 4% to €21.5bn in 2005; for primary insurance, it anticipates an increase of just under 3% to €18.0bn. After consolidation, the Group's overall premium income should reach €37.6bn, only slightly below last year's high level.

It is too early at the end of a first quarter to make a forecast of the year's results. Munich Re will continue to put profitability before growth, setting itself the ambitious target of a return of 12% on average shareholders' equity (including minority interests) after tax.

The Munich Re Group
The Munich Re Group operates worldwide, turning risk into value. In the business year 2004, it achieved a profit of €1,833m, the highest in its 125-year corporate history. Its premium income amounted to approximately €38bn and its investments to around €178bn. The Group is characterised by strongly diversified business. It has more than 40,000 employees in 60 countries throughout the world and operates in all lines of insurance. It is one of the world's leading reinsurers and, through the ERGO Insurance Group, the second-largest primary insurance provider in Germany. The Munich Re Group also operates in the field of asset management through MEAG.

Disclaimer
This media information 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.