Press release

• Half-year result of €870m
  
  
• 12% RoE target for 2005 confirmed
  
  
• Reinsurance: Combined ratio of 99.8%, despite substantial reserve increase at American Re 
  
  
• Excellent performance of active business
  
  
• Primary insurance: Very good result from ERGO
  
  
• Outstanding combined ratio of 94.6% in the primary insurance segment as a whole

"The Munich Re Group's good overall half-year profit fulfils expectations, even though it was burdened by American Re's reserve strengthening", said Chairman of the Board of Management Nikolaus von Bomhard at the half-year press conference. "This underlines how strong our earnings power has meanwhile become. We therefore see our return target of 12% for the whole year within reach."

Summary of the Group's half-year figures (see attachment for details)

The profit^* for the first six months amounted to €870m (1st half-year 2004: €1,192m). This includes the reserve strengthening at American Re, which had an impact of €388m before tax and €750m after tax. Taking into account these additions to reserves, the second quarter produced a satisfactory overall profit of €182m (2nd quarter 2004: €649m) owing mainly to the pleasing performance of active reinsurance business and the marked improvement in the ERGO Insurance Group's result. The overall investment result amounted to a good €4,974m (4,063m), benefiting shareholders and policyholders alike. Written premiums fell by 1.5% to €19.4bn compared with the first half of 2004. Shareholders' equity has risen by €1.3bn to €22.1bn since the beginning of the year.

Reinsurance: Half-year profit of €683m despite reserve strengthening at American Re / Satisfactory renewals
As already reported in detail on 19 July, the second quarter was burdened by reserves for liability business assumed by American Re many years ago, which impacted the Group result for property-casualty reinsurance with €388m before tax or €750m after tax (see attachment for details).

These burdens mask the excellent performance of the other reinsurance business in the second quarter, which altogether closed with an operating result of €895m (937m) and a profit of €82m (595m). Thus the reinsurers contributed €683m (1,098m) to the Group's half-year profit. The high quality of the active portfolio and the below-average costs for major losses in the second quarter benefited the combined ratio: it amounted to 103.0% (94.7%), and 99.8% (95.5%) for the first half-year. Of this, the reserve strengthening at American Re – including the positive effect from the IBNR reserves – accounted at Group level for 10.7 percentage points in the second quarter and 5.3 percentage points in the half-year figure. The largest individual loss in the second quarter, at over €40m, was a fire in a German industrial plant; there were no major losses for the Group from natural catastrophes worldwide.

In the first half of 2005, gross premiums written totalled €11.2bn (11.9bn) in reinsurance, slightly less than the figure for the first half-year 2004 – a consequence of the Group's result-oriented business policy. Munich Re will keep to its course in the renewals at the turn of the year 2005/6, where it expects business still to be characterised by a high degree of market discipline overall. With a premium volume of €7.3bn (8.0bn), property-casualty reinsurance contributed €289m (905m) to the reinsurance result in the first half-year; the balance-sheet burden of €750m from the reserve strengthening has already been deducted from this amount. American Re, the Group's largest reinsurance subsidiary, wrote gross premium income of US$ 1.8bn (2.1bn) and, including the burdens of US$ 1.4bn from prior years, showed a loss of US$ 1.4bn after tax (profit of US$ 187m in the same period of last year; US GAAP in each case). In the life and health reinsurance segment, premiums remained stable at €3.9bn, with the contribution to the profit in reinsurance rising to an outstanding €394m (193m). This was helped by an improved technical result and a higher profit on investments.

The renewal negotiations at 1 January and 1 April went well and, in the Asian region, produced a slightly increased premium volume with promising business. In the renewals at 1 July 2005 for the markets USA, Latin America and Australia, Munich Re continued to provide capacity at strictly risk-adequate prices and conditions; in the generally stable market environment, the US market showed signs of increased competition. Where necessary, Munich Re consequently withdrew from treaties and consciously accepted the related loss in premium, so that there was an overall reduction in volume of 7.8% in the approximately €1bn of business up for renewal at 1 July.

Primary insurance: ERGO shows further marked improvement in result / Very good combined ratio / Life and health record increase in premium income
The primary insurers in the Munich Re Group – ERGO, Karlsruher, Europäische Reiseversicherung and the Watkins Syndicate – achieved a half-year profit of €320m (97m), clearly exceeding last year's level. The ERGO Insurance Group doubled its reported profit after tax compared with the first half-year 2004 to €265m (124m). The combined ratio amounted to an excellent 93.1% (91.1%). With gross premiums written of €8.1bn (7.8bn), ERGO earned a good 90% of the premium income in the primary insurance segment.

Overall, premium income in primary insurance grew by 7.4 % to €4.3bn (4.0bn) in the second quarter and by 3.3% to €9.2bn in the first half-year. The life and health insurers doubled their half-year result to €105m (56m), with premium income rising slightly to €6.2bn (5.9bn). In life insurance, changes in German tax law at the turn of the year had prompted many clients to take out policies before the end of 2004, so that new business in the first half of 2005 was expectedly weaker. In the second quarter, the Group recorded an appreciable upturn in this sector compared with the particularly subdued first quarter. Gross premiums written in life insurance rose marginally to €3.7bn (3.6bn). Health insurance registered strong premium growth of 9.1% to €2.5bn because premiums were raised to take account of higher healthcare costs and also because demand for supplementary insurances in Germany increased further.

The Group's property-casualty insurers achieved a very pronounced rise in their profit to €215m (41m). Premium volume remained stable at €3.0bn, thanks to the good growth in foreign business. The reasons for the drop in German business were mainly the lack of impulses from new vehicle registrations and greater price competition in German motor insurance. The combined ratio, including legal expenses insurance, was a very pleasing 94.6% (93.4%) for the first half-year and thus within the target of 95% for the year as a whole.

Investments: Exposure from major shareholdings further reduced
As at 30 June, the Munich Re Group's investments, most of which are managed by MEAG, had a book value of €184.1bn (178.1.bn). The investment result improved to €4,974m (4,063m), mainly owing to substantial gains of €1,507m (802m) on the disposal of investments. At the beginning of the year, the Munich Re Group sold its stake in MAN, achieving a capital gain of €178m and, as announced, further reduced its exposure in the German financial services sector. Its shares in BHW were sold in the first quarter with a gain on disposal amounting to a good €60m. In the second quarter, the Group's stake in Commerzbank was reduced to under 5% and its interest in Allianz by one percentage point to around 8%. Altogether, this resulted in profits of around €120m; a portion of these gains on disposals is allocated to policyholders. At the end of June, the equity-backing ratio after hedging was 13.3% (compared with 13.4% at the end of 2004).

Outlook for the business year 2005 as a whole: Pleasing prospects for primary insurance and reinsurance
Despite the keener competition in the renewal negotiations at 1 July, premium and conditions stayed at an acceptable level for Munich Re. "Our strategy for the coming renewals sounds unspectacular, but is a key success factor: portfolio quality and profitability continue to be decidedly more important for us than growth", said Torsten Jeworrek, member of Munich Re's Board of Management. The Group is therefore proceeding on the assumption that, if exchange rates remain stable, premium for the whole of 2005 will show a marginal decline to around €38.0bn (38.1bn). Before consolidation, we currently expect reinsurance to provide approximately €21.9bn (22.4bn) of this, and primary insurance around €18.0bn (17.5bn). In both fields of business, the Group is expecting further premium growth in the segments life and health and slight reductions in property-casualty business. "Despite the reserve strengthening at American Re, we are confident of being able to achieve a combined ratio of under 100% in reinsurance – barring the occurrence of exceptional losses", said von Bomhard.

The Group's investment result will benefit in the third quarter from the book profit of €563m from the further cutting-back of its Allianz shareholding to below the 5% threshold. With this important step, the Munich Re Group has – as envisaged – successfully reduced the concentration risk associated with this investment. The announced offer to exchange HypoVereinsbank shares into UniCredit stock opens up opportunities to improve the structure of the investment portfolio even further.

Reviewing the situation of the Group, von Bomhard was confident: "Our current business is producing the desired earnings in both reinsurance and primary insurance. We are keeping on course and adhering to our selective risk-assumption policy. We continue to aim for a return of 12% after tax on average shareholders' equity for 2005. This target is within reach."

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 particularly pronounced diversification. It has more than 40,000 employees in 60 countries throughout the world and operates in all lines of insurance. It is both the world's leading reinsurer and, through the ERGO Insurance Group, the second-largest provider in the German primary insurance market.

The half-year report II/2005 and the presentation for the media telephone conference (at 10 a.m. today) can be viewed in German and English at www.munichre.com. The press conference on the Rendez-Vous de Septembre in Monte Carlo will be held on 11 September 2005 at 2.30 p.m.

Münchener Rückversicherungs-Gesellschaft
signed von Bomhard           signed Küppers

As already reported in detail on 19 July, the second quarter was burdened by reserves for liability business assumed by American Re many years ago, which impacted the Group result for property-casualty reinsurance with €388m before tax or €750m after tax (see attachment for details).

These burdens mask the excellent performance of the other reinsurance business in the second quarter, which altogether closed with an operating result of €895m (937m) and a profit of €82m (595m). Thus the reinsurers contributed €683m (1,098m) to the Group's half-year profit. The high quality of the active portfolio and the below-average costs for major losses in the second quarter benefited the combined ratio: it amounted to 103.0% (94.7%), and 99.8% (95.5%) for the first half-year. Of this, the reserve strengthening at American Re – including the positive effect from the IBNR reserves – accounted at Group level for 10.7 percentage points in the second quarter and 5.3 percentage points in the half-year figure. The largest individual loss in the second quarter, at over €40m, was a fire in a German industrial plant; there were no major losses for the Group from natural catastrophes worldwide.

In the first half of 2005, gross premiums written totalled €11.2bn (11.9bn) in reinsurance, slightly less than the figure for the first half-year 2004 – a consequence of the Group's result-oriented business policy. Munich Re will keep to its course in the renewals at the turn of the year 2005/6, where it expects business still to be characterised by a high degree of market discipline overall. With a premium volume of €7.3bn (8.0bn), property-casualty reinsurance contributed €289m (905m) to the reinsurance result in the first half-year; the balance-sheet burden of €750m from the reserve strengthening has already been deducted from this amount. American Re, the Group's largest reinsurance subsidiary, wrote gross premium income of US$ 1.8bn (2.1bn) and, including the burdens of US$ 1.4bn from prior years, showed a loss of US$ 1.4bn after tax (profit of US$ 187m in the same period of last year; US GAAP in each case). In the life and health reinsurance segment, premiums remained stable at €3.9bn, with the contribution to the profit in reinsurance rising to an outstanding €394m (193m). This was helped by an improved technical result and a higher profit on investments.

The renewal negotiations at 1 January and 1 April went well and, in the Asian region, produced a slightly increased premium volume with promising business. In the renewals at 1 July 2005 for the markets USA, Latin America and Australia, Munich Re continued to provide capacity at strictly risk-adequate prices and conditions; in the generally stable market environment, the US market showed signs of increased competition. Where necessary, Munich Re consequently withdrew from treaties and consciously accepted the related loss in premium, so that there was an overall reduction in volume of 7.8% in the approximately €1bn of business up for renewal at 1 July.

The primary insurers in the Munich Re Group – ERGO, Karlsruher, Europäische Reiseversicherung and the Watkins Syndicate – achieved a half-year profit of €320m (97m), clearly exceeding last year's level. The ERGO Insurance Group doubled its reported profit after tax compared with the first half-year 2004 to €265m (124m). The combined ratio amounted to an excellent 93.1% (91.1%). With gross premiums written of €8.1bn (7.8bn), ERGO earned a good 90% of the premium income in the primary insurance segment.

Overall, premium income in primary insurance grew by 7.4 % to €4.3bn (4.0bn) in the second quarter and by 3.3% to €9.2bn in the first half-year. The life and health insurers doubled their half-year result to €105m (56m), with premium income rising slightly to €6.2bn (5.9bn). In life insurance, changes in German tax law at the turn of the year had prompted many clients to take out policies before the end of 2004, so that new business in the first half of 2005 was expectedly weaker. In the second quarter, the Group recorded an appreciable upturn in this sector compared with the particularly subdued first quarter. Gross premiums written in life insurance rose marginally to €3.7bn (3.6bn). Health insurance registered strong premium growth of 9.1% to €2.5bn because premiums were raised to take account of higher healthcare costs and also because demand for supplementary insurances in Germany increased further.

The Group's property-casualty insurers achieved a very pronounced rise in their profit to €215m (41m). Premium volume remained stable at €3.0bn, thanks to the good growth in foreign business. The reasons for the drop in German business were mainly the lack of impulses from new vehicle registrations and greater price competition in German motor insurance. The combined ratio, including legal expenses insurance, was a very pleasing 94.6% (93.4%) for the first half-year and thus within the target of 95% for the year as a whole.

Despite the keener competition in the renewal negotiations at 1 July, premium and conditions stayed at an acceptable level for Munich Re. "Our strategy for the coming renewals sounds unspectacular, but is a key success factor: portfolio quality and profitability continue to be decidedly more important for us than growth", said Torsten Jeworrek, member of Munich Re's Board of Management. The Group is therefore proceeding on the assumption that, if exchange rates remain stable, premium for the whole of 2005 will show a marginal decline to around €38.0bn (38.1bn). Before consolidation, we currently expect reinsurance to provide approximately €21.9bn (22.4bn) of this, and primary insurance around €18.0bn (17.5bn). In both fields of business, the Group is expecting further premium growth in the segments life and health and slight reductions in property-casualty business. "Despite the reserve strengthening at American Re, we are confident of being able to achieve a combined ratio of under 100% in reinsurance – barring the occurrence of exceptional losses", said von Bomhard.

The Group's investment result will benefit in the third quarter from the book profit of €563m from the further cutting-back of its Allianz shareholding to below the 5% threshold. With this important step, the Munich Re Group has – as envisaged – successfully reduced the concentration risk associated with this investment. The announced offer to exchange HypoVereinsbank shares into UniCredit stock opens up opportunities to improve the structure of the investment portfolio even further.

Reviewing the situation of the Group, von Bomhard was confident: "Our current business is producing the desired earnings in both reinsurance and primary insurance. We are keeping on course and adhering to our selective risk-assumption policy. We continue to aim for a return of 12% after tax on average shareholders' equity for 2005. This target is within reach."

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 particularly pronounced diversification. It has more than 40,000 employees in 60 countries throughout the world and operates in all lines of insurance. It is both the world's leading reinsurer and, through the ERGO Insurance Group, the second-largest provider in the German primary insurance market.

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.