Property-casualty reinsurance: Renewal of treaty business at 1 January 2006

• Consistent pursuit of risk-adequate underwriting policy
  
  
• Opportunities taken in a positive environment – Premium volume up slightly
  
  
• Earnings potential still at a high level
  
  
• Renewals at 1 April and 1 July: Similarly positive outcome expected

At 1 January 2006, the Munich Re Group renewed about 66% of its treaty business (i.e. without facultative reinsurance) in property-casualty reinsurance, involving a premium volume of around €8.9bn. By consistently implementing its strict underwriting policy, Munich Re expects earnings potential to remain at a high level for its property-casualty portfolio.

Figures in relation to the respective renewable business: Premium volumes will rise by around 5%, taking into account price increases. Some 7% of new business was acquired (at terms in line with our risk-adequate underwriting policy). Approximately 6% of our business was not renewed as premiums and / or conditions did not meet Munich Re's requirements. On average, a 3% rise in rates was achieved for business renewed, with the usual variations in prices and conditions according to trends in specific regions and classes of business.

As was to be expected, the largest price increases involved treaties affected by the 2005 hurricanes, rates going up here considerably (high two-digit figures). The highest increases were in offshore energy, with approx. 400% on the primary insurance side, from which Munich Re profited in proportional reinsurance business and via its primary insurance subsidiary Watkins in London.

Board member Torsten Jeworrek: "All in all, we are highly satisfied with the renewals. Our clients understand that if you want to buy or sell first-class reinsurance cover, there is simply no alternative to risk-adequate prices and conditions."

The hurricanes in the USA, Mexico and the Caribbean in the summer and autumn of 2005 had a definite impact on the renewals, as did experiences from the windstorms in 2004. These natural catastrophes clearly demonstrated the threat posed to many people and also the high exposure of insured values. They also made it necessary to reassess the risks. Adjustments have been made to the windstorm models (based on historical data and scientific knowledge) that reinsurers use to determine possible loss scenarios in the future. Munich Re has also adapted its catastrophe risk models and taken account of the results in the treaties it renewed.

By and large, the continuing discipline of market players was apparent. In so-called short-tail business (property and marine), Munich Re enhanced its risk profile by implementing higher premiums and introducing structural changes. We are concentrating to a greater extent on covers above the frequency-loss area, which respond comparatively less often. In doing so, we require our cedants to create more transparency in portfolio information, and we reduce our peak liabilities in the treaties. These two factors being part of our risk management. In long-tail business (third-party liability), we were able to maintain the good standard of terms and conditions we have worked on achieving over the past few years.

For the forthcoming renewals on 1 April (Japan and Korea) and 1 July (parts of the US market, Australia and the Latin American markets), Munich Re expects a similarly stable environment as that prevailing on 1 January 2006. In particular, the negotiations on business renewals at 1 July, when a large portion of US natural catastrophe covers is up for renewal, ought again to have a positive impact on the development of premiums and conditions.

"With the 1 January renewals, we have created the basis for reinsurance business to contribute strongly to the profitability of the whole Group in 2006", said Jeworrek. "The advantages of active risk diversification that result not only from distributing risk across various regions and classes of business but also from our creating value from primary insurance and reinsurance were particularly obvious in the past year. Thus, despite extreme burdens, Munich Re remains a reliable partner to its clients, who continue to benefit from our excellent financial strength."

You can view the presentation on the 2005/06 renewals at www.munichre.com.

The balance sheet press conference will take place at 10.30 a.m. on 14 March 2006.

Münchener Rückversicherungs-Gesellschaft
signed Dr. Jeworrek           signed Küppers

The Munich Re Group operates worldwide, turning risk into value. In the business year 2004, it achieved a profit of €1,833m, until then the highest in its 125-year corporate history. In 2005, it was able to improve on that figure (details to be published in the balance sheet press conference on 14 March). In 2004, 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 one of the world's leading reinsurers and, through the ERGO Insurance Group, the second-largest provider in the German primary insurance market and a leading player on several other European insurance markets.

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.