Press release

• Munich Re – Excellent reinsurance business performance in the first three quarters: Combined ratio of 92.1% 
  
  
• Comparatively low major-loss burden from natural catastrophes 
  
  
• Primary insurance: ERGO with outstanding result 
  
  
• Return on risk-adjusted capital at 16.5% after three quarters 
  
  
• Target of 15% for the year will be clearly surpassed as things stand at present 
  
  
• Given normal claims experience and stable capital markets until the end of the year, consolidated profit in the range of €3.2–3.4bn achievable 
  
  
• Another dividend increase in prospect 
  
  
• Share buy-back of €1bn

"We have achieved another extraordinarily good quarterly result, which boosts our shareholders' equity further. Following the substantial dividend increase in April, we are now offering our shareholders a share buy-back", said Jörg Schneider, member of the Board of Management, adding that this capital management measure would also reinforce the disciplined underwriting policy in reinsurance. Growth would continue to be sought only where the Group's return targets could be met, said Schneider in a media telephone conference.

Details of the share buy-back: Up to the Annual General Meeting in April 2007, Munich Re will acquire own shares with a purchase price of up to €1bn via the stock exchange – at the current share price level, this would be nearly eight million shares or 3.4% of the share capital. The shares will then be retired. The parameters for acquiring up to 10% of the share capital were created at the last Annual General Meeting. Full details of Munich Re's first-ever share buy-back will be published in the next few days.

With regard to business performance in the first nine months of 2006, Schneider said when presenting the quarterly figures: "Our interim result is very positive, even if allowance is made for the unusually good claims experience and the favourable stock market situation. As things stand at present, we will clearly surpass our 15% RORAC target for 2006. Provided the capital markets and claims experience remain within normal bounds up to end of the year, the consolidated profit should be between €3.2bn and €3.4bn. That would be the third record year in succession." Given the excellent business performance, Schneider sees the possibility of increasing the dividend again.

The result in reinsurance business benefited from risk-adequate prices, terms and conditions. In contrast to the same period last year, Munich Re was also largely spared major losses from natural catastrophes in the first three quarters of the current year.

The operating result increased to €3,694m (2,154m) in the first nine months, and reinsurance contributed €2,361m (1,030m) to the Group profit. The reinsurers' investment result declined to a still excellent €3,409m (3,637m), because net realised gains on disposals were €287m below last year's figure. Buoyed by positive developments in exchange rates, premium income was up slightly by 0.6% to

€16.8bn (16.7bn).

In the life and health segment, premium income was around last year's level at €5.8bn, and the segment contributed €429m (682m) to the profit. By establishing Munich Reinsurance Company – Life Reinsurance Eastern Europe/Central Asia in Moscow, Munich Re is the first foreign reinsurer to have its own company in the Commonwealth of Independent States (CIS). In order to carry on growing organically and profitably in life reinsurance, Munich Re intends to take advantage of the promising economic development and pent-up demand for old-age provision in the CIS.

In property-casualty reinsurance, premium grew slightly to €11.0bn (10.9bn) and the result jumped to €1,932m (348m). The combined ratio came to an excellent 92.1% (108.2%). As the number of major losses from natural catastrophes was below average in the first nine months, these events only had an impact of 0.7 (12.6) percentage points. In the two previous years, severe tropical cyclones had burdened the results. Torsten Jeworrek, member of Munich Re's Board of Management in charge of reinsurance operations, stressed the persistent threat from natural catastrophes: "The moderate hurricane season to date does not break the trend. The cyclical warm phase in the Atlantic and man-made global warming entail a substantial increase in extreme weather anomalies. There are no grounds for relaxing or being complacent. We must continue to face the prospect of severe natural catastrophes whose loss potential is huge and growing, given the increasing concentration of values. It is to this loss potential that we will have to gear our prices, terms and conditions."

In the renewal negotiations in non-life reinsurance at 1 July 2006 in the USA and Latin America, the focus was on property and offshore energy risks with natural catastrophe exposure (especially oil rigs). In the light of the general increase in risk awareness and the considerable upward revision of the loss potential, it proved possible to implement the necessary substantial price increases.

In the first nine months, the primary insurers in the Munich Re Group improved their operating result to €997m (795m), and their profit rose significantly to €573m (461m). The ERGO Insurance Group, which writes about 95% of the gross premiums in Munich Re's primary insurance segment, contributed particularly to the positive development, with an increased profit of €566m (416m). Its combined ratio for property-casualty business including legal expenses insurance amounted to a very good 90.6% (93.0%) and that of the whole primary insurance group, i.e. including Europäische Reiseversicherung and Watkins Syndicate, to 91.0% (93.4%). The investment result in the primary insurance segment totalled €3,700m (4,514m), declining due to a decrease of €425m in gains on disposals and an increase of €209m in write-downs, especially of hedging instruments (owing to the rise in interest rates).

Gross premiums written fell to €12.4bn (13.3bn), with ERGO writing an unchanged amount of €11.8bn. This reduction reflects last year's sale of the Karlsruher Insurance Group and the Nieuwe Hollandse Lloyd Verzekeringsgroep (NHL). Without these sales, the Munich Re Group's primary insurance premium would have risen slightly by 0.8%.

The life and health insurers recorded premium of €8.4bn (9.1bn) and contributed €175m (136m) to the Munich Re Group's result.

• Premium income in life fell in the first nine months to €4.6bn (5.4bn). Even after adjusting the figures for the sale of Karlsruher and NHL, this still amounts to a decrease of 2.4%. Growth in pension insurance was positive, especially in "Riester" business: since January, a total of 100,000 new policies were sold – an increase of 46.5% compared with the same period last year.
• Premiums in the health segment grew by 4.2% to €3.8bn, mainly due to business with supplementary insurance, where premium rose to €712m (649m). Debate about the health reform in Germany is creating uncertainty among clients throughout the market and thus curbing growth in comprehensive health insurance. "The Munich Re Group continues to regard the rules currently planned by the German government for private health insurance as unsatisfactory and in some respects even unconstitutional", said Jörg Schneider.

The property-casualty insurers (including legal expenses insurance) achieved a rise in their profit to €398m (325m) in the first three quarters. Premium volume declined by 5.8% to €4.0bn (4.2bn). Adjusted for the sale of Karlsruher and NHL, premium grew by 1.8% overall. Outside Germany, the property-casualty insurers recorded high growth especially in Poland and the Baltic states. Premiums in legal expenses insurance (adjusted for the above-mentioned sales) also grew as a result of the positive trend in foreign business. In German motor insurance, premium income decreased, partly because of the selected underwriting approach to fleet business.

Munich Re is continuing to systematically pursue its policy of risk-adequate prices, terms and conditions. Torsten Jeworrek on reinsurance: "Discipline and stability will be our watchwords in the forthcoming renewals at the turn of the year. In 2006, we were able to achieve substantial price increases for natural catastrophe risks in the US market; this level is risk-adequate. For the European markets, we expect at least stable prices." Jeworrek continued: "Where necessary, we will detach ourselves in proportional business from developments on the primary insurance market."

In primary insurance, Munich Re expects premium income to rise slightly. At the beginning of October, ERGO acquired a majority stake in the Turkish insurance group Isviçre, including the country’s fifth-largest property-casualty insurer, Isviçre Sigorta, whose focus is on personal lines business. The Group is also active in the strongly growing segments of life and health. ERGO is thus excellently positioned to tap the great opportunities offered by the Turkish market in the years ahead.

Munich Re reckons that, with stable exchange rates, the Group's premium income for the whole of 2006 is likely to be between €37bn and €38bn and thus at the same level (adjusted for the sales of subsidiaries) as last year. Before consolidation, it currently expects reinsurance to provide approximately €22–23bn of this, and primary insurance around €16.5–17.0bn.

Schneider was confident of achieving a combined ratio of below 95% for reinsurance in 2006. However, the tropical cyclone season was not yet over. He pointed out that the autumn and winter storms typical of this time of year in Northern Europe might also result in large claims burdens, as indicated by last week's events on the North Sea coast. In primary insurance, another combined ratio of around 93% should be achievable for 2006. "We would then surpass our targets in both reinsurance and primary insurance and be on course for another record result", said Schneider.

Rainer Küppers (60), for over 30 years responsible for various aspects of public relations work under the Chairman of the Board of Management, especially for the Munich Re Group's media activities at home and abroad, will be stepping down after the balance sheet press conference on 20 March 2007 at his own request. Until the end of the active period of his semi-retirement, he will act as consultant to the members of the Boards of Management and communication personnel of the Group’s companies. His successor will be Dr. Christian Lawrence, currently head of global communications at Allianz Global Investors. Like his predecessor, Dr. Lawrence will report directly to the Chairman of the Board of Management.

The quarterly report 3/2006 and the presentation for today's media telephone conference can be viewed at www.munichre.com in German and English.

Münchener Rückversicherungs-Gesellschaft
signed Schneider           signed Küppers