Press release

• Very good first half-year in reinsurance and primary insurance; profit of €2.1bn at last year's high level
  
  
• Changing Gear launched successfully – growth initiatives vouch for potential of reinsurance and primary insurance
  
  
• Munich Re increases profit guidance for 2007 to €3.5bn–3.8bn
   

In the first half of 2007, the Munich Re Group posted a profit of €2.1bn – approximately two-thirds of its original result target for the year as a whole. The Group's Changing Gear programme was also launched successfully. Initial examples of the programme in action are the acquisition of the underwriting manager Bell & Clements Group, new coverage concepts for natural hazards in the Caribbean, and the expansion of the cooperation between ERGO and UniCredit. The capital-efficiency measures that form part of Changing Gear have also been resolutely implemented: almost half of the share buy-back announced in May has been completed. To further improve its capital structure, the Group also placed a bond with a volume of €1.5bn. Consequently, Nikolaus von Bomhard, Chairman of the Board of Management, was satisfied with the progress: "We have already reached important milestones since the launch of Changing Gear three months ago." Von Bomhard is confident for the financial year 2007: "We have made such good progress to date that we are increasing our profit guidance and, with the one-off income resulting from the tax reform, are even setting our sights on a new record result."

To support its initiatives for intelligent, profitable growth in primary insurance and reinsurance, Munich Re is also implementing organisational and structural projects in Changing Gear. Von Bomhard stressed the spirit of optimism prevalent in the Group: "We are determined to provide our clients more rapidly and purposefully with innovative products."

Von Bomhard highlighted the potential in reinsurance. "In recent decades, the global reinsurance market has always grown more strongly than the world economy, and it will continue to expand in the next ten years. It is a market full of vitality and good growth prospects." He continued: "We intend to participate in this development and, thanks also to our cycle management, become the most profitable of the big five reinsurers. Changing Gear will be our recipe for success."

In primary insurance, there is great potential especially from personal provision in the area of life and health. "We are ideally placed to exploit this", explained Lothar Meyer, Chairman of ERGO’s Board of Management. "We are the only large German insurance group that can fully utilise all the advantages of a common IT platform. Today, ERGO is a single entity, with uniform processes and structures."

In the first six months, the Munich Re Group recorded a profit of €2.1bn (2.1bn). The operating result, at €2.8bn, was lower than the previous year’s record level (€3.3bn).

Notwithstanding negative currency exchange effects, gross premiums written were kept at a steady level and totalled €18.9bn. If exchange rates had remained the same, premium volume would have increased by 1.6% in the first half-year.

Shareholders’ equity showed a decrease of only €1.0bn since the beginning of the year to €25.3bn (31.12.2006: €26.3bn), despite share buy-backs for a total of €1.3bn and the dividend payment of €988m.

Munich Re’s prognosis of a Group claims burden from Winter Storm Kyrill of €450m before tax remains unchanged, even though loss estimates for Germany have now seen significant upward adjustment in the market.

The Munich Re Group's reinsurance business performed successfully in the first half of 2007. Even though the operating result from January to June was down 6.6% to €2.4bn (2.6bn) compared with the same period last year, the consolidated result for reinsurance nevertheless reached €1.9bn (1.8bn), an increase of 9.5%.

This large profit was attributable to a very good investment return and a sound underwriting result – despite the claims expenditure for Winter Storm Kyrill in the first quarter of the year – and was founded on the Group’s highly profitable broad basic business.

The combined ratio for the first half-year amounted to a very favourable 98.4% (91.6%), of which 8.1 (1.0) percentage points were attributable to natural catastrophes. Some 5.7 percentage points derive from losses solely due to Kyrill. At €111m (145m), the total burden from major losses for the second quarter was low. The largest loss event to affect Munich Re was a severe storm in Australia costing approximately €53m.

Compared with the same period last year, gross premiums written fell by 3.0% to €11.0bn (11.3bn), particularly as a result of the strong euro. At unchanged exchange rates, premium volume would have increased by 1.1% in the first half-year. The life and health segment accounted for €3.7bn (3.9bn), and property-casualty for €7.3bn (7.4bn).

Reinsurance CEO Torsten Jeworrek emphasised: "The reinsurance markets remain attractive, but a selective underwriting approach is still required." The maxim of profitability before premium volume had also been applied to Munich Re’s treaty renewals in property-casualty business at 1 July (parts of the US portfolio, Australia and the Latin American markets), said Jeworrek, who continued: "We have succeeded in acquiring profitable business, which has led to a rise of approximately 9% in premium volume from those markets."

The Munich Re Group's primary insurers again presented good figures, with an operating result of €610m (793m) and a profit of €410m (446m).

The ERGO Insurance Group, which writes about 94% of the gross premiums in Munich Re's primary insurance segment, posted a profit of €403m (448m). This was above the prorated budget for the year as a whole.

In accordance with its market position in Germany, ERGO was also hit by the effects of Kyrill: nevertheless, its combined ratio (for property-casualty business) only increased to 92.2% (89.5%). The combined ratio for the primary insurance group as a whole, i.e. including Europäische Reiseversicherung and the Watkins Syndicate, was a very good 93.3% (92.0%), despite Kyrill.

Gross premiums written in the Munich Re Group's primary insurance business advanced to €8.8bn (8.5bn). Growth was especially pronounced in international business, particularly in property-casualty insurance and in the health segment.

The life insurers wrote gross premiums of €3.0bn (3.1bn) in the first half of 2007. This 4.6% decrease is due to the still-high number of planned policy terminations in German business and also to lower revenue from single-premium business with institutional clients in Italy. The health insurers’ premium volume rose 4.6% to €2.7bn (2.6bn).

In property-casualty insurance, premiums climbed by 10.6% to €3.1bn (2.8bn) in the first half of the year. The acquisition of the Turkish İsviçre Group contributed particularly to growth in this area.

The Munich Re Group’s total investments increased by 1.2% to €178.9bn in the first half-year compared with the end of 2006. The investment result improved to €5.6bn (4.8bn) in the first six months of 2007. This was primarily due to strong growth in regular investment income, as well as to the already announced gains of approximately €550m on the disposal of real estate.

In the first half-year, the negative effects of the rise in interest rates exceeded the positive impact of the appreciation in share prices: net unrealised gains on securities available for sale fell to €6.7bn (9.3bn).

MEAG MUNICH ERGO AssetManagement GmbH – the asset manager of Munich Re and the ERGO Insurance Group – had Group assets of €171.8bn (172.4bn) under management at 30 June 2007.

The Munich Re Group aims to achieve a return of at least 15% on risk-adjusted capital (RORAC) again in 2007.

In the third quarter, the German business tax reform and Annual Tax Act 2008 will have a positive impact of around €400m on the result. Anticipating this effect and based on the very pleasing development of its business in the first half-year, Munich Re is raising its profit guidance range for the year from €3.0–3.2bn to €3.5–3.8bn. This presupposes a normal development on the capital markets and in claims costs up to the end of the year. Von Bomhard stressed: "We are right on track for the year as a whole. Our targets remain ambitious, but we can – and aim to – deliver another outstanding result."

As far as the third quarter is concerned, initial estimates indicate that the earthquake in Japan, the floods in Britain, and the air crash in Brazil (all three in July 2007) may each result in a claims burden in the double-digit million euro region.

Despite the effects of currency translation, for 2007 Munich Re currently anticipates only a slight decline in Group premium income to between €36.5bn and €37.5bn. In reinsurance, its sights are still set on a combined ratio of under 97% in 2007. Whether or not this will be achieved is largely dependent upon the natural-catastrophe claims costs for the remainder of the risk period. In primary insurance, the combined-ratio target for 2007 is again under 95%.

Von Bomhard emphasised that with Changing Gear the Group’s objectives were clearly defined: "We want to be the most profitable reinsurer worldwide. As a primary insurer, we intend to exploit business segments and markets with major growth potential, particularly abroad." The Chairman of the Board of Management drew a preliminary conclusion: "Changing Gear is not a programme for just a few months. Nevertheless, we are proud of what we have already achieved in such a short time. We have the risk expertise, the financial strength and the market access. Now it is a matter of using these strengths on the global risk market to grow profitably."

The quarterly report 2/2007 and the presentation for today's press conference can be viewed in German and English at www.munichre.com.

Münchener Rückversicherungs-Gesellschaft
signed Dr. von Bomhard           signed Dr. Lawrence