Press release

• With profit exceeding €3.3bn in the first three quarters, Munich Re on track for new record result
  
  
• CFO Schneider: "We could even slightly surpass our profit target for the year of €3.5–3.8bn."
  
  
• Further progress in Changing Gear: Repositioning in the US market, emphasis on cycle and capital management
  
  
• ERGO continues expansion outside Germany – Joint venture agreed with Housing Development Finance Corporation (HDFC Ltd.) in India 

With a profit of over €3.3bn (previous year: €2.9bn) in the first nine months, the Munich Re Group is again heading for a record result in 2007. "In the third quarter, we again posted excellent results, and are now harvesting the fruits of our strict profit orientation", said CFO Jörg Schneider. As things stand at present, the return on risk-adjusted capital (RORAC) target of 15% for 2007 could be very clearly surpassed.

At the same time, Schneider stressed: "By focusing consistently on profitability and active capital management, we are generating shareholder value." He went on to say that 70% of the ongoing second share buy-back had been completed, and highlighted further progress in the Changing Gear programme, particularly the realignment of business in the US market through the fundamental reorganisation of Munich Re America. This step is intended to significantly increase Munich Re’s profits in the world’s largest insurance market. Schneider also emphasised the importance of capital management to the Group: "We are keeping to our plans of giving back at least €8bn to our shareholders by 2010."

In the first nine months, the Munich Re Group recorded a profit of €3.3bn (2.9bn), considerably more than in the record previous year. In the third quarter, the Group posted positive effects on earnings totalling around €400m from the German business tax reform 2008. The operating result, at €4.0bn (4.6bn), was lower than in the previous year, but in 2006 there had also been an extraordinarily low claims burden from natural catastrophes.

Notwithstanding negative currency exchange effects due to the lower value of the US dollar, gross premiums written stayed stable at €28.1bn. At unchanged exchange rates, premium volume would have increased by 2.1% in the first nine months.

Munich Re has already given back €2.8bn to its shareholders via share buy-backs and dividend payments in 2007. Despite these costs and the interest-rate-induced decline in the market value of fixed-interest investments, shareholders’ equity – at €24.9bn as at 30 September – is only €1.5bn lower than at year-end 2006.

The Munich Re Group's reinsurance business performed successfully in the first nine months of 2007. Although the operating result fell by 13.0% to €3.2bn (3.7bn), reinsurance still contributed €2.8bn (2.4bn) to the Group profit, of which €314m is apportionable to the special tax factor.

The strong performance was due not only to the very good investment result, but also to underwriting business. "Our strict orientation towards risk-adequate prices and conditions in underwriting is paying off and makes our broad basic business very profitable", said Jeworrek.

In the first three quarters, the combined ratio was 98.0% (91.2%), with natural catastrophes accounting for 7.3 (0.7) percentage points. A number of major losses occurred in the third quarter. The largest loss event was Hurricane Dean in August, for which Munich Re expects its claims costs to total around €60m before tax. Further events such as the earthquakes in Japan and Peru, floods in the UK and the air crash in Brazil each caused damage in the single- to double-digit million euro region. The hurricane season, which is still progress, has produced 14 named storms in the North Atlantic to date, but the US coast and its high concentrations of values have so far been spared severe hurricanes.

In spite of the strong euro, gross premiums written remained – at €16.5bn (16.8bn) – on a high level compared with the same period last year. At unchanged exchange rates, premium volume would have increased by 1.6% in the first nine months. The life and health segment accounted for €5.5bn (5.8bn), and property-casualty for €11.0bn (11.0bn).

In August, Munich Re increased its stake in the US company Cairnstone to 100%. Cairnstone, which managed a business volume of over US$ 80m in 2006, offers employers in the USA stop-loss covers for the healthcare expenditure they finance for their employees. The transaction is part of Munich Re’s International Health strategy, which aims to tap profitable growth potential in the global healthcare market. Primary insurance: Result of €752m for the first nine months up on last year’s high level.

Primary insurance business also performed successfully in the first nine months of 2007. The primary insurers in the Munich Re Group significantly increased their post-tax profit to €752m (562m), the one-off tax effect contributing €118m. At €923m (986m), the operating result was close to the previous year’s excellent figure.

The ERGO Insurance Group, which writes about 95% of the gross premiums in Munich Re's primary insurance segment, posted a profit of €701m (555m) and is thus also on track to at least achieve its full-year profit guidance, which it had raised to the range of €700m–€780m in August.

Despite losses due to Winter Storm Kyrill at the start of the year, ERGO’s combined ratio in property-casualty insurance rose only slightly in the first nine months to a still very presentable 92.2% (88.8%). The combined ratio for the primary insurance group as a whole, i.e. including Europäische Reiseversicherung and the Watkins Syndicate, was a very good 92.9% (91.0%).

Gross premiums written in the Munich Re Group's primary insurance business advanced to €12.8bn (12.4bn). Growth was especially prominent in international business, for example in property-casualty insurance and in the health sector.

In the life and health segment, premium income remained stable at €8.4bn (8.4bn). Life insurance premium volume fell in the course of the year by 5.1% to €4.4bn (4.6bn). This decline is largely attributable to the high number of scheduled policy terminations in German business. There was a slight decrease of 1.5% in new life insurance business in Germany between January and September. This was chiefly due to a "basis" effect: the third subsidisation stage for Riester policies had given a major boost to new business in early 2006. Without this "basis" effect, there would have been a 4.3% increase. In property-casualty insurance, premiums climbed by 12.4% to €4.4bn (4.0bn) since the start of the year. Apart from the pleasing development of business in Poland, the acquisition of the Turkish İsviçre Group contributed particularly to growth in this segment, as it alone accounted for half of the increase in premium.

In October, ERGO signed a joint-venture agreement for non-life insurance business with the Housing Development Finance Corporation (HDFC Ltd.), one of the leading financial services groups in India, as well as the country’s largest housing developer. ERGO is thus participating in the dynamically growing Indian insurance market, having already opened a representative office in Mumbai in May. In the healthcare segment, ERGO subsidiary DKV, together with its Apollo Hospitals Group joint-venture partner, is now active in the Indian market with the specialist health insurer, Apollo DKV Insurance Company Limited.

Compared with year-end 2006, the carrying amount of Munich Re Group's investments increased to around €179bn (177bn). The investment result rose to €7.6bn (7.1bn) in the first nine months of 2007, with gains of €2.5bn on the disposal of equities also contributing to this excellent figure.

Although interest rates have since dipped slightly, their significant rise in the first two quarters masked the positive impact of the appreciation in share prices. Prices of fixed-interest securities sank compared with the beginning of the year. In restructuring its portfolio in favour of higher-interest securities, the Group made losses on disposals totalling €611m. Impairment losses and losses on disposal on financial instruments exposed to the US subprime mortgage segment gave rise to expenses of approximately €150m in the first nine months, around €115m of which was in the third quarter. The burdens are thus within the range of the expectations announced after the second quarter. Meanwhile, disposals have considerably diminished the remaining exposure to subprime-related securities to well under €400m, which is 0.2% of the overall investment portfolio.

Net unrealised gains on securities available for sale fell to €6.6bn (9.3bn). The sale of a commercial-property package worth €400m in total will contribute to the result in the coming quarters.

MEAG MUNICH ERGO AssetManagement GmbH – the asset manager of Munich Re and the ERGO Insurance Group – had Group assets of €172.0bn (172.4bn) under management at 30 September 2007.

For 2007, the Munich Re Group has again set itself a target of at least a 15% return on risk-adjusted capital (RORAC). Schneider: "We are very confident that we will clearly exceed this objective. Due to the excellent performance of our business in the first nine months, we could at the end of the year even be slightly above the targeted profit margin of €3.5–3.8bn announced in August. This would be again a record result." The precondition is that the capital markets and claims burden develop normally until the end of the year.

Despite the negative effects of currency translation, Munich Re at this stage anticipates approximately stable Group premium income of between €36.5bn and €37.5bn for 2007, and is still targeting a reinsurance combined ratio of under 97%. Schneider warned that strong autumn and winter storms in northern Europe could yet result in large claims burdens. In primary insurance, the combined-ratio target for 2007 is again under 95%.

Schneider emphasised: "We are pursuing Changing Gear with great vigour, retaining our clear focus on profitability and capital management. We are adhering to our plans of giving back at least €8bn to our shareholders by 2010. At the same time, this efficient capital management forms an important basis for our cycle management and our disciplined underwriting policy in primary insurance and reinsurance."

The quarterly report 3/2007 and the presentation for today's telephone press conference can be viewed in German and English at www.munichre.com.

Münchener Rückversicherungs-Gesellschaft
signed Dr. Schneider           signed Dr. Lawrence