Muench Rueckvers N (ETR:MUV2)

QUOTE AND NEWS
Insurance Journal  Apr 1  Comment 
A study from Munich Re notes that although natural catastrophe losses in 2013 were dominated by floods, “detailed analyses have shown that protective measures can drastically reduce losses. For example, the June 2013 floods in Germany and...
Wall Street Journal  Mar 20  Comment 
Munich Re is targeting consolidated profit of €3 billion this year, below €3.3 billion reached last year, citing higher taxes, lower investment returns, average claims costs and moderately lower rates it can demand from its customers.
Insurance Journal  Feb 6  Comment 
Global reinsurer, Munich Re, announced it is expanding its presence in the U.S. health reinsurance business with the opening of a new regional office in Minnetonka, Minn. The company said this decision was taken to seize opportunities arising from...
Wall Street Journal  Feb 4  Comment 
The world's biggest reinsurer by premium revenues reported a jump in net profit but warns on slackening demand for disaster-protection.
Insurance Journal  Jan 23  Comment 
Munich Re, the world’s largest reinsurer, said its Hartford Steam Boiler agreed to buy the 24-story building that serves as the unit’s headquarters. The structure at One State Street in Hartford, Connecticut, will be purchased from the Hines...
Insurance Journal  Jan 7  Comment 
In its annual review of loss events in the past year, Munich Re emphasized the “exceptionally high losses from weather-related catastrophes in Europe and Supertyphoon Haiyan,” which, the report said, “dominated the overall picture of natural...
SeekingAlpha  Dec 30  Comment 
By Sajit Kapurvalapil: My personal approach to stock picking revolves primarily around book value based metrics: price-to-book (P/B), book value growth, return-on-equity (the key determinant of book value growth), retention ratio (the opposite of...
SeekingAlpha  Dec 10  Comment 
By Early Retiree: In May 2008 Warren Buffett gave a little noticed interview to the German weekly Der Spiegel in which he mentioned another German stock Berkshire Hathaway (BRK.A) (BRK.B) held besides Munich Re (OTCPK:MURGY) (OTCPK:MURGF): ...
Financial Times  Nov 7  Comment 
Munich Re says it will buy back €1bn of shares before its annual meeting, while Swiss Re says it is considering another special dividend




 

Munich Re also known as Muenchener Rueckversicherungs (FRA:MUV2, ETR(XETRA):MUV2, BIT:MUV2) is a Munich, Germany based risk management company dealing primarily in primary insurance, reinsurance (world's largest) and asset management. Reinsurance (also involves risk transfer to capital markets) operates internationally with 5,000 clients (each with multiple customers) and 13,300 staff in 150 countries. Core operations are separated into 3 main divisions, one of them Munich Reinsurance is segmented into 7 parts.[1]

As a reinsurance company it engages in risk management by taking on insurance policies deemed risky by other insurance companies . The reinsurer can be motivated by cost advantages as well as weaker regulations as compared to those dealt with by its clients.[2]

Company Overview

The whole company operates internationally and in Germany through numerous subsidiaries each under one of 3 distinct divisions. In 2009 58% of group premium came from reinsurance 42% from primary insurance.

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Reinsurance (€24.8 billion in premiums written in 2009 61% from property casualty, 39% from life and health insurance). 2009 operating income rose 8.9% of about €400 million while premium income rose 13.5% (13.1% if currency rate changes are excluded) or €3 billion Revenue from Germany as compared to the rest of the world is more balanced than with primary insurance.

Munich Health (another reinsurance division) - Established in 2009 this division uses knowledge gained in all areas of healthcare insurance by Munich Re's other divisions to identify opportunities in sales, profitability, risk management, cost management, product and service enhancements. Products and services formulated from that information is offered to clients in over 100 countries (primary and other). In 2009 Munich Health tookover all of the groups health reinsurance and international (outside Germany) health primary insurance.

Primary Insurance (stake in ERGO increased from 90 to 95% in 2009)- Deals in areas such as life, property-casual, health, travel, and legas expenses. Also conducts underwriting medical risk reserach ERGO (also oversees the D.A.S brand in 16 countries, ERGO Direkt (4 million dental, long term care, term life and funeral benefit insurance customers in Germany), present in 31 countries in Europe and Asia where over 40 million people are served. Next to Allianz AG it is the largest primary insurance company in Germany. Meag, the company's asset manager looks after 113 billion euro in assets belonging to ERGO. Subsidiaries also include DKV (4 million health and long term care customers in Germany) and ERV (travel insurance represented in 26 countries). In 2009 74% of group premium income came from Germany. 2009 operating and consolidating results increased despite lower first half numbers

Asset Management - Handled by subsidiary MEAG GmbH, a company that manages over 50 investment funds with assets valued at over 190 billion euro. Started in 1999.

Regional Divisions

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Within Reinsurance Europe and Latin America - handles property casualty business in the same region (doesn't include Germany). Germany, Asia Pacific and Africa Division - handles property casualty business in the same region and Australia and the Pacific Islands. Global Clients and North America - manages accounts the company has with major international insurance companies. It also brings together information pertaining to the North American market. Subsidiaries include Munich Reinsurance America, Munich Reinsurance Company of Canada, The Midland Company (Midland) and the Hartford Steam Boiler Group (HSB Group).

There are also 2 other segments; the Risk Trading Unit and Corporate Underwriting Division

Within Primary Insurance Main International subsidiaries (among many other smaller ones) include ERGO Italia, the Polish property-casualty insurer ERGO Hestia and the Turkish ERGO.İSVİÇRE. In Germany most if not all subsidiaries were withdrawn from the market/rebranded ERGO. ERGO (over 95% owned by Munich Re which plans to buy out the rest of the outstanding shares). In the banking sector ERGO collaborates with Unicredit Group. In 2009 ERGO absorbed travel insurer ERV (Europäische Reiseversicherung) and Mercur Assistance.

Within Asset Management MEAG (MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH in Germany and MEAG MUNICH ERGO AssetManagement GmbH) has officies in New York and Hong Kong. Holds 19% of the asset management company of the People’s Insurance Company of China (PICC).

Business & Financials

Key Financial Metrics (€ million) 2005 2006 2007 2008 2009 1HFY09 1HFY10 Change (%)
Gross premiums written 38,200 37,400 37,300 37,800 41,400 20,693 22,613 9.3%
Operating result 4,156 5,877 5,573 3,834 4,721 2109 2218 5.2%
Total Assets 218,737 215,874 214,253 215,362 223,412 219,191 237,322 8.27%
Investments 177,200 176,900 176,200 174,900 182,200 177,437 192,462 8.47%
Net Income 2751 3519 3923 1579 2564 1134 1194 5.3%
ROE 12.5% 14.1% 15.3% 7.0% 11.8% 10.5% 10.4% (-)0.1%
Natural Catastrophe Losses (Reinsurrance) 2603 139 634 832 196 382 1485 289%
Earnings per share 11.74 15.05 17.83 7.74 12.95 5.73 6.33 10.5%
Market Capitalization 26,300 29,900 29,000 22,900 21,500 19,200 19,500 1.56%
  • Data from 2009 Annual Report[3] 2006, 2007, 2008 Annual Reports[4][5][6] 2009, 2010 first half reports[7][8]

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  • Since 2008 Consolidation which isn't included reduced assets by about €20 billion a year about 8-10% of assets.

Subsidiaries and Affiliated Companies

Affiliated Companies with over €100 mil in Equity[9] Base % Interest Equity €'000 2009 Result
Munich American Holding Corp Delaware 100 7,363,997 82,377
Munich Re America Corp Delaware 100 3,074,614 98,005
ERGO International Akt Dusseldorf 99.64 2,000,760 0
ERGO Versich Dusseldorf 99.64 1,995,411 86,613
Munich Reinsur America Delaware 100 1,688,503 167,127
Osterreichische-Volksbanken AG Vienna 9.96 1,377,567 80,800
Munich American Reassurance Comp Atlanta 100 1,052,603 45,124
New Reinsur Comp Geneva Floriana, Malta 100 1,037,209 130,131
VICTORIA Leb Dusseldorf 99.64 738,653 0
Hartford Steam Boiler Insp and Insur Comp Hartford 100 597,725 89,231
VICTORIA Ver Dusseldorf 99.64 528,152 5181
DKV Deutsche Krank-Akt Cologne 99.64 466,352 0
HSB Group Delaware 100 447,361 -1004
American Family
Home Ins
Florida 100 103,542 13,126
American Modern Home Ins Comp Ohio 100 233,238 24,548
Great Lakes Reinsurance London 100 330,375 84,779
HSB Engin. Ins London 100 114,477 14,843
Munich Re of Malta Holding Ltd Floriana, Malta 100 193,971 -50
Munich Re of Malta PLC Floriana, Malta 100 197,559 5181
Munich Reins Comp of Africa Johannesburg 100 137,547 26,299
Munich Reinsur Comp of Australasia Sydney 100 111,208 3853
Munich Reinsur Comp of Canada Toronto 100 186,530 30,743
Sterling Life Insur Comp Floriana, Malta 100 147,915 1557
Hamburg Mannheimer Sach-Akt Hamburg 99.64 202,486 0
Hamburg Mannheimer Ver-Akt Hamburg 99.64 402,885 0
DKV Seguros y Reaseguros,
Sociedad Anonima Espanola
Saragosa 99.64 127,025 15,611
D.A.S Deutscher Automobil Munich 99.64 249,657 0
ERGO Italia SPA Milan 99.64 311,738 25,205
Sopockie Towarzystwo Ubezpieczen
ERGO Hestia Spolka Akcyjna
Sopot 99.64 160,928 26,605
ERGO Previdenza SPA Milan 99.64 331,854 44,501
MEAG Munich
ERGO Asset Management
GmbH
Munich 99.85 126,973 26,224
Admiral Group Cardiff 10.18 310,168 162,623
Helvetia Holding St. Gallen 8.16 550,720 44,977
MEDICLIN Akt Offenburg 34.88 189,780 5820
Sana Kliniken AG Munich 21.62 166,498 12,670

Trends & Forces

Upward trend in natural catastrophe costs

In the 1st half of 2010 losses by Munich Re were substantially higher than the previous year. Chile (more than 190,000 insurance claims) where insurance density is high, Haiti, Chile, Turkey and Costa Rica and volcanic eruptions in Iceland, Ecuador and Guatemala have burdened the company. In the long run climate change forecasts makes the insurance business more risky.[10]

Effects of the Financial Crisis

Capital base of insurers recovered quickly. Insurance markets in general grew with moderate growth in Europe and high growth in China. In Germany most of the premium income growth was in Life Insurance.[11]

Reinsurance business was less negatively impacted by the financial crisis than primary insurance. However in the long run reinsurers could be faced with higher capital costs as new capital will be more difficult to obtain[12]

Competition

Key Financial Metrics (000) Central Reinsurance Corporation (Taiwan $)[13] Hannover Re Group (€)[14][15] Odyssey Re Holdings Corp. (US $)[16][17]
2009 Gross Premiums Written 13,778,934 10,274,800 2,195,000
1HFY10 Gross Premiums Written na 5,682,300 1,038,887
Change over previous half na 8.2% 2.57%
2009 Total Assets 29,516,324 42,264,200 10,785,400
1HFY10 Total Assets na 48,205,200 10,920,891
Change over previous half na 14% 1.26%
2009 Net Income 992,823 731,200 375,100
1HFY Net Income na 310,600 187,143
Change over previous half na (-)28.3% 59.32%
  • Average exchange rate for 2009: $1 Taiwan = $0.030237 US, €1 = $1.3884 US[18]

References

  1. Munich Re Group
  2. Info About Reinsurance
  3. 2009 Annual Report
  4. 2006 Annual Report
  5. 2007 Annual Report
  6. 2008 Annual Report
  7. 1HFY09 Report
  8. 1HFY10 Report
  9. Munich Re 2009 Group Report
  10. Munich Re sees unbroken upward trend in natural catastrophe costs
  11. Economic Parameters
  12. Reinsurers 'Unscathed by Financial Crisis' Says Willis Re Renewal Report (2009-01-05).
  13. Central Reinsurance Corporation 2009 Annual Report
  14. Hannover Re Group 2009 Annual Report
  15. 1HFY10 Results Hannover Re Group
  16. Odyssey Re Holdings 2009 Annual Report
  17. 1HFY10 Results Odyssey Re Holdings Corp.
  18. 2009 Average Exchange Rates
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