Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

Thank you, Elaine. Hello, good afternoon, or rather good morning to everyone. A warm welcome to our Q2 earnings call. Hope you are all well and healthy. Our CEO Joachim Wenning and our CFO Christoph Jureka will kick it off with a short introductory remark. And afterwards, as always, we will go straight into Q&A. That's all from my side so far. So Joachim, please feel free to kick it off.

Excellent, Christian. Thank you very much. Colleagues, ladies and gentlemen, good afternoon to everybody. It's our pleasure now to report Munich Re half-year figures 2020 to you. In a nutshell, results are really good. And when you take out insurance, you would expect resilience of your insurer and even more so from reinsurers before that background Munich Re is showing this resilience and robustness once again during the corona pandemic. I suggest to remember the very first challenges back then in March were business continuity related. Within a few working days only, we have practically sent 95 or 96% of our workforce home to run the operations remotely. And here's my message. Digital investments undertaken before have proven to be extremely useful and working well when needed. And then the equity markets crashed, as you may remember, in March and April. And also here, our hedgings have proven to be highly effective. Since then, we have been seeing material COVID-19 claims from various lines of business. And if there is one line of business where, with the benefit of hindsight, I'd say our exposure tended to be on the high side, it's event cancellations. But otherwise, claims are evolving, and we always and still emphasize that uncertainty continues to be high. Yet, we can't say with confidence that in any case our insurance risks are well manageable. And I'd also like to highlight that our stress resilience and risk-bearing capacity was proven to be so pronounced that we could pay out dividends with no change to our previous commitments and plans. Now while I'm emphasizing our resilience, I'd like to underline our very significant contributions in fulfilling our economic and social role. It's not that we are resilient because we don't pay or don't care, quite the contrary. We cover very material claims, by today 1.5 billion euro of COVID-19 claims. And we protect lives, safety and well-being of our employees as best we can. And we do not sacrifice jobs to corona. We engage in discussions to provide for superior solutions for the next pandemics. And of course, both as a company and with our staff, we engage in voluntary benevolent activities. No doubt, COVID-19 is a large loss event, but it also drives demand for reinsurance, accelerates digitization, and requires substantial risk-bearing capacity. And thanks to our past investments, and strong capitalization also going forward, we will benefit from those opportunities. Reinsurance markets are hardening as they haven't for a pretty long time. You have never heard me or us here in this room saying so before Corona, but we have seen this in the most recent 1.7 renewal and we will continue to see this in future renewals. plus we can see a flight to quality no doubt only in the most recent one seven renewal we grew our book by more than eight percent and achieved rate increases of 2.8 percent this is by far the best development since since not only many many quarters but since even many years and of Of course, we are benefiting from this with all the capital we can now employ and with the capacity that we offer to the markets. Before this background, ultimately suspending the share buyback this year is very good news only. But also Ergo is benefiting from their hybrid customer strategy into which they have invested quite some money. During lockdown and still now, retail sales activities are more or less on a pre-2020 level because of the digital equipment and because of the intended integration and not separation of on and offline propositions meeting on and offline customer behavior. And of course I shouldn't forget to reiterate that we stick to our dividend policy also going forward. You should expect us to pay at least prior year's dividend per share and when earnings growth allows, we will also increase dividends as we have shown between 2017 and 2019. As said, already in Q1, we will miss our 2020 bottom-line target of €2.8 billion for COVID-19. But adjusted for COVID-19, I would have told you today that we are very well on track to meet target. And as you know mid and long term we seek being among the top of a peer group of eight global reinsurers and insurers. We are looking at this metric as you know since 2018 and you can see that we are currently ranking number two with a return of close to 50%. With this introduction I'd like to hand over to Christoph.

Thank you Joachim. Good afternoon and good morning also from my side. As usual, I will not go through the presentation slide by slide, but just highlight some aspects of our numbers in my introductory remarks. As said by Joachim already, our Q2 numbers reflect a very good underlying business performance and a high resilience of our balance sheet in these challenging times. As already indicated in the pre-announcement, we achieved a pleasing net result of €579 million in Q2, corresponding to an ROE of 10.4%. I think it's important in that context to highlight again the contribution of Ergo of €173 million, which stabilised the more volatile reinsurance result, a very strong Ergo result. Now let me start with some remarks on the earnings impact of COVID-19. In reinsurance, COVID-19 related claims accumulated to 1.5 billion euros in the first half of this year. P&C reinsurance carries the lion's share with 1.4 billion euros. The insurance of large events continues to be the most affected area for us. We expect claims in other lines to further increase in the remainder of the year, but not to reach the level of contingency losses. Our reserves cover all claims incurred until the 30th of June and as always we are setting the reserves in a very prudent way. Now to give you some more technical detail how this reserving works. The total loss amount consists obviously of the paid claims and of reported case reserves and as well we have additional IBNR reserves for claims incurred but not reported by our clients yet. As of 30 June, the paid and reported claims amount to only €80 million. The remainder, which means €1.3 billion, is IBNR and includes around €500 million for claims where we gave a confirmation of coverage in the process. But just to be very clear, reserving for claims not incurred by 30 June or for claims which will occur in the future, It's simply not possible, according to our accounting standards, to build up provisions already today. But again, and that's something I would like to underline, as always, we are setting our reserves in a very prudent way. Life and health reinsurance claims were around 100 million euros, a number which also includes paid and reported claims, as well as the IBNR. But an IBNR to sufficiently cover the lost development until the end of June. We refrained from booking specific provisions for claims occurring after the 30th of June, as again our accounting rules would not allow that. They would only allow that if the additional claims cost exceeded the margins built into our existing reserves, and that is something we do not expect to happen in the foreseeable future. The claims development itself is driven by mortality, especially in the US. And we thought it might potentially be helpful for you if we give you a rough idea of the sensitivity of our book. So an extra 5% mortality in claims would lead to about 200 million in additional losses. COVID-19 claims at Ergo continue to be insignificant from a group perspective overall. In P&C Germany we observed adverse claims development due to business closure and event cancellations but that was partially offset by lower claims in retail lines. Travel insurance was affected by COVID-19 but we did not record an increased claims activity in health. Now after that introduction on COVID-19 I I'd just like to give you a few comments on major developments aside from COVID. Let's have a look at the investment results. The ROI amounts to a solid 2.7% in the second quarter, which was more or less a mirror image of Q1. So we saw this sharp recovery in global equity markets, which partially reversed the beneficial impact of the hedges we had in Q1, while obviously the impairments in the second quarter were quite low. Derivative losses and the impairment were offset by net disposal gains, on the one hand due to the financing of the ZZR at Ergo, and then, of course, due to the ordinary portfolio management and reinsurance, where we unavoidably realize gains as soon as we just touch a single security. On the other hand, losses from derivatives for hedging with equity exposure, they were also partly compensated for by equity disposal gains and dividends, while at the same time our unrealized gains or valuation reserves were strengthened. The running yield stands at 2.8%, the reinvestment yield being at 1.6%. In life and health reinsurance, we have a technical result including fee income of $48 million, fell short of the Pro Rata Fulia ambition. This is almost exclusively owing to the impact from COVID-19 because apart from that we experienced some ups and downs in various markets which largely compensate. So we had some higher than expected claims in the US not related to COVID-19 which are attributable to a small number of clients and a couple of larger claims. In Australia, we saw some higher than expected claims in Q2, which then partially reversed the good results we saw in Q1. And then we saw strong results in Asia and in Europe. Given COVID-19 and also the uncertainties ahead, we've finally withdrawn the 550 million euro guidance for the technical result, including fee income in 2020. In P&C reinsurance, we achieved a combined ratio of 99.9%. Due to a benign nut-cut season, so far the overall large losses outside of COVID were somewhat below expectations. I'm pleased that our underlying performance remains sound and we continue to profitably grow our business. including reserve releases of 4 percentage points, the normalized comment ratio amounted to 97.1%, fully in line with our ambition. On top of that, we posted a very strong premium growth of 13%. Now let's have a look at Ergo. Ergo, the net result in German life and health amounted to a pleasing 63 million, If you have a look at the technical result, there we have a technical effect as a consequence of the COVID-19 induced market volatility and due to the interdependency between the investment and the technical result, which leads to some inter-year distortion in the technical result. On the German P&C segment, I can report that the segment delivered sound earnings of 50 million euros, as well as a combined ratio of 92.5%, fully in line with our full year guidance. The result was supported by a low level of nut-cut losses and also by lower expenses. Finally, international. We have 59 million of profit in Ergo International in this quarter, driven by an improved operating performance and then also the absence of the burden from last year's portfolio streamlining. The combined ratio was exceptionally good, 90.1%, probably an all-time low. benefiting from lower claims frequency due to COVID-19, especially in the motor business in various markets. On top of that, we also saw lower large losses. Now, coming to the group's economic position. Our economic position remains to be very sound. The Solvency II ratio was largely unchanged at 211% compared to the previous quarter. and both our own funds as well as the risk capital, the SCR, increased. We saw positive operating economic earnings following also the positive IFRS result, so that helped the owned funds. And then on top of that, we saw the discontinuation of the share buyback also supporting the owned funds. But the benefit of the tightening credit spreads, which maybe you would have expected to also support the owned funds, That was largely compensated, largely offset by the reduction of the volatility adjustment, which shows a large impact this quarter on our Solvency II figures. On the risk capital side, the STR increase was mainly driven by business growth, especially in the nut-cut area, and then also by further decreasing interest rates. What we did not do is we did not set up an explicit provision for the future COVID-19 related claims under Solvency II. due to the uncertainty of the further loss development but more importantly due to our existing on top aggregate provisions which we anyway have. To maybe comment a little bit further on the solvency 2 ratio, I think what I would like to underline is that of course we continue to have this very conservative model calibration, so we don't use a dynamic volatility adjustment, we don't use the deduction aggregation method internationally, and various other aspects we can easily go deeper into that, where we think our model is conservative. Our leverage continues to be very low, 12%, which gives us a lot of room also from a capital perspective. And so if you would ask if we feel restricted at all by this 211%, so either for business growth or for capital management for the employment of our capital management strategy, the straightforward answer would be no, we don't feel at all any limitation here. We continue to be at the upper end of our optimal range and feel very comfortably there. My final remark is on the outlook. As stated by Joachim already, in the outlook for the remainder of the year, we kept the guidance for the investment return and for the Ergo Financials unchanged. And after this strong premium growth we are seeing, we mentioned it already, we increased the guidance for the cross-written premiums to $54 billion now for this year. With that, I'd like to close my introductory remarks. I'm looking forward to answering your questions and now hand it back to Christian.