Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

Good day and welcome to the Munich Re. Analysts and investors call on annual results and January renewals. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Becker-Huthum. Please go ahead, sir.

Yeah, thank you very much. Good afternoon, everyone. Welcome. to our call on our full year 2020 earnings release, including 1.1 renewals and the outlook for 2021. I have the pleasure to be here with Joachim Wenning, our CEO, and Christoph Jureka, our CFO. And both gentlemen will kick it off with their statements. And afterwards, we will go right into Q&A, and we have ample opportunity to answer your questions. So I suggest, Joachim, the floor is yours.

Thank you very much, Christian, and good afternoon, everybody out there. Thanks for joining this conference. As said, Christoph and I would like to report the final figures 2020, the outlook 2021, and again highlight one of the other essentials of our ambition 2025. To start with, the Corona pandemic has had, no doubt, a decisive impact on 2020. But also, without any doubt, in the absence of Corona, today we would have celebrated an excellent business result. And despite COVID-related losses of around 3.5 billion euro, we closed the year with a profit of 1.2 billion euro. And despite the very material COVID-19 losses, despite the further drop in interest rates, and despite significant business growth, also requiring capital, of course, we closed the year with a solvency ratio of 208% in the upper quarter of our optimal range that you know. And subject to the approval of the AGM later in April, we will pay a dividend of €9.80 per share, unchanged from the previous year. We, as you know, have been keeping our dividend promise now for more than 50 years, even in challenging years, without any one exception to date. And we don't want to change that. Looking back, we have delivered on our mid-term ambition 2020 and also successfully mastered the three-year period 2018-19-20. And I may add, despite quite some challenges in that period, like falling interest rates, above average large losses, and barely any significant tailwind from the P&C rate cycle, because P&C rates really only started going up more broadly since last year, only in 2020. So overall, our success was driven by good growth and good earnings and reinsurance, the turnaround of ergo, and savings. Every year, if you look on slide five, every year we report on how natural catastrophes are developing. In our most recent report on the year 2020, we again highlighted that climate change is coming with ever higher costs. Weather-related natural catastrophes become more frequent and more severe. In this context, we are a proven partner of our clients with expertise and, in many cases, large or even very large insurance capacities. The message that we would like to add again now, today, is that in addition to all that, with our climate ambition announced two months ago, we are also committing ourselves to targets in line with the Paris Agreement. Our targets are science-based. They are very concrete, they are binding, and they are measurable. Just to recall, We are committed to net zero without exception in all areas. So firstly, on the investment side, and not only net zero in 2050, we commit to five-year milestones. The next one in 2025, we will have reduced our carbon footprint by at least 25%, maybe slightly below 30%. Secondly, that ambition is the same on the liability side, net zero by 2050. Of course, but we will be out of thermal coal business already by 2040. And that business footprint, we will already reduce by 35% points in the five years to come. And also, with regard to oil, and gas, we start reducing that footprint by 5% at a lower pace because systemically these energy sources are still very important as science suggests. So you will see we will be out of the business with explorers and producers of fossil energies at the latest by the point in time when science suggests that those fossil energies are no longer compatible with Paris 2050. So we hope that this good example is a good example for other industries and companies to follow for the sake of climate. change or climate protection. And thirdly, of course, we also have a net zero emission with regard to our own emissions from buildings and from traveling, et cetera. We have reduced that dramatically already the last 10 years by little less than 50% CO2 emission per person. We're going to reduce it by another 12% in the five years to come. We will be net zero by 2030. Let's move on. A systemic risk like COVID-19 poses many challenges to risk management, of course, because too much of this risk can be can be poison and undigestible, but also to business continuity. And with regard to both aspects, we can be very satisfied with how we have dealt with the pandemic. Although the COVID-19 losses are material for the whole industry, including ourselves, they are well manageable and they are digestible. And at no point they have weakened our capital strengths so that not only we pay a dividend, but also benefit from current growth opportunities. Let me move on to the 1.1 renewal in reinsurance. We have taking the opportunity of the hardening market to grow further in pnc prices have increased as you know risk adjusted so margin improving by 2.4 percent in 2020 and in 2019 january renewals those rate increases were then only 1.2% or 0%. So you see the trend increase in the rate development. And we've seen the strongest increase in the property XL business, so non-proportional property business, as well as in particularly loss-affected businesses. In these areas, often, double-digit, and in some cases with very large capacities, deeply into double-digit increases. In all other areas, I would say across the board, single-digit rate increases. And as planned, we seized this opportunity and were able to expand our business by 10.9% in terms of premiums so that we can say we are really pleased with a really good renewal, which fully supports the target combined ratio as we have communicated it for this year, 2021. And if you allow me, the outlook for the 1.4 renewal and the 1.7 renewal this year should be even better because those renewals typically are NATCAT heavier, but we will see when we come there. Slide 8 shows the regions and the lines of businesses and how they have seen rate changes and how we could leverage these rate changes for business growth. I think what becomes obvious is that In no region and in no line of business have we seen any rate deteriorations. This is different from previous years. And to us, this is another good sign of markets hardening. With regard to investments, Christoph is going to give you some more details in a moment. However, I'd like to just take this opportunity to reiterate that not only was the 2020 investment result very pleasing with a return on investment of 3% and a difficult year with ups and downs, but also I'd like to reiterate that the investment strategy in place has the power to partially counterbalance the yield erosion, which is the consequence of declining interest rates, while we are not increasing our appetite for market risk. All in all, the path we took three years ago has had a very positive impact on our total shareholder return. In the three years since 2018, the TSR has increased by more than 50%, and compared to our peers, this was first best. We will work hard that the five years ahead of us will hopefully look similarly positive. And then you have the slides 11, 12 and 13 in your deck, which are repetition, if you like, from our investor day presentation last December. What they are saying in summary is that this year, 2021, the expectation of delivering a 2.8 billion euro result means that we will be already back at the pre-corona earnings level this year. We will maintain our capital strength. We have strengthened the growth elements of the proven strategies at Ergo and in reinsurance. And as a consequence, we expect growing earnings and returns on capital on equity of 12 to 14%. and we aim for an average annual dividend growth per share of at least 5%. And with this introduction, I'd like to hand over to Christoph.