Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

Good day and welcome to the Munich Re half-year financial report 30th of June 2021 conference call. Today's conference is being recorded and at this time I would like to turn the conference over to Mr. Becker-Hassan. Please go ahead, sir.

Thank you, Simon. Ladies and gentlemen, dear friends, good afternoon, good morning, wherever you are. A warm welcome to our conference call on Munich Re's second quarter 2021 results. Pleasure to have you all with us and very happy to welcome our today's speakers, Joachim Wenning, our CEO, and Christoph Jureka, Munich Reef CFO. The two gentlemen will start this call with a short statement based on the slide deck we provide on our website. Afterwards, there will be ample opportunity for Q&A, as always. And with that, I hand it over to you, Joachim.

Thank you, Christian, and good afternoon, everybody. Thanks for joining the conference, and I hope you're all doing well. Let me talk you through some important achievements of Ergo and reinsurance in the first half year on the way to meet our 2021 group earnings commitment. Ergo had a good start into the first year of the five-year ambition 2025. Top line shows strong growth in Germany and internationally . In Germany we are seeing strong new business development both in P&C and in life. And the hybrid customer approach responding to on and offline needs of customers has been effectively supporting this good business development. The strongest growth at Ergo International could be seen in P&C in Poland and in the health business mainly in Spain. So Ergo bottom line shows very strong numbers so far. As expected, various initiatives targeted to continuously increase the level of process excellence in Germany and abroad contribute to further improve efficiency And the technical quality of the business remains remarkably strong with stable and attractive combined ratios despite above average major losses. On the reinsurance slide, I'm on slide six just in case, in life and health, we continue to grow our portfolio and key contributors are a strong new business development in the U.S., and ongoing growth in our financially motivated reinsurance business. And I should also mention the interesting acquisition of Group Health. Group Health is a leading TPA in the Canadian group life business, allowing us deeper and broader access into a, what we consider, low-risk, high-return market. And beside that, it's really a shame we cannot see the beauty of the life and health reinsurance development due to ongoing COVID losses, which are affecting this line of business. On the P&C reinsurance side, we seized the tailwind from a hardening market environment by substantially growing both our core and the risk solutions business. Growth currently is clearly double-digit, and we are actually leveraging our leading market position. However, we aren't rushing. While strongly expanding in attractive markets, we are more reluctant and more selective in other areas, like US casualty. At the same time, we are paving the way for future growth, by creating and developing new business opportunities, in many cases based on digitalized models. And of course, I should not miss to add that the investment results have been very strong with attractive returns on investment. In addition to that, Our captive asset manager, Merck, is also progressing well with regard to their TPA and third-party asset management business. It's been growing and Morningstar rankings show Merck in top positions compared to their peers. So bottom line, insurance, reinsurance, and investments altogether have contributed to a strong first half-year result of €1.7 billion, totally in line with our 2021 earnings commitment. On slide 7, I would now turn our attention to the 1.7 renewal experience and results so far. Overall, the price change for our book was 2%, plus 2%. As always, fully risk-adjusted. We benefited from this by growing our book by 11.1%. The most powerful impact was observable in the US, there practically in all lines of business, in casualty due to social inflation and low interest rates, and in property due to cat losses. Outside the US, so in Latin America, And in some Asian markets, we also saw rate increases driven by loss experiences. Against this background, Europe showed the mildest price momentum. Our takeaway from this renewal, or I would say from all the renewals in the course of this year, is that the trend of rate increases is unbroken. We do appreciate this. in some areas by improving the technical margins, in other areas by compensating for interest rates and loss inflation. However, it's also true that in the... With close to a billion of US dollar of cyber premium income, we have a global market share of close to 10%. Despite the various attacks with high media attention, and primarily since the outbreak of the pandemic last year, our cyber performance is still fully in line with our expectations. Their impact on us was very limited and Compensated by price increases, we are well on track to achieve 85 to 90% combined ratio going forward. And going forward, we would also expect demand to grow faster than available capacities. This should create further momentum to increase transparency provided by clients and customers and improving terms and conditions. We will prioritize our capacities towards those areas where diversification is the highest, wording is the strongest and interest alignment the most pronounced. We regard Munich Re as key driver to further foster resilience throughout the global cyber market and to accomplish this we will continue to further invest in expertise, technologies cyber services and cyber partnerships just a few comments on inflation as well slide 9 the consumer price index has indeed increased recently starting in the us and then with a delay and probably at lower levels in other regions like europe as well but we aren't worried about it first many lines of business and it's true also for the shorter-term property reinsurance businesses. Second, in P&C business, in many cases, index clauses are protecting against inflation. Third, in new business, we always price for the most recent trends. And fourth, with regard to the back book, we are broadly hedged against consumer price index through inflation bonds. That said, CPI, however, has only limited significance in insurance. There is more specific phenomena like medical inflation, social inflation, and others, which can matter more or less. We take all of these factors regularly into account when it comes to adjusting our pricings and reviewing our reserves likewise. Plus, we have additional hedging potential available on the asset side through asset classes like real estate, infrastructure invest, equities and others. With slide 11, I would like to miss mentioning ESG. I should remind you of our non-financial ambitions 2025, above all our climate ambition 2025, and our social ambition to have 40% female managers by 2025. The necessary governance to reach all of this is set up. and respective execution and monitorings are taking place. And I think that we will report our progress probably on an annual basis and probably starting next year. Yet, I'd like to highlight already today that we are well on track to also reach our non-financial targets. Finally, a quick look at the outlook 2021, slide 12. With 1.7 billion euro in the first six months, we have already earned 60% of the earnings commitment. From a growing book of business, we believe that 2.8 billion earnings this year is still doable and we are fully confident. This view has not changed. Ergo and reinsurance have grown their top line to now €58 billion, €1 billion more than what we indicated last quarter. And the recent flood event in Germany and the neighboring countries in the Netherlands, Belgium, France and Austria will probably mean a mid-three-digit million euro loss burden to us. Still all in line with our expectations for the €2.8 billion result in 2021. I do not want to miss to express my deep sympathy with all people and families affected by this terrible catastrophe and thank for the immediate and extensive support and solidarity from all corners of our society. And with this introduction, I'd like to hand it over to Christoph.