Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

to Munich Reef Q2 earnings call. Today's speakers, as announced, Joachim Wenning, our CEO, with a presentation. Afterwards, there will be ample opportunity for Joachim.

Christian, ladies and gentlemen, good morning. After the first half of the year, we see strong performance across all lines of business. In P&C reinsurance, we continue to navigate in a favorable environment with highly attractive rates. We have taken advantage of the further hard-earned market. We find ratio is way better than our full-year ambition for 2023. Our life and health reinsurance posts an excellent total technical result, well ahead of the pro rata full year guidance, and Ergo continues to be a very reliable earnings contributor. In terms of return on equity, we are already at the upper end of our targeted range of 14% to 16% for the group, but also for each of the Our ambition 2025 trajectory is based on sound underlying development, but additionally it benefits from a longer than anticipated favorable pricing cycle. And I'd like to say even if the cycle should reverse at some point, and of course it will, but I don't think so soon, we will continue to deliver. By expanding the earnings contribution of less cyclic businesses like Life & Health 3, Global Specialty and Ergo, we facilitate increasing resilience of our overall earnings going forward. Diligently managing earnings, we aim for a rather steadily increasing earnings path. I'd like to now summarize my key takeaways for each segment, and I start with core P&C reinsurance, where the July renewals have seen a continuation of the upward pricing trend. We posted a fully risk-adjusted rate increase of 5%, which is significantly above the one seen in past July renewals, but also the two renewals on 1.1 and 1.4 this year. Main driver remains NatCat business, which we further expanded across all regions, but we also further improved terms and conditions and did quite some work on wordings and exclusions, etc. As weaker wordings tend to cost some money from time to time, and strong wordings make the business more robust, This to us is an equally important achievement of our underwriting rigor. We are simply not willing to support what doesn't make technical sense and we have seen some evidence of this in quarter two. So we continue to be very disciplined in the casualty lines which are very long tail and we also reduced a little bit our property proportional business, I come to this. And as a result of this business shift, business makes shift from proportional to non-proportional, we have reduced premiums by almost 2%. Taking then a closer look at lines of business, it is striking that NatCat provides increasingly attractive margins. I'd like to repeat, now is the time to grow this segment, and we are prepared to do so and seize opportunities. For the other lines of business, the picture is slightly more differentiated. Consistent with our approach in recent years and against the backdrop of social inflation and the like, we have further reduced our exposure to proportional casualty business. And in property, we have given priority to non-proportional structure. All the remaining lines of business are doing really good. In our eyes, the favorable market environment will not only sustain into 2024, But I'd like to make a bold statement. It will probably sustain into 2025 as well. Now, we don't have the crystal ball and nobody can really know and predict this. And nobody knows what the actual large loss is going to be, how they impact the cycle, how the capital markets might or might not impact available capacities. However, beside those effects that always will be there, there is simply too much ongoing uncertainty around in the market and too much to still catch up to worry about rates broadly decreasing. So I give you examples. Take the personal lines business. Everybody would agree that there is something more to do. Just take motor business in many of the international markets. It's obvious. But then there is climate change and related losses. Whether the big, large ones or the more local ones, it's obvious that losses practically have doubled in recent years. And this trend will not become cheaper if at all, but will become more expensive. Insurance gaps are still high even in established markets. To the extent that they will close, this is further demand. The cyber market. There is not too many risk carriers offering their capacity. Inflation is somehow lower, yes, but it's still very much there. So I also don't see any easing at this front. And social inflation driven by US litigation industry drives rates up and up or coverages down. I could add more points, but those define our position that we don't see the positive trend changing any soon. Then within P&C, you know that we're working on extending our specialty business. That's why we have bundled this under the lead of Mike Koerner. We seek for synergies in the areas of underwriting, claims, sales, and operation. This has been worked on. We expect this segment to grow by 25% to around 10 billion primary income by 2025. And the combined ratios should end up in the low 90s. In life and health reinsurance, earnings are developing rapidly. Much better than anticipated, total technical result is expected to exceed 1 billion by 2025. On the one hand, this is supported by IFRS 17 because the business profitability is crystallizing much better and earlier than under IFRS 4. But at the same time, and more importantly, the underlying performance of our business has improved materially. I come to ERGO, which has delivered an exceptionally strong net result of $470 million in the first half, way more than 50% of the full-year guidance. I'd like to say that going forward into 2025 and thereafter, there is even more earnings potential than the $700 million annually. We are confident that ERGO management will get there step by step, as evidenced in the last six years. In addition to the favorable insurance market environment, we are experiencing some tailwind also from higher interest rates in the capital markets. We are currently reinvesting new money at almost 4.5%, so much better market conditions than just a year ago. And in essence, we use three major levers. some technical shorter term positions like higher investments in high yielding assets and or taking some currency positions like very recently increasing our US dollar position which we had reduced towards the end of last year. But then another reason is of course that we are constantly expanding our investments in the alternative sector thus liquidity premiums. And the third lever is that we are also open to mandating the asset management for high parties that outperformance. Let me summarize. Munich Re is in very good shape to further increase earnings. demonstrated in the last renewals we have absolutely no constraints to deploy capital in the hard market and profitably expand our book. But we don't do this blindly, we do it consciously, nothing for growth's sake, as evidenced in the July renewal. We are leveraging our superior underwriting qualities to safeguard profitability and diversification. At the same time, Our shareholders participate via growing dividends and by share buybacks. The result can be seen in the leading total shareholder return against our peers, now for the second time in row number one. This brings me to the end of my presentation, concluding the 2023 outlook, which as you can see is unchanged compared to our last announcement in May. Some of the KPIs might look a little bit conservative from today's perspective, as we have already achieved 60% of our net earnings target. So I would agree to this view, and no doubt the likelihood of achieving or even surpassing our financial targets in 2023 has further increased yet, cautious and mindful of the hurricane season still ahead, there is still to us no sufficient reason to adjust guidance now. With that, I'd like to hand over to Christoph for his guidance.

Thank you, Joachim, and a warm welcome also for myself. As always, I will not go through the presentation, but just kick off the Q&A with my personal remarks. I'd like to provide you with some more color on Q2 results to begin with. This time, the story of the second quarter is really quite straightforward. Our technical performance in all fields of insurance business continues to be very strong, while the investment result was dampened by losses on fixed income. We posted a very solid net income of almost 1.2 billion euros, which, by the way, is very close to the analyst consensus. On a personal note, I think it's impressive how well you guys have managed to estimate our earnings. You obviously did a lot of homework on IFRS 17, like we did, which makes me very optimistic that you join me in appreciating the higher amount of transparency and predictability IFRS 9 and 17 offer compared to the old regime. We will continue to provide you with detailed explanation necessary to thoroughly project and analyze our earnings. Now coming back to the Q2 numbers, Munich Re exceeded almost all KPIs and Borata financial targets, with the exception of the ROI of 1.1% in Q2, which was clearly below our guidance. And here the Q2 result was negatively influenced by two management decisions, aiming at a steadily increasing future earnings trajectory and as much as possible dampened volatility, both in reinsurance and as ergo. First, management decision affects investments. It's reflected in the comparably low ROI. In reinsurance, we decided to reallocate funds in our fixed income portfolio, realizing losses of around 300 million euros, thereby increasing future investment income. Similarly, negative fair value changes from interest rate derivatives in agri-life and health Germany will also lead to a higher investment result going forward. Without these two effects, the investment result would have been more than twice as high and would have fully met the guidance. The second management decision affects P&C reinsurance and Ergo P&C. In these two segments, we used the opportunity of higher-than-expected discount benefits to book more prudent best estimates results. We'll come back to that. Despite all the mentioned measures, After the first half of the year, MiniGree is well ahead of its pro-rata 4 billion 2023 net earnings target, reflecting an excellent underlying performance. Now turning to the segments and business fields one by one, and let's start with reinsurance. Life and health, total technical result of 325 million euros in Q2 was again above the pro-rata annual ambition. The release of CSM and risk adjustment was in line with expectations. Experience variances on aggregate were largely neutral, with negative U.S. mortality compensated for by positive variances from the remainder of the portfolio. The prudent booking of certain short-term group and health business had some negative impact booked in the on-risk contracts line. Total technical result would have been significantly higher without negative currency effects reflected in the result from insurance-related financial instruments. Consider this an accounting mismatch. Related FX hedging activities are recognized in the currency result. On an underlying basis, our FinMori business continues to grow and to perform very successfully. GSM in life and health re-stands at 10.5 billion euros. This is a small decline compared to the year end, driven by a shift from CSM to the risk adjustment as a result of an annual parameter update, as already seen in Q1, so that's not new. The CSM and the risk adjustment represent future profits. We do not expect any margin deterioration from a shift from risk adjustment to CSM or the other way. CSM from new contracts is reflecting a new business generation which was particularly pleasing in North America in the release through P&L. In P&C reinsurance, we continue to strongly expand our business. Revenues increased across the board by 9% in the first half of 2023. In Q2, we posted a very good combined ratio of 80.5%. Major claims amounted to only 9.3 percentage points, clearly below the average expectation of 14%. 200 million euros, the flood in Italy was the single biggest loss for Mini Green. Against the backdrop of a quite active nut-cut quarter for the industry, specifically in the US, this large loss result bears testimony of our prudent underwriting. Underlying performance, remains sound as we earn through the margin improvements of the recent renewals. The normalized comment ratio of 86.2% is fully in line with our guidance. Already in Q1, we again used the high 8 percentage points discount benefit to cater for claims uncertainty by prudent basic loss bookings. The increase of the normalized comment ratio versus Q1 is a reflection of the even more prudent loss picks in Q2 compared to Q1. In primary insurance, Ergo delivered an exceptionally strong Q2 net result of €250 million, which leads to a very high half-year net profit of €470 million. Starting with German Life and Health, the net result amounted to €72 million in Q2. In addition to a strong contribution from the Life Back Book, The result of PAA business exceeded the level achieved in Q1, driven by a very pleasing development of short-term performance. In P&C Germany, we achieved a very good technical performance with a pleasing combined ratio of 84.7%. This number includes a high discount effect of 3 percentage points, which we, as we did in reinsurance, used for a prudent reflection of downside risks in the basic loss ratio. Isolated second quarter with 88.1%. Combined ratio was pleasing, supporting a good net result. Again, benefited from the seasonality of acquisition costs, and again, lower than expected major losses, contributing to an H1 major loss level significantly below expectations. Let me quickly explain the acquisition cost topic. For the PAA business, the IFRS 17 standard allows to fully recognize the acquisition costs as expenses when they are paid out. This leads to seasonality, especially for the motor business, where the majority of sales and renewals happens in Q4. Therefore, the acquisition costs will increase significantly in the fourth quarter, leading to a much higher combined ratio in that last quarter. And as a consequence, in assuming a normal large loss level, we of course expect P&C Germany earnings to be substantially lower in the second half of the year than in the first half. The international business of Ergo saw a strong operating performance and benign large loss development in P&C. Compared to the first quarter, the Q2 combined ratio improved to 88.1%, with particularly good combined ratio in Greece and in Poland. The total technical result was also supported by the CSM release on an expected level and a €30 million one-off release of claims reserves in life and health. The segment net result came in at a very strong level of €116 million. A few remarks only on capitalization, which remains very strong according to all metrics. The group's economic position is particularly strong with a solvency 2 ratio of 273% at the end of Q2 due to good operating earnings and lower capital requirements from active risk and capital management in P&C reinsurance, including a recent issuance of a cut bond. Joachim mentioned the outlook already. I can only reiterate what I said at another occasion already. We do not want to wake any hurricanes by raising our outlook too early. So let's wait and see how Q3 develops. And in any case, we'll continue to diligently assess and, where beneficial, also implement measures to support a reasonable earnings trajectory going forward. That's it. Then also from my side, Joachim and I, we are looking forward to all your questions. But first, I'll hand it back to Christian.