Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

Welcome to the Analyst Investors Call on Annual Results and January Renewals Conference Call and Live Webcast. I'm Moritz, the Callers Call Operator. I would like to remind you that all participants will be in the listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christian Becker-Husson. Please go ahead, sir.

Thank you, Moritz. Ladies and gentlemen, good morning. Welcome to our call on the full year 2024 earnings and 25 January renewals. I think I don't have to introduce today's speakers. Joachim Benning, our CEO, and Christoph Jureka, CFO of Munich Reek. Same procedure as every year. Joachim and Christoph will kick it off with their remarks. Afterwards, there's plenty of opportunity for Q&A. So, Joachim, please.

Thank you very much, Christian. And ladies and gentlemen, welcome to our conference today. 2024 was again a very successful year for Munich Reef. Thanks to strong operating performance across all segments and a pleasing investment return, we have clearly exceeded our profit target with a net income of €5.7 billion. Uncertainty triggers demand for solutions, making our clients more resilient. As we have not been observing any significant inflow of new capacity or new capital into the reinsurance space so far, We remain confident that the attractive market environment will continue to prevail. And we want our shareholders to participate in our strong financial performance, so we decided to substantially increase the dividend per share by 33%, proposing a dividend of €20. In addition, we continue with share buybacks, also on a larger scale, of €2 billion until the AGM next year. Looking at the achievements of our current ongoing ambition 2025 so far, we delivered or even over-delivered on all our targets. In terms of return on equity, we are noticeably ahead of our target range of 14% to 16%. This is well above our cost of capital, so we create substantial value for shareholders. And we have, of course, seized opportunities of an attractive market environment. Our solvency to ratio continues to be well above the optimal range. Now, while this is a happy problem and protects us against adverse developments, we don't want to sit on excess capital. Therefore, we are committed to further deploying capital into attractive markets, yes, but in addition to repatriating a substantial share of our earnings to bring excess capital down over time. The chart that you can see on slide six summarizes the journey of our ROE improvement. Taking the rather mechanical impact of the accounting change to IFRS 17 aside, there are fundamentally three levers. Underwriting? Here we achieve both. Business growth by doubling our premiums in reinsurance and margin improvements. The second driver is investment income. There is a passive element of just benefiting from increased interest rates, as everybody else as well. But in addition, we have accelerated this tailwind through active investment management, increasing the return contributions. Shareholders' equity, third point, increases with growing earnings, naturally. And to manage capital efficiently, we are returning a significant portion of the capital built up. So in the following slides, I will dig a little bit deeper into these three dimensions. But I start on slide seven with a new reporting segmentation as from this year on. As global specialty insurance has grown significantly, already accounting for more than 30% of P&C reinsurance premiums, we decided to make it a separate segment. This provides more transparency on our earnings drivers, in particular as regards the share of less cyclical and less volatile business segments, which has been growing significantly over past years. Already today, the net profit of ERGO and the net profit of life and health reinsurance fully finance our annual dividend payment. So we are in a comfortable position to manage the reinsurance cycle more rigorously than ever. Global specialty insurance is a fast-growing segment and is expected to stay so. We are steering the unit as one unified specialty business and are leveraging its platform to realize synergies in multiple ways. We are harmonizing processes and systems, we strengthen distribution relationships, and we share, of course, data, risk insights, and best practices across the specialty insurance units. We are also focusing on managing P&L volatility of the unit as a whole. Over time, we should see it gradually decreasing. The financial track record of global specialty insurance is remarkable. The business has been growing organically by more than 10% every year. Attractive market opportunities for example in select US casualty business and personal property, are expected to continue to fuel growth in 2025. An underlying performance is sound, while also impacted by major losses in single years. What can you expect from the specialty insurance units in this year? In our niche personal lines business, written out of American modern, where there is elevated weather-related loss potential, we have adjusted our pricing and risk-of-action criteria. And additionally, underwriting actions taken last year already will earn through 2025. In Hartford's steam boiler, continued solid growth and strong profitability are provided through exceptional customer service and innovative solutions. In our North American commercial small and mid-market business, elevated loss trends are driving good rate environment, and we expect continued growth, in particular in the US surplus lines market. Munich Re specialty global markets, so covering everything beyond North America, Here, business growth is expected to slow a bit in the London market, partially offset by growth in additional geographies outside the UK. And this brings me to the January renewals in P&C reinsurance, which had a really good outcome in an ongoing attractive market environment. High profitability levels were largely sustained, the slight price decline of 0.6% is, as always, fully risk-adjusted, considering most recent loss trend assumptions, as conservatively as we have been doing all the time. Specifically, against the backdrop of somewhat moderating price dynamics, the high degree of diversification in our portfolio is paying off. We could hold on to improvements of terms and conditions achieved in last renewals, and this is important. While this is not fully captured in the price development and cannot be, it continues to maintain the high quality of our portfolio. So this includes wording improvements as well as exclusions and clearer coverage definitions, but also high attachment points of course make the portfolio more robust. Rigorous portfolio management, rigorous cycle management means being serious about giving up business when required. We deliberately reduce business which did not meet our risk return requirements. Partially this could be offset by selective growth in other areas, On an aggregate level, volumes declined by 2.4%. I'm on slide 12. Let's there have a look at the single lines of the P&C business in more detail. The chart nicely shows that we quite consistently gave up business with negative rate changes and expanded business with positive price momentum. The market environment in NatCat continues to be healthy with attractive margins. In some European markets, we increased the exposure. In other markets, we reduced business if rates were not adequate. In property proportional business, we actively managed the portfolio. Overall, we slightly reduced business. We gave up some businesses and added some other new businesses. More importantly, overall, we could improve the portfolio mix, leading to better margins. Our cautious assumptions as regards lost cost trends become obvious when looking at the development per casualty sub-line of business. In particular, in casualty proportional, ex-motor, our prudent inflation expectations more than offset nominal rate increases. Hence, we substantially reduced exposure to these casualty lines, especially in the U.S. And this also includes cyber business, where we remained steadfast on our view on accumulation risk or on excluding systemic risk, to be more concrete. In motor proportional, on the other hand, volume increase driven by growing original rates and by seizing selective business opportunities. In life insurance, earnings continue to develop much better than anticipated. The technical result has grown strongly. In 2024, all earnings drivers worked in our favor. and the underlying performance of the business has improved noticeably. The exceptionally strong new business growth has benefited the contractual service margin, which has increased to 14.5 billion euro, and you know thereof around 7% will be annually released into earnings. Ergo, share the continued successful development further increasing its net result and meeting its guidance. This was driven by both the German and the international business. In Germany, Ergo achieved a top-line growth of 2%. In P&C, they focused on lines of business with attractive margins. Hence, Ergo has a significantly lower share of motor business than the market. together with sizable price adjustments and better claims cost control through network expansion of car repair shops, helped to keep the combined ratio at a very good level. In international, Argo achieved very pleasing results. In Europe and Asia, top-line growth was above market, particularly so in India and Thailand, as a consequence of organic business expansion, price adjustments, and M&As. Overall, we are very confident that Ergo continues to be a reliable deliverer of good results to the group. I come to the investment results, and on this side, we are experiencing tail-in from higher interest rates, as said in capital markets, which enables us to increase sustainable investment income. We reinvested new money in 2024 at around 4.4% and currently we are reinvesting at 4.2%. However, we are also actively managing our portfolio to earn a spread in excess of high interest rates only. For example, by reallocating funds to higher yielding asset classes, as well as by exploding opportunities in the currency and equity markets. And a more longer-term strategy is to earn us an illiquidity premium by continuous expansion of so-called alternative investments. With regard to capital repatriation, slide 17, I can say that over the last 10 years, Munich repatriated 24 billion euro, or around 85% of its net earnings. Dividend growth is particularly close to our hearts. As you know, we have a track record of more than 50 years not cutting the dividend, even in dire times. And after raising the dividend by around 30%, For 2023, we take another big step in the same order for 2024 and will propose a dividend of 20 euros to the AGM. To manage excess capital, we continue to make use of share buybacks. Following on from last year, we are once more increasing the amount by 500 million to then 2 billion euros. As regards our non-financial targets, you can see on slide 18, we are making steady progress in all three core dimensions, assets, liabilities, and own operations. And on the social dimension, we set ourselves a target of achieving 40% share of women in leadership positions across all geographies. And the group, with 39.5% 5% end of 2024, we are almost there. Over the last four years, starting Ambition 2025, Munich Re significantly outperformed almost all its European primary insurance and reinsurance peers, with a total shareholder return of 135%. We have the capital strengths and we have the financial flexibility to grow our business, increase the dividend, and execute share buybacks at the same time. This brings me to the end of my presentation. We are heading for a net result of 6 billion in 2025, which is 20% higher than what we had initially targeted for 2024. Christoph will now lead you through the financials in more detail.