Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

Good morning, everyone, and welcome to Munich Re's analyst and investor call on our full year 2025 earnings. As announced, today's speakers are Christoph Jureka, our CEO, and Andrew Buchanan, CFO of Munich Re Group. Both gentlemen will start with their main messages before we go into Q&A, and it's now my pleasure to hand it over to Christoph.

Thank you, Christian, and good morning also from my side. Let me briefly recap our ambition 2025, which concluded last year. It has been a great success marked by strong progress year after year. Over the five-year period, we more than doubled our net earnings. We also significantly increased our return on equity to 18.3%, an exceptional result compared with industry peers and clearly above our cost of capital. This success was primarily driven by disciplined underwriting and active investment management based on our strong client orientation and the excellent capabilities of our employees and business partners worldwide. We created substantial value for our shareholders who participated in this success to a significant extent. Dividend per share growth was even higher than the increase in earnings per share. Ultimately, both metrics grew at nearly four times the pledged 5% per year. And what's more, we remain very comfortably capitalized despite materially increased capital returns. And this gives us considerable strategic flexibility as we embark on our new multi-year strategy, Ambition 2030. In short, Ambition 2025 successfully accomplished. We over-delivered on all targets by closing with another record year for Munich Re. And thanks to strong operating performance across all segments and a pleasing investment return, We even exceeded our profit target for the fifth consecutive year. Net earnings increased by almost 8% to 6.1 billion euros. And our result would have been even higher had we not deliberately strengthened our balance sheet and future earnings power. We could implement these measures without compromising financial targets, enhancing our resilience in an environment shaped by geopolitical tensions, by capital market volatility, and by continuously increasing insurance risks. At the same time, we want our shareholders to once more participate in our strong financial performance. We have decided to increase the dividend per share substantially again by another 20 percent to 24 euros. Additionally, we continue with share buybacks also on a larger scale of 2.25 billion euros until the AGM next year. Altogether, we will return almost 90% of our earnings, very much in line with our commitment for our ambition 2030. This strong capital return is well supported by earnings contributions from beyond the more cyclical P&C reinsurance segment. While this segment remains our largest earnings driver, the combined contribution from GSI, from Liferay, and from Ergo was nearly as significant and covers the dividend to a large extent. So our highly diversified business model is paying off. Our combination of a global reinsurer and primary insurer at scale gives us a competitive edge in maintaining the high profitability throughout the cycle. Before I delve into the specifics, allow me to provide a high-level overview of our segments. Global specialty insurance has been growing for quite a while. We focus on structuring the portfolio in such a way that it generates robust and increasing returns in attractive specialty insurance markets in the United States and increasingly worldwide. Life-free insurance has delivered a strong earnings trajectory over the past years. A well-performing in-force book, free of legacy issues, and strong new business growth have been the key drivers. Ergo continues to deliver like clockwork. With a rising earnings share from international operations, the business is becoming more diversified. Taking together these segments make us less dependent on the P&C reinsurance cycle. At the same time, P&C reinsurance continues to be the strong backbone of Munich Regroup. The rising contribution from our non-PNC reinsurance segments, however, allows us to manage the cycle with discipline and achieve still attractive profitability levels. And this brings me to the January renewals, which had a good outcome given price competition. Despite abundant capacity in the market, the discipline regarding terms and conditions was steadfast. The high quality of our portfolio was maintained with largely unchanged terms and conditions, as well as structures. The main battleground in this renewal was on pricing, reflected in a price decline in our portfolio of 2.5%, still within the range of our expectations. As always, this price change is fully risk-adjusted, which means conservative inflation and other loss-trend assumptions as well as model changes are taken into account. Either way, coming off very high levels, the margins remain healthy. Consistent with our underwriting DNA, we were prepared to walk away from business which failed to meet our risk-return requirements. Selective growth in certain casualty markets and in credit business offset this only partially. Overall, we actively reduced our renewed 3D volume by nearly 8%, with around three-quarters of the decline driven by proportional business, which has limited impact on the bottom line. Now, looking at the individual lines of business, the bubble chart on slide eight clearly illustrates our consistent approach, protecting technical pricing adequacy by giving up business where necessary. Rigorous underwriting and strict portfolio management remain essential to safeguarding attractive profitability. After several years of steady rate increases, pressure was greatest in property XL and primarily in not cut. Prices declined by 6%, yet margins remain attractive, similar to levels seen three or four years ago. Still, to maintain high returns, we gave up a meaningful amount of business. Proportional business showed a more mixed picture. We reduced positions that no longer met our criteria, while selectively expanding in areas such as casualty in Europe and Latin America. Let's now turn to global specialty insurance. Bringing our specialty insurance operations under one roof is paying off, increasingly recognized by clients and brokers alike. GSI benefits from a large diversified portfolio across specialty lines. While still US-focused, further international expansion will enhance diversification. As regards bottom line, GSI achieved an excellent performance in 2025. To some extent, this was supported by below average major losses. But even more so, it was the result of very strong underlying performance of all business units, while strictly adhering to our prudent reserving practices. Building on this success, we continue to emphasize on underwriting and claims excellence. This is the basis to effectively manage the different cycles in specialty markets and manage P&L volatility in the portfolio. At the same time, maintaining cost rigor remains an important lever to deliver on the combined ratio targets. GSI has grown top line by roughly 10% annually in recent years. In 2025, growth continued but was dampened by a weak US dollar. Looking ahead, I expect compound annual growth of 5% to 9%, while always prioritizing profitability and underwriting discipline. Turning to Life & Health Week, which has reached a significantly higher earnings level compared to the start of Ambition 2025. Strong new business momentum continues to support the CSM which now stands at above 15 billion euros despite adverse currency effects, an impressive increase of roughly 40% since its introduction at the end of 2022. With around 7% release to earnings annually, this creates a predictable income stream for many years to come. More recently, significant tailwind came from large transactions, The global life and health reinsurance market is rapidly transforming, expanding from traditional biometric reinsurance into transactional business. Since 2022, large transactions have pushed new business CSM and operating changes by more than 3 billion euros. And we are anticipating a healthy pipeline also going forward. In addition, a significant share of the positive business development came from Thin Marie business. And additionally, we see good opportunities to expand our longevity business in the course of Ambition 2030. This year, we expect the total technical result to increase by more than 10% to 1.9 billion euros. I would like to conclude my remarks on the segments with Ergo, which once again met its guidance with strong net earnings. The German business continues to deliver profitable growth. Adjusted for the one-off impact of the German corporate income tax reform, also the earnings improved. In P&C, the top-line momentum paused as Ergo prioritized technical performance improvements. Among other measures, one focus was on improving the profitability of the motor business. These efforts are reflected in the strong combined ratio of 89%. Life and health also performed well. Technical profitability improved, while the runoff of the life back book and migration to the new platform continue as planned. Ergo's international business is growing faster than its German operations, with dynamic improvements in both revenue and earnings, organically and through acquisitions. The segment now accounts for 30% of revenue, and this share continues to rise. With the acquisition of Next Insurance, Ergo expanded its international footprint to the world's largest insurance market, the United States. Entering the US small and medium enterprises market provides very attractive growth opportunities, while at the same time giving us access to purely digital business models and underwriting processes. The unit is developing exactly as expected, both financially and operationally. Despite strong expansion, we maintained an attractive combined ratio. Altogether, Ergo's domestic and international developments give me great confidence in its contribution towards our ambition 2030, always based on technical excellence and on rigorous cost control. Beyond the insurance business, capital markets continue to provide tailwinds. Investment income is gradually rising as we reinvest at attractive yields. We aim to unlock additional earnings potential through active investment management. And we closely monitor financial markets to capture short-term opportunities. In 2025, we deliberately accepted $0.8 billion in disposal losses in the reinsurance fixed income portfolio to shift capital into higher-yielding assets. And we also captured opportunities in commodities and in global equities. Over the longer term, we continue to build exposure to alternative investments to earn illiquidity and complexity premium. Our ambition is to meaningfully increase the contribution from active management to our return on investment. In 2025, this approach once again paid off, adding more than 30 basis points to the group ROI. Importantly, we do not intend to materially increase our risk appetite going forward. When presenting Ambition 2030, we emphasized capital repatriation as a key lever in managing capital efficiently to support our return on equity targets. In this respect, dividend growth is particularly close to our hearts. Over the past five years, our dividend per share has more than doubled. Munich Re has not cut its dividend in over 50 years, even during crises. Following a more than 30% dividend increase for 2024, we now propose a further 20% increase for 2025. Thus, the dividend increase again surpasses earnings growth, underscoring our confidence in the sustainability of our earnings and future dividend potential. This confidence is strengthened by the high share of earnings coming from less volatile, less cyclical segments. We will also continue to use share buybacks as a flexible capital management tool. Following last year's increase, we are again raising the amount to 2.25 billion euros. We have also exceeded our Ambition 2025 non-financial targets. We have set clear targets and a roadmap for reducing our greenhouse gas emissions, and we outperformed in all three core areas, investments, insurance, and own operations. The same applies to our social targets. We committed to achieving 40% of women in leadership positions across the Munich Re group by 2025, and we reached 40.5%. Building on this success with Ambition 2030, Munich Re remains committed to further reducing greenhouse gas emissions and strives for balanced teams across all aspects of difference globally. To conclude, We confirm the financial targets for 2026 presented at our capital market days last December, and with a projected net income of 6.3 billion euros, we are again on track for another record result. In line with our strategy, the expected earnings increase will be driven by the less cyclical segments, life and health reinsurance, global specialty insurance, and ergo, while we expect a muted development in P&C reinsurance given the more competitive market environment. And 2026 is also shaping up to be a strong start to Ambition 2030. Our Solvency II ratio remains well above 200%. We clearly deliver the payout ratio above 80%. and net income growth coupled with increased share buybacks should support an earnings per share CAGR of more than 8%. And we enter the new emission period with an expected ROE above 18%. With that, I hand over to Andrew, who will lead you through the financials in more detail.

Thank you very much, Christoph, and good morning to you all, also from me. Indeed, 2025 was another very successful year for Munich Re. Strong financial performance across all lines of business led to net earnings of 6.1 billion euros, slightly above our 6 billion euro target, as you all know and have heard already. In short, a low major loss burden was roughly offset by significant currency losses, while pressure from a lower than planned top line was compensated for by higher investment income. Overall, the result was firmly supported by strong underlying performance across all business segments. I am also particularly pleased with the quality of the result. As we already indicated with our Q3 earnings release, we used the stronger than expected financial performance opportunistically to strengthen the balance sheet in Q4 thus supporting a steadily rising and more stable earnings trajectory. In line with this long-term steering approach, we deliberately realized disposal losses in our fixed income portfolio to support the running yield and further enhanced our claims reserve prudence, placing us on an even more cautious level. From an economic perspective, our Solvency II ratio increased further to almost 300%, driven by the strong operating performance, also reflecting new business growth in life reinsurance and lower capital requirements. At this strong level, we could comfortably afford to increase the dividends substantially. And as you know, we also chose to implement a new higher share buyback program in 2026-27. Before moving to the full year view, let's briefly look at the isolated Q4 results. In light of those balance sheet strengthening measures, which by the way also contributed to somewhat lower ergo earnings, we expected Q4 to fall short of the exceptionally high earnings of the previous two quarters. This was already implied by the Q3 guidance for the full year being maintained at 6 billion for the group. And against this backdrop, net earnings of around 0.9 billion euros for the quarter again benefited from strong operational performance. In P&C reinsurance specifically, underlying profitability remained strong despite a higher headline combined ratio of 85.3% in the quarter. And the underlying movements merit some closer examination. As part of our customary annual reserve review, which you all know about, we reassessed the reserves bottom up. And while our actual versus expected analysis once more confirmed a very favorable overall reserving trend, we used the strong financial performance and also the benefit of lower large losses to further reinforce prudence. And this affected three key components of the combined ratio that I would like to run through with you for a few minutes. Number one was additional prudence in new business. So we booked new business in contract year 2025 at the very upper end of the best estimate range, which overall added roughly one percentage point above the usual level of prudence. And this fully explains the elevated normalized combined ratio, which was 83.6% in Q4 standalone, but more importantly, the full year figure of 80.1%. So about 1% above the 79% guidance. The second category is lower reserve releases. So regarding reserves for basic losses from prior accident years, our cautious response had a similar magnitude of impact as the new business effect that I described a moment ago, resulting in lower than planned reserve releases, only 1.8% in Q4 and 5.0% for the full year instead of the approximately 6% that we usually expect. And then category three is higher manmade losses. So larger manmade losses clearly exceeded expectations in Q4 as we proactively addressed reserve uncertainties that we saw in several long tail casualty lines. And so we built up outlier reserves for these lines. And this, by the way, is what caused the increase in the discount rates to 13% in the quarter standalone, quite a high number. which is about 4% above the typical level of 9% in the quarter standalone, or for the full year, about 1% above the normal level. Now, turning to GSI, GSI likewise benefited from a quiet major loss Q4, producing a better-than-expected combined ratio of 86.4%, and the full-year combined ratio outperformed expectations as well, the 85.9% being a very good number, about one point better than the revised outlook of 87% that we issued at Q3. Life and health reinsurance delivered a positive Q4 performance, meeting the full-year guidance for the total technical result. Biometric experience was favorable, and both the CSM release and the result from the insurance-related financial instruments developed as expected. Turning briefly to Ergo, as mentioned, we also used the favorable claims development at Ergo Germany to strengthen reserve prudency. Overall, the combined ratio in Q4 and the full year met guidance. In the international business of Ergo, the combined ratio was slightly elevated as the pleasing development in major European markets was counteracted by higher claims in the legal protection business and Thailand, as well as the higher combined ratio of Next Insurance, which is now included in the figures for Ergo International. In addition, temporarily higher project costs in several entities and costs for M&A activity impacted the net result. Coming back to group level now and the investment return, overall, we delivered a solid return on investment of 2.8 percent in the last quarter. While we once more incurred disposal losses, approximately 0.8 billion euros across the three reinsurance segments to support future regular income, we also benefited from almost the same amounts in fair value gains, which were mostly booked under P&C reinsurance. The same pattern is reflected at full-year level, so positive fair value changes from supportive capital markets were offset by deliberate disposal losses. And the full-year investment return then, the 3.2 percent, was pleasing relative to our guidance of at least 3 percent. And you will have seen at year-end 2025, the reinvestment yield declined to 3.8 percent, partly due to reinvestment into shorter maturities at lower yields. Now, before turning to the 2025 full-year financial developments of the two business fields in more detail, allow me a few remarks on the top line. You will have seen we missed our insurance revenue guidance for the group of initially 64 billion euros by 3 billion euros. And to a large extent, this was driven by technical factors like currency effects, especially the U.S. dollar, and premium adjustments, including changes in the so-called NDIC calculation, which I remind you does not affect the bottom line and which we discussed already back at Q3. But it was also the result of active portfolio management decisions. deliberately giving up business no longer meeting our return requirements. These effects were almost exclusively limited to P&C reinsurance. Thanks to our strong underlying profitability in all segments, we were able to fully mitigate the top-line pressure and over-deliver on our net income target. Now, as said, let's take a closer look at the full-year financials, this time starting with Ergo. where both segments contributed to the strong bottom line performance and successfully achieved all of their goals. In Germany, the increase in insurance revenue was largely driven by the life and health business, where technical profitability improved thanks to strong contributions from short-term health and travel business. In P&C, the combined ratio remained at last year's very good level, as a benign major loss development together with an improved cost development was used to increase reserve prudence. In contrast, the net profit decreased due to a significant negative one-off in Ergo Germany related to the future reduction of the corporate income tax rate in Germany. On an adjusted basis, if you take out that special effect, the net result increased year on year. At Ergo International, we experienced substantial growth driven by organic expansion, particularly in Poland, Belgium, and Thailand, complemented by the first-time consolidation of Next Insurance and the Norway health business. Profitable growth coupled with a higher CSM release along with favorable claims experience, resulted in a strong technical performance in major markets. Consequently, the combined ratio for Ergo International improved by almost two percentage points. In addition, the net result benefited from a significant one-off positive effect related to the consolidation of Next Insurance. Moving on to the reinsurance business field now, Life and health reinsurance met its guidance with a total technical result of 1.7 billion euros. Performance was strong overall with releases on CSM and risk adjustment in line with expectations and very healthy new business generation. FINMO re-business also developed positively. Experience variances were volatile throughout the year, slightly negative overall, but within the range of expectations. At global specialty insurance, underlying growth was held back by the weakening of the U.S. dollar, but the segment benefited from low major losses and solid reserve releases, resulting in an excellent combined ratio of 85.9%. And with around 560 million euros in net income, GSI contributed very meaningfully to the group result. In P&C reinsurance, the headline combined ratio improved to an all-time low of 73.5%, supported by very benign major losses. Adjusted for additional prudence, the normalized combined ratio was fully in line with expectation, as I mentioned earlier. And this brings me to the topic of reserving. Our reserving position remains very comfortable. High reserve releases were possible despite a cautious reaction to loss trends, in particular in U.S. liability business, where social inflation remains elevated. Overall, the outcome of the reserve review was again positive. The actual versus expected analysis has now shown consistently favorable indications for 14 consecutive years Unsurprisingly, property was the largest source of releases where the favorable market environment was felt most strongly in the most recent contract years. For casualty overall, we acted cautiously despite favorable indications. Our strong reserving position would, of course, we believe, have allowed a higher release, which would have then been at the 6% level in P&C reinsurance in line with our guidance. However, as I mentioned, we decided to use the overall strong performance to reinforce our prudency, resulting in the 5% release. Turning now to the economic disclosure. Capital generation was strong, and our solvency to ratio remains at a very comfortable level, 298%, driven by strong operating performance and lower required capital. This ratio already fully reflects the proposed dividend, while the announced share buyback program will be deducted in Q1 of this year. Our resilience remains very high. Even after significant stress events, we would remain far above our capitalization floor. The well-balanced risk profile and the strong Solvency II position give us significant strategic flexibility to continue developing the group while continuing the disciplined repatriation of earnings. And to conclude with our third important capital metric, HGB or German Gap, the improved results of 5.5 billion euros reflect the strong business performance described earlier. It does also reflect some positive one-off effects from the release of equalization provision and currency. But more important than the result in any one year is the stock of distributable earnings, which at more than 10 billion euros provides a robust starting point for continued attractive capital returns. With these final remarks, Christoph and I look forward to taking your questions. But first, I will hand back to Christian.