Munchener Ruckversicherungs-gesellschaft Ag · XETR:MUV2
Munchener Ruckversicherungs-gesellschaft — Munich Re — Investor Day (December 2020)
79 slides from Munchener Ruckversicherungs-gesellschaft's investor day presentation, Dec 8, 2020
Slide 1: Munich Re Group Ambition 2025
Munich Re Group Ambition 2025 8 December 2020 ve ee) / Nee
Slide 2: Agenda
Agenda 02 03 04 Munich Re Group Ambition 2025 Group Finance Group Investment Management ERGO Reinsurance Joachim Wenning Christoph Jurecka Nicholas Gartside Markus Riess Torsten Jeworrek Munich Re Group Ambition 2025 Munich RE == 08 December 2020 2
Slide 3: Munich Re Group Ambition 2025 - Joachim Wenning
eo Sad Sawa Tae Munich Re Group Ambition 2025 Joachim Wenning Munich RE = a ae 5 i See a oe | Z 73" oe a of Ya "aie.
Slide 4: COVID-19
COVID-19
Slide 5: Ambition 2020 reignited profitable growth
2018-2020 2021-2025 Ambition 2020 reignited profitable growth Munich RE = Strategic focus Key achievements D Increase Growing Reinsurance and turning around ERGO has raised earnings allE earnings to a new level; new Group CIO for improved investment management 508 Digital Leveraging data and technol
Slide 6: Munich Re has delivered on its Ambition 2020!
2018-2020 2021-2025 Munich Re has delivered on its Ambition 2020! Munich RE = Net income targets achieved... ... despite challenging developments €bn == Guidance * Above long-term-average large losses in 2019 BB Actual = P-C RI markets only started selectively firming Actual in excess of guidance a
Slide 7: Turned around RoE erosion and delivered superior Total Shareholder Return
2018-2020 2021-2025 Turned around RoE erosion and delivered Munich RE superior Total Shareholder Return RoE TSR since 1 January 2018! % % Value creation ee oe oo i lm (oC | eee of capital 0 2010 2015 2019 lii 0.3 fe} ~ QOD 28.7% + ~8% i. EH 10-year RoE Cost of capital 66 74 Munich Re Peer Peer Peer
Slide 8: We believe in gradual market shifts with major opportunities
2018-2020 2021-2025 We believe in gradual market shifts with Munich RE = major opportunities for Munich Re Group Gradual shifts in markets ... ... while fundamentals will not be disrupted <Z> Rate hardening in commercial, specialty and og ° : : ... despite alternative capital reinsurance will contin
Slide 9: Slide 9
Slide 10: Munich Re Group Ambition 2025
Munich Re Grou Munich RE _
Slide 11: Munich Re Group Ambition 2025: Scale. Shape. Succeed.
2018-2020 2021-2025 Munich Re Group Ambition 2025 Scale. Shape. Succeed. Munich RE == my Scale .. OUF COre businesses, ee leveraging our capabilities further an Lf"! ... the insurance value chain, Shere creating new business opportunities JY Succeed ... benefiting our ... Shareholders Clients Employ
Slide 12: Munich Re Group Ambition 2025
2018-2020 2021-2025 Munich Re Group Ambition 2025 Scale. Shape. Succeed. Munich RE = Expansion of core Scale Preference for organic growth Leverage superior underwriting Uplift asset performance Create additional business AN [i Monetize digital business investments Shape Create new strategic options
Slide 13: Growing RoE
2018-2020 2021-2025 Munich Re Group Ambition 2025 Munich RE = Growing RoE AYN RoE improvement Succeed % Shareholders Clients Employees Communities RoE 2020 Margin Underlying Yield Performance Capital generation RoE normalized improvement growth erosion uplift and management 2025 Across all businesse
Slide 14: Long-term partner: superior products, experience and capacity
2018-2020 2021-2025 Munich Re Group Ambition 2025 Munich RE = Long-term partner: bring superior products, experience and capacity to our clients YS Succeed Shareholders ERGO Reinsurance * Deliver excellent service levels = Reliable and predictable partner Employees = Continue to simplify and harmoni
Slide 15: Employer of choice
2018-2020 2021-2025 Munich Re Group Ambition 2025 Employer of choice y AN Skill-driven in technical excellence Driving digital culture Succeed = Leading technical excellence, passing on = Superior data analytics trainings Shareholders superior UW capability * New ways of tech-enabled working Clients
Slide 16: Munich Re Group Ambition 2025 and beyond: climate action
018-2020 2021-2025 Munich Re Group Ambition 2025 and beyond Lead by climate action - leveraging role as investor, underwriter and audible public voice ba LEX Assets Liabilities Succeed Financed CO, emissions Insured CO, emissions (primary, direct, facultative) Shareholders Today No investment in The
Slide 17: Our commitment to Succeed
2018-2020 2021-2025 Our commitment to Succeed Munich RE = Leading Total Shareholder Return q We will deliver JY Succeed Improved RoE, 2025 EPS growth! DPS growth'2 Solvency II ratio in optimal range 124% >5% >5% 175-220% Decarbonization targets in coal, oil and gas 1. CAGR - compound annual growth r
Slide 18: Christoph Jurecka
Christoph Jurecka VV VK = W WO === 5 Se erg. co EN SSeS ee
Slide 19: Group targets are closely aligned to internal and external value drivers
Group targets are closely aligned to internal and external value drivers Major TSR drivers Group targets 2025 New targets Improved RoE, 2025 RoE expectation i 12-14% Expected EPS growth me EPS growth! 25% Existing focus - DPS growtht2 25% Expected dividend growth a Solvency II ratio Other factors, e
Slide 20: Short-/medium-term profitability, long-term profitability, capital resources
Short- / medium-term profitability … ▪ … ▪ … Long-term profitability, ▪ risk assessment ▪ ▪ ▪ ▪ ▪ Capital resources ▪ ▪ ▪ ▪ ▪
Slide 21: RoE improvement driven by profitable business growth
RoE improvement driven by profitable business growth Munich RE = overcompensating lower contribution from investments iN IFRS < AYN RoE improvement Succeed % Shareholders my | | RoE 2020 Margin Underlying Yield Performance Capital generation RoE normalized improvement growth erosion uplift and manag
Slide 22: Continuation of prudent reserving approach allows ongoing reserve releases
Continuation of prudent reserving approach allows for ongoing reserve releases . = Conservative loss estimates for new business, which facilitate af Reserving reserve releases after clear manifestation of loss development id [—=) approach = Reserves continue to be set at the upper end of the range o
Slide 23: Strong economic value added
Strong economic value added Munich RE = Facilitation of self-funding growth creating financial flexibility Illustration: Expected economic earnings and capital generation 2021 to 2025 Economic <7 Economic Delta Capital External Capital earnings SCR repatriation financing generation Munich Re Group A
Slide 24: Unchanged balance between investment and insurance risks
Unchanged balance between investment Munich RE and insurance risks SCR composition of investment and insurance risks Economic <7 % -Q:| Investment risks 48 = Unchanged risk appetite despite persistently low interest rates 60 = Retaining flexibility to seize investment opportunities Insurance risks 5
Slide 25: Capital generation supports SII ratio at upper end of optimal range
Capital generation supports SII ratio at the upper end of the optimal range despite growth and capital repatriation Solvency II ratio’ % 220 175 r—— Illustration Munich RE = Economic <7 €bn 2017 2018 2019 Q32020 2021 2022 2023 2024 2025 EOF 35.1 36.0 41.5 39.8 SCR 14.4 14.7 17.5 18.4 1 Based on Grou
Slide 26: Funding structure provides financial flexibility
Funding structure provides financial flexibility Low debt leverage €bn Debt leverage! 8 Senior and other debt? HB Subordinated debt 15.1 12.6 13.2 10.0 0.4 0.3 0.3 08 —— 5 I I TC —_ i 12.0 2016 2017 2018 2019 Q3 2020 1 Strategic debt (senior, subordinated and other debt) divided by total capital (st
Slide 27: Stable outlook maintained - rating agencies confirmed balance sheet strength
Stable outlook maintained - rating agencies recently Munich RE = confirmed our balance sheet strength Capital < Insurance financial Last Vv Agency strength rating Outlook affirmation A “The ratings reflect Munich Re’s balance sheet strength, which AM + Best categorizes as strongest, as well as its s
Slide 28: Foster shareholder participation in earnings growth
Foster shareholder participation in Munich Re’s Munich RE = earnings growth Capital management Sustainable dividend-per- Outlook Capital YQ instruments share growth = DPS growing with earnings ... Dividends Profit participation Tt * Dividend floor of at least previous uy year's DPS €7.8 | * ERGO div
Slide 29: Ambition 2025 creates competition between share buy-backs and growth
Munich Re Group Ambition 2025 creates competition Munich RE == between share buy-backs and growth opportunities Conceptual capital management framework RoE RoE > Cost of equity > RoE < Cost of equity <— Cost of equity Equity Capital YQ Expansion of balance sheet to fund earnings growth for sustainab
Slide 30: Outlook 2021
Outlook 2021 Group Gross written premium ~€55bn ERGO Gross written premium ~ €17.5bn Reinsurance Gross written premium ~€37bn 1 91% without COVID-19 impact. 2 95% without COVID-19 impact. Net result ~€2.8bn Net result ~€0.5bn Net result ~€2.3bn Return on investment >2.5% Combined ratio P-C Germany ~
Slide 31: BACKUP: Composition of normalized RoE in 2020
BACKUP: Composition of normalized RoE in 2020 Group RoE! 11.9% RI RoE! 12.7% ERGO RoE ~9% Munich RE = IFRS <* Outlook 2020 net income €1.2bn €23.Abn Equity 31.12.2019° . N li | Adjustments for COVID-19 and +€1.6b +€2.Bbn crmelizes msncesulk other? delet ; -€1.8bn Dividend / share buy-back in 2020 No
Slide 32: Group Investment Management
Munich RE => Group Investment Management Nicholas Gartside
Slide 33: Outlook: Key investment challenges
Outlook Munich RE = Key investment challenges a t Integrating ESG Net-zero greenhouse gas emissions by 2050 Ni Low interest rates Mitigating yield attrition without increasing risk G < x 3 Capital market volatility Portfolio resilience and market opportunities Munich Re Group Ambition 2025 08 Decemb
Slide 34: Integrating ESG
Integrating ESG Impact = Further embed ESG criteria in investment process = New investment opportunities * Sectoral changes within asset classes Public commitments Member of the UN net-zero Asset Owner Alliance (AOA) Climate Action 100+ membership Responsible Investment Guideline PRI Munich RE Targe
Slide 35: Low interest rates
Low interest rates Munich RE Yield environment ; % Market drivers = Demographics = Lower economic growth * Digitization and globalization imply lower inflation Opportunities = Alternative assets 2 = Corporate credit 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 - . = Hedging strategies Source: B
Slide 36: Capital market volatility
Capital market volatility Elevated volatility Robust and resilient portfolio protecting against downside risks VDAX Defensive investment portfolio® High quality fixed-income portfolio? % % 100 ° ° Total 50 €250bn 10) 2016 2017 2018 2019 2020 Il Fixed-interest securities and loans 81.2 MBAAA 42 MsaB
Slide 37: CIO goal
CIO goal Munich RE = Higher investment return without increasing relative risk position Defined asset owner and asset manager responsibility Investment management : Asset management Strategic asset Tactical asset Asset manager Implementation Security , allocation > allocation > selection : of mandat
Slide 38: Investment management
Investment management Levers to sustainably increase investment returns Strategic asset allocation = Group investment strategy to improve the risk / return profile based on liabilities * Diversification benefits * Integration of ESG criteria Tactical asset allocation = Common investment views across
Slide 39: Asset management - MEAG
Asset management - MEAG Munich RE = Levers to sustainably increase investment returns Strengthen Third-party Sustainable performance business growth operating model = CIO public markets and ClO = Liability-driven investment = Productivity increase through alternative assets appointed expertise is a
Slide 40: ESG investment strategy
ESG investment strategy Close alignment with our AOA commitments we tr Set targets for asset classes, sectors, engagement and financing transition Principle Target Succeed } Transition of investment portfolio to net- zero greenhouse gas emissions by 2050 All investments with impact on Focus environm
Slide 41: Munich Re Green Bond
Munich Re Green Bond Active role in sustainable finance Impact investment Succeed } Munich Re Green Bond Framework: inaugural Green Bond issuance transacted in September 2020 Objective Increase investment in sustainable projects and play a key role in the transition to a low-carbon economy Selection
Slide 42: Return on Investment (RoI)
Return on Investment (Rol) Munich RE = Yield erosion to be partially offset Rol expectations % ~3.0 | vy, ws y YG Z yp 2s ZG Guidance 2025e 2020 Succeed WN Yield erosion Excluding performance uplift, ordinary running yield attrition of >1Obps p.a. expected due to persistently low interest rates Perf
Slide 43: Markus Riess
Markus Riess
Slide 44: Combined ratio, Return on Equity
Combined ratio Return on Equity Combined ratio Return on Equity ▪ ▪ ▪ Combined ratio Return on Equity ▪ ▪ ▪ ▪ ▪ ▪ ▪
Slide 45: ERGO Strategy Programme (ESP) 2016-2020
ERGO Strategy Programme (ESP) 2016-2020 ESP to be successfully concluded by end of 2020 Net profit ERGO Group €m Cost savings cumulative, €m Combined ratio P-C Germany ~+490 % 2016 2017 2018 2019 2020 Outlook Combined ratio ERGO International 279 % 234 2016 2017 2018 2019 2020 Outlook 2016 2017 2018
Slide 46: ESP 2016-2020 workstreams successfully concluded
ERGO Strategy Programme (ESP) 2016-2020 12 workstreams successfully concluded i 1 Sales - = Productivity of tied sales agents increased by 41% Fit elimination of since 2016 redundant structures 2 Administration - * Sustainable cost savings of €277m (net; accumulated, as improvement of Q3 2020) achie
Slide 47: Munich Re Group Ambition 2025: new strategic phase for ERGO
Munich Re Group Ambition 2025 The new strategic phase applies to all parts of ERGO Group Germany Top player position with market leading profitability International Top peer profitability in European markets Digital projects and technology Technology enabled value chain and transfer of digital asset
Slide 48: Logic of ESP applied: measures for 2021-2025
Logic of ERGO Strategy Programme (ESP) applied 90 measures defined to be executed in 2021-2025 Initiative portfolio selection Focus initiatives - examples * Grow in existing business fields = Enhance operational and technical excellence = Embrace cross-border Scale initiatives a EERE 1] Assessment o
Slide 49: Ambition 2025 - ERGO: RoE uplift
Munich Re Group Ambition 2025 - ERGO RoE uplift results mainly from underlying growth Munich RE = q AYN RoE improvement Succeed va —s RoE Margin Underlying Yield Performance Capital generation RoE 2020 improvement growth erosion uplift and management 2025 Better margin More growth Low yields eroding
Slide 50: ERGO Germany
ERGO Germany Sustainable top-player position with market leading profitability Scale Secure profitable and stable market share = Maintain and continuously upgrade high level of insurance technical capabilities = Further improve End-to-End process excellence, continue to simplify = Reduce costs in IT
Slide 51: ERGO Germany: balanced initiative portfolio
ERGO Germany Balanced initiative portfolio with focus on growth Munich RE = =—, Life P-C Health Growth * Premium growth through product = Continued optimization of product innovation and simplification range = Expansion of commercial business = Additional growth in corporate = Implementation of digi
Slide 52: ERGO International
ERGO International Increase contribution from existing business through profitable growth Scale Increase net profit contribution of the international portfolio * De-risk and expand product portfolio * Scale up sales channels by combining digital and non-digital sales models = Continue cost-disciplin
Slide 53: ERGO International: growth in European markets
ERGO International ERGO with growth in European markets Munich RE = Inter national a> Poland and Baltics Spain Austria Greece Growth * Accelerate organic growth * Enlarge share in group = * Continuation of successful * Further expansion of strategy in Non-Life business business cooperations in exist
Slide 54: ERGO International: India and China
ERGO International Focus on high growth markets India and China Inter national India China Growth = Expand product portfolio in Health = Expand agency-channel and increase and Non-Motor retail digital sales especially in Life insurance = Ramp-up distribution in OEM, online * Build mobility ecosystem
Slide 55: Digital projects and technology
Digital projects and technology Deploy technologies and implement digital asset transfer Digital technologies Business application Munich RE = DP and T Optimize IT Scale * Extend the number of Robotics- applications = Leverage investments in Al infrastructure = Optimize online platforms and enhance
Slide 56: Application of Artificial Intelligence
Application of Artificial Intelligence Data and Al as main drivers for beneficial digitalization ERGO has established a professional Al infrastructure ... People / Skill Experienced management team with analytics, IT and insurance background Al factory Group-wide accessible IT environment which enab
Slide 57: ERGO strives to improve profitability to 12-14% RoE
Over the next five years ERGO strives to improve its profitability to sustainably 12-14% RoE Ambition 2025 Execute growth and shape business models = Further enhance Hybrid Sustainable RoE Customer model 12-1 4% in Germany Strict cost discipline, = Strong growth, especially lean organization through
Slide 58: Torsten Jeworrek
Munich RE 8-Bamm Torsten Jeworrek
Slide 59: Grow, excel, invent
Grow, excel, invent Ambition 2020 has been successfully accomplished in Reinsurance 2018: Ambition defined 2020: Achievements Grow AMS W insurance fields (Risk Solutions) = We service our Reinsurance clients in challenging markets = We expand market positions in selected primary Strong and continuou
Slide 60: Reinsurance has delivered bottom line despite challenges
Grow, excel, invent Munich RE = Reinsurance has delivered bottom line despite challenges IFRS result after tax (Reinsurance) €m MP-C ML&H BM Normalization Ambition 2,268 2,300] 2020 BGs Without COVID-19-effects, Ambition 2020 would have been reached, even in low interest rate environment 2018 2019 O
Slide 61: Successful initiatives laying foundation for further progression
Grow, excel, invent Successful initiatives laying foundation for further progression P-C Reinsurance Munich RE = L&H Reinsurance CAGR > GWP GWP ~ BY €bn €bn —— ~ 8% Core P-C 10.8 11.7 12.5 Reinsurance Risk Solutions 2018 2019 Outlook 2018 2019 Outlook 2020 2020 Combined ratio ~99% ~98-99% ~97% Techn
Slide 62: Ambition 2025 - Reinsurance
Munich Re Group Ambition 2025 - Reinsurance Leading the evolution of our industry as a strong multifaceted player Core P-C RI Leading global reinsurer in Property- casualty Risk Solutions Leading specialty insurer in selective businesses based on UW expertise L&H Reinsurance Leading global reinsurer
Slide 63: Strong RoE contribution from Reinsurance
Munich Re Group Ambition 2025 - Reinsurance Strong RoE contribution from Reinsurance a AYN RoE improvement Succeed h areholders Munich RE = afi 12.7 gee =i RoE 2020 Margin Underlying Yield Performance Capital generation RoE normalized improvement growth erosion uplift and management 2025 Short-term
Slide 64: Core P-C Reinsurance and Risk Solutions
Core P-C Reinsurance and Risk Solutions P-C lines contribute significantly to Ambition 2025 Scale Gross written premium €bn ~ 31.5 ~24,0 ~246 CAGR _ —7 .Ay% Core P-C Reinsurance — _> CAGR Risk Solutions _j-_ 10% Outlook Outlook = Ambition 2020 2021 2025 1 - 95% without COVID-19 impact. Munich RE = C
Slide 65: Core P-C Reinsurance: leveraging underwriting superiority
Core P-C Reinsurance Core traditional business leverages its underwriting superiority Grow with mature and emerging markets in favourable cycle = Realize growth into a hardening market environment = Strengthen local footprint in selected markets = Keep focus on underwriting excellence and profitabil
Slide 66: Market hardening augmented by COVID-19
Core P-C Reinsurance Munich RE = Market hardening augmented by COVID-19 Core RI PC “_ = £Y* ail oo Reinsurance market driver Hypothesis on rates and portfolio Low interest rates to further Exacerbated need for appropriate technical Partially balancing effects continue in the market margins and profi
Slide 67: Positive pricing outlook for upcoming renewals
Core P-C Reinsurance Positive pricing outlook for upcoming renewals Worldwide / Specialty Pricing sharpened by loss trends as well as Europe specific occurrences (Aviation), lack of _—". interest income and capacity reductions Lower pressure than in US, but driven by low interest rate and Japan . ge
Slide 68: Ample growth opportunities in reinsurance
Core P-C Reinsurance Ample growth opportunities in reinsurance Munich RE = > Core RI PC Core P-C RI Expected nominal growth rates Global ceded premiums 2019, % CAGR (2020-2022 in €), % 5 6 | Europe 2-4 31 | North America 3-5 Reinsurance ambition 2025 to grow above P-CRI 24 | Asia Pacific 5-7 market
Slide 69: Risk Solutions: growth trajectory
Risk Solutions Growth trajectory based on products and digitization Scale Extending our business based on strong client base = Expansion in SME including E&S as largest contributor to growth Strengthen HSB core business Enter into large single risk opportunities in positive cycle - continued caution
Slide 70: MRSI: shaping as differentiator for specialty lines in US
Risk Solutions MRSI: shaping as differentiator for specialty lines in US Strong focus on less cyclical specialty commercial segment American Modern Munich Re Specialty Insurance HSB Munich Re Syndicate MR F&C Share of Risk Solutions in P-C % of GWP 75 70 25 30 Outlook 2020 Ambition 2025 Munich RE =
Slide 71: L&H Reinsurance
L&H Reinsurance Strong fundament supplemented by promising business opportunities Building on growth of underlying Gross written premium Technical result incl. fee income markets and a strong foundation... €bn €m = Strong new business proposition driving traditional business _ WG 7 _ eo 7 developmen
Slide 72: L&H Reinsurance: key drivers for Ambition 2025
L&H Reinsurance Market growth and established initiatives key drivers for Ambition 2025 Growth of ~ 5% in core markets as foundation * Strong growth in Asia to be continued * Traditional business in US market with excellent proposition * Sophisticated product design and data-based pricing as basis f
Slide 73: Innovation: continue to shape beyond strong core
Innovation Avenue for Munich Re - continue to shape beyond strong core Innovation potential avenue for Munich Re... — » innovation . . ee New value Risk sharing EEE proposition : Primary insurers | Primary insurers | Corporates and Across industries Target clients Corp. insurance buyers : Corporates
Slide 74: Shaping the cyber market
Innovation Shaping the cyber market as relevant driver for growth Innovation » * Leading position and growth due to early and full commitment (market share ~ 10%) CAGR 7 ~4159 * Profitability — 15% 14 of insurance and reinsurance book (CR 85-90%) ~ = Accumulation and risk management 0.7 GWP continuo
Slide 75: New Ventures: Canadian group insurance market
Innovation New Ventures: tapping into Canadian group insurance market Bringing concrete solutions to our clients with the vision to enhance the Group insurance market and create new income streams a Third-party administrator and broker Parachute Digital insurance Platform income Admin services provi
Slide 76: IoT: attractive EaaS business
Innovation Munich RE = loT: attractive EaaS business providing comprehensive solutions = Higher equipment sales and earnings growth = Stronger customer confidence through guarantees Equipment OEM Equipment User = Higher operating margins through alignment of equipment costs with usage = Operations i
Slide 77: Reinsurance well positioned to deliver on Ambition 2025
Reinsurance well positioned to deliver on Ambition 2025 Successful strategy = Grow, excel, invent successfully executed = Constant delivery of convincing results = Initiatives laying foundation for further progression Scaling on solid fundament = Grow P-C Reinsurance in favorable cycle = Extend in R
Slide 78: For media inquiries please contact
For media inquiries please contact Florian Amberg Strategic Communications & PR Phone: +49 89 3891 2299 Mobil: +49 170 712 97 84 Email: flamberg@munichre.com Faith Thoms Media Relations Asia-Pacific Phone: +65 63180762 Mobil: +65 83390125 Email: —fthoms@munichre.com Minchener Ruc! KéniginstraBe 107
Slide 79: Disclaimer
Disclaimer This presentation contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the a