Munchener Ruckversicherungs-gesellschaft Ag · XETR:MUV2
Munchener Ruckversicherungs-gesellschaft — Munich Re — Investor Day (December 2020)
80 slides from Munchener Ruckversicherungs-gesellschaft's investor day presentation, Dec 8, 2020
Slide 1: Munich Re Group Investor Day 2020
Munich Re Group Investor Day 2020 8 December 2020
Slide 2: Agenda
Investor Day 2020 Agenda 01 Munich Re Group Ambition 2025 Joachim Wenning 02 Group Finance Christoph Jurecka 03 Group Investment Management Nicholas Gartside 04 ERGO Markus Riess 05 Reinsurance Torsten Jeworrek Munich Re Group – Investor Day 08 December 2020 2
Slide 3: Ambition 2025
Munich Re Group Ambition 2025 Joachim Wenning
Slide 4: Priorities for 2020 delivered
Priorities for 2020 delivered Ambition 2020 COVID-19 2018–2020
Slide 5: Ambition 2020 reignited profitable growth
2018–2020 2021–2025 Ambition 2020 reignited profitable growth Strategic focus Key achievements Increase Growing Reinsurance and turning around ERGO has raised earnings earnings to a new level; new Group CIO for improved investment management Digital Leveraging data and technology for automation, sop
Slide 6: Munich Re has delivered on its Ambition 2020
2018–2020 2021–2025 Munich Re has delivered on its Ambition 20201 Net income targets achieved1 … … despite challenging developments €bn Guidance Above long-term-average large losses in 2019 Actual Actual in excess of guidance P-C RI markets only started selectively firming from 2018 onwards COVI
Slide 7: Turned around RoE erosion and delivered superior TSR
2018–2020 2021–2025 Turned around RoE erosion and delivered superior Total Shareholder Return RoE TSR since 1 January 20181 % % Value creation 52.8 16 49.8 47.4 12 Average cost 8 of capital 4 19.8 0 2010 2015 2019 10.3 9.7 Ø 8.7% ~ 8% 10-year RoE Cost of capital -6.6 -7.1 Munich Re Peer Peer Peer Pe
Slide 8: We believe in gradual market shifts
2018–2020 2021–2025 We believe in gradual market shifts with major opportunities for Munich Re Group Gradual shifts in markets … … while fundamentals will not be disrupted Rate hardening in commercial, specialty and … despite alternative capital reinsurance will continue for a couple of years … Digi
Slide 9: Munich Re Group Ambition 2025
Munich Re Group Ambition 2025 Ambition 2025 Scale. Shape. Succeed. 2021–2025
Slide 10: Ambition 2025: Scale, Shape, Succeed
Munich Re Group Ambition 2025 Scale Succeed Shape
Slide 11: Munich Re Group Ambition 2025: Scale. Shape. Succeed.
2018–2020 2021–2025 Munich Re Group Ambition 2025 Scale. Shape. Succeed. Scale … our core businesses, Succeed leveraging our capabilities further … benefiting our … Shareholders Clients Employees … the insurance value chain, creating new business opportunities Communities Shape Munich Re Group – Inv
Slide 12: Munich Re Group Ambition 2025: Scale. Shape. Succeed.
2018–2020 2021–2025 Munich Re Group Ambition 2025 Scale. Shape. Succeed. Expansion of core Scale Preference for organic growth Succeed Leverage superior underwriting Shareholders Growing earnings and RoE Uplift asset performance Clients Long-term partner – superior products, experience and capacity
Slide 13: Growing RoE
2018–2020 2021–2025 Munich Re Group Ambition 2025 Growing RoE RoE improvement Succeed % Shareholders 12-14 Clients Employees 11.9 Communities RoE 2020 Margin Underlying Yield Performance Capital generation RoE normalized improvement growth erosion uplift and management 2025 Across all businesses, Ac
Slide 14: Long-term partner for clients
2018–2020 2021–2025 Munich Re Group Ambition 2025 Long-term partner: bring superior products, experience and capacity to our clients Succeed ERGO Reinsurance Shareholders Deliver excellent service levels Reliable and predictable partner Clients Employees Continue to simplify and harmonize Le
Slide 15: Employer of choice
2018–2020 2021–2025 Munich Re Group Ambition 2025 Employer of choice 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 Be
Slide 16: Ambition 2025 and beyond: lead by climate action
2018–2020 2021–2025 Munich Re Group Ambition 2025 and beyond Lead by climate action – leveraging role as investor, underwriter and audible public voice Assets Liabilities Own CO2 emissions Succeed Financed CO2 emissions Insured CO2 emissions (primary, direct, facultative) from operational processes
Slide 17: Our commitment to Succeed
2018–2020 2021–2025 Our commitment to Succeed Leading Total Shareholder Return We will deliver Succeed Improved RoE, 2025 EPS growth1 DPS growth1,2 Solvency II ratio in optimal range 12-14% ≥5% ≥5% 175-220% Decarbonization targets in coal, oil and gas 1 CAGR – compound annual growth rate 2020-25 (EP
Slide 18: Group Finance
Group Finance Christoph Jurecka
Slide 19: Group targets aligned to 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 12-14% IFRS Expected EPS growth EPS growth1 ≥5% Holistic, value-driven Existing focus DPS growth1,2 internal Economic ≥5% steering Expected div
Slide 20: Internal steering covers value creation holistically
Internal steering covers value creation holistically Dimensions of internal steering Key messages Short- / medium-term Growth of IFRS earnings and capital productivity … profitability … driven by business growth and (cyclical) margin expansion … Net income … outweighing yield erosion in overall ea
Slide 21: RoE improvement driven by profitable business growth
RoE improvement driven by profitable business growth overcompensating lower contribution from investments IFRS RoE improvement Succeed % Shareholders 12-14 11.9 RoE 2020 Margin Underlying Yield Performance Capital generation RoE normalized improvement growth erosion uplift and management 2025 Short-
Slide 22: Prudent reserving approach allows ongoing reserve releases
Continuation of prudent reserving approach allows for ongoing reserve releases IFRS / Economic Conservative loss estimates for new business, which facilitate Reserving reserve releases after clear manifestation of loss development approach Reserves continue to be set at the upper end of the rang
Slide 23: Strong economic value added
Strong economic value added Facilitation of self-funding growth creating financial flexibility Illustration: Expected economic earnings and capital generation 2021 to 2025 Economic ~ €20bn Economic Delta Capital External Capital earnings SCR repatriation financing generation Munich Re Group – Invest
Slide 24: Unchanged balance between investment and insurance risks
Unchanged balance between investment and insurance risks SCR composition of investment and insurance risks Economic % Investment risks 48 Unchanged risk appetite despite persistently low interest rates 60 Retaining flexibility to seize investment opportunities Insurance risks 52 Gradually incr
Slide 25: Capital generation supports SII ratio
Capital generation supports SII ratio at the upper end of the optimal range despite growth and capital repatriation Solvency II ratio1 Economic % Illustration 244 245 237 216 220 Optimal range 175 €bn 2017 2018 2019 Q3 2020 2021 2022 2023 2024 2025 EOF 35.1 36.0 41.5 39.8 SCR 14.4 14.7 17.5 18.4 1 B
Slide 26: Funding structure provides financial flexibility
Funding structure provides financial flexibility Low debt leverage Capital €bn Debt leverage1 Senior and other debt2 Despite recent issuance of €1.25bn Subordinated debt subordinated green bond … 15.1 … debt leverage remains one of the lowest 12.6 13.2 in the insurance industry 12.0 10.0 Suffi
Slide 27: Stable outlook maintained – rating agencies confirmed
Stable outlook maintained – rating agencies recently confirmed our balance sheet strength Capital Insurance financial Last Agency strength rating Outlook affirmation “The ratings reflect Munich Re’s balance sheet strength, which AM A.M. Best A+ Stable 17 July 2020 Best categorizes as strongest, as w
Slide 28: Foster shareholder participation in earnings growth
Foster shareholder participation in Munich Re’s earnings growth Capital management Sustainable dividend-per- Outlook Capital instruments share growth CAGR DPS growing with earnings … Dividends +4.7% Profit participation … even faster than in previous years with ≥5% CAGR €9.8 Dividend floor of
Slide 29: Competition between share buy-backs and growth
Munich Re Group Ambition 2025 creates competition between share buy-backs and growth opportunities Conceptual capital management framework Capital RoE Expansion of balance sheet to fund earnings growth for sustainable dividend growth RoE Cost of equity Cost of equity RoE Cost of equity In times of l
Slide 30: Outlook 2021
Outlook 2021 Group Gross written premium Net result Return on investment ~ €55bn ~ €2.8bn >2.5% ERGO Combined ratio Gross written premium Net result P-C Germany International ~ €17.5bn ~ €0.5bn ~ 92 %1 ~ 93% Reinsurance Combined ratio Technical result, incl. fee Gross written premium Net result P-C
Slide 31: BACKUP: Composition of normalized RoE in 2020
BACKUP: Composition of normalized RoE in 2020 IFRS Group RoE1 Outlook 2020 net income €1.2bn €23.1bn Equity 31.12.20193 11.9% +€2.8bn Normalized net result Adjustments for COVID-19 and +€1.6bn other2 -€1.8bn Dividend / share buy-back in 2020 Normalized net result 2020 €2.8bn €24.1bn Equity 31.12.202
Slide 32: Group Investment Management
Group Investment Management Nicholas Gartside
Slide 33: Key investment challenges
Outlook Key investment challenges Integrating ESG Net-zero greenhouse gas emissions by 2050 Low interest rates Mitigating yield attrition without increasing risk Capital market volatility Portfolio resilience and market opportunities Munich Re Group – Investor Day 08 December 2020 33
Slide 34: Integrating ESG
Integrating ESG Public Impact commitments Target of the AOA Further embed ESG Member of the UN net-zero Commitment to net-zero criteria in investment process Asset Owner Alliance (AOA) greenhouse gas emissions New investment Climate Action 100+ by 2050 opportunities membership Engagement S
Slide 35: Low interest rates
Low interest rates Yield environment % Market drivers Demographics 5 Lower economic growth 4 Digitization and globalization 3 imply lower inflation 2 1 0 Opportunities -1 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 portfolio3 High quality fixed-income portfolio3 % % 100 Total Total 50 €250bn €213bn 0 2016 2017 2018 2019 2020 Fixed-interest securities and loans 81.2 AAA 42 BBB
Slide 37: CIO goal: new setup focuses expertise
CIO goal 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 Backoffice allocation allocation selection of mandates selectio
Slide 38: Investment management: levers to increase returns
Investment management Levers to sustainably increase investment returns Strategic asset Tactical asset Asset manager allocation allocation selection Group investment strategy to Common investment views Assign investment mandates improve the risk / return profile across asset classes to best ma
Slide 39: Asset management – MEAG
Asset management – MEAG Levers to sustainably increase investment returns Strengthen Third-party Sustainable performance business growth operating model CIO public markets and CIO Liability-driven investment Productivity increase through alternative assets appointed expertise is a key strength
Slide 40: ESG investment strategy
ESG investment strategy Close alignment with our AOA commitments Succeed Set targets for asset classes, sectors, Transition of investment portfolio to net- Principle engagement and financing transition Target zero greenhouse gas emissions by 2050 All investments with impact on Reduce CO2 emission by
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 o
Slide 42: Return on Investment (RoI)
Return on Investment (RoI) Yield erosion to be partially offset RoI expectations Succeed % ~ 3.0 Yield erosion Excluding performance uplift, ordinary running yield attrition of >10bps p.a. expected due to persistently low interest rates ~ 2.5 Performance uplift Management measures partly offset decl
Slide 43: ERGO
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Slide 44: ERGO continues to deliver
ERGO continues to deliver 2025 2020 Combined ratio Return on Equity Germany International ~ 90% ~ 91% 12-14% 2016 Combined ratio Return on Equity Top peer group profitability Germany International Strong presence in Germany ~ 92% ~ 94% ~ 9% Increased contribution from Combined ratio Return int
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 Combined ratio ERGO Group P-C Germany ~ -5 ppts. €m ~ +490 % ~ 530 97.0 97.5 96.0 412 440 92.3 ~ 92.0 273 41 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Outlook Outlook Cost savings Combined rati
Slide 46: ESP workstreams successfully concluded
ERGO Strategy Programme (ESP) 2016-2020 12 workstreams successfully concluded 1 Sales – Productivity of tied sales agents increased by 41% 8 Optimize product Portfolio substantially renewed and de-risked with Fit Successful elimination of since 2016 portfolio dedicated focus, e.g. biometric offe
Slide 47: Ambition 2025: new phase applies to all of ERGO
Munich Re Group Ambition 2025 The new strategic phase applies to all parts of ERGO Group Germany International Digital projects and technology Top player position with Top peer profitability Technology enabled value chain market leading profitability in European markets and transfer of digital asset
Slide 48: Logic of ESP applied to 2021-2025 measures
Logic of ERGO Strategy Programme (ESP) applied 90 measures defined to be executed in 2021-2025 Initiative portfolio selection Focus initiatives – examples Net profit contribution Grow in existing business fields 51% Enhance operational and technical excellence Embrace cross-border Scale initia
Slide 49: Ambition 2025 – ERGO: RoE uplift
Munich Re Group Ambition 2025 – ERGO RoE uplift results mainly from underlying growth RoE improvement Succeed % 12-14 Shareholders ~9 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 Germany Inter- national DP and T Secure profitable and stable market share Combined ratio Maintain and continuously upgrade high level P-C Germany of insurance technical capabilities % Further improve End-to-End proce
Slide 51: ERGO Germany: initiative portfolio
ERGO Germany Balanced initiative portfolio with focus on growth Germany Inter- national DP and T P-C Health Life Growth Premium growth through product Continued optimization of product Continued expansion of new innovation and simplification range “capital light” book through capital market-or
Slide 52: ERGO International
ERGO International Increase contribution from existing business through profitable growth Germany Inter- national DP and T Increase net profit contribution of the Combined ratio international portfolio International De-risk and expand product portfolio % Scale up sales channels by combining digi
Slide 53: ERGO International: growth in European markets
ERGO International ERGO with growth in European markets Germany Inter- national DP and T 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 exis
Slide 54: ERGO International: India and China
ERGO International Focus on high growth markets India and China Germany Inter- national DP and T 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
Slide 55: Digital projects and technology
Digital projects and technology Deploy technologies and implement digital asset transfer Germany Inter- national DP and T Digital technologies Business application Optimize IT Extend the number of Robotics- Grow pure digital player nexible Increase IT-efficiency applications based on digitally
Slide 56: Application of Artificial Intelligence
Application of Artificial Intelligence Data and AI as main drivers for beneficial digitalization Germany Inter- national DP and T … with a tangible footprint in developing AI use cases … ERGO has established a Pattern recognition in Health claims to professional AI infrastructure … >10 use cases a
Slide 57: ERGO 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 in Germany 12-14% Strict cost discipline, Strong growth, especially lean organization through
Slide 58: Reinsurance
Reinsurance Torsten Jeworrek
Slide 59: Grow, excel, invent: Ambition 2020 accomplished
Grow, excel, invent Ambition 2020 has been successfully accomplished in Reinsurance 2018: Ambition defined 2020: Achievements Grow We service our Reinsurance clients in Strong and continuous top-line growth in all areas challenging markets and lines of business (CAGR ~ 8%) We expand market pos
Slide 60: Reinsurance has delivered bottom line despite challenges
Grow, excel, invent Reinsurance has delivered bottom line despite challenges IFRS result after tax (Reinsurance) €m P-C L&H Normalization Ambition 2,268 2,300 2020 1,864 706 Without COVID-19-effects, Ambition 2020 729 would have been reached, even in low 1,135 1,562 interest rate environment 2018 20
Slide 61: Successful initiatives laying foundation
Grow, excel, invent Successful initiatives laying foundation for further progression P-C Reinsurance L&H Reinsurance CAGR 24.0 GWP 20.4 22.1 GWP ~ 8% €bn €bn CAGR 11.7 12.5 Core P-C 10.8 Reinsurance ~ 6% CAGR Risk Solutions ~ 18% 2018 2019 Outlook 2018 2019 Outlook 2020 2020 Combined ratio ~ 99% ~ 9
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 Risk Solutions L&H Reinsurance Leading global Leading specialty Leading global reinsurer in Property- insurer in selective reinsurer in casualty businesses based on Life and
Slide 63: Strong RoE contribution from Reinsurance
Munich Re Group Ambition 2025 – Reinsurance Strong RoE contribution from Reinsurance RoE improvement Succeed % Shareholders 12-14 12.7 RoE 2020 Margin Underlying Yield Performance Capital generation RoE improvement growth erosion uplift and management normalized 2025 Short-term better margin Long-te
Slide 64: Core P-C Reinsurance and Risk Solutions
Core P-C Reinsurance and Risk Solutions P-C lines contribute significantly to Ambition 2025 Core RI Risk RI P-C solutions L&H Gross written premium Combined ratio €bn % ~ 31.5 ~ 24.0 ~ 24.6 Scale CAGR ~ 4% ~ 97 ~ 96 1 Core P-C Reinsurance Range Core P-C Reinsurance ~ 95 CAGR Risk Solutions Risk Solu
Slide 65: Core P-C Reinsurance
Core P-C Reinsurance Core traditional business leverages its underwriting superiority Core RI Risk RI P-C solutions L&H Grow with mature and emerging markets Gross written premium in favourable cycle €bn Realize growth into a hardening market environment CAGR Strengthen local footprint in select
Slide 66: Market hardening augmented by COVID-19
Core P-C Reinsurance Market hardening augmented by COVID-19 Core RI Risk RI P-C solutions L&H 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 profitabil
Slide 67: Positive pricing outlook for upcoming renewals
Core P-C Reinsurance Positive pricing outlook for upcoming renewals Core RI Risk RI P-C solutions L&H Worldwide / Specialty Pricing sharpened by loss trends as well as Europe specific occurrences (Aviation), lack of Lower pressure than in US, but RI book interest income and capacity reductions drive
Slide 68: Ample growth opportunities in reinsurance
Core P-C Reinsurance Ample growth opportunities in reinsurance Core RI Risk RI P-C solutions L&H Core P-C RI Expected nominal growth rates Global ceded premiums 2019, % CAGR (2020-2022 in €), % 5 6 Europe 2-4 31 3-5 North America Reinsurance ambition 2025 to grow above P-C RI 24 ~ €274bn Asia Pacifi
Slide 69: Risk Solutions: growth trajectory
Risk Solutions Growth trajectory based on products and digitization Core RI Risk RI P-C solutions L&H Extending our business based Gross written premium on strong client base €bn Expansion in SME including E&S as largest contributor to growth CAGR Strengthen HSB core business ~ 10% ~ 9.5 Enter
Slide 70: Risk Solutions: MRSI shaping specialty lines in US
Risk Solutions MRSI: shaping as differentiator for specialty lines in US Core RI Risk RI P-C solutions L&H Strong focus on less cyclical specialty commercial segment … with a strong MRSI is a differentiator … value proposition … … and Ambition 2025 American Modern Munich Re Specialty Insurance Indiv
Slide 71: L&H Reinsurance
L&H Reinsurance Strong fundament supplemented by promising business opportunities Core RI Risk RI P-C solutions L&H Building on growth of underlying Gross written premium Technical result incl. fee income markets and a strong foundation … €bn €m Strong new business proposition CAGR driving traditi
Slide 72: L&H Reinsurance: key drivers for Ambition 2025
L&H Reinsurance Market growth and established initiatives key drivers for Ambition 2025 Core RI Risk RI P-C solutions L&H Growth of ~ 5% in core Longevity markets as foundation Carefully continue expansion outside UK (e.g. Netherlands) Underwriting approach stays prudent and selective Strong g
Slide 73: Innovation: avenue to shape beyond strong core
Innovation Avenue for Munich Re – continue to shape beyond strong core Core RI Risk RI P-C solutions L&H Innovation potential avenue for Munich Re … Innovation New value Risk sharing proposition Primary insurers Primary insurers Corporates and Across industries Target clients Corp. insurance buyers
Slide 74: Shaping the cyber market
Innovation Shaping the cyber market as relevant driver for growth Core RI Risk RI P-C solutions L&H Innovation Leading position and growth due to early and full commitment (market share ~ 10%) CAGR Profitability ~ 15% 1.4 of insurance and reinsurance book (CR 85-90%) Accumulation and risk mana
Slide 75: New Ventures: Canadian group insurance market
Innovation New Ventures: tapping into Canadian group insurance market Core RI Risk RI P-C solutions L&H Innovation Bringing concrete solutions to our clients with the vision to enhance the Group insurance market and create new income streams Platform Munich Re Tapping into large CAD 44bn income Ca
Slide 76: IoT: Equipment as a Service
Innovation IoT: attractive EaaS business providing comprehensive solutions Core RI Risk RI P-C solutions L&H Innovation Equipment as a Service Higher equipment sales and earnings growth Alternative investment opportunities Sale Invest Stronger customer confidence through guarantees Interesti
Slide 77: Reinsurance well positioned to deliver on Ambition 2025
Reinsurance well positioned to deliver on Ambition 2025 Shaping new business opportunities Sustainable RoE 12-14% Create opportunities by shaping product landscape Making targeted use of Scaling on solid digitization fundament Expand beyond strong core Grow P-C Reinsurance in with focused in
Slide 78: Financial calendar 2021
Financial calendar 2021 Balance sheet media conference for 2020 financial statements Analysts' and Investors' call Half-year financial report as at 30 June 2021 Annual General Meeting 2021 25 FEBRUARY 28 APRIL 10 AUGUST 17 MARCH 6 MAY 9 NOVEMBER Quarterly statement as at 31 March 2021 Quarterly stat
Slide 79: For information, please contact
For information, please contact Investor Relations Team Christian Becker-Hussong Thorsten Dzuba Christine Franziszi Head of Investor & Rating Agency Relations Tel.: +49 (89) 3891-8030 Tel.: +49 (89) 3891-3875 Tel.: +49 (89) 3891-3910 Email: tdzuba@munichre.com Email: cfranziszi@munichre.com Email: c
Slide 80: 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