Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (ETR:MUV2)

Earnings Call: Q4 2011

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Mar 13, 2012

Good morning, my very esteemed ladies and gentlemen. Good morning, ladies and gentlemen. I would like to welcome you here in Munich for our financial press conference 2011. I would also like to welcome our listeners online. Our press conference is going to be broadcast live in full length and is also being translated simultaneously. I also would like to let you know that we are also publishing our annual report this morning. You know that the main figures of 2011 and also the results for the renewal on January 1st, we have published these figures on February 2nd. Today, it is about a more in-depth explanation, and we're looking forward to the discussion with you. You know the gentlemen who are going to speak today, the CEO, Dr. von Bomhard, who's going to give you an overview. Mr. Schneider, the CFO, will then explain the financial figures. Then you will hear from Torsten Oletzky, who is the CEO of ERGO, and then Torsten Jeworrek, as the head of the reinsurance, will talk next. Now I'd like to hand over to the CEO, Nikolaus von Bomhard, and his overview. Well, I would also like to welcome you. Good morning, everybody. Good morning. Well, we have started the year 2012 in a much better fashion compared to the previous year, which is something that is not going to surprise you, I suppose. After 2 and a half months, we can say that after what we had to experience last year during the same time frame, we are actually in a much better position right now. The reinsurance has also started with a very satisfying renewal round, and also when we look at the natural catastrophes until today, until last year, until this date, we had already to deal with three major losses. The ERGO can now concentrate also on its own business and on delivering on its brand statement. Also when we look at the financial crisis, we haven't found a solution yet. But at least we have seen, because of the haircut in Greece, we have seen a more quiet situation right now. What we still have to deal with, however, is a great amount of uncertainty in the capital markets. Let me give you an overview about what you're going to hear from us this morning. This is the agenda you're familiar with. As we have heard, after myself, Mr. Schneider will talk, followed by Mr. Oletzky and Mr. Jeworrek. Then another summary. So let's take a look back at the year 2011 and the challenges which are summarized here. In the middle, you have the map of the world. This is a summary of the major natural catastrophes which affected the big economies worldwide and the people, but also, of course, the insurance industry. And three of these nat cats had already taken place until the same date last year. And something we tend to forget sometimes when we talk about the crisis, we have seen major distortions in the capital market and what was especially important for the insurance company, especially the downturn of the interest rates by more than 100 basis points. That is something which is a huge amount for the insurance industry. Then we have also seen great fluctuations, 145 basis points, and then also the stock market, which had a downward trend as well, but it didn't affect us as much as it would have in the past. Now we're in the fifth year of the financial crisis already, and there's no end in sight yet as a whole. However, the good news is when we look back at the last year, our company, Munich Re, coped quite well. Despite the major stress, we have successfully completed the year with a result of about EUR 700 million in total, and we were able to prove that we were resilient even in such a year. And against this backdrop and against the outlook for the current year, we have told the supervisory board, or together with the supervisory board, we will pay out an unchanged dividend, or suggest to pay out an unchanged dividend of EUR 6.25 per share. Now let's take a look back. This is a timeline of the financial crisis. What's important from the point of view of the insurance industry, and that includes us, let me point out once again, the interest rates, that is a major challenge for the insurance industry. And we are suffering from the supportive measures of the central banks, which kept the interest rates low. That poses a major challenge for us, especially when it comes to our capital investments and also when it comes to guarantees we have had to make. Then there was a great amount of volatility, which is a great challenge for every investor. We're focusing on the passive side when it comes to creating value. That is the management of insurance risks. But on the asset side we also have to make efforts to make it through this crisis. And you can see that we have been successful when you look at the right-hand side. That is something you're familiar with on the right-hand side. On the one hand, on the one axis, you have the total shareholder return, including the dividend, and on the right-hand side, you have the volatility of total shareholder return. Here we're comparing ourselves with our large competitors. You can see that we are actually positioned where we would like to be in the upper left corner. We have had a great profit with a relatively low volatility. That is what we have wanted to achieve, the upper left corner of this square or rectangle. The shareholders, they profit. We're producing a sustainable result, and we're achieving that because we have the right mix of risk-taking and diversity on the other hand. When I say diversity, I mean the insurance industry, but also when it comes to our capital investment. This is just some information about the development of the dividend. On the left-hand side with the book value, this is a positive development. Here the shareholders, of course, are interested also in the relative dividend payout, which is relatively high. Last year, we were looking at 6.6 percentage points here, and you have to see that in comparison to a 10-year German government bond, which amounts to about 2% right now. You also have to take into account, when we look at the credit worthiness of Munich Re, we are one of the three or four companies with the lowest CDS, so you have a relatively low credit risk with us. From the point of view of an investor, it is an attractive buy. Okay, let's take a look at the next slide, which we're showing you for the first time. I'm looking at slide 6 right now. This is the management of our portfolio. Again, we have two axes here. On the left-hand side, you see the sensitivity to macroeconomic changes, which is in the current situation of the financial crisis, an important point because the economic cycle reacts differently to austerity measures. The question is, what does that mean for us as an insurance company or especially as Munich Re? Then also, to what extent does the company invest during this difficult situation? To what extent do we want to make a faster return to harvest, so to speak? Therefore, it takes some skill to strike a balance here and always keep in mind the capital strength we have. We do have the capital strength to actively manage our portfolio. You can see that the only business which is listed in all three columns here is the primary insurance, ERGO, which provides you with cash flow because of the property casualty insurance, which is in the middle here. We are especially exposed to macroeconomic changes, especially when it comes to life insurance, where you talk about guarantees. On the right-hand side, you have listed ERGO International as a form of investment. Here we're investing for the long term. We don't want to see any short-term profits. We're creating economic value, which you don't see at the end of the year yet. The other fields of our business, you can see listed here as well, but they're not listed in all three columns. Here it is our task to make sure as a group that we strike a good balance against the background of the overall economic conditions and based on what opportunities we have. We're not just talking about financial resources. We're also talking about what do we have in terms of personnel? What can we achieve during which time frame? It is an interesting portfolio because on the right-hand side, we do not have to slow down. We can continue to invest. Mr. Jeworrek will tell you later on that we are investing a lot, especially in reinsurance, but that is definitely at the expense of our profit today. Okay. A short summary. We're trying to create sustainable long-term value. We're not looking at quarterly results. Even yearly results are not that important. Of course, they are important to a certain extent when it comes to the dividend, et cetera, but our business model has a long-term focus, especially in the reinsurance industry, but also when it comes to the primary insurance segment. If we can afford to, we need to take a medium and a long-term approach, and we continue to do so. If you want to characterize our company, then people think about reliability, financial strength, and sustainability. However, there is a second and a third block. Secondly, we need to be aware of the risks in whichever way, shape, and form. So when we take on the risk, we need to know what to do in risk management. That is the core of our business. Then the third segment, which is often overlooked, at least in people's awareness, it is the willingness to take new approaches, to be creative, to be curious, to offer solutions for questions which have not been adequately answered yet. All parts of the company are doing that. It starts with the fact that we are saying we have primary and reinsurance under one roof, and we remain committed to our strategy. Others are saying that, but they don't do it. The reinsurance company is willing to go closer to the primary insurance where you have to have the know-how, where you have to be aware of the risks. ERGO has taken a new approach with its new brand statement, which calls for quite some courage, and the approach of Munich Health is also innovative. Here we've also brought together primary insurance as well as reinsurance. We've taken it out of the usual business, and with the development of the health market, we are growing by taking on risks. Everything has worked quite well during the first four and a half years of the crisis. That is the good news here. So, despite great uncertainties during the past four and a half years, we were able to stay on track. We were able to deliver results, and the concentration on the risks of the insurance industry is an essential factor. We didn't make bets, and we weren't hoping for the interest rates to go up. We had controversial discussions within the management. A lot of people said, "Well, with all the liquidity in the market, the interest rates should go up." But we didn't know. So we didn't position ourselves accordingly. We weren't betting or hoping for high interest rates. On the other hand, we're looking at all kinds of scenarios, extreme scenarios, not just in the insurance industry, but also when it comes to the capital market. We have tried to be as prepared as possible for whatever may come. That means all of this has resulted in a great amount of continuity, which is also expressed in the dividend payout, which we're going to suggest during the annual general meeting. So much for my side right now. I will now hand over to my colleague, Mr. Schneider, for the financial highlights. Yeah, good morning, ladies and gentlemen, also from my side. A profit of EUR 712 million is not a reason to celebrate for Munich Re. But after the very difficult start to the year and the unique series of natural catastrophes, we can be relatively satisfied with that result. Our shareholders' equity rose by EUR 300 billion and in the fourth quarter by approximately 5%. On the investment result, we had a return of 3.4%, which is approximately the value that we are also expecting for the year 2012. When we look at the reinsurance business, here the combined ratio stands out 113.6%, which includes an exceptionally high nat cat ratio of 28.8% of the earned net premiums. So an amount of EUR 4.5 billion, that's really high. But that is our job, and we are prepared for this, and we're well prepared for such a situation. We had a positive development in life reinsurance. ERGO was approximately at the previous year's level. The combined ratio of 97.8% is a little bit higher than in the previous year, but still on a good level. When we look at the combined ratio in our youngest segment, Munich Health, we reached 99.4% and a net result of EUR 45 million that was affected negatively by foreign exchange effects. A view at the individual quarters here. The first quarter, of course, stands out with a loss of EUR 948 million that was coined by the earthquake in Japan and the February earthquake in New Zealand. In the fourth quarter, we posted a result of EUR 632 million, and this was again affected by severe burdens. Just would like to remind you of the flood catastrophe in Thailand, which cost us EUR 547 million, and then the deterioration of the losses from the several earthquakes and aftershocks in New Zealand, which added another EUR 420 million to the losses already booked. Negative foreign exchange effects had a negative result of EUR 85 million. On the other hand, we had a tax revenue, which I would like to explain to you. Several years ago, we had severe losses in the U.S., and we then created deferred losses, loss reserves, and ever since, profits in the U.S. have been free of tax for us, which led to significant additional benefit compared to a situation in which we would have had to pay taxes. Today, we can state that these profits turned out to be really sustainable. According to the current IFRS accounting regulations, we therefore have to activate an asset, which added another profit of EUR 300 million. Overall, a very positive combination of facts that led to this tax benefit, this tax revenue. Our capital position remains solid in spite of the burdens. We had a slight increase of our equity, and in the fourth quarter, even by EUR 1.1 billion, which was shaped above all by the reduction of the interest rates on the relatively low-risk government bonds. We have a capital investment on the asset side. We are balancing it, so we are counting it at market value, and that led to the increase of our equity. In the lower part of the slide, you can see the setup of our available financial means, where the sum of senior debt, subordinated debt, another long-term debt of EUR 28.5 billion overall. Out of that, only 18% consists in liabilities. The other is equity. So a high equity ratio, especially if we compare this to our peers in the insurance segment. Moreover, the equity has a relatively high quality. What I mean by this is that we have only very low goodwills on our balance sheet. We often talked about the fact that as soon as we see any evidence that companies we have taken over do not develop the way we want to see them, that we have written off goodwill as quickly as possible, which always has a negative short-term effect. But over the long term, it means that we get a sustainable balance sheet, which is very positive for us. Mr. von Bomhard talked about the balanced portfolio. We do not have any major bets on any specific scenario. That is why I always underline that you will never see Munich Re as the winner of certain development because positive and negative effects of certain possible market scenarios will always set off each other in our company. We believe that this is important in order to present a solid balance sheet as the basis of our insurance business. Overall, we have an investment portfolio of EUR 207 billion. That would have been reason for joy in the past, but right now, we are sharing the difficulties that every individual saver has these days. It is not so easy to create return with these funds and means and to combine this with acceptable risk. 84% of our portfolio consists of fixed income securities, and you see the setup on the right-hand side of the slide. Amongst those, 48% are government or semi-government bonds. Last year, especially in the second half of the year, there was another shift towards the more secure government bonds. That is to say, the German and Western European bonds. Overall, 70% of our government portfolio is invested in German, U.S., Canadian, U.K., and French bonds. But we also have a stronger focus that we put on the emerging markets, but it is not that easy to spread your commitment in these areas because there is not that much offer. We also had a cautious buildup of our corporate bond portfolio, and we remained at a relatively low share portfolio. Now let us take a look at our capital investment results. We had a reduction of 22% to EUR 6.7 billion. The regular income has decreased a little bit. The reason for this is that the balance of write-ups and write-downs was clearly negative EUR 1.6 billion. Here, we would like to underline, especially, of course, the impairment of our Greek government bonds that was due to the tune of EUR 1.2 billion. So how will we go on here? Well, the return on our reinvestments in the second half of the year 2011 was at approximately 3%, and right now in 2012, we are even below this value. With the German federal bonds, we have a return of 1.75% and for US Treasuries of approximately 2%. If we then need to go into long durations and want to go into long durations to have a balance to the long-term liabilities that we're facing, then this leads to a reinvestment yield of slightly below 3%. That is to say that our average yield, our average return on capital investment is slowly decreasing. Therefore, it's of utmost importance for us to find alternatives with stable returns and manageable risks. Here, the investment in renewable energies is one of the most important options. We have renewable energies and infrastructure investments. In renewable energies alone, we invested approximately EUR 500 million in photovoltaics, sometimes in electricity grids. For us, we see an attractive risk-return profile here. The diversification effect compared to our other investments is a real positive effect. Another new investment focal point are infrastructure investments. Our planned volume of the medium term, we're talking about EUR 1.5 billion, and we're talking here about the segments of transportation, utilities, and communications most of all. Just as with the renewable energy portfolio, it helps us that we have a lot of technological know-how in our company, not just here in Munich, but also, for example, in our U.S. subsidiary, Hartford Steam Boiler. The experts in these fields are closely linked to our investment process. What we need is to have the fitting framework conditions. That means, on the one hand side, we need to have investment safety from the legal point of view, and also with the partner that we're talking about. So we need long-term, reliable conditions. From our point of view, we need to be treated the right way when it comes to the regulatory side. When we look at the Solvency II drafts right now for infrastructure and renewable energy investments, in spite of their stable cash flow, we need the same amount of capital as for shares, and that doesn't reflect the character of these investments. Therefore, we hope that there will be adaptions in the Solvency II process. This would then be the most decisive lever for another fruitful preparation in times of empty public coffers. We as the insurance segment, and we as Munich Re are prepared to do that, and we hope that the change of the framework conditions will come. Let me now talk about the individual segments before my colleagues, Torsten Oletzky and Torsten Jeworrek will present their large segments. I would shortly like to present to you our youngest and smallest business segment and its development. For Munich Health, which is our international, that is to say, non-German health insurance and our health reinsurance. Here we had a plus of 19.3% in premium income, driven above all by reinsurance, and here, especially by growth in large volume contracts. In primary insurance, only a slight growth of 2.2%. That was coined above all by the shifts in our business in the U.S., where we had a company that offered a cost release product or a reimbursement product, just as the German health insurance. Due to the American health reform, the framework conditions for this product were deteriorated significantly, which led to a negative result for us over there. But with a lot of effort, we were able to acquire another company that is working with the business model of the health maintenance organization. A company that offers a network of health providers, physicians, pharmacies, hospitals, and all that, and offers this to the policyholders, and that is the future path for international healthcare. That influenced our business or the result of Munich Health. On the other side, and additional to this, we had negative foreign exchange effects here. To sum this up from my point of view, we had a pretty resilient result. 2011 was finished with a significant profit in spite of all the negative conditions. That was also due to a well-diversified investment portfolio. We really managed and maintained the sound capital base of our company, and therefore, the dividend remains well-financed. I would now like to hand over to my colleague, Torsten Oletzky for primary insurance. Good morning, everybody. The year 2011 for primary insurance within Munich Re for ERGO, it was quite a difficult year, a challenging year. We had difficult environments at the capital markets. The low interest rates in Germany were a descendant also, of course, the situation in Greece. Then we had our own negative headlines added to that. When you look at all of that, you can say that all things considered, ERGO has done quite well, and that we can be satisfied with the results. Now let's take a look at the results ERGO achieved. On the left-hand side, you can see the results from the IFRS from Munich Re. Here we've seen an increase of EUR 100 million up to EUR 762 million, but that also includes internal transactions between the different segments of primary insurance, which are not taken out here. What's more important is the fully consolidated result for ERGO. Here you can see that we have almost achieved last year's result. We had EUR 355 million in 2010 and EUR 349 million in 2011. The result in 2011 is relatively heavily influenced by one-off effects of a positive as well as of a negative nature. That includes, of course, the write-offs on Greek government bonds, but then there also has been a real estate sale in Singapore. We have also sold subsidiaries from Munich Health. That was also managed by the headquarter in Munich. The result by 2011 was characterized by a number of special effects. But all things considered, as I said, the result is pretty much the same like last year's, and it is satisfying. Now let's take a look at the investment results, which worried us a lot during 2011, where we've seen a quite significant decrease across all segments of ERGO. An important effect, of course, was the effect of the Greek government bonds, which had an overall effect of over EUR 1 billion. Net effect was around EUR 200 million, and these write-offs mostly affected the segments Life and Health. Then we have also made hedges for low interest rates, which amounted to EUR 350 million. The net effect was about EUR 80 million. Then we had also a lower balance of unrealized gains and losses in unit-linked life insurance, which led to a negative result of over EUR 500 million, which does not have an overall effect on the yearly surplus. Then we have the internal transfer of international health insurers that was mostly due to Spain and Belgium, where we had a net effect of about EUR 100 million. Gross, it was about EUR 200 million. The real estate sale mentioned in Singapore. The last two transactions had been planned. They had not been done to compensate the effects of Greece. They would have happened in 2011 anyway, so it is pretty much a coincidence that the result after all these special effects was pretty much at the previous year's level. Now let's take a look at the premium income development. Here you see a slight plus when you look at the premiums of about 1%. If we take out foreign exchange effects, which had a negative effect of EUR 82 million, then we see an organic growth of EUR 220 million, which is about 1%. On the right-hand side of the slide 21, you can see the development broken down into segments. Life is showing a decrease of 3.4%. That had to do with single premium payments or the decrease of that, of single premium business. In property casualty, we've seen an organic growth of 2.5%, and in health, 4%. Now let's take a look at the growth figures for life and property casualty, these areas which we have in Germany as well as on an international level. If you make the comparison here, you can see here that in the year 2011, we have seen almost the same development within Germany as well as abroad. That was not always the case when it comes to these premiums in Life in Germany, but as well as internationally, we had to see decreases because of the single premium business. When you look at property casualty below, we have seen growth rates which are also pretty close. That we have not seen more growth internationally when it comes to property casualty is due to the fact that we have followed a strong consolidation course. If you have followed the press conferences in the past, then you know that we used to have negative results internationally in the past. So we focused more on results versus growth. So it is a reasonable development. When it comes to Life, it was mostly the effect of the single premium business, which had a negative effect on the international business as well. Now let's take a look at the primary Life new business. Here, we were able to say that there's an overall positive development with a plus of 4.3% of the regular premiums. The single premiums, however, show a decline of about -8%. If you look at the annual premium equivalent, we pretty much achieved last year's results, but we have a better mixture with more regular premiums and fewer single premiums. All in all, it is actually a positive result. Both trends are reflected in Germany as well as internationally, where you see an increase of regular premiums and a decrease of single premiums. Here it is positive that the trend in Germany with our regular premiums is even more noticeable. We see a plus of 6% here, and that is quite positive considering the difficult circumstances we had within ERGO last year. Internationally, all in all, we have pretty much achieved the same results in Germany, but the developments were quite different in the different markets. We have seen a noticeable decrease in Austria, and that had to do with the fact that the tax regulations were changed in Austria. People have to keep their life insurances for 15 years now instead of 10 years, and that is something that is definitely noticeable when it comes to the new business. We have seen a decrease of about 20%. However, we have seen, again, very positive developments in Belgium as well as in Poland. Now, let us move to slide 24 and take a look at health. Here, when we look at the development of our new business, we see a significant plus in the comprehensive health insurance that would have been even more noticeable if we had not decided to say goodbye to the business of the minimum health insurance and low-price tariffs. We have decided that we would give up this business. That means that these tariffs were no longer sold in 2011 after we had taken our decision. Well, at first glance, it looks slightly problematic when we look at the supplementary business, but you have to keep in mind that the figures from 2010 include a major contract with a corporate customer. That was a block which amounted to over EUR 60 million of new business back in 2010. If we were to take that out, then in the supplementary new business, we would also see a plus in the double-digit figures, namely 13%, taking out that special effect. We have tried some new things. We have had controversial discussions at ERGO Direct. We have introduced the instant dental cover product, which supports you once you already experience the first damage, so to speak. This product has developed in line with our assumptions, so the loss ratio is as we would have expected after the first months. We have had slightly higher losses on average, but the frequency was lower, so these two effects actually balanced each other out. We have taken here a very careful approach. We have sold 17,000 contracts here, and we will keep an eye on this business. We see a positive development here in the future, but we need to get some more experience. Now let us take a look at 2012. Here, we will provide more information for our DKV customers online. We want to create more transparency, especially when it comes to changing to a different tariff. That is something where we, as well as the whole industry, has been criticized, and we have created the portal here, which is called myDKV. If you want to change to a different tariff, that is where you would go as a customer, and that is something we're going to work on in 2012 in our health insurance business. Now let's move on to property casualty insurance. 2011 was a difficult year. When you look at the slide, I'm looking at slide 25, you can see that within Germany, we have seen an increase of the combined ratio of 93%. That was due to natural catastrophes. I don't want to mention the names of the storms here. I don't want to mention these names, Achimbert and Frank, because Mr. Jeworrek will come up with the major catastrophes, natural catastrophes. I mean, these were national events, but it definitely does have an effect. We had local and regional major losses, so to speak. Also from liability insurance, we had some larger claims. With a result of 93.1, we have achieved a relatively high combined ratio. I, however, assume that other companies would love to have such a combined ratio. But for us, it is definitely an increase of 3%, which will have a negative effect on our results. It is slightly more positive when you look at the bottom right at our international business, where we have made an improvement in the combined ratio coming down from 107.8 down to 105%. For 2011, actually, we would have wished to take a larger step even. Nevertheless, in 2012 and in 2013, a lot of work remains to be done here. Now, let's take a short look at our German as well as our international business here on slide 26. Here you see the combined ratios broken down into the different segments. If you compare ourselves to competitors, please keep in mind that we have the combined ratios done according to IFRS. However, others are doing it according to HGB, the German Commercial Code. Please be careful when you make a comparison here, because there are differences if you calculate according to IFRS versus HGB. However, the basic statement is that we have here an IFRS combined ratio in motor insurance of 112% and also in fire and property. These two areas, these are the topics where, especially in the German market and in ERGO, that is something where we need to get busy and do something. The prices which we can achieve here, they are just not enough to cover our losses. Whereas in other areas, as you can see here at the bottom left, we're doing quite well. All in all, even in a difficult year, we had a total combined ratio of 93.1. Our goal for the group is we want to stay below 95%. Since we have a slightly different mix internationally with a higher motor insurance percentage, it will be difficult to achieve that result that year. But for Germany, we want to definitely stay below 95. Significantly below 95 would be nice. Now I'm moving on to slide 27. This is our international business. Here we see also a slight positive trend. We're looking at a combined ratio of 105%, as I mentioned before. Here we have seen a very positive development in Poland across all our business, property and casualty as well. As others, we have achieved about EUR 1 billion in total. Even after a more difficult year of 2010, we have seen better results in Poland with a combined ratio slightly below 100 with 99.6. We have definitely taken an important step forward. The places that worry us are the markets in Turkey and South Korea, two very demanding markets where we have a high percentage of motor insurance. Here, on the one hand, we have noticed that the local management, with the support of Dusseldorf, has been taking the right steps in the right direction. However, that wasn't really noticeable yet in 2011, and we hope to see better results in 2012. What's positive here is the development in the Netherlands, which is our largest international DAS company, with a contribution of over EUR 200 million. That means we have an even greater market share compared to Germany. We see a very positive development as well as all the business we're doing under the brand name DAS, which contributed nicely to the overall development here in our business. Now, let's move to my summary. The overall result, taking the overall conditions, is satisfying. There's no reason to be euphoric, but it is reasonable. Of course, the low interest rates are a great challenge for us, especially for life and health insurance. Therefore, we need to make changes, and we need to adjust to the changing environment, especially in health insurance. In property casualty in 2011, we had a weaker year, somewhat weaker year. However, we have positive expectations to achieve better results in 2012. In our international business, we need to strengthen the turnaround or confirm the turnaround where we have seen the beginnings in 2011. That we can make sure that we achieve an overall combined ratio for Germany and internationally below 95%. That would be a great result for property casualty. I would now like to hand over to my colleague, Mr. Jeworrek. Good morning, ladies and gentlemen. I come to the reinsurance business. Before I start talking about the results, the year 2011 was, as you all know, coined by severe natural catastrophes. Just an overview of the gross premiums written first. 2011 in life and non-life, overall, EUR 26.5 billion in premiums. That's an increase of 12.3% and significantly more than we had thought possible in the competitive situation, especially in the non-life segment. I'll come back to the reasons later on. But I would like to mention first that we reached all this organically, fully organically. We didn't have any acquisitions or didn't reduce our profitability requirements, especially in non-life. Life, 21.5% premium growth to EUR 9.6 billion. Where does that stem from and how can you explain that? I can tell you we hadn't planned that much. That was above all due to the fact that we participated in part from the positive development in Asia and the growing demand there. But even more from the fact that the need for life reinsurance treaties, large ones that support the cedents in difficult capital market situations, here demand has continued to grow. Just as in the year before, we had additional major transactions, especially in the North American region, that supported our premium growth, even if it was unplanned. Those were contracts of between 3-5 years that we will have them in our books, and we will see how they will be renewed. But we can see that the trend for additional transactions of this nature has continued. Now, the non-life side premium growth of 7.7% to EUR 16.9 billion. That is also more than we had expected, especially as the competitive situation in property casualty was still seen as quite difficult. Therefore, the question remains, where does it come from? Well, there were two drivers behind that. First of all, due to the severe losses, so due to the severe natural catastrophes already in 2011, in the following renewal rounds. So especially in April and July, we were able to profit from significant premium increases, especially in the natural catastrophe segment. The second reason was that also in the non-life segment, there were some major contracts to alleviate the burden on solvency, especially in the Asian region, with the volume of several hundred million euros of new premiums for us. Therefore, a very positive development for us. But I would like to remind you that premiums are not the most important target for us. Of course, we're willing to accept this if it adds to our profitability and fulfills our requirements, so no change of our business approach here. Let me now talk about the segments. Let me first start with the property casualty reinsurance. What you can see here is a significant reduction, especially in the consolidated results, down to EUR 371 million, but also in the technical result and negative technical result, and that is the effect of the natural catastrophes. The underlying basic business is still profitable and solid. So here we can feel the volatility of our business. But as Mr. Schneider said, that's our job to deal with this. Then the investment result. Here, a slight decrease on the difficult capital market circumstances, but still at a relatively good level if you take the framework conditions into account. Now let me look at the combined ratio in 2011. Of course, this reflects the severe nat cat losses. So 28.8 percentage points of our combined ratio of 101.8% are attributable to natural catastrophes. So that was the major driver here of the 113.6%. And what we've seen in 2011, the series of floods, then the New Zealand earthquake damages in February and June, then the severe earthquake in Japan and the hurricane damages then in the U.S. and the Thailand flooding. So from our point of view, from our broad estimate, that is a likelihood of 2% that something like this happens per year. So a 50-year event, a relatively rare event. That doesn't mean that it cannot happen again this year or next year. If you throw the dice, you can throw a six three times in a row, even though the dice is fully working. But nevertheless, this is just to give you an idea. In the center of the slide, you can see that we had positive results from reserve releases to the tune of EUR 600 million. That's approximately 4 percentage points of our non-life premiums. Here we profited above all from the good underwriting years of the last decade, where we had taken an overly cautious approach in forming our reserves. That's not any kind of change of our reserve policy. Others are doing more, but what we're doing is doing the unavoidable, if you wish. Also when we look at our results, the negative results we had from the reserves of our U.S. subsidiary 10 years ago, this is a lesson we've learned. We don't release reserves too early. If you look into our financial reports, you can see that the releases come from the short-tailed business, where you can quickly check the reliability and then release reserves if that is possible. What I also would like to mention is the underlying business. The basic loss ratio is relatively unchanged. You see the releases, the EUR 600 million in reserve releases. Those are accidental volatilities. But we're convinced that our business as a whole is profitable and is profitably managed. On the next page, you see the differentiation here. You have to ask yourself, where do the figures stem from that we talked about? On the top, you can see the combined ratio versus the basic loss ratio, and at the bottom, the difference between natural catastrophes and the man-made major losses. What do you see from this slide? The overall combined ratio was volatile, especially in 2011, whereas the underlying basic loss ratio was relatively stable, even with a slight improvement tendency. You can see that it decreases over time, and that's remarkable because the competitive situation over the last 2 to 3 years has tightened, and we've seen a stricter competition, and we counteracted this pretty well, as you can see here. At the bottom, you see the man-made losses in blue. Those are major losses of over EUR 10 million in our portfolio. That is something like an oil rig, for example. If you think about Deepwater Horizon or major fires, so everything that's not a natural catastrophe. They've all been relatively stable with a slight downward tendency. Above all, volatility stems from our natural catastrophe losses. On the right-hand side, you see the overview of the most important major losses. With the earthquake in Japan, we're at EUR 1.5 billion, which was our initial estimate, so no change here for our portfolio. There is a small positive development, and I don't want to celebrate too early, which goes into the direction that the indirect contingent business interruption claims, some delivery problems that stem from the earthquake and tsunami situation, they haven't materialized so far, and we're now 1 year after the catastrophe. We shouldn't get any additional claims from the contingent business interruption here, and which doesn't change our underwriting policy in any way. We still believe that this product is overly intransparent, and we can only offer this with significant limits if transparency of the supply chains can be clearly improved. The New Zealand earthquake, once again, a loss of EUR 1.5 billion for our portfolio. That is higher than we had estimated at first. We had to add here in the fourth quarter, and we believe that now we are reserved really conservatively. But where does the uncertainty stem from in this case? That is to do with the fact that within the event, the geology. What happened was uncertain. I had told you about the interferences here, where the waves were reflected by the rocks and then overlapped and formed climaxes that led to severe damages. Then the ground situation that led to additional damages. Also something we have to manage is the political situation. In New Zealand, there have been all kinds of political discussions with the question, where do we want to rebuild? Do they want to rebuild? Everything is slowed down and doesn't really start. Then there are also discussions of changing the construction code. They want to build better buildings than there used to be, and the question is, who will pay for the higher standards? Of course, there is money linked to that and the time value that goes beyond the value that the insurance has had. Now, Thailand. EUR 500 million, EUR 450 million right now, unchanged. There is still a certain degree of uncertainty. It hasn't been too long since the event, and the flood continued to December in Bangkok and the region around. We have a slightly different portfolio than our competitors in that we have hardly any exposure in the Thai market. We had reduced underwriting there for completely different reasons, and therefore, we are not that affected by the proportional fire business for price reasons. You cannot say Munich Re is a high proportional underwriter, because especially in Japan, where we had a lot of losses from proportional business here, they also stem from Japan and the proportional business, but from the fire contracts. Here we don't see any reasons to change our estimate according to the current situation. But the uncertainty here is also to business interruption and contingent business interruption. Now, after these major events, I would like to talk a little bit about our business model, and I would like to show you that we are not just suffering payments after these severe events as we have seen them over the last few years. If we have mass damage. No, it goes beyond that. We also offer our customers, the major insurance companies, loss services. That starts with the prevention. We offer them emergency plans and preparative measures for citizens who are in regions that are affected by such events. One example I put down here is the example of Chile. In 2010, we had a severe earthquake in Chile, and afterwards Chile was able to recover quite well because the insurance business as a whole did quite a good job. What was our part? Well, if such an event happens, we of course have to look at the loss reserves internally. But then we also go out to our customers. five days later, we were there with a complete team in Chile, and we offered the customers, the citizens, immediate services in doing the claims inspection and all this, which is also of a high value to the policyholder, because if such an event happens, here in Chile, 190,000 damaged or destroyed buildings, residential buildings. Then another 30,000 cases of damages to industrial and company buildings. So a huge challenge for the citizens. They do not have that many people. They need to have experts, and there is the fight about claims adjusters and so on and so forth. The longer this takes, the more difficult it gets for the policyholders, because they feel helpless towards the damage situation. We see something like this relatively often. That is to say, more often at least than it happens in a specific country. So we have the necessary people in place. We have the necessary resources, and we then give advice to our customers and go to them and support them. One aspect of this is, of course, that we are also doing this to our own benefit, because if we are able to quickly adjust claims and take emergency measures, so replacing production, finding replacements and all that, of course, also reduces the losses for us, which in a major risk for us in Chile, led to a reduction in the double-digit million EUR region. Now let me take a look forward. The question is, what do we have to think about the natural catastrophe business? After such an event, you get into kind of a state of shock, and you ask yourself, how can this happen? In the last decade, we had this twice. 2005, the severe hurricanes, Katrina, Rita, and Wilma in the U.S. and the Caribbean, and then 2011, earthquake damages once again. The question then, of course, is, are we doing the right thing? Do we have to change something? Are we over-dramatizing, or how do we need to deal with this? Then we take a quite close look. We are doing profitability analysis. We check our models. Beforehand, we always have the need for adaption in our models. There is even a need for adaption in the earthquake and storm models if nothing happens. So our mathematicians, our model scientists adapt models all the time. The question is just whether there are new special lessons from these special events so that models have to be calibrated more than in other years. The profitability analysis show that if you look over the medium term, so the last 15 years or so, over such a time frame, you would need to sustain such major losses. Then you find out that the business is one of the strongest pillars of our business. So if you take a conservative approach, if you adjust the models, then you can earn a lot of money with it. But we have also taken these events and increased the margin, the annual margins for natural catastrophes. So the value we have to expect on an annual basis was increased from 6.5% to 8.5%. What is the reason for this? Well, in the last two years, we have underwritten more liability in the medium scenarios, and then there were also needs to readapt due to the new models, RMS 11 here, for reasons that were not affected that much by the events of the last years. Then we also included additional events, such as in Thailand, which also led to the fact that we needed to increase the margin. In part, this was also reallocation from the man-made losses. What are the effects of this on our annual business? The effect is slightly unchanged because the margin combined of natural catastrophe and man-made remains almost unchanged at 12%. What will we see over the remainder of the year? In April, we have the renewal round, Japan, Korea, and North America. Then in July, New Zealand, Australia, U.S., and the Caribbean. So two renewal rounds, and these are significant renewal dates for the catastrophe business. There's more catastrophe business renewed at these points in time than in our January round. That's why they are important for us. Right now, without being able to talk too much about the ongoing renewal round, we assume that in the ongoing renewals, especially in Japan, we will be able to create significant price hikes. In Japan, that happens from two sides. Here we'll have a change of earthquake rates in the insurance business, which affects us in the proportional business where we are proportionally linked to these figures. Then there are also price raises in the catastrophe business, especially because the renewal rounds had ended for some of our customers when the catastrophe struck last year. In July, we believe there will be slight increases in North America, 5%-10%. This will be the effects of RMS 11 and in the Caribbean as well. So overall, you can see that property casualty has continued to show organic growth based on strong underlying combined ratio. We had high volatility from natural catastrophes, but it still remains an important profit contributor, and we believe that we will be able to reach good results from the ongoing renewals. Life insurance reinsurance, a few words here. The net result developed very positively. So consolidated result, EUR 403 million. Technical result, EUR 367 million. Clear increases in both cases. So you see that we get additional profit from existing and new business. The EUR 367 million, they are close to our highly ambitious EUR 400 million that we've set as our goal for the near future in life reinsurance. So we're close to this ambitious target, and that's in spite of the fact that in the third quarter we had to form additional reserves for the Australian disability business. Premium development. On the left-hand side, you can see that the amount of life reinsurance with EUR 9.6 billion has increased. Also, relatively compared to the overall business, we're now at 36%. If you look at the bottom right, here you can see that the value of the new business, so the cash value of the newly underwritten new business. Here you can see two columns that stand out. First of all, the year 2009 with EUR 562 million, and then 2011 with EUR 643 million. So a new record year in 2011. 2009 was the time post Lehman, where there was additional demand for major reinsurance transactions. Now in 2011, once again, an improved picture so that the goals we set ourselves five years ago were clearly reached and even outperformed. What's our strategy in life reinsurance, and do we want to change something here? Our business is based on four columns that we are in. The two ones on the top that you see left and right are the ones that create strong profit. On the bottom left and right, you see the parts that show innovation and investment into the future. We believe that with our strategic initiatives, in our existing business, actuarial service, automation of primary insurance. We have service products for them. We give them advice, and we believe that we can get traditional business here, especially in Asia, but also in other markets. On the left-hand side, financially motivated reinsurance. I told you that the trend continues. Reinsurance has turned more and more into an interesting tool to avoid hybrid investments or other securities that you would need to contain your solvency, and you replace them via reinsurance. At the bottom left, what we call asset protection. That is a completely new field of business for us. You're invested in IT and infrastructure, and we are offering the customers holistic reinsurance contracts that not just include the biometrical risks but also capital market risks are included. But we do not keep them in our balance sheet, but just take them over insofar as we are able to hedge them from the capital markets. So we offer the customer a holistic product but only maintain the biometric risk and alleviate ourselves from the capital market risks. On the right side, another small experimental field that we're in, longevity, especially companies are trying to alleviate the burden. We're taking a cautious, very cautious approach here because the longevity trend is something that's really uncertain. Humankind is striving to become older, so you need to have higher margins in order to offer that. What we haven't seen so far is that this is really profitable. Right now, we're not seeing this as a major business field, and I think we're well positioned here. I would like to hand over to Mr. von Bomhard. Well, thank you so much for this speedy presentation of the different business segments, and that gets us towards the end. Let me just give you a very short overview from my point of view. What's important for me personally is that we have been able to deal successfully with the economic cycle. Of course, the natural catastrophes left their mark, but with the financial crisis and especially with the economic cycle, we were able to deal quite well. It's interesting to see for our investors that we behave differently compared to very many other companies. So we have always remained our capital strength. During the financial crisis, we were always able to seize every opportunity because we always had enough capital. If we didn't do certain things, it wasn't because of a lack of capital. What is also interesting for the people who have been here for a long time, when you look at the overall result, the overall result is carried by two major blocks. On the one hand, it is ERGO and it is also the U.S. reinsurance business life and non-life. I should rather say North America instead of U.S. because Canada is also included. These two parts carried our overall results and balanced out the losses we had elsewhere. Otherwise, our result would have looked differently. Something else I would like to let you know, we have left 2011 behind us without any major effects which will affect us this year. There is no goodwill problem, for example. There is nothing that we will have to take into the new year. We can start from scratch again. We have a clean slate for this year. Despite a still difficult capital market environment, we will continue with our successful strategy. That means we are striving for a result of EUR 2.5 billion for this year. Here you can see what we expect from the capital market, about 3.5%, but that is return on investment. If we are going to see major distortions, that might actually be less. You need to know that our investment in shares is relatively low at this point in time, so that we cannot profit from that like others who might be more invested in shares. For us, what really matters is the development of the interest rate. What we would like to see is a gradual growth and not a growth in spurts. What we expect is we would like to stay in property casualty under 100% combined ratio. Overall, good results. Let me say one more word about Greece. The steps which were taken just recently in order to stabilize the Eurozone. We believe these steps were the right ones, and they were important ones. We as a company, we gave it a lot of thought, and we were totally free in our decision what we should do, and we discussed it back and forth also in the interest of our policy holders in life and health insurance, and we decided to discuss it back and forth also in the interest of our policy holders in life and health insurance, and we decided to take part in the swap. The question was, how many people would participate? Because we didn't want us to be amongst the participants, whereas a lot of others wouldn't participate. However, the important hurdles were successfully overcome and the Greek government did include the collective action clauses, did the right thing, and it made sure that all the others who were still holding the Greek bonds would also be part of the haircut. That was an important aspect from our point of view so that everybody would be treated equally. Also it was an important step for the stabilization of Europe. What is decisive now is that we don't stop here when dealing with the indebtedness, but also when it comes to Greece. We should now take a step forward, do something like a Marshall Plan, subsidize investments. That is something which is not easy, but the EU has a task force because it is the other side of the coin. On the one hand, we have calmed the situation in Europe, but now we also need to instill trust, and that is the most important thing that we see again, trust in the markets. So much from my side, let me hand back to Mr. Lorenz. We now have our Q&A session. If you could tell us your name and company you work for, that is important for the video broadcast. Mr. Flämig, Börsen-Zeitung. I have three questions in total. Mr. von Bomhard, you mentioned the capital situation of Munich Re is quite good. Is Munich Re thinking about using its capital strength in order to buy portfolios or other companies? My second question is about the quality of the result of 2011. You said ERGO and U.S. Reinsurance were the two mainstays. Is it true that without the U.S. Reinsurance and the special effects, you would have seen a group-wide loss? You not only profited from the tax benefit, but also from the $700 million. Then the third question. You mentioned, Mr. von Bomhard, that you would also like to see a new framework. No, that was Mr. Schneider for Solvency II for infrastructure projects. Mr. Flämig, thank you so much. The capital situation, which I would call at least comfortable, is not going to make us do anything stupid. During all the time of the crisis, we could have done takeovers or acquisitions. We always had enough capital to do so, and I also believe that in the year 2008, around the Lehman crisis, we would see good opportunities. There were some opportunities, but we either believed from a strategic point of view, or from an economic point of view, they weren't interesting. The prices during the whole crisis, from our point of view, remained very high, astonishingly high, with the one exception of Hartford Steam Boiler Group, where everything was just fitting nicely. We would have liked to see more of that. Unfortunately, it didn't happen. Now let's take a look forward. The crisis is still here, and some companies are still struggling, also within the insurance industry, more abroad than here with our immediate vicinity. We are looking at everything that makes sense from a strategic point of view. The likelihood that we're taking over whole companies or portfolios, this likelihood is not very high because we still think the prices are quite high, especially against the backdrop of the low interest rate scenario. Then your second question, the taxes which you mentioned for the U.S., they didn't have any effect anymore. We looked at IFRS results only, and the dividend didn't play any role. Dividend only plays into it when you're doing it according to HGB. So, as Mr. Schneider said, the fact that we had a tax-free result. Despite the tax-free result, these were the mainstays of our policy in 2011. For the third question, I'd like to hand over to Mr. Schneider. About the infrastructure investment, let me say the following. It is important that we find the right targets for our investments. Things are moving quite slowly still because all the participants are still collecting experience. Often, a buzzword is public-private partnership, where we have seen good examples. For example, freeways are being built, and then the partners get the income from the toll. Then another example would be telecommunication, where you would not necessarily work with the government as a partner. These things are difficult to finance. What would be ideal for us is where you would receive some money from third parties. Like, for example, when you can collect the toll, for example, for the freeways, but also when you look at renewable energies, where you could then participate from the money generated because of the energy prices. So right now, there's not much on offer. Since we have a lot of capital investments, we have a very large portfolio. We also like to look at illiquid or non-liquid direct investments, and we do that in partnership sometimes with funds, but we're not investing in the funds themselves. What I said is what we would like to see is lower capital requirements. For shares, you have about 40%. So if you invest EUR 100, 40% is what you have to have in terms of capital. I think this is too much for these type of investments. Mr. Höpner is next, followed by Mr. Dauer and Mr. Fromme. Okay, Höpner of Handelsblatt. Mr. Schneider, what are the returns you're expecting in the renewable energies and infrastructure investments? Then the second question on Munich Health, when is this supposed to have a size and profitability in the returns so that you get a certain balance in the group? Then the third question, a follow-up to Mr. Jeworrek. The $1.5 billion of Japan, does this include contingent business interruption, and how much of it? Okay, when we come to the returns, I don't want to give you any fixed figures. That really depends on the individual commitments than on the general interest rate level that is existing at the investment point in time of the investment horizon and also the residual risks. So please don't make me give you any figures here. When we look at Munich Health, we're quite confident that we'll not just get the premium volume, but also the profitability. But it's a difficult business because it's really severely influenced by the political framework. The companies, wherever they are, be it in the U.S., in Europe, in the emerging markets, they all will have to face the fact that there needs to be private co-financing in health expenses. Otherwise, it's not possible in an aging society to really provide for old age. So we're confident and optimistic, but we don't give any short-term targets here. Okay, let me come to the $1.5 billion that included a lump sum for all not modeled dangers, and that includes contingent business interruption. I told you once that we don't have any models for this because we don't have the necessary data, but also for accidents and anything else. And so we included a block in the lower three-digit million area. I cannot tell you exactly what CBI was of that because we do not have a separate sum for this. That is the best answer I can give you. And that is included. Okay, Mr. Höpner, Mr. Flämig, and then Mr. Fromme. I would like to know what the natural catastrophe budget is for 2012. For 2011, you had about EUR 1 billion, and why the premium forecast seems to be unambitious, as some of the analysts told me. Just one short add up to the return question before of the alternative investments. They are illiquid, non-liquid, basically, and they are linked to certain risks, and that is why the return is slightly higher. This is in the ex-ante view. In an efficient and transparent capital market, a thing no one believes in any longer, but then the risk should have the right return, and then it would be a zero-sum game. Let me come to the natural catastrophes. The 8.5%, you can calculate this, the sum, and then you will come up with EUR 1.3 billion plus or minus. The question, premiums. In ERGO, we are a little bit more courageous when it comes to premium forecasts because the business there is easier to forecast, and there are different reactions to market movements. In reinsurance, it is one of our basic pillars that we do not give any forecasts for premiums. That is why you only see ranges. And Mr. Jeworrek was almost ashamed of the growth in his area, the 1 billion to 2 billion in addition, and he wants to counteract the view that we are trying to gain premiums here. No, we are not interested in that. We are not interested in a size comparison based on premium. What we want to see is the result. And if we get this by additional premium, okay. Primary insurance, that is a little bit different. Here in Germany, from a legal point of view, we need to include this, but it is just one of many goals because ERGO, of course, also is looking at profitability just as the rest of the group. A short follow-up. The EUR 1.3 billion were for natural catastrophes and not for major losses in general, right? Yes. Mr. Oletzky and Mr. Schneider. Herbert Fromme of Financial Times Deutschland. First question is, if we look at the reinsurer, why did you have a worse result than Swiss Re and Hannover Re? And if we look at the last five years, you had a downward trend, the second minus in two years. And then the question regarding the wisdom of combining primary and reinsurance. At first, you always explained that you are loyal to ERGO and Mr. Diekmann of Allianz did this with Dresdner Bank until the very end just as well. I do not understand. EUR 400 million, half of this from selling real estate in Singapore, another third that you transferred when you took over the health insurance. So you do not get rich by this. And five years ago, you promised us that within five years, the profit of ERGO would be doubled, and we are far away from this. I can see that we have a crisis, but others have doubled their profits over the time. In the fall saw the German life business as a strong negative factor for the rating. Could you please explain once again why this is such a good combination? The crisis affects on both sides, both in Munich Re and in ERGO. Thank you very much, Mr. Fromme. First question, the relative comparison. Well, even for us, it's difficult to see through the figures of the competitors. You can also look, and this is what I often do, how the stock market reacts. Now, Mr. Fromme, I think what we do each and every year, we're talking about the right time frame. I would like to look at the last 9 years, not 5 or 10, but next year, we can talk about the last 10. The medium-term comparisons show that there are no significant differences, at least not with Swiss Re. The colleagues in Switzerland release significantly higher reserves. Now, if I knew compared to which bases I could compare this, but I don't know the bases, so it's difficult to judge. We have gross reserves, which are interest and spread driven of over EUR 11 billion, where we didn't make any differences. So there are so many volatile and parts included that it's difficult to just compare the overall results. But the fact is that the volatility regarding our results is much lower. So anything that happens on the term of sustainability works quite well. This, and that brings me to the next point, that this also means that it is right that we have a primary insurer like ERGO in our group because we used to be exposed too much to the capital markets in the past with both parts. That was right, but we reduced this. If you look at the diversification now, that might be a little bit technical, but the new risk capital that we'll present tomorrow, and you will see the diversification across the business segments of over EUR 4 billion, just by the pure fact that we have this both under one roof, and it gets more interesting on the capital investment side. The diversification of different durations and interest rate positions in primary and reinsurance saves us risk capital to the tune of EUR 2.8 billion. We're positioning our group when we look at the durations. As we are highly exposed to interest rate risks and in life insurance in ERGO, I will come to this in a minute, in Germany, but also abroad. A primary life insurer is always too much in the short position, and this is balanced by the reinsurer, which is usually a little bit too long in the tail. That leads to the EUR 2.8 billion in saved risk capital. This is just one of the example why it really makes sense to have them both under one roof. I don't want to talk about all the synergies, costs, and value synergies, but in capital investment, you can clearly feel it and see it. When it comes to the question of the profit expectations, well, when Mr. Oletzky joined us, the expectations were different, and he started before the crisis. The expectations were different, that's true, not everyone has doubled their result in the meantime. There have been sideways movements across the board. If interest rates come down and you don't want to increase the risk, then the result will be reduced. The same is true for you reduce the stock ratio. We are with ERGO at the stock ratio of approximately 1%. Then the return cannot be that high, but the relation of risk and result has improved here. Unfortunately, there was also worsening through the interest rates. That's true. That brings me to the third point. It's right. The rating agencies, analysts, investors, and that also includes us, do see the model of the German life insurance as critical because it wasn't built for a low-rate environment. At the time when guarantees of 3% were offered, the nominal interest rate was at 7%. I can swear to you, if you had asked someone at the time whether within five years we would come to interest rates of below 2% for 10-year bonds, they would have called you crazy. We could have had a different setup at the time in the product development and capital setup, so we weren't matched, and therefore, the situation is difficult now. But for us, within the group, it's not acutely difficult because we have a long-term view to our business. But under risk and return points, it is the weakest link of our chain right now. If interest rates go up by just 100 basis points, the world looks completely differently. Then the situation changes within minutes, and then the analysts, I can guarantee you, will also like the life insurance again. We don't change our opinion that quickly. We want to work on this. ERGO has worked on it. We want to improve our products, and it's hard to follow suit because the interest rate development has pulverized basically anything that ERGO formed, especially if you look at the duration management last year, for example. ERGO has done great steps, but if the interest rate once again falls another 100 basis points, then it's difficult to follow suit with the matching. But acutely for the individual years, no topic solvency is completely sufficient in the HGB world and around, and the ERGO Group can sustain the interest rate level through 10 years of time without any issues. It's just the outside view of the rating agency of the investor, and that is why the life insurance currently poses the largest challenge for us. Thank you very much, Mr. Eitken and Mr. Cremer. Mr. Reipka, Platow Brief. I have three questions. On the one hand, I'd like to know, Mr. von Bomhard, you said in the beginning that the perception of Munich Re is based on financial strength and reliability. Well, when I look in the volatility of the share price, if I look at the development of the past five years, actually, I get a different picture. So are you in line with your opinion and the opinion of the shareholders? Are you on the same page? Then the second question, the conservative approach when it comes to your bookkeeping, you keep mentioning that. What would have to happen for you to lower the dividend? Or do you want to just keep the shareholders quiet with your dividend right now? Then my last question towards Mr. Schneider about capital investment. You talked about the infrastructure projects. You said there's a lot of demand, but not a lot of supply. Which alternatives do you have? I'm thinking about a few hundred meters from here, you have a large primary insurance company, and they are looking into commercial real estate insurance. Is that not a topic for Munich Re? Corporate bonds, you're going to increase, but to what extent can you do that? That's something else. Well, thank you so much for your three questions. The first two questions will be answered by myself. Reliability. Well, it depends on how you measure it. We believe that volatility is a good yardstick to measure the oscillation of our share price. Our share price doesn't oscillate as much compared to all of our competitors. I showed you a small slide where you were able to see the volatility axis. Our beta is the lowest in the whole industry. The same is true for our CDS. Warren Buffett is known for one thing, sustainable investment, and he's our largest shareholder, and he has actually increased his percentages. That is actually something that speaks for us. Let me just say, the reliability in what we're doing, what is going to happen, and how our share price develops is definitely amongst the highest reliability within the industry. The second question about the dividend payment. The dividend payment is always something you weigh against the alternatives. First of all, what you need to have is a capital stock that lets you pay out a dividend. Are you solvent enough so that you can actually afford a dividend payout? No question about that first part. Secondly, according to HGB, do you actually have the money to pay out? In the HGB world, we have a result of EUR 1.2 billion, and we're paying that out, or EUR 1.1 billion. The EUR 700 million, that is the IFRS result. The most interesting question about the dividend is what alternatives do you have? For example, do we give away growth opportunities or M&A opportunities because we would need the money elsewhere? The question is, no. We have enough of a buffer for what we see we do have in terms of reasonable opportunities. There might be a mega opportunity where we might not be able to afford it, but I cannot imagine it right away. No, the dividend is not meant to calm down the investors or something along these lines. It is the result of last year's results. We have again proven the resilience of our group. We also expect EUR 2.5 billion for 2012. We didn't have any doubts about the payout of the dividend. I would now like to hand over to Mr. Schneider. The investment in commercial real estate insurance. That is for another way of diversification. I don't know whether we should be acting as a type of bank here. We have definitely checked these opportunities, so don't expect any major steps from us here. You shouldn't overlook the fact the oversupply of money, which Mr. von Bomhard has mentioned during his initial speech, could lead to new asset bubbles. The first signs are already noticeable in some local real estate markets, because all that money focuses on the sought-after objects, where there are only a few. The worries about the economic cycle, especially in Europe, would also have a negative effect on commercial real estate. Then you also mentioned the corporate bonds. Corporate bonds are an important focus of our investment policy. But let me also mention covered bonds. They also have a good risk ratio. Then also, if we go beyond Germany, also asset-backed securities, the securitization of motor insurance, consumer credits, and such things. That's also an interesting form of investment. But you depend highly on the economic cycle, on the development of the economy, but you get nice returns. But that was not the case before 2007. And now government bonds of the emerging markets, that's also interesting. Also investments in resources in order to hedge against inflation risks. We don't have any major focus points for our investments. We're trying to achieve a balanced approach. Mr. Kramer, I'm working for Reuters. I have three questions, a logic complex about Greece. What I'm most interested in, the haircut and the swap. I mean, that is going to hurt you a lot. So what have you learned personally? Do you think there's a danger of contagion still, or is it no longer contagious, or can Greece stay within the euro? That is about my questions about Greece. Then two smaller questions, Mr. Jeworrek, about the renewal rounds in April and July. You mentioned especially these segments where you expect price increases, especially the Nat Cat business. Can you tell us across the board what you expect in terms of price increases for the two renewal rounds? And a question to Mr. Schneider. Since the share prices have risen in the first two months, can I expect the capital investment result to be really good for the first two months? Or to what extent? Can you give me some idea here? Well, let me get started with the first question about Greece. Well, a haircut, personal consequences, contagion, and how safe. Well, the last question is the most difficult one, and I'm not going to answer that. Well, to personal lesson, well, you've got to be prepared for everything. And the scenarios we try to imagine, which are unimaginable. Well, we started back in 2008. We started in time to deal with our government bonds. However, that doesn't stop us from making mistakes. But we had to start off a very highly diversified portfolio. And when I look at government bonds, we also have a great regional spread. But also we believe that when you buy government bonds, that there would be no defaults, and such a default is unique on a worldwide basis. So that was a wrong assumption. Would we do it again? Probably not to the same extent, but we still have government bonds, and we still are strongly diversified. There might be some other countries which might face some kind of trouble in the future. They don't necessarily have to be within the Eurozone, and we might be holding some of their government bonds. So diversification is important. I was talking about valuation reserves, and we have valuation reserves in safe haven countries. But we're holding government bonds of countries which are evaluated at under 100. And if you look at the shareholder value, then it's the factor 8. You shouldn't just look at one side. You should look at the portfolio as a whole, and that's important when it comes to Greece. So my personal lesson, well, there's a risk capital behind everything. We have done that in time. Diversification in our business model is absolutely decisive. As Mr. Schneider said, that is why we are always part of everything, for the good and for the worse. We do not know anything else. We cannot predict the future. Then the question about the contagion. Yes. The politicians were often accused that they were acting too slowly. That is justified to a certain extent. On the other hand, you have to understand that the institutions, they needed to find a way to organize everything within the legal framework. On the other hand, the capital markets were able to stay ahead of the wave. The contagion, which would have been there a year ago, is not completely gone, but it has been reduced because the market is now prepared. If you start thinking first Greece and then Portugal is dealing differently with its debts because it has a different population, different preconditions, and the capital markets are keeping an eye on it. The spreads have run out, but they have not exploded yet. The Portuguese government, together with its population, has taken a different approach compared to Greece. The administration is on a different level. There are differences, and the capital market is definitely noticing that. Is there no danger of contagion? Of course, you cannot say that. The problem is the uncertainty in the market. Sometimes it is small events elsewhere, sometimes even, which start a bushfire, and then the capital market tends to exaggerate, and then you either need a lot of patience, or you need to act skillfully. I think the danger has definitely been reduced compared to a year ago. Then the last question about the Eurozone. The politicians, for a good reason, have done everything to keep the Eurozone as well as Europe together, and this step was of utmost importance. The question, what is going to happen next is something we have to see what the IMF is going to do. Then the second package would be as promised at a capital market. Then the debts have been lowered and the goal is in 2020, you want to reduce the government debt to 120%. That sounds high and it is a long way to go, but I still believe it is feasible. It is possible. People could have taken a different approach, but this is a moot discussion. The question is whether things should have been solved earlier through a haircut and whether that would have helped. We do not know what would have happened, and to take such decisions is difficult for the politicians. I believe that Greece now stands a chance and the European and the German politicians have shown that they want to try everything to keep Greece within the Eurozone and within Europe. I think it is worth it. About the natural catastrophes, I am going to hand over to Mr. Jeworrek. The natural catastrophe business was mentioned because as an individual block with 30% in the two renewal rounds, it is going to be the driver of what is going to happen. If you move away from natural catastrophes, then the rest in Japan and in Korea, but also Australia, New Zealand, the Caribbean, and U.S.A. in the summer will be driven by the proportional business, which is to be renewed within these markets. What are our expectations? Well, in the U.S., according to our opinion, we will see in the renewal round of liability insurance, we will see a sideways movement. It is stable and not so much an upward trend. When we look at property casualty, here we depend on the development of the rates within the U.S., which have shown some movement. Whether it is a sustainable move, we do not know. It is driven by the models in the U.S. They have changed by 10, 15, 20% in the primary insurance for property casualty. A similar situation we see in Japan. As far as the proportional earthquake insurance is concerned, we depend on the development of the primary insurance, where we have seen an increase of 20, 30% during the past year, and we assume that next year we are going to see another 10% to 15%, so that the proportional earthquake business will be at 40, 50% higher compared to about one and a half years ago. Let me just make one more comment about Korea. Korea, here we are talking with our customers about the adequate limits for certain events. The maximum damage stemming from one event, such as an earthquake. These maximum amounts are being reduced right now. One more word about Korea. Korea, in all industries, across all industries, we will probably see a sideways movement. Mr. Grimme, you asked for the forecast of the capital investment result for the first quarter, and I do not expect any spectacular developments there. The ongoing capital investments from interest rate and dividends should probably be a little bit lower than in the previous year, based on the effects that are described from the reinvestment. The bull market on the stock markets affects the stock price, but that does not affect our profit and loss statement as long as we do not sell these shares. So the hedges that we have, they are being revalued all the time, and they might lose in value, which goes directly into profit and loss. That is to say, increasing stock prices, as long as we do not sell the shares, mean a negative effect on a quarterly and annual result. But as I have showed you before, these are smaller amounts we are talking about. Okay. We will continue with Mr. Kuhn, Mr. Fromme, Mr. Muller, and Oliver Suess. Mr. Kuhn. Rüdiger Kuhn of Frankfurter Allgemeine. Mr. Jabari, just to clarify, does that mean that in two years you will have a premium increase for Japan risks only of up to 50%? Because you said for Australia, 5% to 10%. Just that we get an idea. Then a more technical question, Mr. Schneider. On the tax effect in the U.S., if you look at the future years, will there be any additional effects from this upwards or downwards? Because if I understood this correctly, this was triggered by the asymmetry of losses that everything happened outside the U.S., if I understood this correctly. Then you talked about EUR 300 million in deferred taxes. What is the effect we can expect here? The EUR 450 million, that is a significant number. Mr. von Bomhard, you talked about Warren Buffett, the investors. Also, the Chinese are certainly in contact with you, and the Chinese just as Warren Buffett talked about an increase of their investment. What is the current situation in this regard? Do you assume that we can expect something here? How do you talk to these gentlemen? Okay, Mr. Jeurink, will you start first? The statement is correct regarding Japan. This is referring to the Japanese earthquake business. Nothing else, just the earthquake business that was affected, and for this the figure is right. Okay, just a short question in addition to this. You talked about the hurricane at the time in 2005. Were you also able to get price increases of this dimension? That was the same. For Australia and New Zealand, they were even higher in the upper two digit, up to three digit even, price increases. Okay, then I go on before Mr. Schneider gets into the tax question. We are in contact, of course, but those are not investors who tell us beforehand how many million they want to spend at what point in time. With Warren Buffett, it was clear that he likes our share and he invests from time to time, not just in our company, but also in other companies. He publicly stated he does not have a certain target for the height of his investment, and he is not paying the dividends, so he has to reinvest all the time. If what the press wrote was correct, then he invested EUR 875 million in Europe, and we were part of this. So he is now above 10.2? 11.2. 11.2. That is also true for the governmental funds. We are in contact with them, of course, but they do not tell you, "Now we will invest another EUR 500 million or so." No one does this. But if those major investors extend their positions, extend their holdings, then we are glad about this because, say, they have long-term investments and they are fitting to our business model therefore. That is why the talks to these investors are often easier because you do not have to explain to them why the quarterly result was red, green, or yellow. But we are talking about two- or three-year developments, so completely different talks. Now Mr. Schneider on the tax issues. Well, okay. I would say approximately half of the existing carryover losses in the group has been recognized. We do not like this, and that is why we had to be pushed a little bit in this direction. We will only do this in a very restricted fashion. You have to basically do a forecast for how many years you are expecting additional profits, and we are not doing this till eternity. So we are taking a cautious approach, and we go to up to three years, specifically, to forecast in this regard. But I do not want to give you any additional quantification here because the tax situation is usually not fully presented. But in our business report, in our financial report, you will get detailed figures on this, and I can tell you the page later on. Okay. We will continue with Mr. Fromme, Mr. Muller and Oliver Suess. Herbert Fromme, Financial Times Deutschland, once again. Mr. Schneider, Mr. Jeworrek, maybe you could give us three simple figures for simple journalists and readers. If you add all the natural catastrophes, what was the cost in 2011? Then the financial crisis, the sovereign debt crisis in Europe, what was the cost for this? What is the cost of a low interest rate of 100 basis points? These three figures would be interesting. No three questions, Mr. Lord, so I can ask one more. Second question. Mr. Jeworrek, I believe for the first time you have done what you have announced for 5 years. So you have given up business that was not profitable in the German storm business. The German market has a negative tendency of having a long memory, and if you go out of some business, then it is going to be difficult to get back in again. So how much have you given up, and are you optimistic that you can get back into the field again should prices start to rise? Then the third question to Dr. von Bomhard. Life insurance did not affect you just on the interest rate side, but also on the reputational side through the ERGO scandals. HMI was basically a life business field. Why did you not close HMI? Was that a question of cost? Were you afraid of additional events, of additional stories? Now, the quagmire that you had there, this is still volatile, and much more could come out of this. Well, okay. The counting of your question remains a secret. I have the feeling that you had much more than three questions, but anyway. I would ask Mr. Jeworrek to answer the question on the cost of natural catastrophes. That is easy. Then the second one, that is more difficult, sensitivities and financial crisis. The third one, if you could include this, then giving up German business and reinsurance. The last one, of course, is a question to Mr. Oletzky. I can only say that from the point of view of the shareholder, the events that moved the press at the middle of the year when it came to the question valuation, did not have any immediate effect on the valuation. This is something that we recognize, even with a certain degree of astonishment, that the customers and the business partners at the time had a very cautious reaction, and this might also be due to our business model. We have a longer running business. Now, Mr. Jeworrek, if you could start with your part. Natural catastrophes in some EUR 4.54 billion in 2011, and you can also see this on slide 32 in the bottom left. Man-made 580. Regarding Germany, how much have we given up? Well, per balance, we gave up 75 million, a little bit more than 100 million, and then we had some new business. So overall, 75 million net out of a good EUR 700 million in the local German market. So that does not include the large international programs, just say the local German ones in non-life business. The question is whether we came back, get back into the market or not. Okay? You never know that. That is right. But you cannot base your decisions on speculations whether you can come back into market again or not, then you would have to suffer through each and every cycle and accept every negative premium development and just hope for a better future. But the problem would then be, and we've seen this over the last 10 years and significantly felt this in Germany, but also abroad, that the question of a re-entry into the market is clearly overestimated. If you have good capacities, if you have good performance, you can get back to the programs. So the loss that you might incur if you're stuck in a soft market cycle would be much higher than not being present in the market when it gets better. So the good old traditional model of 20 to 30 years ago that we will go through good times and bad, that does not work any longer across the board, at least. The reason for this is simple. If markets turn around, if they improve and you can participate from good rates, even under those circumstances, the cedents themselves are under pressure, not just because Munich Re or anyone else was with them in the soft market to transfer profits at any price to Munich Re and have them participate. No. Even then you have competition. Then you have newly established companies like Bermuda that offer good offers at a good price. Then customers cannot just say, okay, they stuck with us through the bad times, now we will continue to have them participate now that the good prices are there. So we need to be selective. We differentiate clearly by customer with whom we want to go through the bad times a little bit more, but we need to check this individually and then take a customer specific decision, and sometimes also we have to end business. Mr. Oletzky. Okay, then I'll talk about HMI, now it's called ERGO PRO. We had a difficult year in 2011 in this sales organization, but we didn't see it right that the many thousand people there who did a great job, that we would fire them basically because there was a small group that did violations. ERGO PRO is an agency system, so less than 50% based on multi-level marketing and structural business. You can also do this kind of business cleanly, and we've started changes a year ago, and we've accelerated these changes in the areas of recruitment, where we have clearer structures than when it comes to training and education of our sales force there. In the past, we only had a financial compass, which wasn't sufficiently used across the board. So we entered clear regulations here and we further developed the sales organization. So that's also why we changed the name to clearly show that we now have a new approach. We also want to give the thousands of people there the opportunity to show that their sales organization is much better than the headlines they had over the last year. That didn't have anything to do with the costs of a potential closure, and we were not afraid of any new events or stories popping up. We believe that majority of our salespeople in what used to be HMI are willing to continue down the path and stay with us, and also accept the changes that we've introduced. Some of the other will probably leave. That's clear, and it's almost the case. Then we will try to get a fair separation independently of whether the wish for the separation comes from the company or the salesperson. Therefore, we are optimistic that we've taken the right decision. Okay, now Mr. Schneider, with the question of the cost of the crisis and the sensitivities. Well, first of all, I'd like to add for Mr. Kuhn before, in our financial statements, there's so much work included, and that's why I'm glad if I can tell you something about it. On page 215, you will find the table that contains what you were asking for before, the losses carry forwards and how far they've been recognized or not. We recognized clearly less than half of that. You can see it on page 215. Now the questions of Mr. Fromme. The natural catastrophes cost us EUR 4.5 billion before taxes, and if we add taxes, EUR 1.1 billion. So approximately a quarter of this does have a tax effect. Then we're talking about EUR 3.3, EUR 3.4 billion net. Increasing interest rates, that's difficult. There's different sensitivities. First of all, the balance sheet, according to IFRS. The capital investment will lose in value if interest rates go up, whereas on the liability side of our balance sheet, the liabilities don't reflect current interest rate changes. That leads to a reduction of shareholders' equity, which we also have in our financial statements on the business report on page 266. So the effect would be approximately EUR 6.6 billion, where if interest rates go up 1%. For profit and loss, approximately, ballpark figure is EUR 600 million. Sounds dramatic, but it isn't, because economically speaking, also on the liability side, with their long-term liabilities, those are also reduced in value if interest rates go up. So we go down on both sides. So if we look at an economic sensitivity, then we could look at the embedded value, difficult topic, but we're trying to reflect the existing value of a life and health business here, and you can see this on page 258. The ballpark figure here with the lasting increase of interest rates above 100 basis points or 1%, this would mean an increase of assets of the company of EUR 2.4 billion. So you have counteracting positions, a clear reduction of wealth in IFRS, and an economic increase of wealth from the economic point of view. So that adds to what Mr. von Bomhard said. Economically, we're profiting from increasing interest rates, but in the balance sheet and the profit and loss statement, they pose a challenge for us. Now, the most difficult question, the cost of the crisis, because of this counteracting positions. On the one hand side, the economic, and on the other side, the balance sheet position. It's really difficult to put a price tag on that. In the balance sheet, it didn't cost us that much. We lost something when it came to our equities. We also lost real money with the Greek impairments. But on the other side, we had an increase in assets through the added value of our German and U.S. bonds. So once again, if we take the economic point of view, then we've lost through this low interest rate scenario, the economic burdens through the long-term liabilities and life insurance were affected much more. But to quantify all that wouldn't be a serious position, wouldn't be acceptable, and I would ask you for understanding for that. We will now continue with Mr. Muller, followed by Mr. Mossus. My name is Muller. I have some simple questions towards Mr. Oletzky about the current contributions to life insurance. Are your customers are dying? Are your contracts running out? Or do you have a lot of cancellations? And I have a question to Mr. Jäberg about the strategic initiatives which you have mentioned, and the quote about the holistic product, where you first take on the capital market risks and then transfer them to the capital market. Is that some special help you give to the primary insurance? Well, let me get started. While we looked at the premium payments for a German new business, there was a slight plus. But we have actually lost something, but actual cancellations have gone down, the actual cancellation numbers. So the sum of the new business was not sufficient, and that might have to do with the fact that the life insurance business wasn't pushed too aggressively in the past. We had always shown some restraint, whether this is enough during the difficult economic position of the life insurance, but definitely this segment of our business, we didn't push as hard as some of our competitors have been doing. It's not that our customers are dying, and it's not the number of cancellation rates. It is just that we're not achieving as much as we would like. This is page 87. Okay, I wasn't that fast. Page 87. Ambassador Ewerick. Well, the question about asset protection in life, whether we're actually providing development aid. Well, partially. There are some markets in the U.S., in Japan, where you have established life insurance markets, where these products are already being sold. And today, because of the financial crisis, people believe, well, there are some risks in our original policies, and we don't want to keep them, or cannot keep them. And here, we were able to do transactions which, yes, we were helping in a crisis in a difficult capital market environment. But these markets where these products already exist, these markets, they also had the opportunity to do hedging with the capital market risks. And they've often taken the approach, well, the biometry risks, mortality rates, we pass that on to the reinsurance companies. The capital market risks, we keep them ourselves, or we move to Goldman Sachs, that they hedge that for us in the capital market. What we do is we offer one product, we offer the customer exactly the same thing upfront. What we're doing in the back, the customer, we're hedging that then. On the other hand, when we are doing this, we are working together with the customer in product development, and we would like to get the products which can then be hedged. Because not everything which these products contain you cannot hedge. For some long-term volatilities, you cannot do any proper hedges in the capital market. Then we don't like to take on such products or such risks. So the question of development aid or actually the developing products together, that's also what we're doing internally together with ERGO. You're not talking about the German market exclusively. No, this is a worldwide approach. On the contrary, it's a worldwide approach. As I said, we have Austrian and Japanese transactions. We have done transactions there during the past years. It is not an approach for the German market. It can be one for the German market, but that wasn't the idea in the first place. Mr. von Bomhard? No? Okay, then Oliver Suess will be next, then Mr. Wilson, Ms. Stour. Oliver Suess, Bloomberg. I have one more question about Greece. Do you expect in the market for credit default swaps some distortions? Another partial question, do you have any major gains or losses with CDS? That's easy to answer. No, we didn't buy and we didn't sell in this case. We expect, since the capital market had so much time to get prepared, we don't expect any major distortions when we see the further development here. But everything is keeping an eye on that, on how this is going to develop and what's going to be paid out. But we don't hold any positions. Well, Ms. Stour? No, this was exactly my question as well. So that's been taken care of. So Mr. Wilson is next. I have 2 small questions. The nat cat ratio. You talked about 8.5%, you raised it slightly, but we're looking at 12% for major losses. So do we people have become more cautious, or why don't you have to increase it for that, for man-made losses? My second question about the investments in infrastructure, et cetera. Here, I'd like to know, you would like to get some recognition for Solvency II, et cetera. So how likely is that Solvency II is going to be changed here? You, of course, are not the first insurance company which would like to invest more in this type of business. Can you maybe recognize a bubble developing in this segment as well? Well, let me start with the natural catastrophe ratio, 8.5%. There are 2 reasons why these 12%. We see a decline in man-made losses, but there's also a reallocation which we're seeing here. Well, in the past, we have taken a different approach. The old 6.5 which we had covered natural catastrophe scenarios for the large 40 regions of the world where we have done our modeling. And now we have said the rest was for outside of these 40 regions where you had some other damages which were treated like man-made losses. So we kept an eye on that. There was a loss here, a loss there. It was like single large events. So in the man-made losses, we also included some natural catastrophes, and we have taken this part out now, and we are modeling it explicitly. And we have added it to the other natural catastrophes, the EUR 6.5 billion which we had before. So it is not the same composition as before. You asked Mr. Wilson whether we are confident that the capital requirements for investments in infrastructure will be lowered. I believe so, yes. Because the politicians and authorities who are working on the regulations for Solvency II, they need some evidence about how volatile an asset is, how reliable the cash flow is, and that is something people can understand. It's just a matter of time. Secondly, there is a great demand from the investor side. There's a danger of a bubble, lower returns. Nevertheless, there is a huge supply. If you think about necessary investment, especially in the German federal states in the West, when you think about road building, for example, and also when you look about the change in our energy policy. This cannot be paid for by the government. We just need to have a steady stream of revenues coming in, and then it is a successful project for us. So we can see here a close cooperation here between the authorities here on the one hand and the insurance industry on the other hand. Then we have Mr. Koerner and Mr. Flämig with a few more questions. Well, Mr. Oletzky, once again, your area, market research and advertisement agencies probably celebrated last year. Could you tell us what the disaster in Budapest and around the Austrian pensions cost you in market share? In general, I think you considered that you measured that intensively, and then it affected your advertisement campaign at the time that needed to be stopped. Now you're working on a new kind of approach. But could you tell us what this cost you in market share? Because your competitors will certainly have celebrated. What was the cost, or what's the cost for improving your image now? If you think about the media campaigns and all the other actions you need to take, how much do you have to invest, and are you seeing an image improvement right now? Well, what was the cost? Unfortunately, that cannot be quantified. It's a frustrating answer, but it's the only right one. Of course, we did market research again and again. If you look at our figures that we presented today, you won't see any major effects. Do I stand here and say that it hasn't affected us at all? Look, there is no result, effect, or anything? No, of course, there was a significant image damage. It's just that you cannot quantify it reasonably. The campaign, moreover, in the year 2011 wasn't stopped. We just held it for some time. When the first articles came up in June, we stopped it for four to six weeks, and then we continued with the same campaign concept in 2011. Just as when we started in 2010, the beginning of 2010, when we set up the concept, then in the fall and winter of 2011, we sat down to discuss what the next advertisements should look like. The first commercial will come on March 18. It will look different than the ones we had before. That doesn't have anything to do with the fact that of these many image relevant topics for us last year. It's got more to do with the fact that our campaign was so successful that it's difficult now to see the difference between an E.ON and an ERGO ad or a Targobank and an ERGO Bank commercial. There are many that followed suit, and we want to stand out and be unique. That's why we've changed the commercials a little bit. You said our competitors will have been glad or will have celebrated about this. I personally don't believe this. Because we always know if something happens to our competitors, that it always has a negative influence on the whole competitive situation and also on the competitors then. That's why I believe that also our competitors saw this in quite a reasonable way, and I wouldn't wish this any competitor. We always know that if there is the focus on one of the companies, that it affects the whole segment, because the insurance segment as a whole is based on trust, and therefore, I believe none of our competitors will have celebrated. We will continue the restructuring that we started in 2009, then 2010 with our campaign. We will continue this approach. We will try to be transparent, easy, and understandable and have a new approach in our insurance business in areas where we didn't wish to do so before. We had the opportunity to show transparency, and I think we did this. We've answered all the accusations in an open and transparent way, and we will continue to do so in the future. But the accusations that came up last year don't change anything about the concept for ERGO, which is still correct. I wasn't referring to schadenfreude of your competitors, but to the loss in market share, even if it's difficult for you to attribute. Well, we don't know the exact figures of the whole segment, but you've seen our figures in the three segments. I assume that in life insurance, we might have lost slightly, which was a trend we've seen over the last years because we were a little bit cautious in this. In property casualty, we will be basically unchanged. In health insurance, we will have lost in the comprehensive insurance, but that is also due to the business model, and that we gave up the entry tariffs. It is always difficult to compare premium income here, because it depends on premium alterations. If in 2012 we have less growth, for example, then it is okay for us, because we did not have to adapt our premiums that much, which is good for our existing customers. In the market share figures, you will not see any major effects. Also, by the way, not in the image values that we have measured ever since we started the new campaign. There has not been that much of a change than we would have expected. Nevertheless, we are not underestimating the image effect in any way. Okay, Mr. Flämig, you have the last question. Three questions. Two to Dr. von Bomhard, one to Torsten Jeworrek. Okay, you said, Dr. von Bomhard, some had lost the belief in the efficiency of the capital markets. Have you lost your belief in the efficiency of the capital markets? Then second question. I would like to come back to the topic of acquisitions. You said the prices were too high. What is the reason for this? Is it a bubble on the capital side, or is this also an effect of overability of liquidity? Or is it reflecting profitability expectations for the future? The third question goes into the same direction, Torsten Jeworrek. Munich Re so far had a combined ratio in reinsurance over the market cycle of approximately 97%. That was the expectation. In the business segment, you are now talking about 96%, and then the combined ratio without nat cats is at 85% in 2011. So an extraordinary low value. It is never that low over the last 10 years. Does that reflect that the underlying profitability of the business over the years has improved from your point of view? Well, I have never been an enthusiastic follower of the Chicago school, but I believed strongly in the efficiency of the capital market. That is true. I have always had a problem with the transparency, the asymmetrical spread of information. This is about the speed, when, who gets which information, which piece of information, and whether information is passed on at all. You will find this in the mass business, in the wholesale business. You will find this in B2B business. Therefore, from my point of view, I have not fallen from the top to the bottom. I have been in the center and went down just a little bit. So I lost a bit of my belief. That is true. If in the regulation wave that we are seeing right now, the topic of transparency, if that is put into the focus, then we can make up lost ground here, I believe. Personally, I have never been one to justify everything that happens in the market by saying, this helps us with liquidity, that liquidity is at the center. No, you always have to ask the question, who does profit in which way? If you ask these questions once and again, if the regulators do the right thing, it's not so much about quantity, but doing the right thing, then I believe that our system of the social market economy and also the capital market does have its place in the system. That offers the best way of distributing resources that we can assume. There were severe distortions. M&A or the question of being more active on the markets. I don't think it's that much of a bubble. There is a lot of liquidity in the market, that's true. I believe if we look at why we haven't made any acquisitions, it's basically the question of assessing business plans. So it's the question of expectations regarding interest rates, regarding market development. I don't have the feeling that we're that cautious, but maybe we are overly critical and conservative in our estimates, and we're not willing to pay strategic premiums. That's another point. There are some companies who offer their strategy and then execute it no matter what happens, basically, because they want to deliver everything that they put up in their strategy. For us, the strategy is the first part, but then we do the economic check, then the strategical value might be there, but if the economic side doesn't fit, then we don't buy, and that's it. Okay, you have the last question. The combined ratio, the 96% we were talking about, that's our expectation for 2012 and beyond. This is to reflect our expectation of a better profitability in the future. That's right. It reflects the necessary rate hikes, especially in the Nat Cat business. On the other hand, and this is something I would like to mention here, the combined ratio is not the perfect tool to measure profitability. Because what's included in here are several facts that materialize themselves in our business, and that's why it's difficult to compare this to competitors. We managed our business strictly regarding the business cycle. Business such as the German or French motor business, significant parts of the long-going U.S. liability business were given up for profitability reasons. Those were difficult decisions that we've taken. But the segment mix between the liability and the property and casualty segments was moved towards the property and casualty segments. They have reduced interest rate components and the cash flows reserves are being paid out relatively quickly, and therefore, it has to lead to a lower combined ratio in order to offer the same profitability for the company. That's important to know. On the other hand, we build something like Hartford Steam Boiler and others, specialized primary insurers who are working in their specialty insurers. They are going more towards the short-term business and therefore towards a lower combined ratio. For the current portfolio, I believe this is a profitability improvement, but you cannot say that the combined ratio could go up at better or unchanged profitability. This could be the case if, for example, we took on the road several motor quotas in China. This is a booming business right now. But relative to 96%, this has a higher combined ratio than the 96. So if we had large volumes there, it would bring up the combined ratio, but nevertheless, profitability from the technical calculations and interest rate from cash flow would still be good and unchanged. Both answers are right. Yes, we answer it to the cycle. We went more into the short tail area. We believe we improved profitability, but it's still not been an unchanged. Both answers are right. Yes, we answer it to the cycle. We went more into the short tail area. We believe we improved profitability, but it's still not the perfect yardstick. This must have been the last word, but I would like to mention three more points. We've passed a challenging year that we believe we've mastered quite well. We enter the new year without any legacy business, and this is also reflected in our outlook for the year that we believe it's going to be a good year for the group. In the interest of Mr. Schneider, I would ask you to use the financial statements, the financial report. There's so much work in it, and if 10 people in our company understood it real well all through, I'd be glad, but it's a great report. We'll test your knowledge next year with our questions, and I'll answer the press conference now. There's a short snack outside. Tomorrow at 12:00 A.M. CT, there will be the analyst conference and the AGM on April 26th. Thank you very much.

Data Source: Quartr Last updated: Mar 13, 2012

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