Earnings Document (MunichRe Half Year Financial Report 2024 en)

Contents

Due to rounding, there may be minor deviations in summations and in the calculation of percentages in this report.

This document is a translation of the original German version and is intended to be used for informational purposes only. While every effort has been made to ensure the accuracy and completeness of the translation, please note that the German original is binding.

Interim management report of the Group

Business environment

Interim management report of the Group

Business environment

The global economy continued on its moderate growth trajectory in the first half of 2024. While previously strong growth in the United States tapered off slightly, the economy in the eurozone recovered from stagnation. The Chinese economy stabilised thanks in part to economic policy measures. The downward trend in inflation rates came to a halt in many industrialised nations. One reason was the sustained marked increase in service prices, mirroring strong wage growth. Furthermore, geopolitical tensions pushed energy prices up at times. Almost two years after it first tightened the monetary policy reins, the European Central Bank (ECB) cut its key rates for the first time in June following a substantial drop in inflationary pressure compared with last year. In addition, the ECB further reduced its securities holdings, as did the Federal Reserve (Fed) in the United States. The Fed left its target range for the federal funds rate, however, unchanged at 5.25% to 5.5%, as it was not yet convinced that inflation was moving sustainably towards the two percent target. Fluctuations in bond yields were less pronounced in the reporting period than in the previous year; they were affected by inflation data and new expectations regarding monetary policy, among other factors. At the end of June, yields on ten-year government bonds in the US and Germany were up on the end of 2023. In a multi-year comparison, they remained at a high level. The gains made by populist parties in the EU elections and the announcement of new elections in France prompted many investors to increasingly pivot to the perceived safe haven of government bonds. The yield differential between many European government bonds and their German counterparts increased.

2

Yields on ten-year government bonds

Political uncertainty triggered hefty price losses on the European stock markets in June. As at 30 June, however, the EURO STOXX 50 was still trading 8% higher than as at 1 January. In the US, on the other hand, stock market volatility was down year on year. At the end of June, the US Dow Jones Industrial Average was up 4% on the level at the end of 2023.

Equity markets

With the exception of the still faltering Japanese yen, which lost 10% in value against the euro in the first half of 2024, fluctuations on the currency markets were minor. At the end of June, the US dollar and the British pound were higher against the euro compared with the end of 2023. The value of the Canadian dollar, on the other hand, was slightly lower. At €0.93, the average value of the US dollar in the first half of 2024 matched the average value for H1 2023. On average, the British pound was higher against the euro year on year. By contrast, the average value of the Canadian dollar was slightly lower and the value of the Japanese yen significantly lower than their prior-year values.

Insurance revenue from insurance contracts issued (insurance revenue) generated by the Group in the first half of the year rose year on year. This development is primarily due to organic growth in both reinsurance segments and at ERGO International, with currency translation effects having a somewhat negative impact.

Major-loss expenditure in property-casualty reinsurance amounted to 12.2% (12.8%) of net insurance revenue, and was thus below the expected value of 14%. We posted nominal losses in reinsurance of €0.2bn related to the flooding in southeGermany. ERGO also posted losses of €44m. In life and health reinsurance, partly due to positive experience adjustments and strong development from new business, we achieved a total technical result in the first half- year that was above pro rata guidance. The total technical result in the ERGO field of business was roughly on a par with the same period of last year.

The investment result was up considerably year on year. In addition to higher regular income from fixed-interest investments, substantial gains from fair value changes particularly contributed to this increase. Changes in exchange rates during the first half of the year led to a positive currency result. The tax rate was 25.5% (25.5%).

Thanks above all to a good net result, and despite the dividend payout in May, Group equity was higher at the end of the reporting period than at the beginning of the year.

Munich Re issued a subordinated bond with a volume of €1.5bn in May. It matures on 26 May 2044 and may be called for early redemption from 2033. The bond pays a fixed rate of 4.25% p.a. until 26 May 2034.

The Group's debt leverage as at 30 June 2024 was 11.2% (9.2%), which is low by industry comparison.

The fair value of our investment portfolio increased in H1, largely due to cash inflows and currency developments. Our investment portfolio continues to be dominated by fixed- interest securities and is composed as follows:

Investment portfolio by economic category1

Total: €236bn (234bn)

1 Measured at fair value.

The portfolio of interest-bearing securities, accounting for 80%, falls into the following economic categories:

1. Includes exclusively government bonds of industrialised countries and comprises other public-sector issuers and government-guaranteed bank bonds.
2. Asset-backedsecurities/mortgage-backed securities.

At the reporting date, 32% (33%) of our investment portfolio was invested in government bonds from developed markets. Our new investments in the first six months were mostly in US and French government bonds. Reductions focused on our holdings of bonds from Canadian issuers. The vast majority of our government bonds continue to come from countries with a high credit rating. The share of government bonds from emerging markets constituted 5% of our investment portfolio.

Our investment in corporate bonds at the reporting date amounted to 15% (14%) of our investment portfolio. Broken down and expressed as a share of the overall portfolio, the investments in corporate bonds comprised 5% (5%) in financial undertakings, 8% (8%) in corporate bonds from other sectors, and 2% (2%) in high-yield bonds.

Non-fixed-income alternative investments accounted for 13% (12%) of our investment portfolio at the reporting date; with regard to the overall portfolio, 7% (7%) comprised property and 6% (6%) equity securities.

Investment result1

Our equity portfolio decreased in the first half of the year, with the equity-backing ratio down to 3.9% (4.6%). Including derivatives, the equity-backing ratio was 2.9% (3.7%).

To hedge against inflation, we hold inflation-linked bonds totalling €6.4bn (6.1bn) (at fair value). Real and financial assets such as shares, property, commodities, and investments in infrastructure, renewable energies and new technologies also serve to guard against inflation. Additionally, our investments in real assets have a positive diversification effect on the overall portfolio.

Regular income

Write-ups/write-downs

Change in expected credit losses

Gains/losses on disposal

Fair value changes

Other income/expenses

Total

Q1-2�2024

€m

4�087

-110

-21

-201

193

-315

3�633

Regular income for the first six months and for Q2 increased year on year, mainly on account of increased interest rates. The reinvestment yield for our fixed-interest investments averaged 4.7% (4.4%) for the period from 1 January to 30 June and 4.7% (4.3%) for the period from 1 April to 30 June.

The result from write-ups and write-downs was lower year on year. Depreciation of property and investments in renewable energies were two reasons for the negative result. The lower result from write-ups and write-downs was also attributable to impairment losses on property and participations accounted for using the equity method.

There was virtually no year-on-year change in the H1 result from the change in the expected credit losses.

The result from the disposal of investments that are not posted under fair value changes amounted to -€201m for the period from 1 January to 30 June, mainly attributable to losses from the disposal of fixed-interest securities.

The result from fair value changes improved considerably to €193m. This can be attributed primarily to the positive result from equities amounting to €644m, buoyed by stronger equity markets, especially in Q1. We also saw positive performance in private equity investments. Losses on fixed-interest securities of €315m as a consequence of higher interest rates were the main negative factor. A decrease of €133m in the fair value of property and losses on fixed-interest derivatives totalling €199m also negatively impacted performance.

Insurance revenue

We write the majority of our business in non-euro currencies (around 95%). As a result, the development of insurance revenue from insurance contracts issued (insurance revenue) is shaped to a considerable degree by exchange- rate fluctuations. Exchange rates had a slightly negative impact on revenue development in the first half-year.

If exchange rates had remained unchanged, our insurance revenue would have increased by 12.4% compared with the first half of the previous year. The increase is mainly attributable to our business in North America and the United Kingdom, and can be traced back to the execution of large-volume transactions and the ongoing expansion of our longevity business.

The growth in our financially motivated reinsurance is not reflected in the insurance revenue, as the majority of new contracts are recognised in the result from insurance- related financial instruments.

Result

Our total technical result showed a marked year-on-year improvement in the first six months, outperforming the pro rata expectations for this segment that we had communicated for the reporting year.

The total technical result comprises the insurance service result and the result from insurance-related financial instruments.

The insurance service result is substantially driven by the release of the contractual service margin and the risk adjustment for non-financial risk. New business developed very favourably and made a positive contribution to the result. This included, in particular, large-volume transactions in North America concluded before the tuof the year and in the first quarter of this year. Overall, claims development in the portfolio was better than expected, including mortality business in the US.

The greatest contributor to the result from insurance- related financial instruments is that part of our financially motivated reinsurance that does not transfer significant insurance risk. The regular result from our portfolio developed very favourably, since contracts performed consistently as expected. The result presented here was influenced by changing economic parameters, in particular exchange rates. These had a positive effect in the first six months.

The investment result for the first half-year was considerably higher than in H1 2023, with Q2 in particular showing a strong increase. The increase in the first half of the year was mainly driven by higher regular income attributable to ongoing reinvestments with higher interest rates. In addition, losses on the disposal of fixed-interest securities decreased and the result from fair value changes increased year on year.

Insurance revenue

The increase in insurance revenue from insurance contracts issued (insurance revenue) was mainly attributable to new business and the expansion of existing client relationships. Changes in the value of the euro against other currencies had a slightly negative effect on insurance revenue compared with H1 2023. If exchange rates had remained unchanged, insurance revenue would have seen a year-on-year increase of 4.8% for the first six months and 3.0% for Q2.

In the reinsurance renewals as at 1 January 2024, Munich Re increased its insurance revenue to €15.7bn (+3.5%). Attractive business relationships arose from the expansion of existing client relationships as well as new business. We were also prepared to discontinue business that no longer met our expectations with regard to pricing or conditions. It was possible to maintain the high quality of our portfolio thanks to stable contractual terms and conditions. Around two- thirds of non-life reinsurance treaty business was renewed - with a focus on Europe, the US and global business. Price development was stable overall, and for the most part more than compensated for the higher loss estimates in some areas, which were primarily attributable to inflation and other loss trends. Primary insurance prices also rose in many markets, with Munich Re benefiting as regards proportional reinsurance contracts. Overall, the high price level for Munich Re's portfolio was maintained with a 0.3% increase.

In the reinsurance renewals as at 1 April 2024, Munich Re was able to increase its insurance revenue to €2.6bn (+6.1%). The company selectively exploited the ongoing favourable market conditions to expand attractive business, with growth opportunities being realised particularly in India, Latin America and Europe. These involved the expansion of existing client relationships as well as new business. At the same time, we discontinued business that was no longer appealing. Once again, price development was stable overall, and for the most part more than compensated for the higher loss estimates in some areas, which were primarily attributable to inflation and other loss trends. Overall, the high price level of Munich Re's portfolio was practically unchanged, with a decrease of just 0.7%. When adjusted for portfolio diversification effects, rates rose by 0.6%.

Result

The total technical result increased in the first half of the year and in Q2. The year-on-year increase is mainly attributable to a lower combined ratio. From January to June, we posted major-loss expenditure totalling €1,608m (1,635m), of which €957m (600m) was attributable to Q2, in each case after retrocessions to reinsurers and before tax. These amounts include gains and losses from the run-off of major claims from previous years, and were equivalent to 12.2% of net insurance revenue in the first half of the year and 14.4% in Q2. Major-loss expenditure was below the expected value of 14% in the first half of the year, and only slightly higher than expected in Q2.

Claims costs from natural catastrophes amounted to €1,078m (1,315m) for the first half of the year, including €846m (445m) for Q2. The highest expenditure for natural catastrophes in the first half of the year was attributable to the flooding in southeGermany at the beginning of June, with a nominal amount of €0.2bn. Expenditure for man-made losses came to €530m (320m) for the first half of the year. €110m (155m) was attributable to Q2. The aforementioned major-loss figures take account of the effects from discounting and risk adjustment.

In addition to the comprehensive reassessment of provisions for basic losses that we carry out primarily towards the end of the year, we also perform detailed quarterly analyses of the claims notifications we receive. As claims notifications remained appreciably below the expected level, we made reserve releases in the first half- year. After adjustments for discounting effects, these releases amounted to €660m, or 5.0% of net insurance revenue. We still aim to set the amount of provisions for

newly emerging claims at the top end of the estimation range, so that risks are adequately taken into account and profits from the release of a portion of these reserves are possible following positive claims development.

The combined ratio amounted to 77.5% (83.5%) of net insurance revenue for the first six months of the year and 79.6% (80.5%) for Q2. The figure for the first half-year is thus significantly lower than the 82% target we projected at the beginning of the year for the whole of 2024.

The investment result for the first half-year was significantly higher than in the same period last year, with Q2 in particular showing a strong increase. The increase was mainly driven by higher regular income attributable to ongoing reinvestments with higher interest rates. In addition, losses on the disposal of fixed-interest securities decreased and the result from fair value changes increased year on year, largely owing to an improved result from derivatives.

Insurance revenue

The Digital Ventures unit was transferred to the Health Germany division within the ERGO Life and Health Germany segment at the beginning of 2024. As a result, we will in future report only on the Life Germany and Health Germany divisions within this segment.

In the first half of the year and in Q2, insurance revenue from insurance contracts issued (insurance revenue) exceeded the level posted in the respective periods last year. The positive development in long-term and short- term health business in the Health Germany division was a material aspect of growth in the first half-year.

In the Life Germany division, insurance revenue for the first half-year totalled €1,421m (1,472m) - a decrease of 3.5%. Insurance revenue in Q2 came to €653m (624m). The negative development in the first half of the year was due in particular to a lower release of the contractual service margin, which was in line with expectations.

In the Health Germany division, insurance revenue grew by 17.9% to €3,524m (2,990m) in the first six months, with Q2 revenue totalling €1,761m (1,509m). We achieved growth in both long-term and short-term health business. This growth was also due in part to the above-mentioned discontinuation and transfer of the Digital Ventures unit.

Result

The total technical result generated in the first half-year and in Q2 decreased compared with the same periods last year. Compared with H1 2023, this was due in particular to a lower release of the contractual service margin, which was in line with expectations. In addition, the contribution from short-term health business to the total technical result was lower than in H1 2023. The total technical result also includes the result from intra-Groupinterest-rate reinsurance, which is offset in the net financial result. This interest-rate reinsurance had a negative effect on the total technical result. The total technical result in Q2 was, as expected, also affected by the lower release of the contractual service margin.