Business Strategy and Outlook
| Henry Heathfield, CFA |Munich Re is the largest reinsurer in the world by gross premiums written. A business of this size in an industry that is geared toward diversification rarely has an opportunity to improve returns on equity beyond efficiency. By that, we mean carving out a superior competitive position by utilizing information technology and scale in order to drive down expenses. However, in the case of Munich Re, while we identify the occurrence of this dynamic, we also see the implementation of innovative technology as key to the ongoing strategic positioning and development of the business. What we think we are witnessing is institutional knowledge that is being transferred from one specialist area within the business to a division that is more commonly associated as a commodity. In the years that we believe this transfer has taken place, we have seen an improvement in divisional operating metrics. For the business unit in question, we calculate this as operating profit over gross premiums written.