Strong reinsurance market in sight through 2010
Fundamentals in the non-life reinsurance market remain strong, in our view. With an average
rate of increase of about 5%, industry-wide at the January renewals, the industry’s
underwriting profitability should be maintained at an attractive level without triggering inflow
of capital, thus enabling incumbent reinsurers to capitalise on this hard market. Furthermore,
any further strengthening later in the year should provide support into 2010.
Revising underwriting margins upwards
Initial feedback from the January renewals prompts us to increase our underwriting margins
assumptions for 2009 and 2010. While we previously anticipated deterioration in the
combined ratios from 2009 to 2010, we now model rather stable combined ratios, reflecting a
longer-lasting cycle than we originally expected.
Valuations remain attractive; Swiss Re sell-off seems overdone
Reinsurance stocks have given back much of their gains recorded going into the January
2009 renewal season. Valuations are hardly demanding and in general more than
compensate for the key risks we see on the horizon – mainly the prospect of disappointing
investment returns. The sell-off in Swiss Re shares seems overdone. Our central scenario
assuming SFr6bn in write-downs and a SFr5bn rights issue points to a fair value of SFr43
per share, significantly above the current share price. We estimate that the current share
price discounts as much as SFr10bn in write-downs and a SFr8bn rights issue.
Keeping Buy ratings on Munich Re, Swiss Re and SCOR
With balance sheet strength likely to be an area of focus in the near to medium term, we
remain positive on Munich Re. With signs that credit markets could be stabilising, Swiss Re
could be a strong performer over the long term. However, it has become difficult to ignore the
dilution risk and, as a result, we reduce our target from SFr78 to SFr56.

Contents
Stay tuned 3
Upcoming updates on January renewals by European reinsurers will likely put a
spotlight on the potential for a more prolonged hard market that many suspect.
Recent market pull-back creates opportunities, in our view. We think the Swiss Re
sell-off appears overdone.
Valuation data 10
Key trends 11
A number of investors seem to have been disappointed with the outcome of the
January 2009 reinsurance renewals. We find reasons for optimism. Upcoming
updates by the companies may help some investors reassess their outlook.
Company profiles
Hannover Re 14
Munich Re 17
SCOR 20
Swiss Re 23