Q2 profits down at Munich Re but full year profit guidance unchanged
Profits plummeted at Munich Re in the second quarter of 2017 but the world’s biggest reinsurer said it was still well on track to reach its 2017 profit guidance of between €2 billion €2.4 billion.
Munich Re posted a consolidated profit of €733m for the second quarter of 2017 compared with €974 million a year earlier. Its profits for the first half-year amounted to €1.29 billion compared with €1.41 billion in the first half of 2016.
Much lower investment returns was a big factor in the company’s lower profits. Its investment result in the second quarter was €1.89 billion, an overall return of 3.2 percent, compared with €2.75 billion a year earlier.
Munich Re said there was a decline in the net balance of derivatives, with losses from equity derivatives and a lower result from interest-rate derivatives having a negative impact on the result.
Profits also fell in its reinsurance segment which accounted for profits of €629 million in the quarter compared with €991 million a year earlier. The operating result for the second quarter was €896 million compared with €999 million in the second quarter of 2016.
For the first half-year, Munich Re thus released reserves totalling around €490 million or approximately 5.9 percent of net earned premiums. Munich Re said it still aims to set the amount of provisions for newly emerging claims at the very top end of the estimation range, so that profits from the release of a portion of these reserves are possible at a later stage.
Joachim Wenning, chairman of Munich Re’s board of management, said: “Both the quarterly result and the half-year result are very pleasing overall. Munich Re is well on track to reach its 2017 profit guidance of €2.0–2.4bn. We have the right strategy, and we can concentrate on implementing that strategy by writing profitable new business.
“Both of our fields of business offer many opportunities in this regard. The bundling of our competencies in reinsurance and primary insurance allows Munich Re to continue driving digital transformation consistently across the entire value chain.”
Torsten Jeworrek, member of Munich Re's board of management, said: “We see potential for profitable growth not only in innovative solutions or new digital business models, but also in traditional areas of business. The insurance gap is considerable even in developed markets. So there are also opportunities to write profitable business in the current market environment.”
The company’s overall gross written premiums were roughly stable year on year at €11.8 billion. In reinsurance, GWP decreased by 2.1 percent year on year in the period from April to June to €7.6 billion. Premium volume in property/casualty reinsurance fell overall by 8 percent to €4.23 billion. It said prices in the July 1 renewals, which mainly concerned treaty business in the USA, Australia, Latin America and with Global Clients, were down again slightly by 0.4 percent.
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