Munich Re: 2021 profit target still in reach but warns on combined ratio as Q3 catastrophes bite

Global reinsurer  Munich Re is still targeting a consolidated profit of €2.8 billion in 2021, but warned that its property/casualty reinsurance combined ratio is expected to deteriorate, with life and health results falling short of its original guidance, as it faces “higher than expected” natural catastrophe claims burden in the third quarter.

The world's second largest reinsurer generated a profit of €366 million in Q3 2021, up from €199 million seen in the same period of 2020. Overall, Munich Re has reported a profit of €2.1 billion in the first nine months of the year.

The reinsurance business contributed €232 million to the consolidated result in Q3 and €1.6 billion in the first 9M of 2021, significantly up from the €63 million contribution made in Q2 and €619 million in 9M 2020. Major losses of over €10 million each were up in Q3 and totalled €1.97 billion, compared with €1.52 billion in Q2 2020.

Its reinsurance gross premiums written increased to €11.16 billion in Q3 2021, compared with €9.93 billion in Q2 2020.

Munich Re's property/casualty reinsurance contributed €138 million to the result in Q3 this year, compared with a loss of €23 million in Q3 of last year. The combined ratio remained almost unchanged at 112.8 percent for Q3, but improved slightly to 100.9 percent in 9M 2021, from 106.1 percent seen in 9M of 2020. P&C premium volume grew robustly to €8 billion in Q3 2021, compared with €6.8 billion in Q3 2020.

In the ERGO field of business, Munich Re generated a Q3 profit of €134 million, slightly down from 136 million seen last year. For the first nine months of 2021, profit rose slightly to €467 million, €from 381 million seen in 2020. Its gross premiums written rose to €4.3 billion in Q3 2021, from 4.22 billion in the prior year period.

The Group’s investment portfolio increased to a high €2.11 billion in Q3 this year, compared with the 2020 figure of €1.7 billion, driven by gains on disposal, outsourcing, and from portfolio restructuring in the current environment of low interest rates.

Overall, heavy natural catastrophe claims made their mark on the quarter, with Hurricane Ida losses amounting to €1.2 billion and Storm Bernd resulting in losses amounting to €0.6 billion. However, losses related to COVID-19 were significantly below expectations, with virtually no pandemic losses incurred in Q3.

Christoph Jurecka (pictured), the chief financial officer of Munich Re, stated that despite the impact of “higher than expected” nat cat losses its annual target of €2.8 billion “remains within reach, thanks to a gratifying operational performance and high investment results”.

The reinsurer, however, reiterated that its life and health technical result would fall short of its original guidance for the full year owing to the increased loss expectation due to COVID-19. Additionally, its property/casualty combined ratio will not match its previous expectation of 96 percent, but reach around 100 percent. Munich Re is still aiming for a combined ratio of around 92 percent for ERGO property/casualty, but with “increased uncertainty”.

Jurecka stressed that the Munich Re will “rigorously implement its ambitious CO₂ reduction targets in its investments, insurance business and own operations.”

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