Munich Re eyes €2.8bn profit for 2021 despite hefty COVID-19 losses

Global reinsurer Munich Re is targeting a profit of €2.8 billion in 2021, but warned that it is set to book COVID-19 related losses of €3.4 billion this year, with an additional burden of approximately €500 million anticipated for 2021.

The German company has set its sights on increasing profits in 2021 despite the mounting losses from the ongoing pandemic. The group expects financial consequences from COVID-19 next year as well, but on a considerably smaller scale than this year.

Munich Re has lifted its estimate for COVID-19 related losses in its reinsurance business to €3.4 billion for 2020, with a further €500 million forecast for 2021.

Life and health reinsurance accounts for €360 million of these losses, and property/casualty reinsurance for slightly more than €3 billion, it said.

For 2020, the largest percentage of COVID-19 claims in property/casualty reinsurance was due to contingency (€1.66 billion). In addition, Munich Re anticipates COVID-19 claims of €965 million in property/business interruptions, €200 million in D&O/workers compensation, €170 million in credit, and €25 million in marine/aerospace.

Against this background, Munich Re forecasts a profit of €1.2 billion for 2020, compared to its originally envisaged 2020 profit target of €2.8 billion, which was retracted in March.

For 2021, Munich Re anticipates expenditure for COVID‑19 claims of approximately €300 million in property/casualty reinsurance, including €200 million in contingency, €50 million in property/business interruption and €50 million in credit insurance. Additionally, the negative impact of premiums will hit the technical result by a further €50 million.

Overall, in its reinsurance field of business the company anticipates premium income of approximately €37 billion, a profit of nearly €2.3 billion, and an estimated combined ratio of 96 percent in 2021.

Despite a negative COVID-19 impact of €100 million on the net result, the ERGO field of business is expected to contribute approximately €500 million to consolidated profit in 2021. While the premium income will amount to approximately €17.5 billion.

Christoph Jurecka, Munich Re's chief financial officer, said: "We expect to generate a profit of clearly above 1bn € this year. The pandemic has naturally had a considerable impact on our result. But the burdens arising from COVID-19 are financially manageable for Munich Re.

"By covering insured losses totalling billions, we are playing a substantial role in helping the economy and society cope with the pandemic. Our business is clearly on track. In the absence of COVID-19, we would have been able to achieve our original result target for 2020."

Jurecka added: "Thanks to our strong balance sheet, we are in a very good position to exploit current market opportunities. In the coming year, we plan – despite anticipated further COVID‑19 losses – to meet the profit target of €2.8bn as envisaged prior to the pandemic."