Munich Re profits slump 77% as P&C reinsurance swings to €23m loss over COVID-19

Munich Re, the world's second largest reinsurer, has restated that it will not issue a guidance for 2020 as its profits fell sharply in the third quarter driven by staggering COVID-19 related losses in the property and casualty (P&C) business.

The reinsurer generated a profit of €199 million in Q3, a 77 percent decline from the €865 million profit it made in the same quarter last year. COVID-19-related losses came in at approximately €800 million for the period.

For the first three quarters of 2020, Munich Re made around €1 billion profit despite COVID-19-related losses of €2.3 billion.

Property/casualty reinsurance reported a loss of €23 million in the third quarter, with its combined ratio deteriorating to 112.2 percent. The unit generated a profit of €464 million in the prior-year quarter, with a combined ratio of 103.9 percent.

The company's reinsurance field of business contributed €63 million to the consolidated result in Q3, significantly down from €746 million in the same quarter of 2019, due to the impact of COVID-19 related claims and other major losses.

Munich Re's life and health reinsurance business saw a profit of €86 million in Q3, compared with €282 million in Q3 2019.

Major losses of over €10 million each totalled €1.518 billion for the period, primarily attributable to man-made major losses, which came to over €1 billion, including around €700 million related to losses connected to the COVID-19 pandemic.

Munich Re said the third quarter saw losses incurred in connection with the cancellation or postponement of major events, as well as losses in other lines of property-casualty reinsurance, such as business interruption. Additionally, the reinsurer sustained losses from the Beirut harbour explosion, and windstorm and wildfires in the US.

Meanwhile, Munich Re's primary insurance unit ERGO posted good results. It generated a profit of €136 million in Q3, attributable in particular to the international and property/casualty Germany segments.

Christoph Jurecka, chief financial officer of the reinsurer, said: "In reinsurance, the third quarter is often characterised by above-average losses – and that was again the case this year. On top of manmade major losses and natural catastrophes in the USA, ongoing high COVID-19 claims affected the result. A gratifying aspect is that ERGO once again delivered a strong quarter. Given Munich Re’s dynamic growth and the recent considerable price increases for reinsurance cover, we can look to the future with confidence."