Munich Re shrinks reinsurance business in Q2

Munich Re has reduced the reinsurance business in the second quarter of 2018 driven by the life and health (L&H) operations.

The group’s gross premiums written in reinsurance were down by 9.5 percent year on year at €6.93 billion. A significant decrease in premium volume in L&H reinsurance could only partially be offset by premium growth in property/casualty (P&C) reinsurance.

Premium income in L&H dropped to €2.31 billion in the second quarter from €3.44 billion owing to terminations and the restructuring of large-volume treaties. At the same time, profits in L&G increased to €285 million in to €112 million.

Profit in P&C reinsurance declined to €335 million in the second quarter of 2018 from €517 million in the same period a year ago, mainly attributable to a “significant” increase in man-made major losses and higher basic losses, according to the company.

Despite negative currency translation effects, premium volume in P&C reinsurance increased to €4.62 billion from €4.22 billion driven by organic growth. At the same time the combined ratio deteriorated to 102.0 percent from 93.9 percent of net earned premiums in the second quarter.

Overall expenditure for major losses of over €10 million increased to €605 million in the second quarter of 2018 compared to €253 million a year ago. The second quarter major loss expenditure represented 13.3 percent of net earned premium and was above the average expected figure of 12 percent, the company said. Man-made major losses jumped to €501 million from €187 million over the period with the most expensive individual loss resulting from structural damage to a hydroelectric power station in Colombia. Major losses from natural catastrophes increased to €104 million from €66 million over the period. 

Munich Re was able to release reserves in the amount of around €200 million, corresponding to 4.4 percentage points of net earned premiums, as claims notifications for basic losses from prior years remained below the expected level.

Overall, the group’s net profit remained broadly stable at €728 million in the second quarter after €733 million in the same period a year ago. At the same time, profit for the first half year was up by 20.5 percent year on year at €1.56 billion.

“With a half-year profit of €1.6 billion, we are most certainly on track to reach our profit target of €2.1–2.5 billion for the year as a whole,” said CEO Joachim Wenning. “We also made progress with the implementation of our strategy: Munich Re is becoming more profitable, more digital and leaner,” Wenning added.

Munich Re has lowered its projection for the combined ratio of its primary operations ERGO International for the full year by one percentage point to 96 percent.

Overall, Munich Re continues to expect to post gross premiums written of €46–49 billion for 2018, and is not changing its forecast consolidated result in the range of €2.1–2.5 billion.

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