Munich Re 'tapping and shaping' as profit tops expectation despite COVID-19 burden

Global reinsurer  Munich Re has delivered a solid quarterly and half-year profit that topped expectations despite the ongoing burden of pandemic-related losses, leading it to raise its gross premium forecast for 2021. The company's chairman Joachim Wenning (pictured) said that "Munich Re is tapping and shaping" to take advantage of the new business opportunities it is seeing in the market, as well as making good use of the improving pricing environment.

The world's second largest reinsurer generated a profit of €1.106 billion in Q2 2021, up 91 percent from €579 million seen in the same period of 2020. Overall, Munich Re has reported a profit of €1.695 billion in the first half of 2021, an increase of 112 percent on the €800 million generated a year ago.

The reinsurance business contributed €951 million to the consolidated result in Q2 and €1.361 million in the first half-year 2021, significantly up from the €407 million contribution made in Q2 and €555 million in H1 2020.

Its reinsurance business gross premiums written increased 16.3 percent to €10.3 billion in Q2 2021, from €8.856 billion reported in Q2 2020. In H1 2021, the GWP rose 8.8 percent to €19.7 billion, from €18.1 billion in the prior year period.

At the July renewals, the company exploited growth opportunities and increased the volume of business written  by 11 percent to €3.9 billion, with a focus on its business in North America, South America, Australia, and with global clients.

Munich Re's property/casualty reinsurance contributed €858 million to the result in Q2 this year, compared with €348 million in Q2 last year. The combined ratio improved considerably to 90.1 percent in the quarter, from 99.9 percent in the prior year quarter. In the first half od 2021, the combined ratio improved to 94.3 percent, from 103 percent seen in H1 2020.

In the ERGO field of business, Munich Re generated a profit of €155 million in Q2 and €334 million in H1 2021, compared with €173 million produced in Q2 and €245 million in H1 2020.

The company noted that 'higher than initially projected' COVID-19-related losses impacted the quarterly results. , a higher amount than initially projected. Overall, the company incurred €302 million in COVID-19-related losses in the first half of 2021.

Given the significant losses, Munich Re said it is increasing its loss expectation from COVID-19 for life and health reinsurance business for 2021 as a whole to approx. €400 million (previously approx. €200 million) and thus for the reinsurance field of business overall to approx. €700 million (previously approx. €500 million). For property-casualty reinsurance, the COVID-19 loss expectation remains unchanged at approx. €300 million.

Wenning, chairman of the board of management, declared that Munich Re is on track to meet its target of €2.8 billion profit for the year.

The Group is showing a very solid profit for the first half of the year. All areas of our operation are helping deliver on our strategic objectives: Munich Re is growing profitably," he said. "Our reliability and expertise are in demand, and we are making good use of the positive market environment – always balancing healthy growth and strict risk management."

Wenning added: " Munich Re is tapping and shaping tomorrow’s new business: cyber, for example, shows how we can move from the role of pioneer to that of market leader.

"Faced with challenges such as pandemics, floods and heatwaves, our aspiration as an insurer remains to contribute our part to the solutions of the future."

Munich Re anticipates "advantageous business opportunities" also in the second half of 2021 and is raising its gross premium forecasts by €1 billion to €40 billion for reinsurance, and by €0.5 billion to €18 billion for the ERGO field of business. At Group level, gross premiums of €58 billion are now projected for 2021.

The reinsurer, however, noted that given the raised loss expectation in life and health reinsurance due to COVID-19, it may not be able to meet its objective of a technical result of €400m, including the result from reinsurance treaties with non-significant risk transfer.

Munich Re noted that all forecasts are made more difficult by the pronounced volatility of the capital markets and exchange rates and by the increased uncertainty with regard to potential claims in connection with the coronavirus pandemic.

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