Munich Re P&C profit halves in Q2 on €700m COVID-19 hit

Germany-based global reinsurer Munich Re's property/casualty profits halved in the second quarter of 2020 as it booked €700 million COVID-19-related losses stemming from business interruptions and event cancellations. Chairman Joachim Wenning said "Munich Re will emerge from this crisis economically stronger".

Munich Re generated a profit of €579 million in Q2 2020, a 41.7 percent decline from the €993 million profit it generated in the same period of 2019.

The reinsurance business contributed €407 million to Munich Re's consolidated result in Q2 2020, down from €858 million in Q2 2019.

Gross premiums written rose to €8.856 billion, compared with €7.583 billion in the second quarter of 2020.

Property/casualty reinsurance business contributed €348 million to the quarterly result, down 50.5 percent from €704 million in Q2 2019. Premium volume rose to €5.52 billion from €4.84 billion in Q2 2019. The combined ratio was 99.9 percent in Q2 2020, compared with 86.9 percent in the same period in 2019.

Munich Re generated a sizable profit of €173 million in its ERGO field of business in Q2 2020, compared with €135 million in Q2 2019.

Overall, the company incurred €1.5 billion in COVID-19-related losses since the beginning of the year, approximately €1.4 billion was attributable to property/casualty reinsurance and around €0.1 billion to life and health reinsurance. For the second quarter of 2020, COVID-19-related losses totalled around €700 million.

Wenning, chairman of the board of management, said: “The world is far from defeating the coronavirus. That is why we have been doing everything in our power to protect staff and their families as well as clients and contractual partners from COVID-19.

"Munich Re will emerge from this crisis economically stronger. We are growing profitably, while taking steps to benefit from the significantly improved market conditions for reinsurers. In addition, we are utilising the capital originally earmarked for the 2020/2021 share buy-back programme – which we will not implement – to invest in profitable reinsurance growth.

"Prices have risen in nine consecutive renewal rounds, and premium income has grown correspondingly. With our high-quality portfolio, we expect to post a premium volume of €54bn in 2020 – which would set a new record in the 140-year history of Munich Re.”

Commenting on the results, Christian Badorff a vice president and senior analyst at Moody’s, said: “Munich Re’s net profit after tax of €579 million was up significantly from the first quarter from the first quarter, and Group Solvency was stable at a strong 211%. Amid further coronavirus related claims, the results mainly reflect below average nat cat activity in the quarter, the positive and diversifying element of ERGO’s primary operations and strong investment performance.

"P&C Re combined ratio was 99.9%, with Coronavirus related claims of €600 million - after €800 million in the first quarter - partially offset by lower nat cat claims. Life Re reported €100 million Coronavirus related claims, mainly based on mortality in the United States. The investment result was strong overall, and in particular at ERGO, which also benefited from strong underwriting performance in its German and international P&C business. In line with its peers, Munich Re reported strong rate momentum and topline growth in P&C Re. Munich Re intends to further grow as P&C reinsurance prices harden and, as announced earlier, will not implement its previously delayed share buy-back programme in the remainder of the year, which Moody’s views as positive from a capitalisation perspective.”