Munich Re posts €476m loss in P&C reinsurance in 2017

Munich Re has reported a loss in its property/casualty reinsurance unit of €476 million due to high levels of natural catastrophes.

This compares to a profit of €2.03 billion the German reinsurer reported for the unit in 2016.

“The hurricanes in the USA and the Caribbean, the fierce wildfires in California, and the earthquakes in Mexico had a severe impact on our result in the reinsurance field of business,” said CEO Joachim Wenning in a letter to shareholders. “Property-casualty reinsurance, which usually generates most of Munich Re’s profits in normal years, posted a loss in 2017. But – and this is the good news – prices for reinsurance business renewed at the start of the year increased as a result of the huge market losses. This positive development is likely to intensify later in the year when many other treaties come up for renewal in the markets affected by the catastrophes. We are confident that market conditions will continue to improve,” Wenning added.

The combined ratio for 2017 deteriorated to 114.1 percent in 2017 from 95.7 percent in the previous year. Adjusted for commissions, Munich Re’s review of reserves resulted in a reduction in the provisions for claims from prior years of around €870 million for the full year, which is equivalent to around 5.2 percentage points of the combined ratio.

Munich Re still aims to set the amount of provisions for newly emerging claims at the top end of the estimation range, so that profits from the release of a portion of these reserves are possible at a later stage.

Total major-loss expenditure for 2017 amounted to €4.31 billion compared to €1.54 billion in 2016. This was equivalent to 25.8 percent of net earned premiums and was thus well above the average expected figure of 12 percent for the full year. The total cost of natural catastrophe losses for the full year was €3.68 billion after €929 million in 2016.

Hurricanes Harvey, Irma and Maria – with a total loss of €2.7 billion – were the most expensive loss events of the year. Man-made major losses were slightly above the level of the previous year and totalled €636 million in 2017 after 613 million in the previous year.

“Although this unusual accumulation of severe catastrophes meant that our original profit guidance for 2017 was no longer attainable, we were well positioned to absorb even such heavy losses,” Wenning said.

Overall, Munich Re reported a consolidated result for the group of €392 million for 2017 compared to €2.58 billion in 2016. Gross premiums written grew slightly to €49.1 billion from €48.9 billion over the period.

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