Munich Re sets new record with ‘highest’ GWP and target-beating €2.9bn profit in 2021

Munich Re, one of the largest reinsurers in the world, more than doubled its profit, boasting “highest” ever gross premium figure in its history, as well as solid growth across all business segments, in the financial year 2021. Its chief executive Joachim Wenning (pictured) expressed a bullish view on surpassing its profit target and plan to “resolutely” tap into the favourable market environment in 2022.

The Germany-based global reinsurer generated a full-year profit of €2.9 billion in 2021, comfortably exceeding its target of €2.8 billion. The profit was up 142% on €1.2 billion reported a year ago when it suffered high pandemic-related losses and natural catastrophes.

Munich Re’s gross premiums written in 2021 increased by 8.5% year on year to €59.6 billion, which is the highest figure in the history of the company. In 2020, its GWP came in at €54.9 billion.

The reinsurance field of business contributed €2.3 billion to the consolidated result in 2021, compared with €694 million in the previous year. Reinsurance GWP rose to €41.4 billion, from €37.3 billion seen in 2020.

Similarly, life and health reinsurance business also generated a higher profit of €325 million in 2021, compared with €123 million in 2020.

Property and casualty reinsurance contributed €2 billion to the 2021 result, compared with €571 million a year ago. P&C combined ratio improved 6 percentage points to 99.6% from 105.6% in 2020.

In its ERGO field of business, Munich Re generated a profit of €605 million in 2021, an improvement from €517 million in the prior year. ERGO GWP increased to €18.2 billion in 2021, from €17.6 billion in 2020.

Major losses of over €10 million each totalled €4.3 billion for the full year, lower than last year’s €4.7 billion. The figures include run-off profits and losses for major claims from previous years.

Munich Re noted the costliest natural disaster in 2021 was Hurricane Ida, which cost the reinsurer around €1.2 billion. The flash flooding caused by Storm Bernd resulted in losses of around €0.5 billion.

At the January 2022 reinsurance renewals, around half of its property and casualty business was renewed, with a focus on Europe, the USA (mainly excluding hurricane cover) and global business. Munich Re was able to increase written business volume to €14.8 billion.

Overall, prices, terms and conditions improved, despite increasing market pressure, the reinsurer said.

Munich Re expects the market environment to remain positive and to present “attractive growth opportunities” in the upcoming April and July renewal rounds.

Munich Re stated that it is aiming for a profit of €3.3 billion in 2022, which factors in COVID-19 losses (before tax) of approximately €300m in the life and health reinsurance segment.

Conversely, Munich Re does not anticipate any significant expenditure for COVID 19 claims at ERGO or in property & casualty reinsurance.

It expects group premium income to “set a new record” of approximately €61 billion in 2022, and return on investment to be above 2.5% despite persistently low interest rates.

In its reinsurance field of business, Munich Re anticipates premium income of about €42.5 billion and a profit of around €2.7 billion in 2022. It is aiming for a combined ratio of 94% in property & casualty reinsurance.

CEO Wenning said: “The year 2021 was good for Munich Re. We beat our profit target, while also making our balance sheet even stronger despite high inflation. Both an increased dividend and a new share buy-back will enable our shareholders to share in this success.

“Our Ambition 2025 strategy programme got off to a very good start and is picking up speed. Propelled by this momentum, we will resolutely tap into the favourable market environment as we increase our profit to €3.3bn in 2022.”

Commenting on the results, Moody’s analyst Christian Badorff, said: “Munich Re reported very strong investment results and a strong contribution from ERGO in 2021, which cushioned the negative effect of above average natural catastrophes and still high Covid mortality claims.

“The Group is utilizing its strong capital position to further grow in the P&C reinsurance market, where pricing is still strong, and the earnings outlook for 2022 is positive. Nonetheless uncertainty related to natural catastrophes and trajectory of Covid-19 mortality losses remains.”

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