News Reinsurance08 Feb 2019

Global:Munich Re's 2018 profits are 5.8x those of 2017

| 08 Feb 2019

Munich Re generated a profit of EUR2,275m ($2,585m) for the full year in 2018, 5.8 times that of the EUR392m posted for 2017, according to an announcement of preliminary financial results by the global reinsurance giant.

Operating results stood at EUR3,725m in 2018, three times that of the EUR1,241m chalked up in 2018.

Gross premiums written by the Group in 2018 were €49,064m, and thus roughly at the same level as in the previous year (49,115m). A decline in premium income in the life and health reinsurance segment, which was attributable to the expiry or restructuring of large-volume capital-relief treaties, was largely compensated for by partly robust growth in property-casualty reinsurance.

Reinsurance

The reinsurance field of business contributed EUR1,864m (2017: EUR120m) to the consolidated result in 2018, and the operating result in this segment climbed sharply from EUR73m to EUR2,464m. Gross premiums written were down slightly to EUR31,286m (2017: EUR31,569m).

Life and health reinsurance contributed EUR729m (2017: EUR596m) to the consolidated result. The technical result, including the result from business not recognised in the technical result owing to insufficient risk transfer, was EUR584m (2017: EUR428m). Favourable claims experience in the US was one of the contributing factors to the very good result.

The result for property-casualty reinsurance rose to EUR1,135m (2017: loss of EUR476m). The combined ratio was 99.4% (2017: 114.1%) of net earned premium, with 105.1% (2017: 103.9%) in the fourth quarter owing to the especially high major losses from natural catastrophes in that quarter. Munich Re was able to release loss reserves for basic losses (adjusted for commissions) of approximately EUR860m for the full year. This corresponds to 4.6 percentage points of the combined ratio for the full year.

Munich Re still aims to cautiously set the amount of provisions for newly emerging claims within the scope of existing estimation ranges, so that profits from the release of a portion of these reserves are possible at a later stage.

Major loss expenditure

Total major-loss expenditure for 2018 amounted to EUR2,152m (2017: EUR4,314m). The major-loss burden amounted to 11.6% (2017: 25.8%) of net earned premiums, and was in the range of the expected figure of 12% for the full year. Natural catastrophe losses impacted the full year with EUR1,256m (2017: 3,678m). At EUR896m (2017: EUR636m), man-made major losses were up on the level of the previous year, which is equivalent to 4.8% (2017: 3.8%) of net earned premiums.

According to Munich Re, the most costly natural catastrophes in 2018 were typhoon Jebi, which killed at least 11 people in Japan in September as well as the forest fires in California. These were dwarfed by hurricanes Harvey, Irma and Maria in the US caused massive losses I 2017.

Solvency

According to a provisional indication, and with due consideration of dividends and potential capital measures in 2019, the solvency ratio under Solvency II slightly increased to around 250% (31.12.2017: 244%).

Renewals at 1 Jan 

Reinsurance renewals of property-casualty reinsurance treaties as at 1 January 2019 once again took place in a very competitive market environment. Prices for the Munich Re portfolio remained stable overall (+0.0%).

As at 1 January 2019, around half of Munich Re’s property-casualty reinsurance business was up for renewal, representing a premium volume of EUR9.4bn. Of this, 8% (around EUR0.8bn) was not renewed, set against new / additional business with a volume of approximately EUR1.4bn. The volume of business written at 1 January thus increased to around EUR10bn.

It is Munich Re’s expectation that the market environment will improve in the next round of renewals in April, as treaties in regions with significant claims experience in 2018, such as Japan, will then be up for renewal.


 

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