Munich Re offsets another €600m pandemic loss with strongly rising premiums

Munich Re posted a decent profit for the second quarter of this year despite incurring another €600m of Covid-19-related losses to bring its total pandemic hit up to €1.4bn for H1. The company benefited from firming prices in reinsurance, a good investment result, lower than normal natural catastrophe losses and a healthy result from its primary group ERGO. The German reinsurer said that given the ongoing high level of uncertainty regarding the further economic and financial consequences of Covid-19, it will still not issue profit guidance for 2020. The group also previously cancelled its planned share buyback. “As with its annual profit target, Munich Re remains committed to the retractions of its sub-targets for annual profit in the reinsurance field of business and its forecast for the combined ratio in property-casualty reinsurance. In addition, Munich Re has now withdrawn its guidance for the technical result, including business with non-significant risk transfer in life and health reinsurance (original target: €550m),” it explained. Despite the uncertainty surrounding the pandemic’s development and its impact on the market, as with other rival reinsurers and insurers, Munich Re’s growth outlook is positive given the firming pricing in Europe and worldwide. “Owing to profitable growth, Munich Re now anticipates premium income of around €54bn (previously: around €52bn). Premium income of €36bn (previously: €34bn) is now expected in the reinsurance field of business,” it said. The group’s consolidated result for the second quarter of this year was €579m, down from €993m for the same period last year. The half-year profit was €800m, compared with €1.6bn last year. Gross written premiums in reinsurance reached €18bn in the first half, compared with €16bn at the same point last year. ERGO’s premiums fell following the sale of a number of foreign operations. It reported gross written premiums for the first half of this year of €9bn, against €9.2bn at the same stage last year. But ERGO’s profitability increased on the back of an improved 92.7% combined ratio for the first half of this year, compared with 95.2% for the same period in 2019. Joachim Wenning, chairman of Munich Re’s board of management, focused on strongly rising premiums as a big positive for the reinsurer, which has now experienced nine consecutive positive renewal rounds. “The world is far from defeating the coronavirus… 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 buyback 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,” said Mr Wenning. Christian Badorff, a vice-president and senior analyst at Moody’s in Frankfurt, was relatively impressed by the result given the pandemic’s impact. “Munich Re’s net profit after tax of €579m was up significantly 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,” he said. “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 top-line 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 buyback programme in the remainder of the year, which Moody’s views as positive from a capitalisation perspective,” added Mr Badorff.

Munich Re offsets another €600m pandemic loss with strongly rising premiums

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