Munich Re to post expectation-beating €1.1bn Q2 net profit

Munich Re expects to book €1.1bn in net profit for the second quarter of 2021, above analysts’ expectations of about €800m and taking the group’s first-half result to an estimated €1.7bn.

The reinsurer said major losses against its P&C reinsurance account were below average for a second quarter, with comparatively low natural catastrophe claims.

Low nat cat losses during Q2 will help balance heavy losses totalling €646m in Q1 after the Texas freeze that cost the group €450m. However, the recent German floods could sit heavy on Munich Re’s third-quarter figures.

Analyst Berenberg said it is working on an industry loss of about €5bn from the recent floods in Germany and other parts of Europe. Berenberg said Munich Re’s bill from the floods is expected to be a “low- to mid-triple-digit million euro loss”, although there is still great uncertainty.

In bad news for buyers, Berenberg said the flooding in Europe is likely to “boost” January 2022 renewals for insurers. “European business has largely lagged the rate increases seen in the US and Asia, so this could help extend the positive pricing cycle, albeit with diminishing rate increases,” the analyst said.

Munich Re said its preliminary Q2 result, which will be confirmed in full on 10 August, puts it “well on track” to achieve a full-year profit target of €2.8bn.

However, Covid-19 losses against its life and health account in Q2 due to high mortality rates in India and South Africa have shaken confidence in that unit’s €400m profit target.

Covid-19-related losses in P&C reinsurance were in line with expectations and caused “only minor effects” at its primary insurers ERGO during Q2, Munich Re said.

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