Global reinsurance giant Munich Re has announced that it exceeded its original profit guidance by €200 million in 2019, despite a high impact from catastrophe losses hitting the performance of its P&C reinsurance segment in the fourth-quarter.
For the full year 2019, Munich Re has announced profits of €2.7 billion, which is up on the €2.3 billion reported in 2018. For Q4 2019, Munich Re’s profits reached €217 million, which is actually down on the €238 million recorded in the same period in 2018.
At more than €4 billion, Munich Re’s operating result for 2019 increased on the prior year’s €3.7 billion reported figure, while the other non-operating result amounted to -€665 million in 2019, against -€639 million in 2018.
The German reinsurer has revealed that during 2019, its reinsurance operation contributed an increased €2.3 billion to the consolidated results, which marks an improvement on the €1.86 billion reported for 2018. For Q4, the reinsurance result was €116 million, which is a decline from the €185 million posted in Q4 2018.
Within reinsurance, the operating result increased to €2.6 billion in 2019 and gross written premiums (GWP) jumped from €31.3 billion in 2018, to €33.8 billion in 2019.
For the full year 2019, Munich Re has announced that its P&C operation contributed profits of €1.6 billion versus €1.2 billion in 2018. Premium volume increased to more than €22 billion in the segment during 2019.
However, as a result of high major losses, the P&C reinsurance combined ratio actually weakened to 101% of net earned premiums in 2019, compared with 99.4% in 2018. For the fourth-quarter of 2019, Munich Re has reported a P&C combined ratio of 112.5%, compared with 105.1% in Q4 2018.
For both the full year and the fourth-quarter of 2019, Munch Re’s major loss bill increased when compared with the prior-year periods, with major losses of more than €10 million each totalling €3.12 billion in 2019 and almost €1.5 billion for the fourth-quarter. The reinsurer notes that these costs include both losses and gains from the settlements of previous years’ major losses.
At 15.2% of net earned premiums, major-loss expenditure for Munich Re for the full year was well above the long-term average expected value of 12%.
The impact of large losses from natural catastrophes in the year was more than €2 billion, and the reinsurer explains that Typhoons Hagibis at €780 million and Faxai at €530 million, were the two most costly nat cat events for the reinsurer in 2019.
As well as natural catastrophe losses, Munich Re’s man-made large loss bill was also comparatively high in 2019 at €1.1 billion versus €896 million in 2018, which the firm attributes to aviation/space and fire losses.
Discussing its reserves, and Munich Re notes that in 2019, reserves for basic claims from prior years amounting to roughly €1.2 billion were released, which corresponds to 5.6% of net earned premiums.
Turning to Life and Health reinsurance, and the company notes a slightly lower profit of €706 million for 2019, while premium income increased in the year to €11.7 billion, versus €10.9 billion in 2018. The technical result within this segment reached €456 million in 2019 and €70 million in Q4 2019, compared with €584 million and €165 million for the same periods in 2018, respectively.
While the majority of the company’s profits came from its reinsurance operations, Munich Re’s ERGO unit generated higher profits of €440 million in 2019 and €101 million in Q4 2019, exceeding its profit guidance of €400 million for the year.
Commenting on the firm’s results, Munich Re’s Chairman of the Board of Management, Joachim Wenning, said: “A higher dividend, new share buy-back programme, and profits beating the guidance: Munich Re delivers. On our journey to make Munich Re more profitable, more lean and more digital, we took a great step forwards in 2019. With this strategic progress, I am confident that we will reach the profit target of €2.8bn for 2020 that we set out in our multi-year ambition for 2018–2020.”
At a huge €7.73 billion, Munich Re’s investment result increased in 2019 and made a greater contribution to the reinsurer’s overall performance. Furthermore, and despite low interest rates, the firm notes that regular income from investments increased slightly to €6.75 billion in 2019.
The reinsurer also provides some commentary on its experience at the recent January 1st, 2020 reinsurance renewals, stating that it was able to increase written business volume to €10.6 billion with around half of its P&C business renewed, with a focus on Europe, the U.S. (mainly excluding cat) and global business.
Munich Re highlights a varied rate response at the renewals dependent on regions and classes of business, and notes that overall, it achieved price increases across its portfolio of 1.2%. The firm notes an expectation of an improved market environment as the sector moves through the April and mid-year renewals.
Looking forward, and Munich Re has announced that it aims to increase its profits for 2020 to €2.8 billion, and expects roughly €2.3 billion of this to come from its reinsurance operations and the rest from ERGO. In P&C, the firm expects to improve the combined ratio to around 97% in 2020.
