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Munich Re expects €1bn Q2 result on lower losses, reserve releases

18th July 2019 - Author: Luke Gallin

Global reinsurance giant Munich Re has announced that it expects to report a consolidated result of approximately €1 billion for the second-quarter of 2019.

Munich ReThe reinsurer states that this figure is mainly a result of low major-loss expenditure and high reserve releases for basic losses in reinsurance from prior years.

Munich Re adds that as a result of the uncertainty concerning developments in major losses and the capital markets through the remainder of 2019, it has maintained its 2019 consolidated result target of €2.5 billion.

Analysts at J.P. Morgan also commented on the company’s reserves and expected Q2 performance. Noting that any reserve strengthening from Munich Re in relation to 2018 catastrophe events will be “more than offset” by lower losses from the second-quarter of 2019, ahead of the reinsurer’s Q2 earnings release in August.

The reinsurance giant announced previously that it expects its large losses in the second-quarter to be within its budget, and as such, analysts expect a “relatively uneventful” second-quarter from the firm.

According to analysts, the fact large losses will be contained within its budget, means that any strengthening of reserves related to 2018 cat events will be “more than offset by benign experience elsewhere.”

Overall, J.P. Morgan analysts had expected Munich Re to record second-quarter net income of €610 million (USD 684 million) for the period, but this has proved far below Munich Re’s actual result for the quarter.

In the second-quarter of last year, Munich Re’s profit suffered from higher-than-expected man-made losses which negatively impacted the performance of its P&C unit, although the firm still produced net income of €728 million for the period. However, the P&C combined ratio hit 102% in Q2 2018.

Higher losses also dented the company’s performance in Q1 of this year, and included an additional €273 million for losses from Typhoon Jebi in Japan, as well as losses from other major claims from previous years.

But while the catastrophe load was elevated in Q1, analysts expect a benign second-quarter to drive large losses within Munich Re’s budget, in Q2 2019.

“Elsewhere we have largely assumed an experience in line with the FY run-rate, with some minor adjustments for small business sales in the quarter and a slightly lower Life Re result,” say analysts.

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