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Munich Re first-quarter profit rises, expands premiums in April

8th May 2018 - Author: Steve Evans

Global reinsurance player Munich Re has reported an improved first-quarter result for 2018, with profits rising almost 50% to €827 million, thanks to lower losses.

Munich Re logo on a signMunich Re’s Q1 2018 profit is reported as €827 million, up significantly from the €557 million the reinsurer reported in the prior year, thanks both to a lower incidence of major losses and good underwriting performance.

The reinsurer, like others, went for growth at the renewals of April 1st, increasing the size of its book by 8.1% as it took advantage of market conditions, although only noting a small price increase of 0.8% across the newly underwritten business.

CFO Jörg Schneider commented on the results, “The first quarter was mainly influenced by low major losses in property-casualty reinsurance. We also achieved a good quarterly result in life and health reinsurance and at ERGO. We can be very satisfied with the start to the year.”

Thanks to the good start to 2018, Munich Re is maintaining its guidance for €2.1 billion to €2.5 billion of profit for the year, but the company also said that its combined ratio target for the property and casualty reinsurance division has improved to 97%, a 2% drop.

Munich Re’s operating result for the period rose to €1.283 billion in the quarter, up from €952 million, while gross premiums written increased by 1.6% to €13.126 billion, but at flat currency rates this growth would have been 7.8%.

As a result, the reinsurer reported an annualised return on risk-adjusted capital (RORAC) of 13.2% and a return on overall equity (RoE) of 11.9%.

The reinsurance business contributed €750 million of profit, up from €466m million, with a much improved operating result of €1.059 billion, up from €683m. Gross premiums written in reinsurance rose by 1.7% to €8.183 billion.

Life and health reinsurance posted an improved profit, as did property casualty reinsurance business, as the lack of losses helped Munich Re to much better year on year results.

In P&C reinsurance the combined ratio came out at just 88.6%, much improved over the prior years 97.1%.

Munich Re was able to release €180 million of reserves during the quarter which has greatly helped the firm to boost its results, thanks to prudent reserving practices.

At the key April 1st renewals, Munich Re said, “The trend that had begun to be observed in January continued, with prices increasing in the markets affected by natural catastrophes, but otherwise remaining stable given the still-high capacity levels in the markets.”

The company saw prices increase by 0.8% across its book, but underwrote 8.1% more premiums as Munich Re took the opportunity for some better returning P&C reinsurance.

The reinsurer underwrote roughly €1.6 bilion of premiums at the April renewal, made up of 15% from the Japanese market, 28% North America and global business, and about 40% from Europe.

Munich Re’s primary business ERGO did not fare as well in the quarter, reporting a decline in profit to €77 million, down from €91 million, as a result of lower realised capital gains and higher German storm losses.

In particular, the German P&C segment at ERGO suffered due to European windstorm Friederike, which helped to drive the combined ratio to 101.7%.

Thanks to the profitable start to the year and the low-level of major losses experienced, Munich Re has lowered its combined ratio target by two points to 97%, although it maintains its profit targets as stable.

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