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Munich Re reports highest ever GPW as 2021 profit exceeds target

23rd February 2022 - Author: Luke Gallin

Germany’s Munich Re has reported profit of more than €2.9 billion for the 2021 financial year, as gross premiums written (GPW) hit a record high in the period, leading the reinsurer to forecast group profit of €3.3 billion in 2022.

Munich ReIn 2021, the company’s profit exceeded the target of €2.8 billion and also came in higher than 2020’s €1.2 billion total. In Q4 2021, Munich Re produced a profit of €871 million, compared with €212 million in the prior year period.

Year-on-year, GPW rose by 8.5% in 2021 to over €59.5 billion, which the firm says is the highest figure in its history.

Munich Re’s 2021 results show an improved performance across the Group, including within its reinsurance business, which contributed roughly €2.3 billion to the consolidated result in 2021, of which €734 million relates to the fourth quarter.

Within reinsurance, property and casualty (P&C) business contributed more than €2 billion to the 2021 result, compared with €571 million in 2020. Premium volume grew significantly in this part of the business, by more than €4 billion to €28.9 billion.

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During the year, major losses of over €10 million each amounted to €4.3 billion, and totalled just over €1 billion in the fourth quarter of 2021. The firm explains that major-loss expenditure corresponds to 16.5% of net earned premiums, coming in above the expected value of 12%.

Additionally, man-made major losses amounted to €1.2 billion against €3.8 billion in 2020. The company attributes this decline to significantly lower COVID-19-related losses in P&C, which decreased to €212 million in 2021.

However, major-loss expenditure from natural catastrophes rose substantially, year-on-year, to €3.1 billion, compared with €906m in 2020. The costliest natural disaster for the reinsurer in 2021 was Hurricane Ida at a cost of roughly €1.2 billion. Munich Re adds that the flash flooding caused by Storm Bernd resulted in losses of around €500 million. The firm also released reserves for basic losses from prior years of just over €1 billion in 2021.

Overall, the P&C reinsurance combined ratio totalled 99.6% in 2021 compared with 105.6% in 2020, which is actually better than the updated target of 100% announced in the third quarter.

In its Life and Health (L&H) reinsurance business, profit increased from €123 million in 2020 to €325 million in 2021, while premium income fell to €12.6 billion, and the technical result improved year-on-year from €97 million to €218 million.

Munich Re’s L&H operation continued to feel the impacts of COVID-19 in 2021, with claims of €785 million. For 2022, the reinsurer expects COVID-19 losses of around €300 million in L&H reinsurance, but does not expect any significant expenditure for pandemic claims at ERGO or in P&C reinsurance.

Across its reinsurance operations, Munich Re has reported an operating result of €2.7 billion in 2021 compared with €984 million in 2020. The segment’s GWP increased from €37.3 billion to €41.4 billion, with a notable increase from its growth strategy in what is an improved market environment.

“The year 2021 was good for Munich Re. We beat our profit target, while also making our balance sheet even stronger despite high inflation. Both an increased dividend and a new share buy-back will enable our shareholders to share in this success. Our Ambition 2025 strategy programme got off to a very good start and is picking up speed. Propelled by this momentum, we will resolutely tap into the favourable market environment as we increase our profit to €3.3bn in 2022,” said Joachim Wenning, Chair of the Board of Management.

At the important January 1st, 2022, reinsurance renewals, Munich Re increased written business volume by 14.5% to €14.8 billion. The firm says that this growth was supported by an optimisation of the portfolio. During the renewals, roughly half of the P&C business was renewed, with a focus on Europe, the U.S., and global business.

The reinsurer notes that, overall, prices, terms and conditions improved at 1/1. While prices varied they did show an upward trend globally, with the firm reporting price increases for its portfolio of 0.7% on a risk-adjusted basis.

“Despite increasing market pressure, Munich Re expects the market environment to remain positive and to present attractive growth opportunities in the upcoming April and July renewal rounds,” says the company.

Turning to Ergo, the company’s primary arm, and profit reached €605 million in 2021 compared with €517 million in 2020. Munich Re reports that this part of the business managed to grow substantially in 2021, with premium income up in all three segments.

On the asset side of the balance sheet, Munich Re has reported that its investment result decreased from €7.4 billion in 2020 to €7.2 billion in 2021.

Looking ahead, Munich Re is aiming to produce a profit of €3.3 billion in 2022, which accounts for COVID-19 losses of roughly €300 million in L&H reinsurance. The firm expects group premium income to set a new record this year of €61 billion.

In reinsurance, the carrier forecasts premium income of €42.5 billion and profit of roughly €2.7 billion for 2022, while the P&C combined ratio should strengthen further to 94%. In L&H reinsurance, Munich Re expects the technical result to amount to roughly €400 million.

Additionally, Munich Re expects its Ergo business to contribute roughly €600 million to the consolidated result in 2022.

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