Reinsurance giant Munich Re has reported profit of €538 million for the fourth-quarter of 2017 and €392 million for the full-year, while high natural catastrophe losses saw its operating result for the year decline to €1.24 billion from more than €4 billion in 2016.
The group’s gross written premiums in 2017 increased slightly when compared with the previous year, to €49.115 billion, and equity declined by roughly €3.6 billion to €28.2 billion.
“Our dividend is reliable. Thanks to our capital strength, we were able to well withstand the high losses from natural catastrophes. In 2018, we will be pressing ahead with the digital transformation of Munich Re, and also seizing opportunities for profitable growth in traditional business. Reinsurance prices improved slightly in large sections of the market at the January renewals – a trend likely to strengthen in coming renewal rounds,” said Jörg Schneider, Chief Financial Officer (CFO), Munich Re.
The Germany-based reinsurer has announced that its reinsurance segment contributed €120 million to its consolidated result in 2017, as the operating result of the segment declined from almost €3 billion to just €73 million, driven by large catastrophe losses in its property reinsurance unit.
The result in property catastrophe reinsurance fell from over €2 billion in 2016 to -€476 million in 2017, which resulted in its combined ratio for 2017 reaching 114.1% of net earned premiums, totalling 103.9% for the fourth-quarter. This is compared to 95.7% of net earned premiums, totalling 101.9% for the same period in the previous year.
The reinsurer states that it released loss reserves of roughly €870 million for the full-year, and around €130 million for the fourth-quarter.
Life & Health reinsurance contributed €596 million to the consolidated result, which is a slight improvement on the €515 million recorded in the previous year. The technical result, which Munich Re says includes “the result from business that is not recognised in the technical result owing to insufficient risk transfer,” was €428 million, which is only just below its €450 million target for 2017.
Major loss expenditure for 2017 increased substantially from €1.52 billion to €4.31 billion, of which just €493 million was from the fourth-quarter. The impact of major losses amounted to 25.8% of net earned premiums, which is well above the average of 12% for the year.
The global reinsurance giant experienced natural catastrophe losses of €3.678 billion in 2017, compared to €929 million a year earlier. Combined, hurricanes Harvey, Irma, and Maria resulted in a total loss of €2.7 billion. Man-made losses came in slightly above 2016, at €636 million, which amounts to 3.8% of net earned premiums.
Overall, the firm’s reinsurance segment recorded an operating result of €73 million, while gross written premiums increased slightly to €31.57 billion.
Offsetting some of the pressures, Munich Re’s ERGO unit reported a profit of €273 million compared with just €41 million a year earlier, which is above the profit guidance raised in August of €200 million – €250 million.
The reinsurer notes that prices for reinsurance treaties increased at the January 1st 2018 renewals season, especially in loss-affected lines of business.
“Other markets and branches were also freed from the pricing pressures of previous years, and price development was stable or even slightly positive. Despite the high losses from natural catastrophes in 2017, the availability of reinsurance capital remained high during the January renewals, so price increases were moderate overall, due also to the slight rise in market interest rates,” says Munich Re.
The firm explains that roughly half of its non-life reinsurance business was up for renewal at January 1st, which amounts to premium volume of €8.3 billion. However, 14% of this was not renewed, and by contrast, the firm wrote new business amounting to roughly €2.3 billion, taking its 1/1 2018 volume of business to €9.9 billion, an increase of 19%.
Munch Re notes that prices increased by 0.8%, after falling by an average of 0.5% in all renewal rounds of 2017.
Looking forward, the reinsurer expects that market conditions will improve further at the remaining 2018 renewals, but warns that “claims experience in the individual market segments will play a major role.”
