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Munich Re’s Q1 operating result improves on lower COVID impact

6th May 2021 - Author: Luke Gallin

Global reinsurer Munich Re has announced a profit of €589 million for the first quarter of 2021 against €221 million a year earlier, as the operating result spiked owing to a considerably lower impact from COVID-19 losses in the period.

Munich ReFor Q1 2021, Munich Re’s operating result improved from €397 million in 2020 to €798 million.

The reinsurer attributes this to the lower burden from COVID-19 losses, especially in its property / casualty reinsurance operation.

In Q1, the P/C reinsurance business contributed €358 million to the result, while premium volume increased €6.33 billion.

The segment’s combined ratio amounted to 98.9% of net earned premium during Q1 2021, representing an improvement from the 106% posted a year earlier.

Within P/C, major losses of more than €10 million each totalled €892 million, which includes gains and losses from the settlement of major losses from previous years.

Major-loss expenditure corresponds to 15.5% of net earned premiums, which Munich Re says is above the long-term average expected value of 12%. Man-made major losses declined to €247 million, including COVID-19 losses of around €100 million. Additionally, major losses from natural catastrophes increased from €208 million to €646 million, attributable primarily to losses of around €450 million resulting from the severe winter storms in the U.S. in February.

At the April renewals, Munich Re says that it was able to increase the volume of business written to €2.3 billion.

“It was possible to tap into growth opportunities, especially with global clients and in Asia – particularly in Japan and India. By contrast, Munich Re once again selectively discontinued business that no longer met risk/return expectations,” explains the firm.

Adding: “Prices were up overall in the sectional markets, with increases varying in connection with the specific claims experience and situation in each individual market. Prices for reinsurance cover rose considerably in some places, including Japan. By contrast, prices rose only slightly in regions and classes of business with low claims experience, such as Europe. All in all, prices for the Munich Re portfolio increased by 2.4%.”

Munich Re’s life & health reinsurance business generated profit of €52 million for Q1 2021, despite COVID-19 losses of approximately €167 million. The technical result, including the result from reinsurance treaties with non-significant risk transfer, reached €51 million.

At ERGO, Munich Re has reported profit of €178 million for the first quarter of 2021, with a combined ratio of 94.2% against 93.4% for the same period in 2020.

The Group’s investment result, excluding insurance-related investments, fell to €1.7 billion in Q1 2021, as regular income from investments fell slightly to €1.43 billion.

“The pandemic has been testing our solidarity and self-discipline every day. The only way to really improve the situation, however, is a more rapid pace of COVID-19 vaccinations. We will do our part at seven Munich Re and ERGO locations in Germany as soon as our company medical staff is permitted to administer vaccinations,” said Christoph Jurecka, Chief Financial Officer (CFO).

“In business terms, we expect that the impact of the pandemic in 2021 will be limited for Munich Re. On top of the anticipated COVID-19 losses, there was an unusual cold snap in the United States early this year. We are nevertheless on track to meet our annual target of €2.8bn thanks to robust operating earnings. The April renewals confirmed that the market environment in reinsurance continues to be favourable, and ERGO’s strong results help boost the Group’s profit.”

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