Munich Re surpasses Q3 profit prediction, eyes full year target

Reinsurance giant Munich Re expects to surpass its initial profit and revenue targets overall for 2019 and has reported a third quarter profit of €865 million, up from €483 million in the prior year quarter.

This profit represents an increase on the firm’s previous €850 million prediction for the quarter and was driven by good operational performance, strong currency gains, and a very good investment result, all of which have helped offset the reinsurer’s high major-loss expenditure in the quarter.

Gross premiums written increased by 7.4% to €13,743 million compared with the same quarter last year. If exchange rates had remained unchanged, Munich Re says this increase would have amounted to 5.5%. Munich Re’s operating result stands at €980 million compared with €1,040 million for the same quarter last year, while the other non-operating result was a loss of €146 million, compared to a loss of €151 million in the same quarter last year

The return on equity was 11.3% for the quarter, down slightly from 11.4% in the prior year quarter. Overall, given its positive performance for the year so far, Munich Re expects to post an annual profit exceeding €2.5 billion in 2019, based on premium volume of more than €49 billion.

The reinsurance field of business contributed €746 million to the consolidated result in Q3, up from €309 million. The operating result amounted to €690 million, up €589 million. Gross premiums written increased by 11.9% to €9,582 million.

Life and health reinsurance business posted a profit of €282 million against the €159 million in last year’s quarter. Premium income rose to €2,989 million from €2,805 million. The technical result, including business with non-significant risk transfer, was €218 million in Q3 Munich Re states this positive quarterly result was driven by to contract restructuring and favourable claims experience overall.

Despite the good result in Q3, the firm adds, there remains a risk – announced already at the end of the first half-year – that Munich Re will not reach its annual target of around €500 million. Property and casualty reinsurance contributed €464 million to the consolidated result in Q3, up from €151 million. Premium volume rose to €6,593 million from €5,761 million and the combined ratio was 104.7% against 100.7% of net earned premium due to high major losses.

In the reinsurance field of business, Munich Re now expects to earn a profit of over €2.1 billion and premium income of over €31 billion for the full year. Major losses of over €10 million totalled €981 million in Q3, up from $599 million in the same period last year, a figure that includes run-off profits and losses for major claims from previous years.

Man-made major losses in Q3 amounted to a relatively high €404 million, mostly due to aviation and space as well as fire losses. Large natural catastrophes cost a total of €577 million with Hurricane Dorian accounting for around €360 million and Typhoon Faxai approximately €380 million.

Typhoon Hagibis is expected to prove even more costly and will be reported in Q4. “We are very pleased to have achieved extremely good results for two quarters in a row now, despite costly hurricanes and typhoons. We now expect to surpass our initial profit and revenue targets overall for 2019,” said Munich Re Chief Financial Officer Christoph Jurecka.

Munich Re’s ERGO business generated a profit of €119 million, down from €173 million in Q3. ERGO is thus currently on track to achieve its profit target of around €400 million for the year. All other expectations for 2019 remain unchanged compared with those presented in Munich Re’s half-year report for 2019, published in August.

Source: Reinsurance News