Munich Re Q1 Profit Tops $1 Billion; Gross Premiums over $17 Billion

May 8, 2012

Munich Re bounced back from the disaster plagued first quarter of 2011, posting a profit of €782 million [$1.019 billion] in the first quarter of 2012, compared to a €948 million [$1.352 billion] loss lost year. Gross written premiums from all its business lines for the period were $13.265 billion [$17.285 billion]; net earned premiums were €12.41 billion [$16.17 billion].

CFO Jörg Schneider described the results as “a good start to 2012. With few major losses and more favorably disposed capital markets, we have posted a healthy profit.” The bulletin singled out the “much lower claims costs from natural catastrophes and higher investment income than in the same quarter last year” as the key factors in generating the profit figures.

With regard to Munich Re’s expected business performance for 2012 as whole, Schneider stated: “Despite the still difficult economic situation, we are optimistic for 2012 and are aiming for a profit for the year of around €2.5 billion [$3.26 billion].”

Other earnings highlights included the following:
– Operating result of €1.202 billion [$1.566 billion], compared to a loss of €1.384 billion [$1.8 billion] in Q1 2011.
– Compared with year-end 2011, equity rose by 4.8 percent to €24.4 billion [$31.8 billion]. — The annualized return on risk-adjusted capital (RORAC) amounted to 12.8 percent and the return on equity (RoE) to 13.1 percent. –  If exchange rates had remained the same, premium volume would have increased by 0.3 percent compared with the same period last year.
– Combined ratio for reinsurance: 94.6 percent (161.3 percent in Q1 2011)                      – Combined ratio for primary insurance 95.3 percent (96.9 percent in Q1 2011)

Munich Re’s primary operations improved, posting a profit of €145 million [$189 million], compared to €53 million [$69 million] in Q1 2011. The operating result totaled €257 million [$335 million], up from €167 million [$217.6 million] for the period. For the first three months of the year the ERGO Insurance Group, in which Munich Re concentrates its primary insurance business, showed an increased profit of €97 million [$126.4 million] from €15 million [$19.5 million].

Munich Re pointed out that in the “first quarter last year reinsurance business had been affected by extremely heavy burdens from major losses, claims costs in the first quarter of 2012 were substantially lower. The operating result amounted to €906 million [$1.18 billion], compared to an operating loss of €1.590 billion [$2.071 billion] in Q1 2011. Altogether, the reinsurance segment accounted for around €634 million [$826 million] of the Group’s consolidated result – a whole lot better than the €1.01 billion [$1.316 billion] loss posted in Q1 2011.

The bulletin also noted that “with a volume of approximately €1.2 billion [$1.563 billion], the renewals at 1 April 2012 in Japan, Korea and the USA, as well as with some global clients, involved around 10 percent of the total business in property-casualty reinsurance.

“Altogether, Munich Re’s premium volume in these renewals decreased to €1.118 billion [$1.457 billion] or by 2.9 percent (around €30 million [$39 million]) compared with the previous year. Rates, i.e. the price level, rose by 5 percent year on year.”

Torsten Jeworrek, Munich Re’s Reinsurance CEO, commented: “We did reduce proportional earthquake covers in Japan in cases where we found the conditions inadequate. But generally we were able to achieve distinctly improved prices and substantially better conditions in Japan.”

The bulletin indicated that in the “renewals at 1 July 2012 (mainly for parts of the US market, and in Australia and Latin America), Munich Re also expects rising prices in loss-affected segments, especially for natural catastrophe covers.”

The complete report and information on accessing the earnings conference call may be obtained on the company’s website.

Source: Munich Re

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