Munich Re announced provisional results for the year 2001, which confirmed that even the world’s largest reinsurer wasn’t immune to the huge losses caused by Sept. 11. Munich’s net profit is expected to be around € 250 million ($222 million), €1.5 billion ($1.33 Billion) less than in 2000.
The company’s statement indicated that premium increases of around 16.1 percent had raised gross premium income to €36.1 billion ($32 billion) last year, but the estimated $1.95 billion in claims from the Sept. 11 attacks severely impacted the company’s earnings. If € 830 million ($737 million) in what it termed “positive exceptional factors” were excluded, it would have actually suffered a loss.
The company indicated that it earned 57% of its premium income from reinsurance, “where premiums written rose by 21.1% to €22.2bn [$19.7 billion]. Adjusted to eliminate the effects of changes in exchange rates and acquisitions, premium growth still amounted to a notable 17.9%.” It noted that its “capacity and security were more in demand than ever last year, – a positive trend that intensified in the renewals at 1st January 2002 and has continued to do so in the current negotiations for renewals at 1st April 2002.”
While Munich Re noted that property-casualty reinsurance premium climbed by 19.6% to €16.3bn[$14.5 billion], its combined ratio rose to 135.1%. It explained that “15.4 percentage points are attributable to the attack of 11th September.” However, as one commentator in London’s Financial Times observed, even without the WTC losses the combined ratio stood at 118.2 percent, “the fifth straight year of deterioration,” and made the company’s stated goal of achieving a 104 percent combined loss ratio extremely unlikely.
With the necessary reserve strengthening, and the losses of 2001 hopefully behind it, Munich Re is optimistic about prospects for this year. It has taken steps to tighten up underwriting practices, rejecting nearly 20 percent of its treaty business which came up for renewal last January. It’s sitting on a pile of cash, nearly $9 billion, and remains one of the few triple A rated insurers left, while its primary business, and its life, health and asset management activities continue to grow.
Dr. Hans-Jürgen Schinzler, Chairman of Munich Re’s Board of Management, stated that, “We have generally achieved an adequate level, but we need to go further: exposure due to natural perils is continuing to increase and the extent of man-made catastrophes is growing dramatically. Insurers and reinsurers therefore need further improvements in the renewals for 2003 in order to finance the foreseeable burdens.” He added that the company foresaw a return to “the positive trend of the previous years in 2002, surpassing the very good Group result we achieved in 2000.”
Was this article valuable?
Here are more articles you may enjoy.