German reinsurer Munich Re reported a 23.5 percent decrease in its first quarter net profit to €633 million ($708.6 million) from €827 million ($925.7 million) in Q1 2018.
The world’s largest reinsurer blamed the profit drop on “higher basic losses and greater expenditure for claims from previous years…. “These losses prevented a repeat of the Q1 2018 result, which “was practically free of major losses,” said Munich Re in a statement.
The company reported a Q1 combined ratio 97.9 percent for its property and casualty reinsurance business, which worsened from the 88.6 percent reported in Q1 2018. Nevertheless, Munich Re said it is on track to achieve its full-year target level of around 98 percent. (A combined ratio above 100 percent means an insurer is paying more in claims and expenses than it’s collecting in premiums).
Total expenditure for major losses in excess of €10 million ($11.2 million) each amounted to €479 million ($536.2 million), compared with €62 million reported during Q1 2018. Munich Re said these figures include run-off profits and losses for major claims from previous years as well as additional expenditure of €267 million ($298.9 million) for losses from Typhoon Jebi, which hit Japan and Taiwan in September 2018.
Major-loss expenditure is equivalent to 9.7 percent of net earned premium for Q1, compared to 1.4 percent in 2018. Major-loss expenditure from natural catastrophes amounted to €195 million ($218.3 million) in Q1, while man-made major losses amounted to €283 million ($316.8 million).
Munich Re’s property-casualty reinsurance business contributed €420 million ($470.1 million) to the group’s overall Q1 profit, down 29 percent from the €591 million ($661.5 million) reported in Q1 2018.
P/C gross premiums written rose 3.8 percent to €5.5 billion ($6.2 billion) from the €5.3 billion ($5.9 billion) reported in the same period last year.
“Munich Re continues to grow organically in its core business of property-casualty reinsurance. The April renewals were the sixth consecutive round of renewals in which we are able to expand our business robustly in some areas,” commented Chief Financial Officer Christoph Jurecka. “Prices for reinsurance coverage have continued to rise following the high losses in previous years.”
At the April 1 renewals, Munich Re said premiums increased in markets and risks affected by natural catastrophes. Further, price stabilization with a slightly upward trend was also observed in the third-party liability markets.
With regard to all April renewals, prices rose by 1.4 percent, while premium volume rose by 10.3 percent to some €1.8 billion ($2 billion), compared to €1.7 billion ($1.9 billion) during the April renewals in 2018.
Munich Re said it was possible during the April renewals to selectively tap growth opportunities in certain markets, especially in India and Japan, which account for one-third of the business renewed in April.
Source: Munich Re
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