Munich Re’s 2020 Profit Drops 55% on COVID-19-Related Reinsurance Claims of $4.1B

February 25, 2021

Munich Re reported a profit of €1.21 billion (US1.47 billion) for 2020, a 55% decline from the €2.71 billion (US$3.29 billion) reported for the previous year.

The reinsurer’s Q4 2020 profit dropped to €212 million (US$258 million) from €217 million ($264 million) in Q4 2019.

Munich Re’s 2020 financial year was marked by high pandemic-related losses, with reinsurance claims totaling €3.4 billion ($4.1 billion). Of this amount, slightly more than €3 billion ($3.7 billion) was attributable to property/casualty reinsurance, while €370 million ($450 million) was attributable to life and health reinsurance.

At ERGO, the group’s primary insurance subsidiary, the negative impact on the result arising from COVID-19 claims totaled €64 million ($78 million).

Adjusted for these pandemic-related losses, Munich Re said it would have met its originally envisaged 2020 profit target of €2.8 billion ($3.5 billion), which it retracted in March 2020.

The company also reported major losses from natural catastrophes of €906 million ($1.1 billion) for 2020, which Munich Re said was far lower than the average expected price tag. This compared to the 2019’s nat cat claims of €2.1 billion ($2.6 billion). The costliest natural catastrophe for Munich Re in 2020 was Hurricane Laura with a price tag of approximately €280 million ($340.3 million).

The group’s property-casualty reinsurance business contributed €571 million ($694 million) to the 2020 result, compared with €1.56 billion ($1.9 billion) in 2019. Premium volume rose to €24.6 billion ($30 billion) in 2020 from €2.1 billion ($2.6 billion) in 2019.

The combined ratio rose to 105.6% from 100.2% in 2019. (A combined ratio above 100% indicates an underwriting loss).

The group’s gross premiums written increased by 6.7% in 2020 to €54.9 billion ($66.7 billion), compared with €51.5 billion ($62.6 billion) in 2019.

2021 Outlook

Munich Re is aiming for a profit of €2.8 billion ($3.4 billion) in 2021, with the expectation that the financial consequences from COVID-19 will be on a much smaller scale than in 2020. Group premium income is expected to rise to about €55 billion ($66.8 billion) in 2021, and return on investment to be above 2.5%, despite persistently low interest rates.

In its reinsurance field of business, Munich Re anticipates premium income of about €37 billion ($45 billion) and a profit of about €2.3 billion ($2.8 billion) in 2021. The combined ratio in property-casualty reinsurance is forecast to be about 96% (95% without the impact of COVID-19).

2021 Renewals

In the January 2021 reinsurance renewals, Munich Re said it was able to increase the volume of business written by nearly 11% to €11.6 billion ($14.1 billion). Around half of property-casualty business was renewed, with a focus on Europe, the U.S. (mainly excluding hurricane cover) and global business.

Prices, terms, and conditions improved; rates increased particularly in parts of the non-proportional business. Prices improved to varying degrees around the world – but on average prices for the Munich Re portfolio increased by 2.4%.

Looking ahead to the upcoming renewal rounds in April and July, Munich Re anticipates that the market environment will remain positive and offer attractive growth opportunities.

“In spite of the tremendous challenges posed by COVID-19, Munich Re closed out 2020 with a clear profit – and our dividend remains dependable,” said CEO Joachim Wenning in a statement. “In 2021, we expect to meet the profit target that we envisaged prior to the pandemic. All the pieces are in place. Our reinsurance business is ideally positioned to resolutely exploit opportunities for profitable growth in the improved market environment.”

Subject to the approval of the supervisory board and of the annual general Meeting, a stable dividend of €9.80 ($11.91) per share is planned.

Topics COVID-19 Claims Profit Loss Reinsurance Munich Re

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