Munich Re posts rise in Q3 profit despite Hurricane Ian losses of €1.6 billion

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Global reinsurer Munich Re has reported profit of €527 million and €1.9 billion for the third quarter and first nine months of 2022, respectively, despite a rise in major losses within property and casualty (P&C) reinsurance on the back of Hurricane Ian losses of around €1.6 billion.

Profit for the quarter increased year-on-year, although declined slightly for 9M 2022 as the reinsurer notes above-average expenditure for natural catastrophes.

In fact, major losses of more than €10 million each reached over €2.6 billion in Q3 2022, corresponding to 26.9% of net earned premiums, and higher than the long-term average expected value of 13% for both Q3 and 9M 2022.

The costliest nat cat event for the reinsurer was Hurricane Ian at €1.6 billion. All in all, nat cats cost the reinsurer €1.8 billion in Q3 2022, compared with €1.7 billion in Q3 2021.

At the same time, Munich Re booked man-made losses of €489 million in the period, compared with €245 million a year earlier.

Further, the company released reserves of €344 million for basic losses from prior years, corresponding to 4% of net earned premiums.

As a result of the losses, the P&C reinsurance business contributed a negative €343 million to the overall result in Q3, with a combined ratio of 108.2% for the quarter, and 96.9% for 9M 2022. However, premiums grew strongly in this operating segment, from almost €8 billion last year to €10.2 billion in Q3 2022.

In life and health (L&H) reinsurance, Munich Re has announced a substantial rise in profit to €424 million for the quarter, compared with €94 million a year earlier, while premium income spiked to €3.5 billion. Within L&H reinsurance, the technical result improved from just €9 million last year to €293 million in Q3 2022.

Also, losses related to the COVID-19 pandemic fell appreciably to €35 million for Q3 2022 and to €323 million for 9M 2022.

Combined, the reinsurance unit performance contributed €81 million to the overall result for the third quarter, and €1.2 billion for the first nine months of the year. Munich Re attributes the quarter-over-quarter decline to the cost of Hurricane Ian and also a lower investment result.

Within reinsurance, the operating result came in negative for the quarter at -€687 million, while gross written premiums jumped significantly, year-on-year, to €13.7 billion.

Turning to the ERGO business, and profit reached €446 million for the quarter and €702 million for 9M 2022, which is up significantly for both periods, driven by a one-off effect in the ERGO Life and Health Germany segment. In the third quarter, all segments continued to see premium growth, with total premium income rising to €4.7 billion in Q3, and gross written premiums rising to €4.5 billion.

All in all, Munich Re has announced an operating loss of €346 million for the third quarter, compared with a gain of €204 million a year earlier. The other non-operating result was also negative at -€5 million, while the currency result increased significantly to €846 million, in part as a result of exchange gains on account of the US dollar.

Across the group, gross written premiums increased substantially to more than €18.2 billion for the third quarter, and jumped by 14% to more than €50.9 billion in 9M 2022.

On the asset side of the balance sheet, Munich Re has reported that its investment result dropped from more than €2 billion in Q3 2021 to €904 million in Q3 2022. Overall, the third quarter investment result represented a return of 1.6% on the average market value of portfolio.

Looking ahead, Munich Re says that in light of the “very positive” business performance so far in 2022, it has raised its guidance for gross written premiums in reinsurance to €48 billion from the previous €45 billion, and in ERGO to €19 billion from the previous €18.5 billion. Across the group, the target has increased from €64 billion to €67 billion.

Additionally, the reinsurer is still targeting a consolidated result of €3.3 billion for the 2022 full year, but warns that this will be a lot harder to achieve given the claims experience and business environment. The firm anticipates a consolidated result of €2.5 billion in reinsurance for the year, which is down on the previous target of €2.7 billion. However, at ERGO, the company expects a consolidated result of €800 million for the year, which is up on the previous €600 million target.

In P&C reinsurance, Munich Re now expects to produce a combined ratio of roughly 97% of net earned premiums for the full-year, compared with a previous target of 94%.

In L&H reinsurance, the firm says that it now anticipates a much higher technical result of €800 million for 2022.

Chief Financial Officer (CFO), Christoph Jurecka, commented: “Financial solidity and professional expertise are of fundamental importance to our clients in times of crisis and guide Munich Re in its actions. Hurricane Ian matches the pattern science would expect of a warming world. Therefore the rising probability of such extreme storms is part and parcel of our models and must be reflected in pricing.

“The sustainable and reliable offering our clients expect of us is based on realistic analyses, not only of natural catastrophe risks, but also of cyber and pandemic risks. And although Hurricane Ian and the macroeconomic environment are making it significantly more challenging for us, we are firmly adhering to our annual guidance of €3.3bn. All fields of business are contributing to sustainably positive performance.”

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