02 February 2010
Published in: Corporate strategy, Insurance risk, Investment risk
Munich Re posts increased profits
Munich Re increased its preliminary consolidated profit to €2.56bn in 2009 from €1.58bn in 2008.
The profit for the fourth quarter totalled €0.78bn (€0.11bn). Subject to approval by the supervisory board and the AGM, the dividend will rise by 4.5% to €5.75 (€5.50) per share.
Said CFO Joerg Schneider. "Despite the challenges posed by the market environment in 2009, we were even able to slightly exceed our ambitious return target of 15% on risk-adjusted capital after tax."
Gross premiums written by the group in the financial year 2009 rose strongly by slightly less than 10% to €41.4bn (€37.8bn).
The combined ratio in reinsurance was 95.3% (99.4%) for January to December, and 92.5% (97.6%) for the fourth quarter.
The reinsurance business profited from exceptionally low claims costs for natural catastrophes (only 1.4% of net earned premiums).
In primary insurance, the 2009 combined ratio for the property-casualty segment (including legal expenses insurance) amounted to 93.1% (90.9%). Its level in the fourth quarter was particularly good at 90.0% (93.8%).
Shareholders' equity rose by slightly less than €1.2bn in 2009.
The group's investment performance rose by over 33% to almost €7.9bn (€5.9bn), benefiting from a significant reduction of over €4.7bn to just under €2.5bn in write-downs. Net gains on the disposal of investments were still high at €1.6bn (€2.2bn).
Munich Re noted that the market environment for the turn-of-the-year renewals was more difficult than in the previous year. "Generally, prices showed a slight downward trend" because of "the stagnation in demand for insurance and reinsurance cover as a consequence of the difficult economic environment."
Torsten Jeworrek, Munich Re's Reinsurance CEO commented: "The renewals involved some tough negotiating. For us, there is no alternative to risk-adequate prices if we want to keep our business sustainable." Treaties that showed no sign of being profitable were consistently terminated, according to Munich Re.
At 1 January 2010 Munich Re had reinsurance treaties with a premium volume of approximately €7.9bn up for renewal in the property-casualty segment. This represents around two-thirds of Munich Re's global property-casualty reinsurance business.
Of this, treaties with a volume of around €6.8bn (85.4%) were renewed and 14.6% (around €1.2bn) were terminated. The terminated business was partly compensated for by new business with a volume of approximately €0.7bn.
Altogether, compared with last year, the volume of business renewed fell by 6.7% (around €530m) to approximately €7.4bn. The price level and thus the profitability of the renewed portfolio remained "pleasingly stable", noted Munich Re. This was because Munich Re "resolutely adhered to its profit-oriented underwriting policy and was prepared to forgo business if necessary."
The composition of the portfolio written as at 1 January was virtually unchanged, with property business making up 45%, casualty 34%, marine 11%, credit 7% and aviation 3%.
Munich Re noted that, although the traditional renewal date for non-life business in most countries is 1 January, for reinsurance treaties in Japan and Korea - and in some cases in the USA - it is 1 April. The main renewal date in the US (especially for natural catastrophe covers), and also in Latin America and Australia, is 1 July.