Muteki loss helps to offset Munich Re’s write down on Greek government bonds

by Artemis on November 8, 2011

Global reinsurer Munich Re have announced their third-quarter 2011 results this morning. They turned a profit of €290m during the third-quarter which has helped them to bring their nine month results into the black after the disastrous start to 2011. For the year to date, Munich Re are now in profit by €80m and they expect that number to climb by the end of the year, pretty amazing given their natural catastrophe claims burden of €3.6 billion from the start of the year.

As well as the burden of natural catastrophe losses, Munich Re have also experienced significant losses due to the write-downs on Greek government bonds which they owned. The Eurozone financial crisis has affected most companies operating within Europe to some degree, but for Munich Re it was always going to be a big hit given the size of their operations.

Munich Re has seen write-down expenses of €933m from the decline in the price of Greek government bonds which equalled a negative impact of €170m net on their nine month result, €45m on the third-quarter. Currency losses further burdened the results for Munich Re.

Those losses due to the Eurozone financial and debt crisis have been offset this year thanks to a write-up due to the total loss of the Muteki catastrophe bond which was triggered by the earthquake in Japan. Munich Re report that of their write-ups “approximately €211m were attributable to earnings from the transfer of Japan earthquake insurance risks to the capital markets.” So the loss of Muteki has helped to offset some of Munich Re’s unforecasted losses this year, just what cat bonds were designed to do.

Read Munich Re’s third-quarter results press release.

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