Global reinsurance giant Munich Re is the latest to say it has taken advantage of market conditions during the first few months of this year, expanding its property & casualty reinsurance book significantly during the first-quarter and at the April renewal season.
Munich Re said that it expanded its property & casualty reinsurance book by almost 17% in Q1, underwriting EUR 5.317 billion of premiums, compared to EUR 4.558 billion in the prior year, as organic growth delivered a greatly enlarged portfolio of risk.
At the April 1st reinsurance renewals, when Japanese, international, some U.S. and European reinsurance business is renewed, Munich Re said that it underwrote 8.1% more premiums, taking its April premium volume to EUR 1.6 billion.
However, prices increases at April 1st were level with those the reinsurance firm experienced in January, at 0.8% across the underwritten portfolio.
Munich Re had previously said that it hoped 2018 would bring “intensifying rate rises” but the experience at April 1st would suggest that flatter increases are the most likely outcome.
Other reinsurers have also reported significant P&C reinsurance growth through the start of this year, Hannover Re reported strong growth as did Hiscox across its reinsurance business recently, following numerous others that have reported in recent weeks.
A decent proportion of the growth experienced has been in the United States property and catastrophe reinsurance market, as the loss affected accounts have provided the greatest rate increases and made them particularly attractive to the major reinsurers this year.
How the performance of the 2018 reinsurance portfolios underwritten by these groups will play out through 2018 should we experience another active hurricane season remains to be seen.
Munich Re had previously said that it expects it will be able to achieve sustained growth of its reinsurance business through 2018, thanks to the availability of higher rates.
So far the company has certainly achieved that, with the significant growth through Q1 and April driving a much enlarged book of reinsurance business for the company to earn premium profits through over the coming quarters.
This certainly positions the reinsurer for a more profitable year, helped greatly by the much improved first-quarter result announced today.
Munich Re reported first-quarter 2018 profits of EUR 827 million, up almost 50% from the EUR 557 million reported for Q1 2017, as our sister site Reinsurance News reported earlier today.
Reinsurance drove most of the profit, as you’d expect, with Munich Re reporting a 61% rise to EUR 750 million of profit, up from EUR 466m million in the prior year.
P&C reinsurance was the major contributor, adding EUR 590 million of this profit, a 74% increase from the prior year period.
The bumper P&C reinsurance result was driven by lower losses during the first-quarter period, with a combined ratio of 88.6% reported, much better than the prior years 97.1%.
Thanks to the strong start to the year Munich Re is now reporting that it expects its combined ratio for the full-year to come in two percentage points better than anticipated at 97%.
At April 1st, Munich Re noted a continuation of the trends witnessed in January, with “prices increasing in the markets affected by natural catastrophes” but more broadly “remaining stable given the still-high capacity levels in the markets.”
But, despite the better market conditions, much larger portfolios underwritten, price increases achieved and expectation of a lower combined ratio across the business, Munich Re is not increasing its profit target for the year, sticking with the previously announced EUR 2.1 billion to EUR 2.5 billion.
You would imagine that Munich Re is hoping to get towards the upper-end of that profit target range, as long as major loss experience remains within expected bounds.
A much larger book underwritten at better pricing and with a 2% lower combined ratio should see the reinsurer on track for solid profits. But, with the property reinsurance portfolio increased in the U.S., any repeat of major industry losses in 2018 could dent the results considerably, for Munich and other reinsurers that have aimed for growth in loss affected areas of the United States.
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