Munich Re grows at higher prices, but EUR267m Jebi creep dents profits

Reinsurance firm Munich Re has continued to grow through the first-quarter of the year and into the April renewals, taking advantage of higher pricing, but in reporting its results today revealed loss creep from Jebi and higher claims, which have served to dent profits.

Munich Re has again confirmed the impacts of typhoon Jebi loss creep on the reinsurance market, having revealed that it has had to harden its Jebi reserves to the tune of EUR 267 million in Q1 2019.

That’s around a 60% increase to the EUR 440 million typhoon Jebi loss that Munich Re had revealed at the end of Q3 2018, a few months after the typhoon loss occurred.

This again underscores the fact that practically everyone missed the typhoon Jebi loss creep, across traditional reinsurance and insurance-linked securities (ILS) funds.

Munich Re reported today a profit of EUR 633 million (down from EUR 827m) for the first-quarter of 2019, with the decline a clear function of the impact of this typhoon Jebi loss creep.

Also impacting the reinsurer were higher claims in the current quarter compared to the prior year, which was relatively loss free, with the impact being a combined ratio of 97.9% in property and casualty reinsurance (up from 88.6% in the prior year).

The reinsurance operating result declined significantly to EUR 633 million (down from EUR 1.059bn), as the Jebi loss creep and other claims dented the performance of this part of the Munich Re group.

Including the Jebi creep and also any reserve releases that took off around EUR 200 million, Munich Re reported major losses totalled EUR 479 million for the firm in Q1, of which natural catastrophes were EUR 195 million and man-made losses EUR 283 million.

Growth continued, with gross premiums written rising 2.4% to EUR 8.38 billion for Q1 in reinsurance, while at the April renewals Munich Re added 10.3% of premium growth at 1.4% better pricing.

The company said that, “1 April 2019 saw price increases in the markets and risks affected by natural catastrophes. Price stabilisation with a slightly upward trend was also observed in the third-party liability markets.”

India and Japan accounted for a third of the renewal book at April 1st, suggesting Munich Re has increased its exposure in Japan again, after a period where it had shrunk slightly.

Despite the slightly higher than expected claims experience and the impacts from typhoon Jebi, the company believes it is still on track for the full-year.

Christoph Jurecka, Chief Financial Officer, commented on the results, “Munich Re has begun 2019 with a good first quarter. Munich Re continues to grow organically in its core business of property-casualty reinsurance. The April renewals were the sixth consecutive round of renewals in which we are able to expand our business robustly in some areas. Prices for reinsurance coverage have continued to rise following the high losses in previous years. In primary insurance, the implementation of the ERGO Strategy Programme is making good progress.”

Munich Re’s expectations for 2019 remain unchanged, the company said, expecting to achieve a consolidated result of around EUR 2.5 billion for the year across the group, with a 98% P&C reinsurance combined ratio.

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