Munich Re posts EUR 589m of profit, despite EUR 892m of major losses

Global reinsurance giant Munich Re has reported a solid quarter of earnings for Q1 2021, as it delivered EUR 589 million of profit, despite the impact of major losses and catastrophes, the largest of which was the US winter storms and freezing weather.

Munich Re reported above-average loss expenditure, largely due to the US freeze that particularly affected Texas.

The company has also reported another roughly EUR 167 million of losses related to the COVID-19 pandemic that fell to its reinsurance book.

Meanwhile, the April reinsurance renewals will help to drive further solid profits for Munich Re, as the company reported 17.1% of premium growth, alongside 2.4% higher prices.

Christoph Jurecka, CFO, commented on the results, “The pandemic has been testing our solidarity and self-discipline every day. The only way to really improve the situation, however, is a more rapid pace of COVID-19 vaccinations. We will do our part at seven Munich Re and ERGO locations in Germany as soon as our company medical staff is permitted to administer vaccinations. In business terms, we expect that the impact of the pandemic in 2021 will be limited for Munich Re.

“On top of the anticipated COVID-19 losses, there was an unusual cold snap in the United States early this year. We are nevertheless on track to meet our annual target of €2.8bn thanks to robust operating earnings. The April renewals confirmed that the market environment in reinsurance continues to be favourable, and ERGO’s strong results help boost the Group’s profit.”

The EUR 589 million of Q1 profit was well up on the EUR 221 million reported for the prior year, as COVID effects dented 2020’s earnings.

The reinsurance business contributed EUR 410 million of the profit, with property and casualty reinsurance EUR 358 million of the total.

Natural catastrophe losses during Q1 amounted to EUR 646 million, well up on Q1 2020’s EUR 208 million and above-average for the quarter.

The key driver of this was winter storm Uri and the Texas freeze, which contributed EUR 450 million of the losses.

While Munich Re tapped into growth opportunities during the April reinsurance renewals, the company also said it continues to prune its book, discontinuing unprofitable business at the same time.

Explaining reinsurance pricing, the company said, “Prices were up overall in the sectional markets, with increases varying in connection with the specific claims experience and situation in each individual market. Prices for reinsurance cover rose considerably in some places, including Japan. By contrast, prices rose only slightly in regions and classes of business with low claims experience, such as Europe. All in all, prices for the Munich Re portfolio increased by 2.4%.”

Looking ahead, Munich Re believes that reinsurance market conditions will persist, saying, “Munich Re anticipates that the market environment will improve year on year in the next renewal round in July, as was the case with previous renewals.”

Because of positive reinsurance market conditions, Munich Re has increased its target for reinsurance premiums from €37 billion to €39 billion for the year.