Munich Re reports Q3 combined ratio of 160.9%, predicts 112% for full year

Despite losing about 2.7 billion euros on three recent North Atlantic hurricanes alone, Munich Re said Thursday it is “expecting to generate a small profit” this year.

Munich Re released its financial results for the period ending Sept. 30, reporting a 1.4-billion euro loss in Q3 and a 146 million euro loss for the first nine months of the year. The euro opened Thursday at $1.48.

In reinsurance, Munich Re reported its combined ratio deteriorated 68.4 points, from 92.5% in Q3 2016 to 160.9% in the latest quarter.

Gross written premiums in property & casualty reinsurance rose 2.8%, from 4.616 billion euros in Q3 2016 to 4.743 billion euros in the latest quarter.

Company-wide, Munich Re reported gross written premiums of 12.279 billion euros in the latest quarter, of which 3.32 billion was in life and health reinsurance, 1.26 billion was in ERGO international, 2.43 billion was in ERGO life and health Germany and 722 million was from ERGO P&C Germany.

“As already reported on 26 October, major losses in the third quarter (after retrocession and before taxes) have had a negative impact of €3.2bn on the result,” Munich Re said.

Hurricanes Harvey, Irma and Maria made landfall Aug. 25 near Rockport, Tex., Sept. 10 at both the Florida Keys and near Tampa, and on Sept. 20 in Puerto Rico.

“Claims expenditure from these hurricanes after retrocessions and before tax is currently estimated very tentatively at a total of €2.7bn,” Munich Re stated.

Those three hurricanes “have significantly increased our forecast for the combined ratio in property-casualty reinsurance,” Munich Re added, noting the company now expects a full-year combined ratio of 112%.

Fitch Ratings Inc. said Sept. 26 it estimated catastrophe losses this year “will constitute a capital event for a number of (re)insurance companies” and not just an earnings event.

“After all the major natural catastrophes, we expect prices in the USA to increase for the renewals as at 1 January 2018,” Munich Re said Nov. 9.

Munich Re added it is “proceeding on the assumption of total insured market-wide losses in the range of US$100 billion from Hurricanes Harvey, Irma and Maria.

For the first nine months of the year, Munich Re reported a combined ratio of 117.3% in this year, compared to 93.7% in 2016.

The “claims burden from natural catastrophes” was 3.186 billion euros during the first nine months of 2017, compared to 470 million euros for the first nine months of 2016.  For the third quarter, the claims burden from natural catastrophes rose from 145 million euros in 2016 to 2.965 billion euros this year.

The claims burden from man-made losses was 200 million euros in the latest quarter, compared to 132 million euros in Q3 2016. For the first nine months of the year, the claims burden from man-made losses increased from 450 euros in 2016 to 635 million euros this year.

Munich re also made reserve releases of about 250 million euros in the most recent quarter, “which is equivalent to 6.0 percentage points of the combined ratio.”

Munich Re reported total gross written premiums of 37 billion euros in the first nine months of 2017, up 0.6% from 36.78 billion euros in the first nine months of 2016.

The consolidated result was a loss of 1.436 billion euros in the latest quarter compared to profit of 683 million euros in Q3 2016. For the first nine months of the year, Munich Re had a consolidated loss of 146 million euros this year, compared to a consolidated profit of 2.095 billion euros in the first nine months of 2016.

“Our capitalisation is strong, and we are able to take full advantage of opportunities arising from the likely market recovery,” Munich Re chief financial officer Joerg Schneider said in a release. “We expect prices to rise again in the forthcoming negotiations – particularly in the markets that have been hardest hit by recent natural catastrophes.”