Munich Re posts profit of 979 million euros for first quarter of 2013

Reinsurer Munich Re Group posted a consolidated result of €979 million in 2013 Q1, up from €782 million in 2012 Q1, in the wake of claims expenditures for major losses that were below the long-term average, the company reported Tuesday.

“There happened to be lower claims burdens from major losses, but the group’s operating earnings also proved to be robust. After this good start, we are optimistic of achieving our profit target for the year of close to €3 billion,” Jörg Schneider, chief financial officer of Munich Re, notes in a statement.

“Furthermore, we continue to see profitable growth opportunities, particularly in markets like Asia-Pacific, for which we are well-positioned,” Schneider says. At print time, one euro was equal to $1.32. 

At 95.9% of net earned premiums, Munich Re’s combined ratio for the first quarter of 2013 was slightly higher than the 95.3% in the same quarter of 2012. However, in international property/casualty insurance, the combined ratio improved to around 99.2% of net earned premiums compared to 101.3%.

With regard to primary insurance, the operating result for 2013 Q1 was €223 million, with a consolidated result of €127 million. This compares to €257 million and €145 million, respectively, for Q1 2012.

Munich Re characterizes reinsurance results from January to March 2013 as very good, with major losses well below expectations. The operating result amounted to €1,120 million in Q1 2013, compared to €906 million in Q1 2012, the company reports. The business field of reinsurance accounted for about €827 million of the group consolidated result, up from €634 million in the first quarter of 2012.

Premium income in the first three months of 2013 was up 1.8% over the same period last year, rising to €7.0 billion (compared to €6.8 billion). “If exchange rates had remained the same, premium volume for the first three months would have risen by 3.2% year on year,” the reinsurer notes.

Despite growth being curbed by foreign-exchange effects, premiums in property-casualty reinsurance rose by a total of 3.6% to approximately €4.4 billion in Q1 2013 compared to about €4.2 billion in Q1 2012.

“Premium income benefited particularly from price increases in the segments recently affected by major losses, including natural catastrophe covers and marine business. Also, rising premium volumes in U.S. agricultural insurance and at U.S. primary insurance subsidiaries American Modern and Hartford Steam Boiler Group contributed to the premium growth in the first quarter,” the statement adds.

The combined ratio in property-casualty reinsurance in Q1 2013 was 85.7% of net earned premiums, improving from 94.6% in Q1 2012. Natural catastrophe losses of approximately €24 million in the first quarter of 2013 (compared to €41 million in the same quarter of 2012) and man-made major losses of €81 million (compared to €223 million) represents just 0.6% and 2.0% of net earned premiums, respectively.

“Floods at the end of January in Queensland, Australia, and a satellite claim gave rise to losses in the mid double-digit million euro range for Munich Re in each case. As loss reserves remain significantly above the level of losses reported, there were moderate reserve releases of approximately €100 million.”

In the renewals at April 1, 2013, a premium volume of around €1.0 billion was up for renewal, with natural catastrophe business accounting for slightly more than 40% of this volume. “The volume of business diminished somewhat while the price level, which gives an indication of the potential profitability of the business, remained stable,” Munich Re reports.

Renewals at July 1 mainly involve treaty business in the U.S. market and in Australia, New Zealand and Latin America, with a premium volume of about €2.2 billion up for renewal. Around 30% will be accounted for by natural catastrophe covers, the statement adds. “Munich Re expects slight price erosion for such covers in the USA, due to growing capacity. Apart from this, Munich Re anticipates a stable price level.”

Munich Re’s outlook for 2013 – assuming exchange rates remain stable – is that the consolidated result in reinsurance should total between €2.3 billion and €2.5 billion; the consolidated result for the primary insurance segment is projected at €400 million to €500 million; gross premiums written will range from between €50 billion and €52 billion; gross premium income for the reinsurance segment is expected to be approximately €27 billion and slightly less than €17 billion for primary insurance; the combined ratio in property-casualty primary insurance should be approximately 95% of net earned premiums; and the target combined ratio for property-casualty reinsurance is about 94% of net earned premiums.

On the last point, notes the statement, “If the incidence of major losses remains within the expected range in the further course of the year, Munich Re would probably even better this target.”