Munich Re profit up in second quarter

Munich Re has reported a consolidated profit of 769 million euros for the second quarter of the year, up from 542 million euros in the same period last year.

For the first six months of the year, the German company’s profits also rose over last year, from 1.51 billion euros to 1.69 billion euros.

Munich Re said that though its performance was strong, the second quarter of this year was “marked by a random incidence of above-average major losses totalling around 617 million euros.”

Munich Re’s CEO Nikolaus von Bomhard said in a statement Thursday that he is optimistic it will achieve its profit target of 3 billion euros for the financial year.

“We are choosing to forgo volume in those classes of business and regions where keen competition over prices, terms and conditions has had a particularly severe impact,” von Bomhard commented in the statement. “At the same time, we are expanding our business with customised solutions. Our shareholders can rest assured that we are managing their investment responsibly.”

Munich Re said that in this market phase it is benefiting from its broad diversification both in reinsurance and in the group as whole. “Our strategy remains geared to making profits through our underwriting business, not through risky investments,” von Bomhard noted.

Gross premiums written in the second quarter showed a decrease of 7.4% to 11.9 billion euros (from 12.8 billion euros in the prior year quarter). If exchange rates had remained the same, premium volume would have fallen by 4.1% year-over-year, Munich Re noted.

The operating result for the primary insurance segment from in Q2 was 245 million euros, up from 223 million euros in the same period of 2013. The consolidated result for the second quarter came to 104 million euros, compared with 149 million euros in Q2 of 2013.

For the first half of the year, primary insurance generated a result of 258 million euros (266 million euros in the first half of last year).

For its reinsurance business, the operating result for the second quarter was 846 million euros (423 million euros in Q2 of 2013). For the first half of the year, reinsurance contributed a result of 1.38 billion euros (1.2 billion euros last year).

The combined ratio in property and casualty reinsurance was 101.4% (99.3% in 2013) of net earned premiums for the second quarter, and 94.1% (92.4% in 2013) for the first half of the year.

“After a first quarter with low costs for major losses, the second quarter was marked by a high random incidence of man-made major losses,” Munich Re’s statement noted.

Altogether, expenditure for major losses totalled 617 million euros in the second quarter (605 million euros in Q2 of 2013), while expenditure for natural catastrophes totalled 291 million euros in the second quarter (314 million euros in Q2 of 2013).

Some of the major weather events included a severe snowstorm in Japan in February (losses from which weren’t accounted for until Q2), a powerful earthquake off the coast of Chile in April, and heavy rainfall causing extensive flooding in parts of Europe in May.

“Following the complex salvage operations, Munich Re now estimates its overall claims burden from the accident involving cruise ship Costa Concordia in 2012 to be around 120 million euros (previous estimate last year: 100 million euros),” it also noted.