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Munich Re surpasses profit targets in 2007


February 25, 2008   by Canadian Underwriter


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The Munich Re Group in 2007 achieved a profit of 3.9 billion [Cdn$5.76 billion], surpassing its projected target of between 3.5 billion and 3.8 billion [Cdn$5.17 billion and Cdn$5.61 billion], the company announced.
The reinsurer also noted a 20.2% return on risk-adjusted capital [RORAC], markedly exceeding its long-term target of 15%.
“We are well above our target with a RORAC of over 20%, and are reporting a record result for the fourth time in a row,” said Munich Re chairman of the board of management Nikolaus von Bomhard. “We have reaped the rewards of our rigorous approach in integrated risk management and our healthy skepticism towards what are often poorly rewarded credit risks.”
Munich Re announced its operating result in 2007 decreased to 5.1 billion (Cdn$7.54 billion), compared to 5.5 billion (Cdn$8.13 billion) over the previous year, “owing to the significant rise in natural catastrophe losses compared with the previous year.”
The company said its combined ratios (COR) “remained at a very good level,” namely 96.4% (92.6%) in reinsurance and 93.4% (90.8%) in primary insurance.
In its property and casualty and legal expenses segment, Munich Re noted its primary insurers produced a consolidated result in 2007 to the tune of 600 million (Cdn$886 million).
Reinsurance contributed 3.3 billion [Cdn$4.88 billion] to the group profit, surpassing the increased profit guidance of between 3-3.2 billion [Cdn$4.4-4.73 billion] announced in August.
In property-casualty reinsurance, Munich Re said it recorded large losses from natural catastrophes such as Winter Storm Kyrill (390 million, or Cdn$576.2 million), the Queen’s Birthday Storm in Australia (60 million, or Cdn$88.6 million), and the floods in the United Kingdom (totalling around 60 million, or Cdn$88.6 million).
“However, at five percentage points of net earned premiums, the overall cost burden from natural catastrophes was at the level budgeted for,” the company noted in a release. “Although the combined ratio consequently rose by 3.8 percentage points compared with the previous year, it was at 96.4% still within the target of 97%, providing renewed proof of the group’s business quality achieved through strict profit focus.”


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