Munich Re’s consolidated profit for 2015 Q1 down to 790 million euros

Munich Re has posted a consolidated profit of 790 million euros for the first quarter of 2015 – down 16% from 941 million euros in the same quarter of 2014 – but officials have voiced confidence that the company remains on track to achieve its annual target results.

The operating result was down as well, amounting to 995 million euros in 2015 Q1 compared to 1,327 million euros for 2014 Q1, notes a statement issued Thursday by Munich Re, which combines primary insurance and reinsurance under one roof and operates in all lines of insurance.

With regard to gross premiums written (GPW), however, these grew 0.9% to 13.0 billion euros in the first quarter of 2015 compared to 12.9 billion euros in the same quarter of 2014. “If exchange rates had remained the same, premium volume would have fallen by 5.4% year on year,” the statement notes.

The same sort of pattern was seen with the company’s reinsurance segment, which contributed 668 million euros to the consolidated profit, down from 768 million euros in the previous-year quarter. The operating result for reinsurance also fell by 258 million euros to 758 million euros in 2015 Q1.

That said, GPW climbed 2.2% to 7.0 billion euros from 6.9 billion euros, “mainly owing to the development of exchange rates,” the statement notes.

Related: Cyclone Pam displaces 3,300, kills 24 in Vanuatu: United Nations

Of the total consolidated result for the reinsurance segment, Munich Re reports that life reinsurance contributed 71 million euros in 2015 Q1 (compared to 122 million euros in 2014 Q1) and property-casualty reinsurance contributed 597 million euros (compared to 646 million euros). The combined ratio was 92.3% of net earned premiums in the first quarter of 2015, up from 86.9% in the same quarter in 2014.

Munich Re reports that for 2015 Q1, overall loss expenditure for major losses totalled -255 million euros. Natural catastrophe losses amounted to about -66 million euros (compared to -36 million euros in the first quarter of 2014) and man-made major losses were -189 million euros (compared to -3 million euros).

The company points out that Windstorm Niklas, which hit Europe in late March, caused heavy losses, for which Munich Re expects expenditure of -40 million euros in reinsurance, the statement notes. In addition, there was Cyclone Pam, which devastated the South Pacific island nation of Vanuatu in mid-March, and cost Munich Re -30 million euros, while the largest man-made individual loss for 2015 Q1 was -35 million euros for a refinery fire in the United States.

Related: Germany could account for 75% of as much as 1.5 billion euros in insured losses from Windstorm Niklas: RMS

For the full financial year, Munich Re continues to aim for a profit of 2.5 billion euros to 3 billion euros, “subject to large losses being within normal bounds and to its profits not being affected by severe movements in exchange rates or the capital markets, significant changes in fiscal parameters, or other exceptional factors,” the statement notes.

“We have started off well, although investment has again been made more difficult by the expansive policies of the central banks,” states Jörg Schneider, Munich Re’s chief financial officer. “We are well on track to achieve our result target,” Schneider reports in the statement.

Looking forward, Schneider points out that only a small part of the risk around the world is insured. “As a result, the strongly increasing capacity supply in the primary insurance and reinsurance sectors at present is matched by a demand potential in many classes of business that is not yet exhausted,” he explains.

Working with present and future clients and partners, Schneider says Munich Re aims “to tap this potential by focusing all of the Group’s extensive knowledge even more strongly on innovations.” [click image below to enlarge]

Compared to the end of 2014, the Group now anticipates that for 2015 its GPWs will be in the range of 49 billion euros to 51 billion euros; in the reinsurance field of business, GPWs are now expected to total about 28 billion euros; and for Munich Health, approximately 5.5 billion euros in GPWs are currently projected.

“In property-casualty reinsurance, Munich Re is now aiming for a combined ratio of only around 97% of net earned premiums for 2015; the improvement by one percentage point in comparison with the March forecast is due to the low incidence of major losses in the first quarter,” the statement adds.

Other Group results for the first quarter of 2015 include the following:

• the ERGO field of business generated a profit of 99 million euros (down from 153 million euros in 2014 Q1), the combined ratio in the property-casualty Germany segment worsened to 98.1% (compared to 95.4%), and total premium income increased 0.7% to 4,870 million euros (up from 4,838 million euros);

• the Munich Health field of business generated a profit of 23 million euros (up from 20 million euros), GPW decreased to 1,443 million euros (compared to 1,501 million euros), and the combined ratio totalled 100.4% (compared to 99.7%); and

• total investments (excluding insurance-related investments) had a carrying amount of 231.1 billion euros, up on the year-end 2014 figure of 218.9 billion euros.

“Despite broad diversification, we are feeling the effects of extremely low interest rates on our portfolio even more keenly, but we will not seek to make up for the shortfall by adopting a more risky investment strategy,” Schneider reports.

“Our good capital position allows us to continue making targeted use of opportunities for profitable growth in individual regions and lines of business. In the long term, above all, we want to grow profitably with innovative business,” he emphasized.