The reinsurer generated a profit of  €1.4 billion in the first six months of the year

Munich Re generated a profit of €768m in the second quarter of 2022, and €1.4 billion in the first six months of the year. The operating result was €763m, compared with €1.6 billion for the same quarter last year.

Gross premiums written saw a rise year on year, by 8.3% to €16 billion in Q2, and by 12% to €33 billion in H1 – in both cases driven by strong organic growth, especially in property-casualty reinsurance. 

Joachim Wenning, chair of the board of management, commented: ”Munich Re has posted a solid quarterly result despite fierce headwinds from inflation, the cooling economy and the war in Ukraine. The profitability of our business is very good, and we again saw clear and profitable growth.

”Our clients are all the more appreciative of our strong balance sheet in these uncertain times. Now is the time to seize opportunities in markets that are continuing to harden. At the same time, we are systematically increasing the share of earnings generated by less-cyclical business.

”The rise in interest rates will give us tailwind in the long term by allowing us to benefit from higher running yields. Our annual target and our objectives for our ’Ambition 2025’ medium-term strategy are firmly in sight.” 

Volatile equity markets dent reinsurance result

The reinsurance segment contributed €1.12 billion (down from $1.4 billion a year ago) in the first half-year. The year-on-year decline was mainly due to the negative investment result.

Major losses of over €10m each totalled €575m (€432m) in Q2. These figures include gains and losses from the settlement of major losses from previous years.

Major-loss expenditure corresponded to 7.5% (6.8%) of net earned premiums, and was below the long-term average expected value of 13%, both for Q2 and for the half-year (8.3%).

Man-made major losses grew to €322m, including €200m of losses caused by Russia’s attack on Ukraine in the first half.

Major-loss expenditure from natural catastrophes increased slightly to €253m (€203m). The costliest natural catastrophe for Munich Re in Q2 was the drought in South America, with losses amounting to some €130m. 

Successful renewals

In the reinsurance renewals as at 1 July 2022, Munich Re exploited growth opportunities successfully and increased the volume of business written to €4.4bn (+6%). The primary focus of the renewals was business in North America, South America, Australia, and with global clients.

Prices for reinsurance cover rose considerably in some markets, including the US, Latin America and Australia. These increases were sufficient overall to offset elevated loss expectations owing to inflation or other developing trends.  

This figure is, as always, risk-adjusted. In other words, price increases are offset if they are associated with increased risk and, consequently, elevated loss expectations.

Particularly in light of higher inflation, Munich Re was deliberately cautious in calculating future loss expectations. Similarly, changes are offset by the composition of different classes of business in the portfolio so as to make valid comparisons possible.

For the next round of renewals in January, Munich Re expects that the market environment will remain favourable and should offer attractive business opportunities.

Annual target unchanged at €3.3bn

As a result of high impairment losses on equities and fixed-interest securities in the first six months of 2022, Munich Re now expects the investment result to represent a return of over 2% (previous forecast: over 2.5%).  

The other targets communicated for 2022 in Munich Re’s Group Annual Report 2021 remain unchanged. Munich Re is still aiming for a consolidated result of €3.3bn for the 2022 financial year.

The achievement of this result target is supported by a remaining major-loss budget in property-casualty reinsurance of around €2.7bn for the rest of the year.

All forecasts and targets face considerable uncertainty owing to fragile macroeconomic developments, volatile capital markets and the unclear future of the pandemic.

In particular, there continues to be considerable uncertainty regarding the financial impact of the Russian war of aggression in Ukraine, notes the reinsurer.

As always, the projections are subject to major losses being within normal bounds, and to the income statement not being impacted by severe fluctuations in the currency or capital markets, significant changes in the tax environment, or other one-off effects.