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8 May 2012 | Group
In the first quarter of 2012, Munich Re achieved a consolidated profit of €782m (same period last year: -€948m). Underwriting business performed well in the first quarter and the investment result showed a marked improvement. For 2012 as a whole, Munich Re is continuing to aim for a profit of around €2.5bn.
CFO Jörg Schneider summed up the business
performance for first three months: "A good start to 2012. With few
major losses and more favourably disposed capital markets, we have
posted a healthy profit." Key features in the result of
€782m are much lower claims costs from
natural catastrophes and higher investment income than in the same
quarter last year.
With regard to Munich Re's expected business performance for
2012 as whole, Schneider emphasised: "Despite the still difficult
economic situation, we are optimistic for 2012 and are aiming for a
profit for the year of around €2.5bn."
Summary of the figures for the first three
From January to March, the Group recorded an operating result of €1,202m ( 1,384m). Compared with year-end 2011, equity rose by 4.8% to €24.4bn. The annualised return on risk-adjusted capital (RORAC) amounted to 12.8% and the return on equity (RoE) to 13.1%. Gross premiums written increased by 2.2% to €13.3bn (13.0bn). If exchange rates had remained the same, premium volume would have increased by 0.3% compared with the same period last year.
As part of its active capital management, Munich Re issued two
new subordinated bonds on 29 March with volumes of
€900m and £450m.
With a term of 30 years, the bonds are first callable on 26 May
2022. Up to then, they have a coupon rate of 6.25% and 6.625% p.a.
respectively. The bonds are designed to be compliant with the
existing (Solvency I) and anticipated future (Solvency II)
supervisory regime, and to meet current rating agency
In the first quarter of 2012, Munich Re modified its segment
reporting with the aim of providing for even greater transparency.
The segments are now presented after elimination of intra-Group
transactions across segments. The previous year's figures have been
Primary insurance: Result situation improved at
In the primary insurance segment, the operating result totalled €257m (167m) for the first three months of the year, while the consolidated result climbed to €145m (53m). The ERGO Insurance Group, in which Munich Re concentrates its primary insurance business, showed a profit significantly above the previous year's level: €97m (15m). The difference between this result and the figure for the primary insurance segment is mainly attributable to interest expenses for intra-Group financing and to reinsurance deposits which are shown in the ERGO subgroup's figures but eliminated at Group level.
Overall premium income across all lines of business decreased by
0.5% to €5,016m (5,040m). Gross premiums
written also remained virtually stable in the first quarter at
The combined ratio for the property-casualty segment (including
legal protection insurance) amounted to 95.3% (96.9%). A slightly
higher combined ratio of 91.3% (88.4%) in Germany contrasted with a
reduction to 101.3% (109.2%) in international business.
ERGO CEO Torsten Oletzky commented: "We can be satisfied with
the result for the first quarter. Particularly pleasing is the
development of the combined ratio in international business. The
turnaround in international business is gathering momentum."
Reinsurance: Quarterly result of
Whereas in the first quarter last year reinsurance business had been affected by extremely heavy burdens from major losses, claims costs in the first quarter of 2012 were substantially lower. The operating result amounted to €906m ( 1,590m). Altogether, the reinsurance segment accounted for around €634m (1,010m) of the Group consolidated result.
Munich Re posted premium income of
€6,844m (6,727m) in reinsurance, an increase
of 1.7% compared with the same period last year. Whilst gross
premiums written rose by 9.9% to €2,599m
(2,364m) in the life reinsurance segment, they fell by 2.7% to
€4,245m (4,363m) in property-casualty
insurance. This decrease was attributable to a technical adjustment
in posting logic for gross premiums written. The effect, which
amounts to approximately €300m, will be
balanced out over the following quarters of 2012.
In the property-casualty segment, the development of major
losses in the first quarter can be described as moderate, with
total expenditure amounting to €264m after
retrocession and before tax. The combined ratio was 94.6% of net
earned premiums (first quarter last year: 161.3% after risk
transfer). Around two percentage points of this was attributable to
major losses from the years before 2012.
With a volume of approximately €1.2bn,
the renewals at 1 April 2012 in Japan, Korea and the USA, as well
as with some global clients, involved around 10% of the total
business in property-casualty reinsurance. Altogether, Munich Re's
premium volume in these renewals decreased to
€1,118m or by 2.9% (around
€30m) compared with the previous year.
Rates, i.e. the price level, rose by 5% year on year. Torsten
Jeworrek, Munich Re's Reinsurance CEO: "We did reduce proportional
earthquake covers in Japan in cases where we found the conditions
inadequate. But generally we were able to achieve distinctly
improved prices and substantially better conditions in Japan."
In the renewals at 1 July 2012 (mainly for parts of the US
market, and in Australia and Latin America), Munich Re also expects
rising prices in loss-affected segments, especially for natural
Munich Health: Result of
In the first quarter, Munich Health posted an operating result of €32m (37m) and contributed €5m (17m) to the Group's overall result.
Gross premium income grew appreciably to
€1,680m (1,487m) in the first quarter, or by
13.0% compared with the same period last year. International health
primary insurance business showed a strong increase of 16% to
€587m (506m), with premium growth
particularly in the UK and the USA. The growth in reinsurance
premium income to €1,093m (981m) is due to
large treaties concluded by clients for capital relief.
The combined ratio for the period from January to March 2012
improved to 99.5% (99.9%).
Investments: Investment result rises to
At €205.4bn (211.8bn at market values), total investments at 31 March 2012 increased by €3.7bn or 1.9% compared with year-end 2011.
For the period January to March 2012, the Group's investment
result showed a year-on-year improvement of 14.7% to
€2.2bn (2.0bn). Annualised, the result
represents a return of 4.3% in relation to the average market value
of the portfolio. Fixed-interest securities, loans and short-term
fixed-interest investments continued to form the greater part of
Munich Re's investments, and totalled
equivalent to 86.6% of the Group's total investments at market
value. Equities make up 3.1% (31 December 2011: 3.2%) and real
estate 2.5% (31 December 2011: 2.6%).
At €1.9bn in the first quarter of 2012,
regular income remained almost unchanged against the same quarter
of the previous year; following portfolio growth, the running yield
sank from 3.9% to 3.6%. The overall balance of write-ups and
write-downs plus net gains on disposals amounted to
€193m (263m) for the first quarter. The
Greek debt restructuring and bond exchange led to relatively low
additional expenses of €9.0m. On balance,
the more favourable, less volatile capital markets meant that
write-downs were restricted chiefly to derivative financial
instruments used by the Group to hedge against falling interest
rates, inflation and declines in share prices. Net gains on the
disposal of investments were high at €372m
(400m). A large portion of these came from realised gains on the
restructuring of fixed-interest investments and derivatives.
CFO Jörg Schneider was satisfied with the
investment result: "Our prudent and balanced investment policy
continues to pay off. We have posted a strong return of 4.3%, and
are well equipped to cope with all likely capital market
The Group's asset manager is MEAG which in addition to Group
investments had segregated and retail funds totalling
€10.6bn (10.4bn) under management as at 31
Outlook for 2012: Profit guidance of around
€2.5bn continues to stand
The outlook has altered somewhat owing to the changes in segment reporting. Based on exchange rates remaining stable, the Group now anticipates that for the financial year 2012 its gross premiums written will range between €49bn and €51bn. Gross premium income of between €26bn and €27bn is expected in the reinsurance segment, and a figure of between €17bn and €18bn for primary insurance. Total premium income in primary insurance (including the savings premiums of unit-linked life insurance and capitalisation products) should be slightly under €19bn. Gross premiums written of around €6.5bn are expected for Munich Health.
For property-casualty reinsurance, Munich
Re’s target is a combined ratio of around
96% of net earned premiums over the market cycle as a whole. In
property-casualty primary insurance, the target remains a combined
ratio of under 95%.
Munich Re still does not anticipate any rapid or significant
rise in capital market interest rates in 2012, so there is no
change in its forecast that regular income from investments will
fall. The investment return is likely to be approx. 3.5%.
The consolidated result in reinsurance should now total between
€1.9bn and €2.1bn in
2012. For the primary insurance segment, Munich Re is targeting a
consolidated result of around €450m, and
expects around €400m for the ERGO Group.
Munich Re's projection for the consolidated result of the Munich
Health business field lies at around
Given average claims experience and in expectation of a rising price trend overall in reinsurance, Munich Re anticipates a significantly improved underwriting result for 2012. CFO Schneider: "We are still aiming at a consolidated result in the region of €2.5bn." This is subject to claims experience with regard to major losses and the impact of severe currency or capital market developments.
Note for the editorial staff:
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Tel.: +1 (609) 243-4622
Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. Munich Re creates value for clients, shareholders and staff alike. In the financial year 2011, the Group – which pursues an integrated business model consisting of insurance and reinsurance – achieved a profit of €0.71bn on premium income of around €50bn. It operates in all lines of insurance, with around 47,000 employees throughout the world. With premium income of around €27bn from reinsurance alone, it is one of the world's leading reinsurers. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. Its primary insurance operations are concentrated mainly in the ERGO Insurance Group, one of the major insurance groups in Germany and Europe. ERGO is represented in over 30 countries worldwide and offers a comprehensive range of insurances, provision products and services. In 2011, ERGO posted premium income of €20bn. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand. Munich Re's global investments amounting to €202bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group.
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.
Munich, 8 May 2012
Aktiengesellschaft in München
This publication is available exclusively to Munich Re clients. Please contact your Client Manager.