In a statement the company said a combination of the factors had all influenced Munich Re’s nine-month result. The Group posted a profit of €80m (same period last year: €1,955m) despite absorbing the claims burdens of €3.6bn from the major natural catastrophes at the start of the year.
In the third quarter, Munich Re posted a profit of €290m (761m). The firm said it continues to anticipate a positive annual result for 2011 as a whole and aims to keep the dividend stable.
The Group increased its premium volume significantly; in the first nine months, gross premiums written were up 9.1% against the previous year. In reinsurance business, the exceptional claims costs for major losses masked a strong performance in basic business: whilst loss burdens from natural catastrophes were roughly €2.7bn above the normalised expected value, the underwriting result declined by only some €1.8bn.
CFO Jörg Schneider expressed great satisfaction with the Group’s development given the difficult conditions:
“Although our result was certainly affected by the capital-market and currency turbulence, our financial position has once again proved comparatively resilient. The low combined ratio in reinsurance in the third quarter and the satisfactory underwriting results in insurance and reinsurance are indicators that our core business is doing well.”
Greek economy impacts lead to €933m write-down
In addition to heavy burdens from natural catastrophes, continuing uncertainty on the capital markets has also been a marked feature of the year to date for Munich Re. The sharp decline in the price of Greek government bonds led to write-down expenses of €933m and a negative impact of €170m net on the consolidated result, €45m of which related to the third quarter. Negative currency translation effects burdened the result by €145m for the first three quarters and by €342m for the third quarter.
In view of the planned participation of private creditors in a rescue package for Greece, Munich Re has written down the value of its total portfolio of Greek government bonds across all maturities by €933m to the market value as at 30 September 2011; €230m of that figure is attributable to the third quarter.
Munich Re has recently reduced its bonds from peripheral European states, instead purchasing bonds of financially strong states and corporates, while increasing its investments in dynamically developing states to further spread its risks. “With our broad diversification, we are well-positioned for different scenarios and thus less susceptible to fluctuations in individual markets”, Schneider emphasised.
Schneider was also optimistic with regard to the overall result for the year:
“We still envisage a positive consolidated result for 2011 as a whole. Munich Re will not be making a more concrete profit forecast than this because the final amount will be influenced considerably up to the last day of the year by the incidence of major losses and the volatility of the capital markets and exchange rates.”
Gross premiums written across all lines increased by 0.6% to €13.2bn (13.1bn) from January to September, with €4.3bn (4.3bn) from July to September. Growth came mainly from property-casualty insurance and German health insurance.
Reinsurance: Profit of €108m in the first three quarters despite large claims burdens
The result from reinsurance business in the first nine months of 2011 was impacted by heavy claims burdens from major losses and the difficult environment on the financial markets. The operating result fell to –€43m (2,512m), of which €636m derived from the third quarter. Reinsurance contributed €108m (1,659m) to the Group’s overall result, €240m (602m) of this in the third quarter.
Losses from natural catastrophes treble against same period last year
Altogether, losses from natural catastrophes totalled €3,589m (1,134m) from January to September and €231m (245m) in the period from July to September.
The earthquake that struck Japan on 11 March and subsequent tsunami still constitute the largest loss event to date, causing insured market losses of around €21bn and costing Munich Re around €1.5bn net before tax. The largest loss event in the third quarter was Hurricane Irene. Based on Munich Re’s preliminary estimates, Irene caused insured losses in the order of US$ 7bn in the Caribbean and the United States. Munich Re estimates the pre-tax net burden for the Group to be €195m.
The two earthquakes in the region of Christchurch, New Zealand, impacted Munich Re with around €1.1bn net before tax. According to current estimates, the consequences of the January floods in Brisbane, Australia, will cost Munich Re around €200m. In Copenhagen, intense rainfall on 2 July 2011 led to flooding, with a pre-tax net burden of around €50m for Munich Re.