Hurricane Ian caused high claims payments for the reinsurer.
(Photo: AP)
Munich, Frankfurt Despite billions in damage from natural disasters this year, the Dax group Munich Re has so far earned more than its two direct competitors Swiss Re and Hannover Re. The Munich-based company made a profit of over 1.9 billion euros by September, as the world’s largest reinsurer announced on Tuesday.
For comparison: Hannover Re reported a profit of 871 million euros for this period, Swiss Re even recorded a loss of 285 million dollars.
In particular, Hurricane Ian, which wreaked havoc in Florida and neighboring states in the USA in September, drove up reinsurers’ loss amounts. With 1.6 billion euros, Munich Re was the most heavily burdened in the industry. Swiss Re reported losses of 1.3 billion dollars, while Hannover Re was relatively unaffected with losses of 276 million euros.
>> Read here: Hurricane “Ian” hits Hannover Re less severely than the competition
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The fact that the Munich-based company made a profit in the third quarter despite the high claims was due to high customer demand for insurance products in all business areas. This drove premium income up significantly. In the first nine months, Munich Re recorded payments of 50.9 billion euros, an increase of 14 percent compared to the same period last year.
Primary insurance subsidiary Ergo delivers good results
In the spring, the insurer had already raised its forecast for premium income this year to 64 billion euros. The group has now increased the target further to 67 billion euros.
A positive factor this time was a one-off effect in the life and health insurance segment of the Düsseldorf primary insurance subsidiary Ergo. Here, currency effects and updated assumptions on the appropriation of profits under the IFRS accounting rules led to a significant increase in the profit contribution from EUR 80 million in the third quarter of 2021 to EUR 344 million.
Operationally, too, business at Ergo continues to go well. Overall, the Dusseldorf earned 446 million euros in the third quarter after 134 million euros in the same period last year. For the year as a whole, the insurer is now expected to contribute a higher proportion of the group profit than previously planned – namely 800 million euros instead of the previous 600 million euros.
Full-year earnings guidance remains stable
Overall, the Dax group is sticking to its profit target of 3.3 billion euros this year. For this to happen, however, the company needs a strong profit boost in the final quarter. The insurer had already announced in October that an expected special effect in the area of capital investments would be required in order to achieve the annual target. The interest rate turnaround should benefit the group. CEO Joachim Wenning already referred to their positive effects in the summer.
The first consequences are already visible. The reinvestment of expiring securities, which has always been a problem in recent years due to the persistent zero interest rate policy, rose significantly to three percent.
In the third quarter, however, the investment result fell to 904 million euros after 2.1 billion euros in the same period of the previous year. One reason was write-downs on shares in the course of falling stock markets. The current yield was 2.8 percent. In the summer, the group had reduced its return expectations for its own investments from 2.5 percent to “more than 2.0 percent”.
The world’s largest reinsurer still has potential for improvement in terms of return on capital employed (ROE). In the third quarter, it was at least 8.5 percent, after 6.3 percent in the same period last year. The in-house strategy plan “Ambition 2025”, which was presented almost two years ago, sets an annual return target of twelve to 14 percent by the year 2025.
More: Munich Re sticks to forecast despite hurricane damage