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MUNICH Re: EUR 733 million profit in Q2; 2017 profit guidance maintained at EUR 2 - 2.4 billion

MUNICH Re posted a consolidated profit for the first half-year of EUR 1,290 million entitling expectations for an annual result reaching the Group's 2017 profit guidance of EUR 2.0-2.4 billion.

Summary of figures for the second quarter:

- consolidated profit of EUR 733 million, supported by the high investment result and a below-average random incidence of major losses

- operating result of EUR 1,156 million, below the figure for the same quarter last year (EUR 1,463 million)

- Equity fell to EUR 30.1 billion as at 30 June 2017, due to dividend payments, share buy-backs and currency translation effects.

- Gross premiums written of EUR 11.8 billion, approximately at the same level as in the previous year (EUR 11.93 billion).

The annualized return on risk-adjusted capital (RORAC) in the first six months amounted to 9.7%, and the return on overall equity (RoE) totaled 8.2%. Since the Annual General Meeting at the end of April, shares with a volume of around EUR 220 million have been repurchased by the end of July as part of the share buy-back programme announced in March.

Reinsurance: Result of EUR 629 million in second quarter

The reinsurance field of business accounted for EUR 629 million of the Group consolidated result for Q2. For the period from January to June, reinsurance business contributed EUR 1,095 million to the consolidated result. The operating result for the second quarter was EUR 896 million.

The technical result in life/health reinsurance declined to EUR 77 million in Q2 in comparison with the very good previous quarters, mostly due to lower results in the USA and Asia. The below expectations Q2 results determined MUNICH Re to lower its estimate for the full year from EUR 450 million to EUR 400 million.

The result contribution of property-casualty business declined to EUR 517 million (778 million in Q2 2016). The combined ratio for April to June totaled 93.9% (99.8%) of net earned premiums; the figure for the half-year was 95.5% (94.3%). Thus MUNICH Re is well on track to meet the target of around 97% for the full year.

Overall loss expenditure for major losses totaled EUR 253 million (542m) in Q2, and EUR 656 million (643m) for the first six months of the year. In the second quarter, natural catastrophe losses amounted to EUR 66 million and man-made major losses to EUR 187 million. These figures are equivalent to 1.6% (nat cat) and 4.5% (man-made) of net earned premium respectively. The most expensive natural catastrophe in the second quarter was a severe thunderstorm in the USA at the beginning of May, for which MUNICH Re anticipates expenditure of around EUR 25m.

Reinsurance GWP decreased by 2.1% y-o-y Q2. In life/health reinsurance, GWP increased by 6.3% in Q2 to EUR 3,436 million, in particular due to several large-volume treaties concluded in Canada, Australia and Europe since the second half of 2016. Premium volume in property-casualty reinsurance fell overall by 8.0% to EUR 4,233 million.

The property-casualty renewals as at 1 July 2017 mainly concerned treaty business in the USA, Australia, Latin America and with Global Clients; the volume renewed was around EUR 2.2 billion. Prices were down again slightly by 0.4% in the July renewals (previous year's renewals as at 1 July 2016: -0.4%). MUNICH Re was able to take advantage of select opportunities in some markets, so that premium volume increased to around EUR 2.6 billion.

Outlook 2017: no change to profit guidance of EUR 2.0-2.4 billion for the Group

MUNICH Re expects to post gross premiums written of EUR 48-50 billion for 2017, and is not changing its forecast consolidated result in the range of EUR 2.0-2.4 billion.

Author: Daniela GHETU on 10.08.2017

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