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Munich Re
9 November 2016 Insurance

Munich Re anticipates higher FY profits but admits Trump adds uncertainty

Munich Re expects to achieve a significantly higher profit for the full year of 2016, but has admitted that uncertainty driven by the US election result and growing protectionist tendencies globally may impact the future performance of its business.

The world’s largest reinsurer posted a consolidated profit of €2.10 billion for the first nine months of 2016, down from €2.39 billion in the same period of 2015. However, Munich Re expects its profit for the 2016 full year to significantly exceed the previously projected amount of €2.3 billion.

In a November 9 media call, Munich Re CFO Jörg Schneider declined to give an estimate for the fourth quarter. Schneider said that currency and market volatility, claims developments, the still ongoing hurricane season and potential earthquakes make any predictions impossible.

Munich Re expects Hurricane Matthew, which hit North America at the beginning of October, to impact its fourth quarter results with a low three-digit million sum. It will take up a major share of the large losses’ budget for the period, Schneider said.

In the recent past, reinsurers like Munich Re have been benefitting from below average claims stemming from natural catastrophes.

In property/casualty reinsurance, Munich Re’s major loss ratio ended “clearly below" an expectation of 12 percent in the first nine months of the year. Even so, the net result of reinsurance in property/casualty improved only slightly in the first nine months to €1.76 billion compared to €1.72 billion in the same period of 2015.

The technical results of the segment deteriorated to €1.64 billion from €1.87 billion. Prices in property/casualty are under pressure due to overcapacity in the market.

Uncertainty created by the outcome of the US election may impact Munich Re’s business going forward. “We don’t like uncertainty. This is something the world does not need, and this is something which makes us sceptical on this day,” Schneider said.

Republican candidate Donald Trump came out winner in the US presidential election, driven by deep anti-establishment anger among American voters and creating political uncertainty for the rest of the world.

The US is the most important market for Munich Re with around €10 billion in premiums, Schneider said. It is by far the largest insurance market in the world and a trendsetter for innovation, Schneider added.

The election result may delay an expected interest rate increase in the US, which wouldn’t be good for Munich Re, Schneider said.

“We hope that an economically strong nation with a strong democratic and republican tradition like the US will be able to deal with such uncertainty through its institutions,” Schneider said.

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