Munich Re profits rises in Q1 but results ‘severely impacted’ by Ukraine war
Profits at global reinsurance giant Munich Re rose 3% in the first quarter of the year but were weighed down by weak investment results and “severely impacted” by the war in Ukraine. Although the claims are still trickling in, the company remains “resilient” and expects to turn a consolidated result of €3.3 billion for the 2022 financial year.
The German reinsurer generated a net profit of €608 million in Q1 2022, up from €589 million seen in the same period of 2021. The reinsurance field of business contributed €511 million to the consolidated result in Q1, supported by strong organic growth across all segments, especially in property/casualty reinsurance. P&C combined ratio improved to 91.3% from prior year's 98.9%.
The gross premiums written increased substantially by 15.7% year on year to €16.8 billion from prior year's €14.5 billion.
Munich Re posted expenditure related to the war in Ukraine of slightly over €100m in some specialty lines. Major losses of over €10 million each totalled €667 milion, lower than previous year's €892 million. This figure includes gains from the settlement of major losses from previous years of around €100 million.
Losses from natural catastrophes came to €481 million in Q1, including heavy rainfall in eastern Australia, resulting in losses of around €440m, and the winter storms in Europe, which produced losses of slightly below €120 million for Munich Re.
Munich Re’s investment result, however, decreased to €987 million in Q1 2022, compared with €1.69 billion in the same period a year ago. The net balance of write-ups and write-downs declined substantially to €1,122 million, mainly due to gross write-downs of almost €700 million (net: €370m) on Russian and Ukrainian bonds, which impacted the investment results of both reinsurance and ERGO.
The ERGO field of business posted a profit of €96 million, down from €178 million in Q1 2021. Gross premiums written increased slightly to €5.52 billion.
Despite the uncertainties of a challenging environment, Munich Re expects to see “advantageous business prospects” in reinsurance in 2022. The reinsurer is still aiming for a consolidated result of €3.3 billion for the 2022 financial year. Gross premium is now expected to increase to €64 billion, compared to the previous estimate of €42.5 billion.
The company’s chief financial officer Christoph Jurecka (pictured), said: “ Munich Re is helping to provide humanitarian aid for the people of Ukraine and fully supports the sanctions against Russia. The financial consequences of the war and the sanctions severely impacted our result in the first quarter: We made write-downs for impairment losses on Russian and Ukrainian bonds alike and recorded the first claims.
“Despite the uncertainties of a challenging environment, Munich Re maintains its annual guidance of €3.3bn based on a quarterly profit of more than €600m.”
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