Munich Re results plummet in 2017 but rate rise allows for growth at renewals
Munich Re’s reinsurance business dragged the company’s 2017 results due to high natural catastrophe levels but the resulting rate improvements allowed the company to grow the business in the January renewals.
The reinsurance business contributed €120 million to Munich Re’s consolidated result in 2017. This compares to €2.54 billion in the previous year. Due to high natural catastrophe losses the result in property/casualty (P&C) reinsurance fell to a loss of €476 million compared to a profit of €2.03 billion in 2016. The combined ratio for 2017 deteriorated to 114.1 percent of net earned premiums in 2017 from 95.7 percent in the previous year. In 2017 hurricanes Irma, Harvey and Maria in North America contributed to a record year for insured losses. Munich Re was able to release loss reserves of approximately €870 million for the 2017 full year.
Overall, Munich Re posted a profit of €392 million for 2017. In 2016 the group reported a consolidated result of €2.58 billion. Gross premiums written by the group increased slightly in 2017 to €49.12 billion compared to €48.85 billion in 2016.
“Thanks to our capital strength, we were able to well withstand the high losses from natural catastrophes,” said chief financial officer Jörg Schneider. “In 2018, we will be pressing ahead with the digital transformation of Munich Re, and also seizing opportunities for profitable growth in traditional business. Reinsurance prices improved slightly in large sections of the market at the January renewals – a trend likely to strengthen in coming renewal rounds,” Schneider noted.
Prices for the reinsurance treaties increased at the January 2018 renewals, particularly in the markets most affected by natural catastrophes, according to Munich Re. Other markets and branches were also freed from the pricing pressures of previous years, and price development was stable or even slightly positive. Despite the high losses from natural catastrophes in 2017, the availability of reinsurance capital remained high during the January renewals, so price increases were moderate overall, due also to the slight rise in market interest rates.
Nevertheless, Munich Re increased the volume of business written at 1 January by 19 percent to around €9.9 billion, due partly to new large - volume treaties in the USA and Australia. Prices increased by around 0.8 percent. Rates had fallen by 0.5 percent on average in all 2017 renewal rounds.
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