Profits and GWP drop as Munich Re maintains discipline
Profits and gross written premiums (GWP) dropped at Munich Re in 2014 as the world’s biggest reinsurer battles to maintain its underwriting discipline in increasingly challenging market conditions.
The company posted a net profit of €3.17 billion in 2014, a small drop on the €3.33 billion it posted in 2013. Its gross written premiums also fell slightly to €48.8 billion compared with €51.1 billion in 2013.
The group’s operating result last year was €4 billion compared with €4.4 billion a year earlier. It said that currency translation effects were again negative, amounting to –€0.1 billion. Mainly as a consequence of a recalculation of taxes for prior years, in 2014 there was a net inflow from income taxes of €0.3 billion (previous year: expense of –€0.1 billion).
Changes in the value of derivative financial instruments, and goodwill impairments owing to a resegmentation of the ERGO field of business also had an adverse impact.
Shareholders' equity rose by €4.1 billion in 2014 to €30.3 billion (December 31, 2013: €26.2 billion).
The reinsurance business contributed €2.9 billion to the net profit while GWP in this segment decreased to €26.8 billion compared with €27.8 billion a year earlier. Property/casualty reinsurance accounted for €2.5 billion of the result for the full year. The combined ratio for 2014 was 92.7 percent compared with 92.1 percent a year earlier.
Torsten Jeworrek, Munich Re’s reinsurance CEO, said: "We continue to focus on our profit-oriented underwriting policy and offer our clients individual solutions. And we benefit from our diversification into primary-insurance-based and specialised market segments."
The company also gave its expectations for the year 2015.
It said it anticipates gross premiums written will be in the range of €47–49 billion, with €26–27 billion generated by reinsurance, €16–16.5 billion from insurance arm ERGO and slightly over €5 billion generated by Munich Health.
Munich Re expects a total investment result of at least €7 billion, representing a return on investments of at least 3 percent. The consolidated result in reinsurance should be at least €2 billion in 2015, it said. For the ERGO field of business, Munich Re projects a consolidated result for 2015 of around €500 million.
The group is aiming for a consolidated result in the range of €2.5–3 billion, subject to large losses being within normal bounds and to its profits not being affected by severe movements in exchange rates or the capital markets, significant changes in fiscal parameters, or other exceptional factors.
