Solid results for Munich Re as it shuns unprofitable business

Munich Re posted a solid set of results for 2014 although its profits fell slightly as did its overall gross written premiums (GWP).

Especially in relation to the recent January renewals, it said it had walked away from large chunks of business because it was not profitable enough.

The company made a profit of €3.2 billion in 2014, a slight decrease on the €3.3 billion it made a year earlier. Its gross written premiums (GWP) for the year were €48.8 billion compared with €51.1 billion in 2013. Its GWP for its reinsurance segment only were €26.8 billion compared with €27.8 billion the year before although it said this was partly due to fluctuations in exchange rates.

The reinsurance unit’s combined ratio was 92.7 percent compared with 92.1 percent in 2013.

Munich Re said its reinsurance business contributed €2.9 billion to the consolidated result.

The company commented extensively on the recent critical January renewals in its results. As in the previous year, it said they were marked by an oversupply of reinsurance capacity and good capitalisation of most market players. Downward pressure on prices, terms and conditions remained stable in most classes of business, it said.

Only programmes affected by major losses, such as aviation, saw price increases. The demand for reinsurance cover was largely stable, the reinsurer added.

“Munich Re was able to stand its ground in this challenging environment. Overcapacity and a relatively low number of major natural catastrophes in 2014 added to the competitive pressure, above all in catastrophe business,” said Torsten Jeworrek, who is responsible for Munich Re's global reinsurance activities. “But Munich Re's broad diversification across lines of business and markets, bolstered by stable client relationships, paid off for us.”

At January 1, 2015, slightly more than half of Munich Re's non-life reinsurance business was up for renewal, representing premium volume of around €9.4 billion. It said that some 13 percent (around €1.2 billion) of this was not renewed, partly because the business concerned no longer met Munich Re’s profitability requirements.

By contrast, Munich Re noted that it wrote new business with a volume of approximately €0.9 billion. Altogether, the volume of business written at 1 January dropped by 9.5 percent to around €8.5 billion. Prices fell by 1.3 percent, it said.

“Munich Re provides its clients with substantial high-security capacities. However, we always ensure that the price we obtain is commensurate with the risk assumed. Consistent cycle management is key in this competitive environment,” he said.

“In addition, we offer innovative risk transfer solutions even for very complex risks, a fact that is becoming more and more important for companies in this globalised economy.”