Combined ratio drops 8.1 points for Munich Re

Munich Re reported a combined ratio of 93.3%, in property & casualty reinsurance, for the three months ending June 30, an 8.1-point improvement over the 101.4% it reported in the second quarter of 2014, while Q2 natural catastrophe expenditures dropped nearly 93% year over year.

For the first six months of the year, Munich Re reported its expenditure for natural catastrophes in particular “was relatively low” at 87 million euros, down 73.4% from 327 million euros during the first half of 2014. The euro closed Friday at $1.44. Natural catastrophe losses were 21 million euros for the most recent quarter, down 92.7% from 291 million euros during the same period in 2014.

“We anticipate net major-loss expenditure of €45m for floods triggered by heavy rainfall in northern Chile at the end of March,” Munich Re stated Aug. 6.

“As the claims notifications remained appreciably below the expected level, we made reserve releases of around €135m in the second quarter, which is equivalent to 3.1 percentage points of the combined ratio,” Munich Re added. “We also still aim to set the amount of provisions for newly emerging claims at the very top end of the estimation range, so that profits from the release of a portion of these reserves are possible at a later stage.”

Man-made losses totalled 375 million euros during the first six months of the year, up 14% from 329 million euros during the first two quarters of 2014.

Q2 man-made losses were 186 million euros this year, down 43% from 326 million euros last year.

“At €50m, the largest claim for the second quarter was a fire loss in a South Korean warehouse,” Munich Re reported. “The second-largest individual loss was a marine insurance claim that cost us €45m.”

The loss ratio was 62.4% in the latest quarter, down 7.6 points from 70% in Q2 2014. For the first half of the year, the loss ratio dropped 1.7 points, from 63.4% in 2014 to 61.7% this year.

In P&C reinsurance, Munich Re recorded gross written premiums of 4.4 billion euros in the latest quarter, up 7.5% from 4.097 billion euros in Q2 2014. For the first six months of the year, gross written premiums increased 6.2%, from 8.478 billion in 2014 to 9.002 billion euros this year.

“Premium income increased year on year due to currency translation effects,” Munich Re stated. “To avoid taking on risks at inadequate prices, terms and conditions in a highly competitive environment, we refrained from renewing some existing reinsurance treaties. If exchange rates had remained unchanged, premium income would have declined by 4.7%.”

Company-wide, Munich Re reported gross written premiums of 12.467 billion euros in the latest quarter, up 5.2% from 11.856 billion euros in 2014. For the first six months of the year, the company reported gross premiums written of 25.505 billion euros, up 2.9% from 24.78 billion euros in the first half of 2014.

Munich Re’s operating result in P&C reinsurance was 1.246 billion euros in the most recent quarter, up 89.9% from 656 million euros in Q2 2014. The operating result, in P&C reinsurance, for the first half of the year was 1.921 billion euros, up 25.7% from 1.528 billion euros in the first half of 2014.

“The renewals at 1 April 2015 involved a relatively small volume of business of around €1bn, or some 6% of the overall portfolio in the property-casualty reinsurance segment,” Munich Re stated. “About a fifth of this concerned the Japanese market, and another 60% North American and worldwide business. At almost 40%, natural catastrophe business – which is subject to particularly significant price pressure – accounted for a high percentage of this volume. At 2.6%, the fall in prices was therefore greater in comparison with January 2015, but far less pronounced than in the renewals of April 2014.”