Munich Re’s estimated earnings figures for 2011 confirm a net profit from its three sectors – reinsurance, primary and health –of €710 million [$933 million], compared to a net profit of €2.43 billion [$3.2 billion] in 2010. Fourth quarter profits rose to €630 million [$828 million] from €480 million [$630 million] in 2010.
Munich Re’s report confirmed the general consensus in the industry that “2011 was marked by a series of severe earthquakes and many weather-related catastrophes.” Its estimates of its claims costs from the “earthquakes in Japan and New Zealand at around €1.5 billion [$1.97 billion] for each event.” Adding in the approximately $642 million it expects from the floods in Thailand brings the total to just under $4.6 billion from these three events alone.
In addition, Munich Re noted that it was also hit by the “worsening of the sovereign debt crisis in the euro zone,” as the value of the euro against the dollar dropped from over $1.40 to around $1.30.
CFO Jörg Schneider commented: “We have never experienced a year like 2011 before – extreme burdens from natural catastrophes combined with the financial crisis, which flared up again after the slight recovery in 2009 and 2010. Given the huge strains these placed on results, it is a notable achievement that we still posted a profit of €0.71 billion.”
Tax income bolstered the figures by €550 million [$723 million], compared to tax outlays of €690 million [$907 million] in 2010, “mainly due to the tax deductibility of the severe natural catastrophe losses in 2011 and the relief effect of earlier losses in the USA,” said the bulletin. In effect the profit figure owes a great deal to the tax payments.
Munich Re also gave the following figures for 2011:
– Gross premiums written by the Group in the financial year 2011 rose significantly by almost 9 percent to €49.6 billion [$65.17 billion], from €45.5 billion.
– Group equity increased by around €300 million [$394 million] to €23.3 billion [$30.62 billion], up €1.1 billion [$1.45 billion] in the fourth quarter “chiefly thanks to the quarterly profit of €630 million and the depreciation of the euro.”
– The Group’s investment result decreased by 22 percent to €6.8 billion [$8.94 billion], “marked in particular by an increase of €1.2 billion [$1.58 billion] to €1.6 billion [$2.1 billion] in the negative balance from write-ups and write-downs. Expenses for write-downs of Greek government securities alone totaled €1.2 billion [$1.58 billion].
– Net gains on the disposal of investments were high at €1.3 billion [$1.7 billion].
– The combined ratio in reinsurance operations for the year rose to 113.6 percent from 100.5 percent for 2010; while the combined ratio in the primary sector was slightly higher at 97.8 percent, but in the health sector it was a bit lower at 99.4 percent.
Torsten Jeworrek, member of the Board of Management and Munich Re’s Reinsurance CEO noted: “The reinsurance markets remain keenly competitive. In this situation, active cycle and portfolio management are of crucial importance. The economic environment prohibits the provision of reinsurance cover at inadequate rates.” He also noted that Munich Re was more or less satisfied with its January reinsurance renewals.
Munich Re said the next renewals beginning April 1st, “mainly Japan and Korea and July 1st 2012 (especially parts of the US market, Australia and Latin America) “will have a greater proportion of natural catastrophe business than the January renewals.” However, Munich Re also noted that it is projecting “further price increases here, particularly in loss-affected regions. For other property business and in the casualty classes, Munich Re is proceeding on the assumption that prices will stabilize with a trend towards slight increases.”
The complete report and additional comments are available on the company’s web site.
Source: Munich Re