Munich Re profit suffers on primary insurance loss, weak investment returnReprints
Munich Reinsurance Co. reported a profit of €436 million ($497.3 million) for the first quarter of 2016, down 44.8% from the comparable period last year due to weaker investment results and a loss in its primary insurance unit, ERGO Insurance Group.
Munich Re said it expects full-year profits to be about €2.3 billion ($2.62 billion), at the low end of a previous forecast of between €2.3 billion and €2.8 billion ($3.19 billion).
The reinsurer said Tuesday that despite “a below-average random incidence of major losses” in the first quarter of 2016, “we had to cope with significant strains on our investment result.”
Munich Re posted an investment result of €1.6 million ($1.82 million) for the first quarter of 2016, down 13.6% from the first quarter of 2015.
The reinsurer said its insurance-related investment result fell to a loss of €208 million ($237.2 million) in the first quarter of 2016 compared with a €579 million ($660.4 million) profit for the first quarter of 2015.
Munich Re posted gross written premiums of €12.51 billion ($14.27 billion) for the first three months of 2016, down 4.0% from those reported for the first quarter of 2015.
It posted gross written premiums of €4.53 billion ($5.17 billion) for property/casualty reinsurance in the first quarter of 2016, down 1.5% from the first quarter of 2015.
Munich Re said its property/casualty reinsurance operations posted a combined ratio of 88.4% for the first quarter of 2016, compared with 92.3% for the first quarter of 2015.
Munich Re said that major property/casualty reinsurance losses cost just &euro100 million ($113.9 million) in the first quarter of the year, compared with €255 million ($290.8 million) in the first quarter of 2015.
The largest man-made loss in the first quarter was a fire at a hydroelectric power station that cost it €37 million (42.2 million).
ERGO, which underwrites both property/casualty and life and health insurance businesses, posted a loss of €25 million ($28.5 million) for the first quarter of 2016, compared with a profit of €102 million ($116.3 million) in the first quarter of 2015.
Jorg Schneider, CFO of Munich Re, said in a statement that it was unlikely that ERGO would post a profit for the 2016 year, in part because of high costs related to a new strategy program at the unit, details of which will be announced in June.
At property/casualty reinsurance renewals on April 1, “pressure on prices, terms and conditions remained high,” Munich Re said in a statement, adding that, overall, rates fell by about 1.5%.
In the absence of any major loss, the market will remain competitive at the July 1 renewal, Munich Re said.