Munich Re’s profit rises on strong reinsurance result

Global reinsurer Munich Re has today reported that its reinsurance business contributed €1.3 billion and €3.2 billion to the Group’s net result in Q2 and H1 2024, respectively, and despite a rise in major loss expenditure, the property and casualty (P&C) reinsurance combined ratio strengthened.

Within reinsurance, insurance revenue from insurance contracts issued increased to €9.9 billion in the quarter, up from €9.3 billion in Q2’23, while the total technical result rose 28% to almost €2 billion, and the operating result increased 51% to €1.9 billion.

Both the P&C and life and health (L&H) divisions performed well in the quarter, with the former generating a result of €786 million, up from €578 million a year earlier. P&C insurance revenue from insurance contracts issued moved from €6.7 billion to €6.9 billion. For the quarter, the combined ratio strengthened from 80.5% to 79.6%, and for H1’24, improved to 77.5% from 83.5%, therefore continues to outperform the full-year expectation of 82%.

The stronger combined ratio has been achieved despite a rise in major losses of over €30 million each to €957 million in Q2’24 compared with €600 million last year. In fact, major-loss expenditure in Q2 corresponded to 14.4% of net insurance revenue, only slightly higher than the average expected value of 14%, but for H1’24 was below the expected value, at 12.2%.

Munich Re has revealed that Q2 man-made major losses decreased to €110 million from €155 million last year, while major losses from natural catastrophes increased to €846 million from €445 million. These major-loss figures take account of the effects from discounting and risk adjustment. For Munich Re, the costliest natural catastrophe in the quarter was the flooding in southern Germany, with nominal losses in reinsurance of €200 million and ERGO posting losses of €44 million.

The reinsurer also released reserves totalling €332 million for basic losses from prior years, which corresponds to 5% of net insurance revenue.

At the July 1st, 2024, reinsurance renewals, Munich Re’s book actually decreased by 5.4% to €3.5 billion, driven by decisions to not renew or write business that did not meet expectations with respect to prices, terms and conditions. The reinsurer notes that price development was stable overall in the sectional markets, with prices for reinsurance rising considerably in some markets. Overall, prices across the Munich Re portfolio increased by a slight 0.6% in the July renewals.

Within the firm’s L&H reinsurance business, the technical result was strong, rising from €325 million in Q2’23 to €617 million in Q2’24, as significant growth in new business more than offset the result from the release of the contractual service margin.

The net result in the segment increased to €553 million from €326 million a year earlier, as insurance revenue from insurance contracts issued came to almost €3 billion, compared with €2.6 billion last year.

Munich Re’s primary insurance business, ERGO, also had a solid quarter, generating an improved result of €284 million and €535 million for Q2 and H1, respectively. The segment’s insurance revenue from insurance contracts issued in Q2 rose year on year to €5.1 billion from €4.9 billion, and the H1 figure increased to €10.3 billion from €9.9 billion.

ERGO’s technical result came down slightly in the quarter to €532 million from €599 million, as the operating result increased to €364 million from €350 million, and the combined ratio weakened to 86.4% from 84.7%.

On investments, Munich Re has today announced a substantial rise in the result to €1.5 billion in Q2’24 from €596 million in Q2’23, with the overall investment result for the quarter representing a return of 2.6% on the average market value of the portfolio.

As a result of all of the above, Munich Re has reported a net result of €1.6 billion for the second quarter of 2024, up 41% on last year’s €1.2 billion. For H1’24, the net result rose 55% to €3.8 billion.

Insurance revenue from insurance contracts issued rose year-on-year in Q2 to almost €15 billion from last year’s €14.2 billion, and the H1 figure increased to €30 billion from €28.5 billion. The reinsurer attributes this development in Q2 primarily due to organic growth in both reinsurance segments.

The total technical result in the second quarter amounted to €2.5 billion, up from €2.2 billion a year earlier, as the operating result increased to €2.2 billion from €1.6 billion.

“Thanks to a profit of nearly €3.8bn in the first half-year, Munich Re has performed well once again. What’s more, we’ve never earned more in the first six months of any year. This result demonstrates our operational strength in reinsurance and primary insurance – both of which delivered better-than-expected profits. Encouraging July renewals plus the continued high yield on reinvestment add up to an optimistic outlook for the rest of 2024. Although our profit target for 2024 remains unchanged at €5.0bn, our impressive half-year result does make it more likely that we can achieve or even outperform our full-year guidance,” said Munich Re CEO, Joachim Wenning.

Looking ahead, Munich Re says that it anticipates encouraging business opportunities for the remainder of the year, and the 2024 targets remain unchanged, with the firm still aiming for a net result of €5 billion for the 2024 financial year.

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