Catastrophic storms hit Munich Re’s 2017 results

Harvey, Irma and Maria took their toll on the global reinsurer

Catastrophic storms hit Munich Re’s 2017 results

Insurance News

By Bethan Moorcraft

The catastrophic storm season that wreaked havoc in the US and Caribbean last autumn has taken its toll on Munich Re’s profits for 2017.

Major losses resulting from Hurricanes Harvey, Irma and Maria (€2.7 billion in total / SGD$4.4 billion) have wiped 85% off the reinsurance giant’s net profits. Today, the company announced a “small profit” of €392 million (SGD$642 million) in 2017 – a significant reduction from €2.6 billion (SGD$4.26 billion) the previous year.

Despite such a challenging year, Munich Re says its “dividend is reliable […] thanks to [its] capital strength,” and it will continue to pay a dividend of €8.60 per share, subject to approval by the Supervisory Board and Annual General Meeting.

The reinsurer’s capital position also remained quite steady, with its capital ratio falling only slightly from 242% to 240%. CFO Jörg Schneider said: “Thanks to our capital strength, we were able to well withstand the high losses from natural catastrophes.”

However, the company’s return on equity fell from 8.1% to 1.3%. It’s combined ratio for reinsurance was 114.1% compared to 95.7% in 2016, and the reinsurer only posted €120 million in reinsurance net profits as opposed to €2.5 billion the previous year.

There was a much more positive outlook for the company’s main insurance division, ERGO, where profits have grown from €41 million to €273 million in one year. ERGO achieved an international combined ratio of 95.3% and gross written premiums of €17.5 billion in 2017.

Despite the challenging year overall, Schneider remains positive. He said: “In 2018, we will be pressing ahead with the digital transformation of Munich Re, and also seizing opportunities for profitable growth in traditional business. Reinsurance prices improved slightly in large sections of the market at the January renewals – a trend likely to strengthen in coming renewal rounds.”

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