MUNICH Re is aiming for a profit increase of EUR 200 million to around EUR 2.5 billion for the current year, of which around EUR 2.1 billion comes from reinsurance and around EUR 0.4 billion from ERGO.
The good result from 2018 and the planned improvements in earnings power for 2019 allow MUNICH Re not only to propose a significant increase in the dividend to EUR 9.25 at the Annual General Meeting, but also to launch a further share buy-back program of EUR 1 billion. The two measures constitute examples of MUNICH Re's sustainable and shareholder-friendly capital repatriation policy.
Following positive developments in the past year, the expected technical result, including the result from business with non-significant risk transfer, for life and health reinsurance has been raised to around EUR 500 million. In property-casualty reinsurance, MUNICH Re is aiming for an improved combined ratio of around 98% in 2019.
In the German ERGO property-casualty segment, an improved combined ratio of approximately 93% is anticipated. In the ERGO International segment, the combined ratio will be around 95%.
MUNICH Re expects an investment result of around EUR 6.5 billion for 2019, representing a return on investments of about 3%.
Assuming exchange rates remain stable, MUNICH Re anticipates GWP of around EUR 49 billion in the 2019 financial year, comprising gross premium of around EUR 31 billion in the reinsurance field of business and approximately EUR 17.5 billion in the ERGO field of business. Total premium income in the ERGO field of business (including the savings premiums of unit-linked life insurance and capitalization products) should amount to around EUR 18.5 billion in 2019.
As always, the projections are subject to major losses within normal bounds and to the income statement not being impacted by severe fluctuations in the currency or capital markets, significant changes in the fiscal environment, or other one-off effects.
Summary of the figures for the 2018 financial year
MUNICH Re generated a profit of EUR 2,275 million (392 million) in 2018. The operating result amounted to EUR 3,725 million (1,241 million). The currency result amounted to -EUR 39 million (-294 million). Taxes on income totaled EUR 576 million (298 million). Gross premiums written by the Group in 2018 were EUR 49,064 million, and thus at the same level as the previous year (EUR 49,115 million).
At EUR 26,500 million, equity was lower in 2018 than in the previous year (EUR 28,198 million), since the good balance sheet result and positive currency translation effects were more than offset by the dividend payment, share buy-backs and lower unrealized gains due to the rise in interest rates.
The return on risk-adjusted capital (RORAC) amounted to 9.1% (1.5%) in 2018, and the return on equity (RoE) totaled 8.4% (1.3%).
With due consideration of dividends and potential capital measures in 2019, the solvency ratio calculated on the basis of Solvency II was 245% as of 31 December 2018 (previous year: 244%).
The reinsurance field of business contributed EUR 1,864 million (120 million) to the consolidated result in 2018.
Life and health reinsurance business raised its profit to EUR 729 million (596 million). The technical result, including the result from business with non-significant risk transfer, was EUR 584 million (428 million) in 2018. MUNICH Re thus clearly achieved its target of at least EUR 475 million for the full year.
The result for property-casualty reinsurance rose to EUR 1,135 million (-EUR 476 million). The combined ratio for the year improved significantly to 99.4% (114.1%) of net earned premiums. Major losses of over EUR 10 million each totaled EUR 2,152 million (4,314 million). This is equivalent to 11.6% (25.8%) of earned premium. Adjusted for commissions, MUNICH Re's customary review of provisions resulted in a reduction in the provisions for basic claims from prior years by around EUR 860 million for the full year, which is equivalent to around 4.6 % of net earned premiums.
Gross written premiums in the reinsurance field of business fell slightly to EUR 31,286 million (previous year: EUR 31,569 million). A decline in premium income in the life and health reinsurance segment, attributable to the expiry or restructuring of large-volume capital-relief treaties, was largely compensated for by partly robust growth in property-casualty reinsurance.
MUNICH Re generated a profit of EUR 412 million (273 million) in the ERGO field of business in 2018, of which ERGO Life and Health Germany contributed EUR 264 million (175 million), ERGO Property-casualty Germany contributed EUR 45 million (57 million), and ERGO International contributed EUR 103 million (40 million). Owing in particular to very good operative performance, ERGO significantly exceeded its original profit guidance of EUR 250-300 million.
The development of combined ratios was very pleasing. At 96.0% (97.5%), it was exactly on target in the German property-casualty segment. In the international segment, the best-ever result of 94.6% (95.3%) was achieved.
Total premium income rose by 0.8 % to EUR 18,688 million (18,548 million), and gross written premiums were up by 1.3% to EUR 17,778 million (17,546 million).
MUNICH Re's investment result (not including insurance-related investments) fell to EUR 6,526 million (7,611 million). Regular income from investments increased to EUR 6,586 million (6,438 million).
Overall, the investment result represents a return of 2.8% on average market value of the portfolio.
As of 31 December 2018, total investments (excluding insurance-related investments) diminished somewhat compared with the 2017 figure, with the carrying amount declining to EUR 216,852 million (217,562 million) and the market value to EUR 231,876 million (231,885 million).