Munich Re, FY2019: consolidated profit expanded 19.0% year-on-year

2 March 2020 — press.release
At the end of 2019, Munich Re generated a profit of EUR 2,707 million, 19.0% more year-on-year. The operating result was up on the previous year to EUR 4,004 million (+7.5%), and the other non-operating result amounted to EUR (665) million (FY2018: EUR (639) million). The currency result totaled EUR 73 million (FY2018: EUR (39) million).


Munich Re FY2019 figures, y-o-y changes

  • Gross written premiums: EUR 51,457 million (+4.9%), of which:
    • L&H Reinsurance: EUR 11,716 million (+8.0%)
    • P&C Reinsurance: EUR 22,091 million (+8.1%)
    • ERGO: EUR 17,650 million (-0.7%)
  • Net earned premiums: EUR 48,280 million (+5.6%)
  • Net claims and benefits: EUR 39,685 million (+13.0%)
  • Net operating expenses: EUR 13,249 million (+5.3%)
  • Investment result: EUR 7,737 million (+18.6%)
  • Return on equity: 9.2% (+0.8 pp.)
  • Return on investment: 3.2% (+0.4 pp.)
  • Consolidated result: EUR 2,707 million (+19.0%)


Gross premiums written increased by 4.9% year on year to EUR 51,457 million. At EUR 30,576 million, equity was significantly up on the level at the start of the year (+15.4%) due in particular to the good consolidated result and the increase in valuation reserves on fixed-interest securities and equities.

The solvency ratio was around 237% at the end of the year (31 Dec. 2018: 245%). The balance sheet shows an annualised return on equity (RoE) of 9.2% in 2019. Under its share buy-back programme, Munich Re repurchased 4.3 million of its shares in 2019, with a total value of EUR 1.0 billion.


Reinsurance

The reinsurance field of business contributed EUR 2,268 million (+21.7%) to the consolidatedresult in the 2019 financial year. The operating result amounted to EUR 2,613 million (+6.0%). Gross premiums written increased to EUR 33,807 million (+8.1%).

Life and health reinsurance business generated a profit of EUR 706 million in 2019 (-3.2%). Premium income increased to EUR 11,716 million (+8.0%). The technical result, including the result from business with non-significant risk transfer, was EUR 456 million (-21.9%) in 2019. Despite extraordinarily good growth in some markets, the target of EUR 500 million for the full year 2019 was narrowly missed. This was due in particular to negative loss experience in Australia, and a related consequential change in assumptions in disability business. Munich Re expects the technical result - including the result from business with non-significant risk transfer - to continue to climb in the future, and has increased its target for 2020 to EUR 550 million.

Property-casualty reinsurance contributed profits of EUR 1,562 million (+37.6%) in 2019. Premium volume went up to EUR 22,091 million (+8.1%). Due to high major losses, the combined ratio for the full year was 101.0% (+1.6 pp.) of net earned premiums.

Major losses of over EUR 10 million each totalled EUR 3,124 million (+45.2%) for the full year. These figures include gains and losses from the settlement of major losses from previous years. Major-loss expenditure for the full year corresponds to 15.2% (+3.6 pp.) of net earned premiums, and was thus well above the long-term average expected value of 12%. Man-made large losses were comparatively high at EUR 1,071 million (+19.5%), due in particular to aviation/space and fire losses. The impact of large losses from natural catastrophes was EUR 2,053 million (+63.5%). The most expensive natural catastrophes for Munich Re in 2019 were the typhoons Hagibis (~ EUR 780 million) and Faxai (~EUR 530 million).

In the 2019 financial year, reserves for basic claims from prior years totalling around EUR 1,154 million were released; this corresponds to 5.6% of net earned premiums. Munich Re still aims to set the amount of provisions for newly emerging claims at the very top end of the suitable estimation range, so that profits from the release of a portion of these reserves are possible at a later stage.

In the renewals as at 1 January 2020, Munich Re was able to increase written business volume to EUR 10.6 billion (+4.4%). Around half of property-casualty business was renewed, with a focus on Europe, the USA (mainly excluding nat cat) and global business.


Investments

The Group's investment result (excluding insurance-related investments) increased in 2019 to EUR 7,737 million (+18.6%). Despite low interest rates, regular income from investments went up slightly to EUR 6,751 million (+2.5%). The high investment result benefited in part from high gains on the disposal of fixed-interest securities and equities. The balance of gains and losses on disposal excluding derivatives increased correspondingly to EUR 2,779 million (+75.7%), thereby compensating for losses of EUR 717 million (+EUR 103 million) in the derivatives result, mainly caused by market-related losses from equity derivatives.

Overall, the investment result represents a return of 3.2% on the average market value of the portfolio in 2019. The running yield was 2.8% and the yield on reinvestment was 2.1%. The equity ratio including equity-related derivatives rose to 6.4% as at 31 December 2019 (31.12.2018: 5.2%).

Total investments (excluding insurance-related investments) as at 31 December 2019 increased compared with the 2018 figure, with the carrying amount rising to EUR 228,764 million (+5.5%) and the market value to EUR 247,310 million (+6.7%).

The Group's asset manager is MEAG. As at 31 December 2019 - in addition to managing the Group's own assets - MEAG managed third-party investments totalling EUR 38.2 billion (+146.5%). The significant year-on-year increase is largely due to a new mandate from an institutional client.

Institutional investors with managed assets of over USD 4 trillion have joined together in the "Net-Zero Asset Owner Alliance", under the leadership of the United Nations. The Alliance seeks to make investments climate-neutral by 2050 and thus to meet the aims of the Paris Climate Agreement to limit global warming to 1.5 degrees Celsius. Munich Re has joined this initiative and adopted the objective of making its investments climate-neutral by 2050.


Joachim Wenning, Chairman of the Board of Management of Munich Re, commented:

"A higher dividend, new share buy-back programme, and profits beating the guidance: Munich Re delivers. On our journey to make Munich Re more profitable, more lean and more digital, we took a great step forwards in 2019. With this strategic progress, I am confident that we will reach the profit target of EUR 2.8 billion for 2020 that we set out in our multi-year ambition for 2018-2020."



More financial information about Munich Re can be found here.


Source: munichre.com
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