Announcing its second-quarter results this morning, global reinsurance giant Munich Re is showing strong growth and its CEO has laid out an expansion plan, as markets continue to strengthen.
Munich Re reported a profit of EUR 768 million in the second quarter of 2022, significantly lower than a year ago when the profit reached EUR 1.106 billion.
The year-over-year decrease in profit was mainly due to a significant decrease in investment costs, with the loss of income from fixed interest and corporate notes affecting that segment.
Annualized return on assets (RoE) fell to 12.3% in Q2 2022 (19.2% on Q2 2021) and 11.2% for the first half of the year (down from H1 2021’s 15%).
The total amount recorded in Munich Re’s business rose by 8.3% to EUR 15.85 billion in Q2, and by 12% to EUR 32.683 billion in the first half, which the company said was driven by strong organic growth, especially in property and casualty recovery. .
Munich Re’s reinsurance division posted the biggest profit for the quarter, at EUR 608 million, but most impressively the property and casualty group increased its Q2 revenue by 18.6%.
Munich Re, like many other reinsurers, has been expanding when the market has dried up and sees opportunities to continue to do so.
Commenting on the quarterly results, Munich Re’s CEO Joachim Wenning said, “Munich Re has delivered strong quarterly results despite headwinds from inflation, the economic freeze and the war in Ukraine. Our business profitability is very good, and we saw strong growth and profitable. Our customers greatly appreciate our strong schedule in these uncertain times.”
Explaining the way to continue business while the market is good, Wenning said, “This is the time to take advantage of the markets that continue to dry up. At the same time, we are systematically expanding the share of income generated by informal businesses.”
Munich Re’s P&C reinsurance business posted a profit of EUR 462 million for the quarter, down from EUR 858 million a year earlier.
But with a combined ratio of 89.7%, the P & C reinsurance underwriting business was more profitable than a year ago. For the first half, the combined ratio was 90.5%, much better than H1 2021’s 94.3%.
Munich Re suffered losses of EUR 575 million in the second quarter of 2022, man-made losses of EUR 322 million and losses from natural disasters of EUR 253 million, which were higher than last year.
The worst event for Munich Re in the last quarter was the drought in South America which resulted in a loss of EUR 130 million.
During the mid-year insurance renewal, Munich Re expanded its book by 6%, recording approximately EUR 4.4 billion in premiums, focusing on North America, South America, Australia, and international clients.
“Prices were higher in group markets, where conditions differed greatly in terms of claims, expected future losses and market conditions. Reinsurance cover prices rose significantly in other markets, including the US, Latin America and Australia. This increase was enough to eliminate the expectation of loss due to inflation or other factors that are growing,” the company explained in the market update.
Risks were adjusted, Munich Re said that the increase in prices was +0.1% in the restructuring of its entire book, despite the wide variation.
Looking ahead to the next season of reinsurance revival, Munich Re has the best in the market.
“At the next round of restructuring in January, Munich Re expects the market to remain positive and should offer attractive business opportunities,” the company said.
Munich Re is still looking at a profit of EUR 3.3 billion for the year, despite the decline in revenue.
Related to this is that the company has about EUR 2.7 billion of its capital expenditure remaining in the second half of the year.
Looking ahead, Munich Re CEO Wenning said, “The rise in interest rates will give us a long-term interest rate by allowing us to benefit from higher yields. Our annual target and our medium-term “Ambition 2025″ goals are close.”