Munich Re targets record premiums in positive reinsurance market

Global reinsurance giant Munich Re is forecasting that it will construct its largest ever portfolio of risk in 2022, as the company anticipates positive reinsurance market conditions and continued growth at renewals this year.

In reporting its 2021 results today, Munich Re said that its gross written premiums grew 8.5% year on year to €59,567m (54,890m), the highest figure in the reinsurers’ history.

Overall the group posted a €2,932m (1,211m) profit for the 2021 financial year, beating its profit target of €2.8bn.

Reinsurance contributed €2,328m (694m) to Munich Re’s consolidated result for 2021 , €734m (75m) of which came in Q4.

As a result, Munich Re beat its profit target of €2.3bn for the reinsurance segment, despite significant catastrophe losses and continued impacts from the COVID-19 pandemic.

The company said that its strong reinsurance result is evidence that “the underlying profitability of Munich Re’s operative business has improved further.”

Joachim Wenning, Chairman of the Board, commented, “The year 2021 was good for Munich Re. We beat our profit target, while also making our balance sheet even stronger despite high inflation. Both an increased dividend and a new share buy-back will enable our shareholders to share in this success. Our Ambition 2025 strategy programme got off to a very good start and is picking up speed. Propelled by this momentum, we will resolutely tap into the favourable market environment as we increase our profit to €3.3bn in 2022.”

Property and casualty reinsurance premiums increased 17% in 2021 and a similar level of growth is to be expected through 2022, as Munich Re capitalises on positive market conditions.

The combined ratio for 2021 came out at a better than expected 99.6%, so just technically profitable in the P&C reinsurance business, despite €4,304m of major losses.

Major-loss expenditure came out at 16.5% of net earned premiums, above the expected value of 12%.

Significance reserve releases helped to moderate the loss burden for Munich Re, with 4% of net earned premium or €1,041m released across the year. Munich Re’s reserving and releasing continues to play a major role in keeping combined ratios more subdued.

Growth is a major piece of the story at Munich Re, with this record premium haul in 2021 set to be eclipsed again in 2022, as long as all targets are met.

At the January reinsurance renewals, Munich Re grew premiums 14.5%, while risk adjusted pricing rose 0.7%.

The reinsurer said that alongside growth, better terms and conditions were also achieved and “an optimisation of the portfolio’s risk profile.”

Despite pressures, Munich re anticipates continued positive reinsurance market conditions through 2022 and forecasts “attractive growth opportunities” at the next renewals in April and July.

This leads the reinsurer to target a profit in 2022 of €3.3bn, up from the €2.8bn target it had for 2021.

Driving higher profits will be growth in a hardening market environment, with Munich Re saying it expects its group premium income will set a new record of approx. €61bn in 2022.

Reinsurance is expected to drive premium income of about €42.5bn in 2022, with a profit of around €2.7bn  and a combined ratio target of 94%.

However, the reinsurer is cautious on broader macro conditions, citing uncertainty due to fragile macroeconomic developments and volatile capital markets.