German reinsurer Munich Re has reported a consolidated profit of €790m for Q1 2015, down 16% from the €941m in the same period last year, on gross written premiums of €13.04bn, up from €12.92bn. The technical result fell to €912m, from €1.22bn, while the investment result declined to €1.82bn, from €1.99bn.
The company affirmed its full-year profit target of between €2.5bn and €3bn.
The decline in earnings came despite a €121m improvement in foreign exchange effects, to plus €6m, from minus €115m in Q1 2014.
There were share buybacks of €300m during the quarter, but despite this equity capital rose 14.7% in the quarter to €34.8bn. This was mainly due to profit, favourable FX movements, and an increase in on-balance-sheet net unrealised gains on investments because of the continued fall in interest rates in the eurozone.
In Reinsurance Property-Casualty there was a 7.6% decline in the result, to €597m from €646m, on GWP of €4.60bn, up from €4.38bn. The combined ratio rose to 92.3%, from 86.9%.
Reserve releases amounted to €165m, equal to 4.0 percentage points of the combined ratio.
Loss expenditure from major losses in Q1 2015 were €255m, up from €39m in the same period last year. Man-made losses dominated, contributing €189m to major losses in the quarter (€3m in Q1 2014).
Munich Re said that it expected expenditure of €40m in reinsurance costs from windstorm Niklas, and €30m from Cyclone Pam in the South Pacific. A fire at a US refinery caused the largest single man-made loss, coming in at €35m.
In Reinsurance Life the result fell to €71m, from €122m, on GWP of €2.41bn, down from €2.48bn.
On the primary (Ergo) side of the business, the result fell to €99m, from €153m in Q1 2014, on GWP of €4.58bn, up from €4.56bn. The property-casualty division of Ergo booked a gain of €37m, down from €68m, on GWP of €1.19bn, a fraction up from the €1.18bn recorded in the same period last year.
Munich Health recorded a profit of €23m, up from €20m, on GWP of €1.44bn. down from €1.50bn.
Earnings per share were down 11.8% year on year to €4.71.
Chief financial officer Jörg Schneider said that Munich Re had started off well, "although investment has again been made more difficult by the expansive policies of the central banks".
Referring to the April renewals (at €1bn, about 8% of Munich Re treaty business), Munich Re Reinsurance CEO Torsten Jeworrek said that "pressure on prices, terms and conditions remained high", but noted that "as we were able to take advantage of selective opportunities in individual markets, our premium volume nevertheless increased slightly". There was a 2.6% average fall in prices, which was a higher decline than seen at the January renewals, but significantly lower than experienced in April last year.
Looking ahead to the July renewals, which at €2.1bn makes up about 17% of Munich Re's treaties, the company said that it expected the environment to remain competitive.
Looking ahead to the rest of 2015, Munich Re said that it now anticipates full-year GWP of €49bn to €51bn, an increase of €2bn on the estimate at the start of the year, mainly because of foreign exchange effects.
In property-casualty reinsurance the company is now looking for a combined ratio of 97%, one percentage point lower than targeted at the beginning of the year. The improved target is a result of a low incidence of major losses in Q1.