Reserve releases aid Munich Re €3.1bn profit - FREE

Reserve releases aid Munich Re €3.1bn profit - FREE

Munich Re has finished 2015 with a consolidated result of €3.1bn, down slightly from €3.2bn the previous year. The firm upped its gross premium from €48.8bn written in 2014 to €50.4bn in 2015.

Most of that was within its core reinsurance business, which increased gross premium to €28.2bn in 2015, from €26.8bn the previous year. The reinsurance combined ratio also improved, dropping to 89.7% for 2015 from 92.7% the previous year.

In the fourth quarter, the group posted a profit of €0.7bn, the same amount in as the previous year’s final quarter.

The company also wants a bigger payback to shareholders, subject to its board and annual general meeting, the annual dividend rising to €8.25 per share.

“The further strong increase in the dividend demonstrates our trust in the sustained earnings power of Munich Re,” said Munich Re’s chief financial officer Jörg Schneider (pictured).

However, the 2015 result was made possible through reserve releases by the firm.

“Munich Re was able to release loss reserves in the amount of €1.4bn during the full year, corresponding to around 8.2 percentage points of the combined ratio,” said Munich Re.

“The figure for the fourth quarter was €0.9bn, corresponding to around 20.9 percentage points of the combined ratio,” added the firm in its results statement.

Munich Re noted that the “result includes various one-off factors that had a net positive effect”.

The firm stressed the low interest rates and “increasing volatility” in the investment environment, which saw the group’s investment result go from €8bn in 2014 to €7.5bn in 2015.

Munich Re also continued its share buy-back programme, buying €800m in its equity since April 2015, expected to reach €1bn by April 2016.

There was a contraction in Munich Re’s direct insurance arm – its Ergo business – which shrank gross premium written from €16.7bn in 2014 to €16.5bn in 2015.

Ergo also revealed a negative combined ratio of 103.9% in Germany and 115.3% internationally in the final quarter, dipping into a €0.1bn loss for the quarter and €0.2bn for the year as a whole.

The group’s Munich Health business managed to up gross premium from €5.3bn in 2014 to €5.6bn written in 2015.

The combined ratio for its health underwriting slipped slightly, from 98.8% to 99.9% in the same period, posting an overall €0.1bn profit for both years.

“Due to the fact that the market environment is so challenging, the 2015 result is pleasing,” said Schneider.

“Even though we benefited from random effects in the form of a low impact from major losses, the good result is mainly due to our operational profitability and rock-solid balance sheet,” he added.

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