Munich Re’s preliminary financial figures for 2012 show a profit of €3.2 billion [$4.33 billion], compared to catastrophe prone 2011, when it posted a profit of €710 million [$960 million].

The reinsurer’s profit for the fourth quarter of 2012 totaled €480 million [$650 million], compared to €630 million [$852 million] in Q4 2011. “Shareholders are to participate in last year’s success through a higher dividend: subject to approval by the Supervisory Board and the Annual General Meeting, the dividend will rise to €7.00 [$9.47] per share,” the company said.

CFO Jörg Schneider commented: “This very pleasing profit is founded on our rigorous risk management, disciplined underwriting policy and the realization of profitable business opportunities. Our core business in insurance and reinsurance is healthy, while the claims burden from major losses was slightly below average.

“We also achieved a good investment result. 2012 thus brought good progress, allowing us to further strengthen our capital resources,” he continued. “We want our shareholders to benefit from the Group’s performance: the substantially increased dividend of €7.00 per share is further confirmation of our attractive and stable dividend policy.

“Only the Group’s smallest business field, Munich Health, performed below expectations owing to losses in US primary insurance business at Windsor Health Group (WHG) and to the resultant write-downs,” Schneider said.

Munich Re’s group operating result in 2012 was €5.4 billion [$7.306 billion], compared to €1.2 billion [$1.623 billion] in 2011. Due mainly, the bulletin said, ”to the high profit for the year, Group equity increased by around €4.1 billion €$5.547 billion] to €27.4 billion [$37 billion]

In its primary insurance business, Munich Re showed a profit of €250 million [$338 million], based on preliminary figures. It posted a loss of €90 million [$122 million] in the fourth quarter of 2012 “owing to the restructuring expenses accounted for in that quarter in connection with the sales reorganization program at ERGO; these adversely affected the result by around €130 million [$176 million].”

The operating result grew by 54.3 percent to €900 million [$1.22 billion]. Gross premiums written in the financial year 2012 fell by 2.1 percent to €17.1 billion [$23.17 billion].

“The combined ratio in property-casualty insurance was 98.7 percent (99.1 percent) for the year as a whole,” the report said. “In international business it improved appreciably, and in German business it was partly influenced by a number of random major losses for which intra-Group reinsurance is consolidated out in the segment view. In the fourth quarter, the combined ratio was 104.0 percent (101.5 percent).”

The reinsurance segment contributed €3.1 billion [$4.2 billion to the consolidated result, compared to €500 million [$677.5 million] in 2011. The operating result increased to €4.3 billion [$5.826 billion].

Compared with the previous year, premium income grew by over 8 percent to €28.2 billion [$38.21 billion], “6.8 percentage points of which were due to currency translation effects. The combined ratio in property-casualty reinsurance was 91.0 percent (113.8 percent) of net earned premiums for the year as a whole and 83.2 percent (101.8 percent) for the fourth quarter.”

Munich Re said that as a consequence its “customary review of reserves, the combined ratio for the full year includes around €900mbillion [$1.22 billion] in the fourth quarter) from the reduction of claims provisions for prior years, which is equivalent to around 5.5 percentage points. This development mainly involves the years 2005–2009 and property, marine and aviation business. Over the year as a whole, the safety margin in the reserves rose slightly nonetheless.”

Natural catastrophe losses amounted to around €1.3 billion [$1.76 billion], compared to €4.5 billion [$6.1 billion] for the entire year, and man-made losses to €500 million [$677.5 million]. The report said “the year’s biggest loss event was Hurricane Sandy, causing insured losses in the range of US$ 25 billion (not taking national flood insurance into consideration) and costing Munich Re around €800 million [$1.084 billion] net before tax.”

Munich Re also said: “Renewals of reinsurance treaties in the property-casualty segment at 1 January 2013. Despite the unrelentingly competitive environment, Munich Re is satisfied with the results of the renewals. Prices, terms and conditions stayed largely stable overall.”

Torsten Jeworrek, Munich Re’s Reinsurance CEO, said: “Demand for reinsurance cover remains relatively constant, and sufficient capacity is available. In a still-challenging economic environment, a consistent underwriting policy and active cycle and portfolio management are vital for the profitability of our portfolio.”

Source: Munich Re