Munich Re has announced its profits. One of the behemoths of reinsurance, the company has reported profits of €768 million for the second quarter of 2022. Against the backdrop of a hardening market and a slew of global challenges the figures make for some impressive reading and show positive signs ahead for the organization.

Let’s take a look at some of the numbers…

You’d be forgiven for thinking that the market conditions would have stopped Munich Re in its tracks. If we’re honest, there are a few issues that might cause concern. Annualised return on equity (RoE) in Q2 went down to 12.3% from 19.2% in the same period in 2021 while the first half 2022 saw a decrease from 15% to 11.2% compared to last year.

Annual profits from the P&C reinsurance business also took a hit. Having reached profits of €858 million in 2021, Munich Re has seen the function’s numbers down almost 50% to €462 million.

However, it’s been far from a doom and gloom scenario. Gross premiums shot up to €15.85 billion in the second quarter of this year – a rise of 8.3% – and H2’s profits are up 12% from the first half of last year to €32.683 billion.

The reinsurer has also seen some positive outcomes in the mid-year renewals. Gross premiums jumped up by 6% to close to the €4.4 billion mark. Price increases in major economic areas such as Latin America, US and Australia have also aided in offsetting other losses affecting the global landscape such as inflation.

What’s affecting the market?

Unsurprisingly, three of the biggest factors at play are inflation, economic uncertainty and the war in Ukraine. Munich Re CEO has mentioned the importance of striking while the iron’s hot: “The profitability of our business is very good, and we again saw clear and profitable growth. Our clients are all the more appreciative of our strong balance sheet in these uncertain times,” he continued, “Now is the time to seize opportunities in markets that are continuing to harden. At the same time, we are systematically increasing the share of earnings generated by less cyclical business”.

Natural catastrophes and climate-related losses are naturally starting to bring further claims. Major losses jumped to €575 million from last year with around €322 million made up of man-made losses and the rest comprised of natural catastrophes. For example, the drought in South America accounted for €130 million in losses – the most expensive event for the business.

What about the future?

Munich Re is looking positively on the market and still aims to hit its target of €3.3 billion in profit, with the end of year reinsurance renewals on the horizon. To cap it off, Wenning shows great positivity: “The rise in interest rates will give us tailwind in the long term by allowing us to benefit from higher running yields. Our annual target and our objectives for our “Ambition 2025” medium term strategy are firmly in sight.”

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