Munich Re maintains stable dividend and continues to grow.
In spite of the tremendous challenges posed by COVID-19, Munich Re closed out 2020 with a clear profit - and our dividend remains dependable. In 2021, we expect to meet the profit target that we envisaged prior to the pandemic. All the pieces are in place. Our reinsurance business is ideally positioned to resolutely exploit opportunities for profitable growth in the improved market environment. And ERGO is performing well following the successful conclusion of its Strategy Programme. We are refraining from launching a new share buy-back programme at this time, because our shareholders will benefit more from investments in the attractive business opportunities now emerging.
Joachim Wenning
Chairman of the Board of Management
Summary of figures for the 2020 financial year
2020 Financial Statements
Munich Re
Munich Re generated a profit of EUR1,211m (2,707m) in 2020, and EUR212m (217m) in Q4. The 2020 financial year was marked by high losses in connection with COVID-19. In reinsurance, pandemic-related losses totalling EUR3.4bn were posted, of which EUR370m was attributable to life and health reinsurance, and slightly over EUR3bn to property-casualty reinsurance. At ERGO, the negative impact on the result arising from COVID-19 totalled EUR64m. Adjusted for the above-mentioned losses, the Group would have met its originally envisaged 2020 profit target of EUR2.8bn, which was retracted in March 2020.
The operating result fell year on year to EUR1,986m (3,430m), while the other non-operating result amounted to -EUR83m (-91m). The currency result totalled -EUR200m (73m), and the effective tax rate was 18.2% (15.1%). Gross premiums written increased by 6.7% year on year to EUR54,890m (51,457m).
Equity was slightly lower at the end of the reporting period (EUR29,994m) than at the start of 2020 (EUR30,576m). At the end of the year, the solvency ratio - as usual, after accounting for the proposed dividend - was approx. 208% (31 December 2019: 237%), and was thus within the targeted, optimum range of 175-220%.
In the 2020 financial year, return on equity (RoE) amounted to 5.3%.
Reinsurance: Result of EUR694m
The reinsurance field of business contributed EUR694m (2,268m) to the consolidated result in 2020; the Q4 result was EUR75m (116m). The operating result amounted to EUR984m (2,613m). Gross premiums written rose to EUR37,321m (33,807m).
Life and health reinsurance business generated a profit of EUR123m (706m) in 2020. Premium income increased to EUR12,707m (11,716m). The technical result, including the result from reinsurance treaties with non-significant risk transfer, amounted to EUR97m (493m).
In 2020, property-casualty reinsurance business contributed EUR571m (1,562m) to the result. Premium volume rose to EUR24,615m (22,091m). The combined ratio was 105.6% (100.2%) of net earned premium on account of the high major losses.
Major losses - in excess of EUR10m each - totalled EUR4,689m (3,124m) for the full year, and EUR1,191m (1,462m) for Q4. These figures include gains and losses from the settlement of major losses from previous years. Major-loss expenditure corresponded to 20.8% (15.2%) of net earned premiums, and was thus considerably above the long-term average of 12%. This was primarily attributable to major losses associated with the coronavirus pandemic. In this context, the most significant losses were incurred in connection with the cancellation or postponement of major events. On a smaller scale, there were also losses in other lines of property-casualty reinsurance, including business interruption. These and other man-made major losses added up to a sizeable EUR3,784m (1,071m). Major losses from natural catastrophes cost EUR906m (2,053m), which was far lower than expected on average - despite a record number of events in some loss scenarios. The costliest natural catastrophe for Munich Re in 2020 was Hurricane Laura (approx. EUR280m).
In the 2020 financial year, provisions for basic losses from prior years totalling around EUR938m were released; this corresponds to 4.2% of net earned premiums. Munich Re continually seeks to set the amount of provisions for newly emerging claims at the top end of the estimation range, so that profits from the release of a portion of these provisions are possible at a later stage.
In the reinsurance renewals as at 1 January 2021, Munich Re was able to increase the volume of business written to EUR11.6bn (+10.9%). Around half of property-casualty business was renewed, with a focus on Europe, the USA (mainly excluding hurricane cover) and global business. Prices, terms, and conditions improved; rates increased particularly in parts of the non-proportional business. Prices improved to varying degrees around the world. All in all, prices for the Munich Re portfolio increased by 2.4%. This figure is, as always, risk-adjusted. In other words, price increases are offset if they are associated with increased risk and, consequently, elevated loss expectations. Looking ahead to the upcoming renewal rounds in April and July, Munich Re anticipates that the market environment will remain positive and offer attractive growth opportunities.
ERGO: Result of EUR517m
Munich Re generated a profit of EUR517m (440m) in its ERGO field of business in 2020, and EUR136m (101m) in Q4. This means that ERGO successfully completed its Strategy Programme, nearly meeting its 2020 profit guidance of EUR530m - the burdens arising from COVID-19 notwithstanding.
This result was buoyed by the ERGO International segment's very high result of EUR230m (105m). Three factors contributed to this achievement: a renewed improvement in operational business, a positive one-off effect as part of the merger of two joint ventures in India, and the fact that the previous year had been burdened by the optimization of the international portfolio. The ERGO Property-casualty Germany segment generated a profit of EUR157m (148m), chiefly owing to strong premium growth and a good technical result. The impact of COVID-19 was cushioned by lower major losses. ERGO Life and Health Germany reported a result of EUR130m (187m). This decline occurred primarily on account of the lower investment result in the health field and the impact of COVID-19 in travel insurance. ERGO's operating result amounted to EUR1,002m (817m).
The combined ratios remained at a very good level. In the Property-casualty Germany segment, the combined ratio was 92.4% (92.3%), which met the 2020 target of 92%. The combined ratio in the ERGO International segment amounted to 92.7% (94.3%), which was even better than the target of 94% for 2020. This improvement was fuelled by a lower claims frequency in motor insurance.
Overall premium income across all lines fell only slightly to EUR18,448m (18,880m), despite international portfolio remediation and the repercussions of the pandemic; gross premiums written decreased to EUR17,569m (17,650m).
Investments: Investment result of EUR7,398m
Munich Re's investment result (excluding insurance-related investments) decreased to EUR7,398m (7,822m) in 2020. Regular income from investments fell to EUR6,273m (6,751m), largely due to lower interest income. The balance of write-ups/write-downs amounted to -EUR1,957m (-309m), particularly on account of impairment losses on equities triggered by the Q1 plunge in equity markets. In addition, net gains on disposals excluding derivatives increased to EUR3,698m (2,779m), driven by the sale of fixed-income investments, equities and real estate. The net balance of derivatives amounted to EUR74m (-717m), with gains on interest-rate derivatives and losses on equity derivatives nearly offsetting each other.
Overall, the 2020 investment result represents a return of 3.0% on the average market value of the portfolio. Munich Re thus managed to achieve its target - in spite of the challenging conditions and high volatility prevailing in the capital markets. The running yield was 2.5% and the reinvestment yield was 1.5%. The equity-backing ratio, including equity derivatives, dropped to 6.0% as at 31 December 2020 (31 December 2019: 6.4%).
Munich Re's investment portfolio (excluding insurance-related investments) increased compared with the 2019 year-end figure, with the carrying amount rising slightly to EUR232,950m (228,764m); the market value amounted to EUR252,789m (247,310m).
The Group's asset manager is MEAG, whose assets under management as at 31 December 2020 included not only Group investments but also a volume of EUR69.6bn (38.2bn) for third parties.
Outlook 2021: Group targets a consolidated result of EUR2.8bn
Munich Re is aiming for a profit of EUR2.8bn in 2021, as communicated on 1 December 2020. The Group expects the financial consequences from COVID-19 to be on a considerably smaller scale than in 2020. Group premium income is expected to rise to about EUR55bn in 2021, and return on investment to be above 2.5%, the persistently very low interest rates notwithstanding.
In its reinsurance field of business, Munich Re anticipates premium income of about EUR37bn and a profit of about EUR2.3bn in 2021. The combined ratio in property-casualty reinsurance is forecast to be about 96% (95% without burdens arising from COVID-19). Munich Re projects a technical result, including the result from reinsurance treaties with non-significant risk transfer, of about EUR400m in life and health reinsurance.
It is anticipated that the ERGO field of business will contribute about EUR500m to consolidated profit. ERGO is targeting a combined ratio of 92% in the Property-casualty Germany segment (91% without expenditure for COVID-19), and 93% in the ERGO International segment. Premium income will amount to approx. EUR17.5bn in 2021.
All forecasts and targets face considerable uncertainty owing to fragile macroeconomic developments, volatile capital markets and the unclear development of the pandemic. As always, the projections are subject to major losses being within normal bounds, and to the income statement not being impacted by severe fluctuations in the currency or capital markets, significant changes in the tax environment, or other one-off effects.
Munich Re is one of the world's leading providers of reinsurance, primary insurance and insurance-related risk solutions. The group consists of the reinsurance and ERGO business segments, as well as the asset management company MEAG. Munich Re is globally active and operates in all lines of the insurance business. Since it was founded in 1880, Munich Re has been known for its unrivalled risk-related expertise and its sound financial position. It offers customers financial protection when faced with exceptional levels of damage - from the 1906 San Francisco earthquake through to the 2019 Pacific typhoon season. Munich Re possesses outstanding innovative strength, which enables it to also provide coverage for extraordinary risks such as rocket launches, renewable energies, cyberattacks, or pandemics. The company is playing a key role in driving forward the digital transformation of the insurance industry, and in doing so has further expanded its ability to assess risks and the range of services that it offers. Its tailor-made solutions and close proximity to its customers make Munich Re one of the world's most sought-after risk partners for businesses, institutions, and private individuals.
Disclaimer
This media release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to make them conform to future events or developments.
Further information
For media inquiries please contact
Florian Amberg
Florian Amberg
Head of Strategic Communications & PR
Phone
+49 89 3891-2299
Email
flamberg@munichre.com
MUNICH RE 
