Munich Re's combined ratio 106.4

Munich Re announced an H1 consolidated profit of €709m, up from €697m on a “very pleasing investment result” of €5.1bn, up 42.8%, despite catastrophes taking its combined ratio to 106.4%.

Chief executive Nikolaus von Bomhard said: “While the technical result was again hit by large losses in the second quarter, we were able to post a very pleasing profit from investments.”

Munich Re also said it would concentrate on its primary insurer Ergo, launching an advertising campaign.

H1 highlights (2009 in brackets)

• Operating result €2,218m (2,109m), €1,448m of this in Q2
• Gross written premiums €22.6bn (20.7bn), with €11.0bn in Q2
• Half-year profit of €1,057m
• Operating result €1.7bn (2.0bn), of which €1.1bn in Q2
• Reinsurance profit €1,057m (1,309m), €633m in Q2.
• Combined ratio 106.4% (97.9%) 103.8% (98.4%) for Q2

Catastrophes

Munich Re said: “In the second quarter, 5.4 (1.5) percentage points of this related to natural catastrophes, compared with 12.8 (3.5) percentage points in the first half-year.

“Natural-catastrophe expenditure in the first half of 2010 thus significantly exceeded the figure for the same period last year: of the originally projected 6.5% for natural catastrophes in the annual loss ratio, around 6 percentage points were incurred in the first half of the current financial year alone, totalling approximately €900m (243m).

“Given the high insurance penetration in commercial and industrial business, it is not surprising that the devastating earthquake in Chile on 27 February was responsible for the largest individual loss in the first half-year.

Third largest ever loss

“Munich Re estimates its total expenditure for this event at nearly US$ 1bn after retrocession and before tax, equivalent to approximately 10 percentage points of the loss ratio.

In terms of Munich Re’s loss burden, the earthquake was the third-largest loss in its history, after the attack on the World Trade Center (2001) and Hurricane Katrina (2005).

Deepwater Horizon

“On 20 April, the Deepwater Horizon oil rig exploded in the Gulf of Mexico, causing 11 fatalities, a high amount of property damage, and an environmental catastrophe. This catastrophe is also turning into one of the most expensive claims ever in the offshore energy sector.

“For Munich Re, it was the largest loss event in the second quarter: the Group is currently reckoning with expenditure in the low three-digit million euro range. At approximately €60m, Munich Re’s share of the property loss from the sinking of the oil rig is relatively easy to quantify.

“By contrast, the liability losses cannot yet be gauged with reasonable certainty, since issues need to be clarified regarding the cause of the disaster – a complex process, especially given the large number of parties involved. Munich Re has made adequate provision for this.

Painful

Torsten Jeworrek, Munich Re's reinsurance CEO, said: “Painful as the consequences of Deepwater Horizon are, it is now essential to reassess the issue of adequate insurance covers and retentions for large engineering projects and the liability risks involved in such projects. This should also have positive effects on the future development of pricing.”

Reinsurance premium income grew by 6.0% in the first six months year on year and totalled €11.6bn (10.9bn), of which €5.6bn (5.5bn) was attributable to the second quarter. Adjusted to eliminate the effects of changes in exchange rates, premium volume would have increased by 1.5% in the first six months.