Capital Markets Hurt Reinsurer Results

Munich Res group result is made up of a profit of 4.5 billion euros ($4.4 billion) in the first quarter, and a loss of 383 million euros ($375.1 million) in the second due to additional reserving for its U.S. business, American Re-Insurance.

For Munich Res reinsurance business, premium increased 30.2 percent to 13.2 billion euros ($12.9 billion). For the entire year, Munich Re is expecting premium income from reinsurance to show strong growth of around 14 percent to 25 billion euros ($25 billion).

The combined ratio for the reinsurance business amounted to 133.1 for the first half, although it would have amounted to 102 if it excluded the reserve strengthening at American Re and the additional reserving for the World Trade Center attack. On a comparably adjusted basis, the combined ratio for the whole of 2001 was 112.7.

Munich Re reported write-downs of 1.5 billion euros ($1.5 billion) on the groups equity portfolios, necessitated by the large price falls on the stock markets.

Until June 30, claim costs from large reinsurance losses were below the long-term average. In July and August, however, severe floods affected Germany, the Czech Republic, Austria and Italy, which coincided with flooding in China and Southeast Asia, Munich Re said.

At Swiss Re, premiums rose across the Swiss Re Group by 16 percent to 13.8 billion Swiss francs ($9.2 billion) during the first half from 11.9 billion Swiss francs ($7.9 billion) in the first half of 2001. However, Swiss Res net income for first-half 2002 of 118 million Swiss francs ($78.6 million) was far below the 1.3 billion Swiss francs ($866 million) reported for first-half 2001.

Swiss Re attributed the reduced result to the poor condition of global stock markets. Net investment income was down 8 percent to 2.8 billion Swiss francs ($1.9 billion) from 3.1 billion Swiss francs ($2.1 billion) in 2001, as a result of the strengthening of the Swiss franc and the absence of dividend income from 2001.

Firming non-life rates and better conditions led to the Property & Casualty Business Groups combined ratio improving to 104 from 113 in the first half of 2001, the company said. Swiss Re said its loss exposure to the European flooding was around 250 million Swiss francs ($166.5 million).

The company said it expects sustained improvement in market conditions to continue across the reinsurance business in the second half of 2002. "As a result, prices and conditions in the non-life business are expected to continue to firm in the upcoming renewals," Swiss Re said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 2, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.