Munich Re Says Net Off 62% For Year

Munich Re reported year over year net income dropped 62 percent, but the company still showed a profit despite the economic downturn, and management is optimistic the slump in premium pricing is over.

"In view of the financial crisis, the result for 2008 is satisfactory," said J?rg Schneider in a statement. "Thanks to our pronounced risk management and a diversified investment portfolio, we have come through the crisis relatively well so far."

Munich Re reported net income for 2008 of EUR1.5 billion (U.S. $1.93 billion at the current exchange rate) down from 2007 net income of EUR3.9 billion ($5.7 billion in 2007). The company said the 2007 results benefited from an extraordinary tax benefit of EUR400 million ($584 million in 2007).

The Munich, Germany-based company said fourth-quarter profit totaled EUR100 million ($128.8 million current exchange rate). The company did not supply fourth-quarter results for 2007.

Gross premiums written rose by 1.5 percent to EUR37.8 billion ($48.7 billion current exchange rate).

The company reported its reinsurance combined ratio climbed 3.1 points to 99.5, while primary insurance shaved 2.2 points off its ratio to 91.2. The increased combined ratio was attributed to increased claims from both natural catastrophes and man-made losses.

Munich Re took a hit on its equity exposure, reducing its equity exposure and investing in government and corporate bonds. The company took "prudent" write-downs of about EUR400 million ($515 million) on fixed-interest securities in the fourth quarter and about EUR500 million ($644 million) for the year.

Two-thirds of Munich Re's property-casualty portfolio was up for renewal on Jan. 1, amounting to a premium volume of EUR8.3 billion ($10.69 billion). Prices, terms and conditions varied greatly between regions and lines of business, the company said, but "stable or increased prices were recorded marketwide."

"The turnaround has been achieved," said Torsten Jeworrek, a member of Munich Re's board of management. "The erosion of reinsurance prices over the last few years has been halted. We have succeeded in improving our portfolio through price increase for existing business and attractive new business, but also by terminating business that was no longer profitable."

Munich Re said it did not renew close to 18 percent of its business, a volume of EUR1.5 billion ($1.93 billion). However, it wrote EUR954 million in new business ($1.23 billion). Including renewed and expanded business, the company said its premium volume fell 3 percent to around EUR8 billion ($10 billion). Rates improved by 2.6 percent compared to last year, the company added.

"Certainly, not all our expectations were fulfilled," said Mr. Jeworrek. "The development of the economy as a whole, with its effects on the insurance industry's capitalization and results, has not yet led to a situation in all markets where the players recognize the need for prices, terms and conditions that are consistently risk-adequate. I am nevertheless satisfied with the outcome of the renewals. We have been able to improve the quality of our portfolio."