NU Online News Service, Feb. 2, 3:27 p.m. EST
Munich Re reported fourth-quarter profit jumped 591 percent, helped by the combination of improvements in its investment portfolio and extraordinarily low natural catastrophe losses.
The Munich, Germany-based reinsurance company reported, "on the basis of preliminary calculations," profit of EUR78 million ($1.09 billion U.S. at the current exchange rate) for the fourth quarter of 2009, compared to EUR11 million ($14 million U.S. at the exchange rate in 2008).
For the year, the company said profit rose 62 percent, or EUR98 million ($1.54 billion), to EUR2.56 billion ($3.57 billion).
"This is another good result that demonstrates Munich Re's earning strength," J?rg Schneider, chief financial officer, said in a statement.
He added that despite market challenges the company was able to exceed its return target of 15 percent on risk-adjusted capital, after tax.
The results produced a proposed 4.5 percent increase in the company's dividend payment from EUR5.50 ($7.07) to EUR5.75 ($8.01). It is still subject to board and shareholder approval.
Gross premiums written for the company rose less than 10 percent from EUR37.8 billion ($48.6 billion) to EUR41.4 billion ($57.8 billion).
Reinsurance combined ratio improved for the year from 99.4 in 2008 to 95.3 last year, while fourth-quarter 2009 results improved 5.1 points to 92.5.
Munich Re said the combined ratio includes 3.6 percentage points for recession-related losses of EUR500 million ($697 million), just under EUR200 million ($279 million) of which occurred in the fourth quarter. However, the reinsurance business profited "from exceptionally low claims costs for natural catastrophes."
For the primary insurance segment, the combined ratio for the property and casualty segment rose 2.2 points to 93.1 for the year, but improved 3.8 points to a "particularly good" 90.
On the primary insurance side, gross premiums written for the year were up 3 percent from EUR17 billion ($21.9 billion) to EUR17.5 billion ($24.4 billion). Of that total, EUR4.5 billion ($6.3 billion) was attributed to the fourth quarter, an increase from EUR4.3 billion ($5.5 billion) in 2008.
On the reinsurance side of the business, premium income increased by close to 14 percent, from EUR21.9 billion ($28.2 billion) in 2008 to EUR24.8 billion ($34.6 billion). For the fourth quarter, reinsurance was up from EUR5.7 billion ($7.5 billion) to EUR6.1 billion ($8.5 billion).
On the renewal of reinsurance treaties for Jan. 1, Munich Re said it was more difficult than the previous one, with "sufficient capacity" for most lines of business. "Generally, prices showed a slight downward trend," the company said. However, credit, aviation and some natural catastrophe covers did see some rate increases based on claims. Terms and conditions were largely unchanged.
Torsten Jeworrek, Munich Re's Reinsurance chief executive officer, said renewals involved some tough negotiating, with accounts that showed no sign of profitability being dropped.
In the property and casualty segment, of the EUR7.9 billion ($11 billion) of premium volume up for renewal, more than 85 percent was renewed and less than 15 percent was terminated. However, compared to last year, the volume of business renewed fell by close to 7 percent.
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