The reinsurance giant Munich Re was one of the few winners in the leading index Dax on Tuesday. After the publication of mixed business figures for the second quarter, the share of the Munich group rose by around 1.6 percent to 233 euros after an initial rollercoaster ride. That was the highest level since the beginning of July, but the gap to the previous high for the year of more than 280 euros at the end of January remains large.
The current optimism of management obviously had an effect on the stock exchange. Despite the effects of the war in Ukraine and the sharp rise in inflation, CEO Joachim Wenning is sticking to his profit target of 3.3 billion euros for the full year. However, the group has only achieved just under 1.4 billion euros in the first half of the year – last year it was already 1.7 billion euros at this point. This means that Munich Re still has to make a profit of almost two billion euros in the second half of the year, which is still characterized by great uncertainty.
The turbulence on the capital markets hit the reinsurer hard in the second quarter. High write-downs on equity investments and losses from interest rate derivatives caused the investment result to collapse from EUR 1.9 billion in the same quarter of the previous year to EUR 971 million. The return on investment is still a meager 1.6 percent. CFO Christoph Jurecka is optimistic about the rising interest rates: although they will lead to short-term burdens, they will lead to significantly higher returns in the medium term. For new investments in the second quarter, the return has already risen to 2.8 percent.
In operational terms, things were going well for Munich Re overall. She continued to benefit from rising insurance prices. Gross premium income rose by more than 18 percent to 16 billion euros in the first half of the year. The claims and expense ratio, which sets premium income in relation to expenses for insurance claims and operating costs, improved to 90.5 percent. The declining damage caused by Covid-19 also provided some relief. In the second quarter, the reinsurer set aside a further EUR 90 million for losses resulting from the war, and put the total cost of the war at EUR 200 million so far. This year, Munich Re also benefited from a below-average burden from storms, earthquakes and major fires. Of the budget reserved for these major losses, 2.7 billion euros are still left for this year. This cushion may be sorely needed: The hurricane season, which could be particularly active this year, is only just beginning.