Munich Re generated a 36% rise in profit to €993 million ($1.65 billion) on low costs from major losses in the three months to June 30, its best quarter in four years, although the Australian disability business dragged on earnings.

The firm has stood by its guidance for this year and next, saying it is strategically and financially on track.

Spending on large losses dropped to just €202 million ($335.78 million) in the quarter, a third of the spend incurred a year earlier and just 4% of net earned premium.

“This expenditure was below the average volume of major claims to be expected, i.e. 12% of net earned premium, both for the first half of the year and the second quarter,” Munich Re said.

Gross written premium (GWP) increased 5.5% to €11.8 billion ($19.62 billion), or by 3.5% excluding foreign exchange movements.

The property & casualty (P&C) combined ratio improved to 87.7% from 102% a year earlier. In the first half-year, it was 92.8% — an improvement from 95.5% for first-half 2018 — and is on track to achieve Munich Re’s 98% target for the full year.

P&C contributed €7.04 billion ($1.17 billion) to the second quarter result.

In Australia, write-offs resulting from a change in “protect your super” legislation and adverse claims experience in Munich Re’s disability business affected the Life & Health (L&H) reinsurance business.

L&H profit fell 46% to €154 million ($256 million).

“The prime factors were various encumbrances from our Australian business,” Munich Re said. “We had already written down parts of the deferred acquisition costs in the past year to account for the effects on our business of a foreseeable change in the law. When the law entered into force, more of the business was affected than was expected, which required more writedowns.”

Claims expenditure in Australian disability business was also higher than expected in the first half despite “intensive remediation efforts”.

Hundreds of thousands of super fund members have had their life insurance cancelled since Protecting Your Super legislation was passed last month. Media reports quote Deloitte estimates that 15-25% of super fund members may be affected.

Munich Re reaffirmed full-year profit guidance of €2.5 billion ($4.16 billion) for 2019 and €2.8 billion ($4.65 billion) in 2020.

In July, overall renewals premium volume was up by 8.9%, with risk-adjusted prices up 0.5%. Munich Re reported a marked improvement in prices for reinsurance cover in markets affected by natural catastrophes.