Munich Re property and casualty (P&C) first-half earnings slumped, weighed down by a blowout in natural catastrophe claims costs to €1.315 billion ($2.22 billion) from €604 million ($1.018 billion) a year earlier. 

P&C reinsurance net result in the January to June period declined 27.1% to €1.338 billion ($2.25 billion) and 34.1% to €578 million ($974 million) in the June quarter. 

The reinsurer is presenting its first-half results in accordance with the new accounting standards IFRS 9 and IFRS 17 for the first time. 

First-half insurance revenue from P&C contracts issued grew 9.1% to €13.192 billion ($22.2 billion) and in the June quarter it rose 5.4% to €6.695 billion ($11.29 billion) and the combined ratio worsened to 83.5% from 74.5%. 

“The increase in insurance revenue from insurance contracts issued (insurance revenue) was mainly attributable to new business and the expansion of non-proportional natural catastrophe covers,” the reinsurer said. 

On the weaker June half net result Munich Re says it is mainly attributable to higher major-loss expenditure, which rose to €1.635 billion ($2.76 billion) from €1.082 billion ($1.82 billion).

An event is defined as a major loss if it leads to claims costs of at least €30 million ($50.57 million), the new threshold since the start of the year for marking out significant catastrophes. Munich Re previously set the threshold at €10 million ($16.85 million). 

Claims costs from natural catastrophes accounted for €1.315 billion ($2.22 billion) of major expenditure incurred in the June half, up sharply from €604 million ($1.02 billion) a year earlier. The highest expenditure for natural catastrophes in the period was the Turkey quake, with a nominal amount of around €600 million ($1.01 billion). 

Expenditure for man-made losses came to €320 million ($539 million) compared with €478 million ($805 million) a year earlier. 

Munich Re says for the July renewals volume of business decreased slightly by 1.9% to €3.6 billion ($6.06 billion) as it selectively discontinued business that no longer met expectations with respect to prices, terms and conditions. 

“The primary focus of the July renewals was business in North America, South America, Australia, and with global clients,” the reinsurer said. 

“Prices for reinsurance cover rose considerably in some markets, including the US, Latin America and Australia. These price increases were sufficient overall to offset elevated loss expectations owing to inflation or other developing trends.” 

Overall prices across the Munich Re portfolio increased considerably in the July renewals, by 5.1%. 

For the April 1 renewals it was able to increase the volume of business written to €2.9 billion ($4.88 billion), an increase of 11.1%. At the January renewals written business volume rose 1.3% to €15.3 billion ($25.79 billion). 

“It was possible to leverage growth opportunities, above all in Asia – especially in Japan and India – and in Latin America,” the reinsurer said of the April renewals. 

“The volume of non-proportional natural catastrophe business was expanded, particularly in view of the attractive price level.” 

Including its life and other businesses Munich Re made an overall net profit of €2.4 billion ($4.04 billion) in the first half, down 20.9% from a year earlier. 

Despite the decline Munich Re says the business remains on track to meet its full-year net profit target of €4 billion ($6.74 billion) as the half-year earnings are “considerably greater” than its 2023 guidance. 

“At the end of the first six months, Munich Re remains confident in its outlook for further positive business opportunities in the second half of 2023. 

“The probability of surpassing this target has increased given the strong half-year result.”